Bank Runs as end runs for policy?

The Greek Finance Minister appeals directly to Ireland in the IT here, while on Medium, Karl Whelan puts the blame for the calamitous situation on the official response of the Troika in 2010.

A serious question we do need to answer: are bank runs, or the potential for bank runs, becoming the ultimate backstop in a currency union comprised of creditor and debtor nations?

In the end the Oireachtas banking inquiry is unearthing the powerful narrative threat of the ‘ATMs running dry’ as driving much of the decision to deliver the 2008 guarantee, Cyprus had a bank run precipitate its crisis, at least partially. Iceland had the same experience, and we all know what is happening to Greek deposits right now, ELA or not.


By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

77 replies on “Bank Runs as end runs for policy?”

Financial Times editorial yesterday: “Experience has shown that even centrist governments need external prods to carry through reforms.”

External prods? Even for the “centrist” governments that think in the correct (neoliberal, technocratic) way? And who exactly is wielding these (cattle) “prods” and what is the source of their legitimacy? And what is the nature of the prods? We saw it in Cyprus: agree to screw over depositors or we’ll lay waste to your financial system.

Time to recognise the EU for what it is: hegemony by other means.

That is a thoughtful and well-written piece by Karl Whelan; thanks for the link.

The answer to the question posed is yes as experience has shown, with the euro at least, that there is no other way of making profligate governments face up to political reality.

It is also the case that the decisive player in the euro system is the European System of Central Banks (ESCB) and not solely the ECB as is popularly understood. There is a canny political division of responsibility, as epitomised by ELA, which leaves the risk with national central banks which continue to operate within their own national legal frameworks. (I understand, incidentally, that there is a question mark over the legislative ability of Greece to introduce capital controls).



Amid all the things that the European Commission state aid boffins were looking at when they analysed the bank bailouts, they never looked a the banking system’s privileged access to the national payments system. That’s what makes “no money in the ATMs if don’t guarantee” logic so potent.


“A serious question we do need to answer: are bank runs, or the potential for bank runs, becoming the ultimate backstop in a currency union comprised of creditor and debtor nations?”

I understand what you mean by ‘backstop’ here, can you expand?

A contribution from CMcC that many will find persuasive.

The contention that the Greeks have undertaken the necessary structural reforms, especially in relation to pensions, is, however, open to question. The harsh fact is that the pension structure in Greece is a form of unaffordable disguised unemployment benefit in a low productivity Balkan economy, the standard of living in which should, in logic, be comparable with its neighbours. It isn’t because the Greeks have been on a borrowing binge funding consumption and not investment for decades. It is now politically impossible for the other countries of the Euro Area, despite the many mistakes that have been made, to allow further borrowing and, least of all, to admit to their electorates that what has already been lent will not be paid back, without a radical change of approach by Greek society. (By way of example of how little has changed, the over-sized defence budget has not been cut. Another, at a a micro-level, of pharmacies closing across the country to block a troika recommendation that people be allowed to buy a packet of aspirins outside their hallowed premises!).

Tsipras/Varoufakis have chosen to take on the heavyweights against this background, betting the farm. They cannot, however, control the game. The timing of various interventions, and notably the holding of an emergency euro summit on the evening of what promises to be a very fraught day for Greek banks, is hardly accidental. Like many a head of a central bank before him, Stournaras, the head of the Greek one, is in a critical position.

Colm McCarthy’s article in today’s Sunday Independent complements Karl’s piece.

Most analyses of the Greek predicament emphasize the high debt to GDP ratio (about 180). This relates the stock of debt to the flow of national income and fails to reflect the fact that Greek public debt is now held on concessional terms.
A better measure of the burden of the debt is surely the ratio of interest payments to GDP.
In a recent article Donal de Buitleir examines the Irish situation and provides some valuable international comparisons. []
According to his data, the cost of debt service in Greece is 4.2% of GDP, not much above the Irish figure of 3.6% and below the figures for Portugal (4.9%) and Italy (4.3%).

@ DOCM: ” …there is no other way of making profligate governments face up to political reality.”

Eh? you seem to have this arseways. All western governments are ‘profligate’ – just some more than others. Ours is well up there with the leaders. Political reality is whatever a profligate government says it is! Its a relative thingy. Like a swinging pendulum.

“The “adults in the room” might be said recognise the reality that is the Greek economy and where the solution lies.”

There are no adults left – well not in modern political circles anyways. Narcissistic politicopaths maybe, but no sentient adults. twenty-first century Capitalism it seems, can only survive by the exercise of fraud, bare-faced theft and the imposition of military force. And we thought the Tudor conquests were bad!

The so-called ‘end-game’ was apparent shortly after 2000 or so. Apparent that is, to those ‘adults’ who chose to see it. Even the Titanic needed seven nautical miles to come to a dead-stop from full-speed. Our western economies will need about two decades for their rates of economic growth to decline (on aggregate) below the level of 3% (annual + compounding, that is) which is what is needed for sustained political stability – 2% may actually suffice. But below this – things get rough.

Of course there is always iPods for iDiots – third-grade-class-where-kids-spend-75-of-the-day

I would like it if Ireland could come out and say something like yes it would be annoying if Greece got better terms than them – but that should not be used as an excuse to screw Greece to an unreasonable extent.

2449 years ago, Alexander cut the Gordian Knot. Here’s hoping that his successor Tsipras reprises the act, cutting through the refusal of governments to admit to their electorates that the debts imposed on Greece will not be repaid by repudiating all debts to official lenders, and appending Karl’s article by way of explanation to the German public.

I see one of Tsipiras cronies has described the bail out of Greek public service wages & pensions by the rest of the EZ as a “social holocaust”. Can we use google Earth to find the camps.
Greece has a mountain of debt @ concession rates so that debt service costs are between 2.5% & 4.5% GDP depending of definition. If Syrizia got a hair cut & a normalisation of rates would service costs go up or down.
What does the current Greek govt want? Permanent underwriting of the public finances by other EZ tax payers. We would all like that

Re: Department stores

@ Stephen,

The one thing, the single most basic thing, which an Oireachtas banking inquiry, ought to have somehow un-earthed, or excavated, or at least scraped at the surface of, . . . was something, which a reporter in Ireland in the later 2000’s working at the Sunday Tribune newspaper reflected upon, in his numerous interviews, frequent participation in a debate and columns, . . . is how Irish banks were somehow able to approach legitimate enterprise, . . . be they pubs, stores, department stores, branch networks or whatever, . . . and over a period of time, convert those enterprises, from being wholly operations focused, turning over product, serving a market, . . . and instead making those companies into real estate investment vehicles of a sort, or basically ‘shells’, inside of which some legacy element of direct employment, and indirect employment rattled around, . . . but upon, gazing at the upgraded corporate structure and balance sheets of these groups, demonstrated aptly, that many old Irish names, franchises and brands, had become hollowed out, somehow to increase their debt-absorption capacity, . . . where the debt of course, was utilized in most cases, to acquire assets, typically ones of a real estate nature, or else, . . . acquire other competitors, . . . that in turn, had claims to ‘assets’ that were nearly always something to do with real estate.

No one has ever fully gotten to the bottom of this one.

It can with no small sense of irony, therefore, that I think in the week in which Ireland’s Oireachtas banking inquiry started to ‘pick up some speed’, in terms of the witnesses it had managed to assemble, and some of the evidence that it had gathered, that this same un-answered question, raised it’s head in the ‘breaking news’, . . . and we saw again on our television screens, an example of yet another old Irish brand, a legitimate business, which had been somehow persuaded by lenders here in Ireland, to fundamentally alter it’s business plan, . . . that of being a retail department store, that employed people, that turn itself into a leveraged asset acquisition, and real estate holding shell corporation.

It is very interesting, to my impression of what is happening at the Oireachtas banking inquiry, that no witness has been called upon whatsoever, from the retail and enterprise sectors in Ireland, . . . as a means to discuss with those business operators . . . what were the nature of the conversations that lenders in Ireland, were holding with so many of these leading brand names, and established companies, . . . that so persuaded, so many of these pillars within Irish commerce, to venture down that extremely risky pathway, of accepting such large amounts of debt finance, from lenders in Ireland, for the purposes of assembling real estate asset portfolios.

And what evidence was there at the time, for example, that something such as a department store, in any city in Ireland, capital city or regional town or even small village, . . . what evidence was there at the time, that somehow these organisations held the capabilities to engage in asset portfolio management? And what convinced lenders who lent so generously to these old established companies in Ireland, during the past decade, that something like a department store could be the most natural choice, to load debt upon, for the purposes of engagement in asset portfolio acquisition and speculation?

The point, that I am making I guess, is what one begins to see in a typical department store example, this week in Dublin, is in microcosm the same as one observes, when one looks or investigates across the wider spectrum of Irish commerce and enterprise, in the past decade. And in a way also, what one sees happening in a department store example, in the city of Dublin, is not unlike what one can observe, when one looks at the scale of entire countries, that make up what is called ‘the periphery’ of the European Union, and includes places like Greece, and also that of Ireland.

And yet, somehow, with all of the bankers that have been questioned before the Irish parliamentary banking inquiry committee, to the best of my knowledge, this is the one line of questioning which has never been explored or investigated. What I have listened to, in evidence and line of questioning pursued at the banking inquiry, is the idea of the ‘mortgage holder’, the mortgage borrower, and questioning about that relationship. There has been frequent question asked, particularly by the chair person of the Oireachtas banking inquiry, of banking executives and financial regulatory officials, about the products that were introduced for consumption by home acquisition borrowers. The same question, has not been asked, at the banking inquiry, as to what kinds of products were made available for consumption by Irish companies, businesses and retailer or hospitality chains, in particular.

All that one can say, is that this clearly is the disadvantage of holding a parliamentary banking inquiry, half a decade after ‘the crash’ has happened. Memories are so faded at that point in time, and even such individuals as the journalists at the Sunday Tribune newspaper, who went around and actually spoke, at the time, to dozens of business owners about their relationships with their lenders in Ireland, . . . where one would enter into a bank, for a conversation about getting finance to fund operations, of the same enterprise, . . . and arrive out on the pavement an hour later, having found oneself signed up to purchase a chunk of real estate, two doors down from a location where one’s business had operated for generations.

And one has to ask the question, what was actually going on there?

And from what I can ascertain, of what the Irish parliamentary banking inquiry has been able to pursue, at this stage, the committee of members from the upper and lower houses of the Irish parliament, has not even been able to scratch upon the surface of what is the most important, and crucial aspect of banking in Ireland, during the boom, . . . and a part that we know almost nothing about.

Instead of offering sympathy, and directions of the nearest labour exchange, to individuals from Clery’s department store in O’Connell street in Dublin, the best sympathy, that our elected politicians might offer those 130 plus odd Irish citizens, and voters, . . . maybe, is to find out what exactly did land those people, in the predicament in which they find themselves in, in later life.

But, unfortunately, it is the one question which a parliamentary banking inquiry, is not capable of asking. BOH.


The extent of the Greek pension reforms (under the Samaras, Papademos and Papandreou governments) should not be underestimated. There is more that can be done and there is no reason to believe that Syriza is unwilling to do more in time. For now the pension system is the main vehicle of redistribution – the rest of the social welfare system is rudimentary. Daft, but that’s where you are starting from. Some of the absurd early retirement ages are a feature of the public sector pension systems in many of the countries recommending reform to Greece, including Ireland. Teams of experts from Europe, USA etc have been recommending sensible reforms in various countries around the world for a generation which remain unimplemented in their home countries. The pharmacy racket in Ireland will do as an example.

Peter Stapleton

You are quite right that Greek debt service burdens benefit from concessionary rates. A debt burden is sustainable, with inflation at zero, only if ten-year bonds can be shifted at say 2%. How soon are you expecting this to happen in Greece? The Greek debt is unsustainable if nobody will lend the state money at affordable rates. Another ‘deal’ will not return Greece to credit-worthiness.


Greece needs a solution, not a ‘deal’. Olivier Blanchard (Vox post) seems to get this, but Lagarde, Juncker, the EP president and various others seem to be happy with name-calling. But then Blanchard is an adult.

By the way, Lagarde’s pretty loose comment about the desirability of adults in the room reminds me: at the famous meeting in mid-March 2013 which decided to haircut guaranteed depositors in Cypriot banks, including solvent ones, there was a full roster of adults present, including, if my memory serves, one C. Lagarde.

Remember Northern Rock — the first bank run in Britain since 1866? The panic was prompted by Bank of England’s confirmation in Sept 2007 that it was in the process of saving the mortgage lender.

A decade after German hyperinflation, the accelerating collapse of the American banking system in the weeks leading up to the inauguration of the new president on March 4, 1933, also cast a long historical shadow.

In the boom years countries like Greece and Ireland appeared to be a lot richer than they were — Ireland remains poorer than Italy on a per capita basis. Greece’s challenge is that it is both a very poor exporter and a poor performer in inward foreign investment.

It would likely take up to 20 years of good governance to fix the Greek economy and because there does not appear to be support in the country for exiting the euro, foreign investment in for example the tourism sector is required to compete with neighbours like Turkey to justify a price premium.

In the short to medium term, the debt burden is not a priority issue. Good governance is:

1. Zsolt Darvas of Bruegel estimated that net interest expenditure was at 2.6% in 2014 when allowing for the fact that Greece did not pay any interest on some of the bailout loans and got refunds from the ECB and national central banks;

2. Separate to the bailout, Greece receives a net 3% of GDP annually in grants and subsidies from the EU budget;

3. The IMF said last year that recovery of Greek exports has been notably weak relative to other “peripheral” euro area economies such as Portugal or Spain. Exports from Greece had grown by only about 1/3rd the growth rates of Portugal and Spain since the trough of 2009-10. Excluding tourism and oil (which comprise about 2/3rds of total exports), the recovery of exports has been even less over the same period.

4. In 2013 about 40% of Greece’s goods exports were fuel as it has a lot of refining capacity but it is not a significant oil & gas producer;

5. Shipping services exports have low value added as most of the crews are from outside Greece;

6. Tourism accounts for almost a quarter of total exports compared with 18% in Portugal and 16% in Thailand;

7. Despite creditor repayments and depositor flight, the net cash flow from Europe has been positive since 2010;

8. It is a huge challenge to change from a kleptocracy but there is evidence of improvement in tax administration and the World Bank now ranks Greece with Tunisia in its key Doing Business index for 2015 which has Greece at 61 of 189 countries — up from 109 in 2010;

9. Pensions have also been reformed and outlays were among the highest in Europe at 13.5% of GDP in 2009 and rising to 17.5% of GDP in 2012 because of the fall in output. Greece’s creditors are now seeking changes that will yield annual savings of 1% of GDP by 2016. They want health contributions to rise from 4% to 6% on average and subsidies for early retirement cut;

10. Per capita real GDP by US state in 2014 ranged from a high of $66,160 in Alaska to a low of $31,551 in Mississippi. Per capita real GDP for the US was $49,469.

11. Actual Individual Consumption per capita, a measure of material welfare of households adjusted for price differences which is a proxy for standard of living, had an index value of 106 in the euro area in 2014 and 100 in the EU28, Germany was at 123, Italy 98, Ireland 93, Spain 90 and Greece and Portugal at 83.

Slovakia was at 74 and Robert Fico, prime minister, said earlier this year that he would only accept concrete promises from Athens that ensure it “will behave in a way that will guarantee that in 10, 15, 20 years, Greece will be able to pay [back] what they get.” The former communist said: “There is no possibility to cut debt in itself…why should the Slovakian people pay some proportion of their debt?”;

12. Every poor country without its own natural resources, needs a strong exporting sector as well as strong inward investment flows. In 2014 Portugal was the fourth highest recipient of Chinese investment.

Whatever may be agreed today, Greece’s prosperity cannot be willed from Brussels. Debt repayments are scheduled out to 2057 and a Greece competently run would likely get debt forgiveness as repayments arise.

However, stumbling from crisis to crisis while insisting on staying in the euro system would be neither good for it or the rest of euro area.

Not only was Greece admitted to the euro system in 2001, in breach of budget rules with public debt in excess of 100% of GDP, it had run a deficit every year since 1974 (France was in the same boat from 1975).

From the start Greek data was unreliable and big revisions were regular.

Between 2001-2008, Greece’s reported budget deficits averaged 5% per year, compared to a Eurozone average of 2%, and current account deficits averaged 9% per year, compared to a Eurozone average of 1%.

Growth was above the Eurozone average thanks to spending on credit.

The deficit apparently declined to 2.6% of GDP in 2006 but was later revised several times to 5.3% of GDP.

Meanwhile, the EMU caravan moves on.

It seems that Tsipras has finally recognised that heads of state and government do not do technical agreements at a political level. These have to be trashed out first in the form of a “staff level agreement” as is normal in most, if not all, areas of government.

Such is the already evident surge of relief in Greece that Armageddon is likely to be avoided, Tsipras should have little difficulty in selling the concessions he is making to the wider population and, ipso facto, to other political parties. The really hard left element in Syriza is another matter; and the junior partner, the Independent Greeks, as a half-a-billion in cuts to the defence budget is, apparently, among them.

Greece and Syriza are getting this spot on for the moment. You have the complete power drunk belligerence of the Eurogroup et al….behind the scenes saying they will grant something later if Greece just capitulates now. It reminds me of the scene from Braveheart where William Wallace’s torturer and executioner offer to grant mercy if he will just kiss the royal emblem…kiss the royal arse of the euro techno/politco/ego centric crats.

Greece would do well to be reminded of Enda Kenny’s “this is a game changer speech”….we played the best little boy in the class routine for many years and with nothing to show for it – the game that changed following this was that we gave up the pretence that we were ever really pushing for anything more than a pat on the back. Greece needs concrete concessions todays, not vague promises and idle rhetoric.

With unemployment at 27% it is difficult to comprehend how any Greek government worth their salt could take any other position than they are taking now. Even the docile Pat might take to the street at 27% unemployment. They are behaving exactly as rational “adults” ought to. They have nowhere near the extraordinary leverage Ireland had (and blew) back in 2012 but they are playing with the cards they got….LaGarde famously stated in 2012 that no one ever lost money lending to the IMF – losing that record is something her ego is horrified by and it is evident in her unstatesman like language and demeanour of late.

Greece need to keep their heels dug in and that worst that can happen is still far better than acceding to a deal on the “promise” that something better can be provided down the tracks.

Colm McCarthy says the Greeks spend too much on defense—I imagine this is because they belong to Nato, a quid pro quo for the US having made great efforts to keep it this side of the iron curtain after WWII.

“12. Every poor country without its own natural resources, needs a strong exporting sector as well as strong inward investment flows.”

This economic scenario is physically impossible to achieve – on anything other than a small, individual scale. The ‘rich’ countries would automatically lose-out if it were to be implemented on a large scale, hence they will at best stymie it, at worst crush it.

This is the problem facing the so-called BRICS. They can produce all the export stuff they are capable of – but there must be willing and solvent buyers at the other end. Seems to be bit of a shortage in the demand departments at the moment.

Badly indebted folk have this tendency to pay off as much of their debts as is possible given their specific circumstances – rather than increasing their consumptions. So, who will do the increased consumption that is needed to keep the Permagrowth economic paradigm on its ever upward trendline? Interesting.

@Colm McCarthy

Your column yesterday was excellent – a voice of reason.

There is no way there will not be a deal in the end, and Syriza knows it.

A hundred billion vs. a Russian aligned Greece and long term damage to the euro; it’s a no-brainer.

If Greece stays within EU, how will write down of debt boost growth if debt service costs are only 2.5% of GDP after monetisation?

Does the euro have a ‘lender of last resort’ the classic backstop against a bank run?. The ECB is providing that function, de facto, to governments, via OMT and now QE, but to date has resisted providing unconditional support for the banking system. using the threat of withdrawal of ELA as a bargaining tool to ensure that the sovereign in question adopts ‘approved’ policies. Would the ECB really allow a national banking system to collapse ?

@ Brian Woods Snr

“12. Every poor country without its own natural resources, needs a strong exporting sector as well as strong inward investment flows.”

A group called the Commission on Growth and Development that reported in 2008 and included US economists such as Michael Spence and Robert Solow, , said that sustained high growth in developing economies is a recent, post-World War II phenomenon.

It said that using GDP figures, “high” is above 7% and “sustained” is over 25 years or more, that a similar picture emerges with variants. Growth at these rates produces very substantial changes in incomes and wealth: Income doubles every decade at 7%.

There are 13 such cases of sustained high growth, and nine are in Asia. These are Botswana, Brazil, China, Hong Kong (China), Indonesia, Japan, Korea, Malaysia, Malta, Oman, Singapore, Taiwan (China), and Thailand.

Each and every one of these miracles had an export sector as a driver of growth and an increasing share of trade in GDP. There are no exceptions. Every growth miracle involves leveraging the demand and resources of the global economy.

This explains the rise of both the Irish and Singaporean economies since the 1960s.

It does not mean that there should be long-term dependence in supplying to global supply chains but it’s the best way to develop a modern international trading structure and Singapore in particular is focusing on developing its own indigenous sector. China’s electronics sector is still dominated by foreign-owned firms.,,contentMDK:23225680~pagePK:64159605~piPK:64157667~theSitePK:489961,00.html

Despite Greece’s superior infrastructure, Romania does much better in attracting inward FDI.

@ CMcC

Whether it is daft or it isn’t, the pension system in Greece, that is, it is a political fact that other countries of the EA, and especially those poorer than Greece, are unwilling to fund it without substantial further reform.

Your argument on what constitutes a sustainable debt burden, if you will forgive me for saying so, is circular. Greece had achieved a limited return to the markets and is now a million miles away from repeating the performance because of the refusal of Syriza to continue the reform effort i.e. notably to confront the vested interests in the public sector with whose support it was elected, a point made by a Greek journalist on the SOR show this morning.

The biggest news, incidentally, from another failed meeting of the Eurogroup, is that Varoufakis left it WITHOUT speaking to the press. Now, that is news! Maybe he, at least, is growing up.

cf. also the informative interview with the former head of the Greek Fiscal Council on This Week.

Mary, the exceptionally high level of military spending in Greece is, at root, more to do with preparedness in case of a military confrontation with Turkey, and some additional nervousness over Balkan neighbours, than to do with NATO. Turkey is the old unloved imperial power, and there have been nasty conflicts even in the last century. They came close to war as recently as 1996. There are still frequently issues over Turkish military aircraft overflying disputed airspace, and being confronted by the Greek airforce.

The proximity of Greek islands to the Turkish mainland gives rise to a range of disputes, described in Wikipedia under “Aegean Dispute”. There is also still a degree of tension over Cyprus.

Ms. C. Lagarde: Mind your banks!

Mr. B. Lenihan: Qui Madame!

text from Aoife (6 1/2) & Anto (7 an a bit)

Bleed1n adults! Why weren’t there any childer in the room? Stickin us for 64 bleed1n billion …. ordoliberal bleed1n fairy Grimm tales from Frankfurt & Berlin

@Greek Lifworlds

In solidarity. Shaft the odious financial system.

@ MH: Thanks for your reply. Yeah, exports are the thing – its just that the production resources (for exports) is now so vast and technologically developed that the question must be asked – who will be able to purchase these exports without incurring continual trade deficits?

Service type exports are fine – but they must be underpinned on a secure base (long-term) of physical export stuff.

Its odd, but I see relatively few comments about the massive increase in the global labour force in the past two decades. This is having a serious negative impact on the economic wellbeing of the ‘olde economies’. I cannot believe that these economies will ever be able to mitigate this negative effect. Neither the US, the UK nor the EU are in good economic shape at present (political propaganda aside). These were the major consumers of physical exports, but no longer.

There was a seperate thread about African demographic trends and the likely consequences of geometric population growth. Its fine, as long as those folk do not increase their energy consumptions. If they did, and their energy consumption increased x2 this would approximate to a doubling of existing fossil fuel (oil, coal + gas) use. There simply ain’t that much of that stuff to go around. Actually, its not a scarcity of fossil fuels that economists need to be seriously concerned about. Its the scarcity of potable water. Its not funny when an economy experiences a shortage of fresh water.

So. What will give?

The huge German and Dutch current account surpluses need to be pared down. Any resolution of the current Greek crisis should include requirements that Germany and the Netherlands increase their imports from Greece. Their surpluses are at the root of the problem. It is Greece’s turn now to suffer under the consequences, but 5 years from now some other country will be under the same spotlight.

A quick (but costly) way to do this is for the German and Dutch governments to provide subsidies to their robust firms to open factories in Greece. Clearly, not the most efficient way to eliminate trade surpluses, but since over avenues have been blocked off, it might be acceptable to the German and Dutch taxpayers.

If the Greek govt engineered a won’the pay default on the IMF & ESM/SF then the banks would be in default. Presumably the ECB option would narrow.
Greece needs to attract FDI but with a Soviet style govt will FDI come. Even Cuba is giving up now.

So Tsipras seems to have capitulated on more or less everything. Glad that the last months of destroying the economy has worked out so well. Sadly predictable sequence of events that the hero worshipped of the Rockstar Finance Minister failed to see coming for so long.

It is interesting to note that only Bloomberg has picked out the probably most significant development in positions (the moves on the Greek side simply being long overdue).

Merkel drew specific attention to this element during her press conference, referring, in English. to “prior actions” by the Greek side. Any suggestion that she might have leeway to satisfy the mistaken Tsipras view of final decisions being possible between leaders disappears. And the option for Tsipras to say one thing in Brussels and another before his Syriza audience in his own parliament is effectively removed. The ball is back at his feet, where it has always been, not that of the Europeans as he has again claimed.

The Germans must know a thing or two about game theory.

We are all creditors now…..reports that Michael Noonan joined the German Finance Minister in calling on the ECB to limit ELA to Greece in the absence of capital controls.

@ Geronimo

How much of the Dutch current account surplus relates to MNC corporate tax avoidance?

30% of Germany’s €189bn trade surplus (goods + services) in 2014 was with the rest of the Euro Area and more than half was with France.

Greece has to take the lead in attracting investment from a wide range of countries including Germany and time spent with Chinese leaders is likely to be more productive than depending on Putin.


“a positive sign”….

For who. The tenor of your posts belies a complete lack of empathy for Greece’s plight or fate. The endgame from you perspective appears only that Greece is put in its place, stays in the Euro and succumbs to unsustainable demands of Europe’s task master. This continuous commentary on the foolishness of Syriza and Varoufakis is grounded in nothing other than there refusal to outright capitulate to what is being demanded of them. At what point would you suggest there position is reasonable….a 25% drop in GDP, 27% unemployment, 40% youth unemployment, social unrest…and this is all before further “reforms” to extract more money from the economy by running excessive surpluses to pay profligate creditors – at WHAT POINT are their actions reasonable in saying enough is enough…huh? Some balance please!

Excellent article here from Bloomberg.

By Nikos Chrysoloras and Mehul Srivastava

To quote…“Quite a lot has been lost, and quite little gained,” said Kevin Featherstone, a professor of contemporary Greek studies at the London School of Economics. If it “was a delaying tactic, that would only make sense if the deal got better,” he said.

On the plus side at least there is a Govt in place in Athens, it would be worse if the Govt collapsed and there was no Yanis Varoufakis to talk to…. !!

Either inside or outside the Euro…. Greece still has more pain in front of it.

@ Nocense

You are missing the central point that I am making which is that the election of Syriza, in my opinion, was a major negative, if not catastrophic, development for Greece. I have as much sympathy for the plight of ordinary Greeks as anyone else but sentiment and money seldom make good bedfellows. Little sentiment is currently being shown by Greeks taking their euros out of Greek banks as fast as they can. Outsiders cannot be expected to continue to replace them to keep Greek banks open in their broader interest.

I cannot put “balance” into the points that I am making by attributing qualities to Syriza as a collective, and to Tsipras and Varoufakis as individuals, which the evidence demonstrates overwhelmingly that they do not have. Good government in a democracy is a question of balancing competing interests in a manner that ensures economic growth and well being. Nine tenths of the detailed actions which Syriza has now formally tabled are based on attempting to increase tax income rather than by undertaking the root and branch liberalisation of the Greek economy that is required. In short, Syriza is trying to retain its appeal to the groups that elected it rather than taking the actions that are necessary in the interests of all. It remains to be seen if the creditors can accept this, especially the IMF.


‘… the election of Syriza, in my opinion, was a major negative, if not catastrophic, development for Greece.’

The election of Syriza, in my humble opinion, was a major positive, if not revolutionary, development for Greece and the European ‘Union’ (sic).

Worth noting that the last time a genuine left looked like winning after WW2 that the Brits and the Yanks sent in the troops to put them down – after the left in Greece had fought valiantly against the Nazis.

Default within the EuroZone is the optimum option for both Greek citizens and EU citizens. The totalitarian duet of Ordoliberalism and Financial System Diktat is proving to be catastrophic for the original ideals of The European Project ….

Minister Noonan’s record on Greece is most unfortunate ….

@Michael Hennigan

Michael, you say: In the boom years countries like Greece and Ireland appeared to be a lot richer than they were — Ireland remains poorer than Italy on a per capita basis. Greece’s challenge is that it is both a very poor exporter and a poor performer in inward foreign investment.

According to Wikipedia (which of course might be utterly incorrect):
GDP (PPP) 2015 estimate
– Per capita $48,787[6] (11th)
GDP (nominal) 2015 estimate
– Per capita $52,256[6] (14th)

and Italy (

GDP (PPP) 2015 estimate
– Per capita $35,811[3] (32nd)
GDP (nominal) 2015 estimate
– Per capita $30,594[3] (27th)

See also:

I can’t figure out who’s correct? Perhaps you might comment.

fyi Back to Reality

Greek crisis: Merkel placing investors above democracy, says Habermas

German philosopher accuses chancellor of undermining EU and its common currency

‘German philosopher Jürgen Habermas has accused Angela Merkel of undermining the European Union and its common currency by putting investor interests above democratic concerns and thus prolonging the Greek crisis.
European leaders had degraded themselves in the crisis, he said.
Rather than correcting euro shortcomings exposed in the crisis by launching a push for full political and economic union, he said they were now acting like “zombie” creditors.’

Wonder what the ‘local bank managers’ make of this?

@Dan Mclaughlin

“We are all creditors now…..reports that Michael Noonan joined the German Finance Minister in calling on the ECB to limit ELA to Greece in the absence of capital controls.”

What was the reason for or purpose to that intervention by Noonan.
In what way did it help Ireland’s national interest, or offer any solution to the 7 year long crisis in Europe.

One can only conclude that Minister Noonan was making amends, for having misspoken as reported in the Varoufakis artcicle.
Perhaps getting back on side is in the national interest.

The outcome of such a request, if conceded, would be to encourage and allow the ECB to shut down en masse the banks of any country, that some of the European powers felt was not towing the line; and by extension shutting down the country concerned.

It was an extraordinary request even by Germany, but most certainly by Ireland.

What goes around, comes around; often sooner than one thinks.

It may be instructive to get the views of a noted Greek commentator rather than those of a German philosopher, however eminent.

Tsipras is now to meet the representatives of the “institutions” aka the “troika” before the Eurogroup meets. And the Greek parliament is to adopt whatever finally emerges by way of agreement before the end of this working week in order to allow the Bundestag to agree in its turn early next week before its recess.

It will be the wrong agreement but better that no agreement.

The end of the travails of Greece is nowhere in sight. But the destiny of the nation states of the EU is in the hands of their own citizens. The task cannot be palmed off on others.

@ shane o’mara

Excluding Luxembourg (which has a GDP per capita boosted by the fact that part of its workforce lives in neighbouring countries), in 2014 Ireland had the highest GDP per capita in the EU at 32% above the average.

This includes tax-avoidance inflated profits of the multinational sector.

Actual Individual Consumption per capita, a proxy for standard of living, shows Ireland’s level below the Euro Area average. This is what would be expected as a large FDI sector does not do significant research in Ireland while the non-international trading SME sector, accounting for two-thirds of private employment, is mainly low paid with limited pensions coverage. Farming is also not viable without subsidies.

Irish standard of living in 2014 below Euro Area average, Italian level; Prices 5th highest in EU28

Most insightful article here…

ELA was …

by by Jeff Black, Dara Doyle & Lorcan Roche Kelly.

‘So-called Emergency Liquidity Assistance for banks has been part of the ECB’s toolkit since its foundation. It was intended to allow authorities to tide over solvent lenders who could neither raise funding in markets nor had collateral for regular ECB tenders. The measure was never meant to save whole countries”.

“There has been little sympathy for the ECB’s dilemma in Athens, where Tsipras has described its tight control of the liquidity aid from the Bank of Greece as “asphyxiation.”

To an extent, Greece has been lucky to escape the full ire of the ECB, especially after Finance Minister Yanis Varoufakis declared in February that he was in charge of a “bankrupt country,” according to Philippe Lamberts, a member of the European Parliament’s Economic and Monetary Affairs committee.

“They knew we were in a situation that really threatened the cohesion of the euro zone and now they have to play safely,” he said. “They showed restraint.”

Game theory at work….and so far working… but for how long?

The end of the travails of Greece is nowhere in sight. But the destiny of the nation states of the EU is in the hands of their own citizens. The task cannot be palmed off on others.

Utter nonsense. You put a gun to a mans head and tell him to cut off his finger – he’ll do it. Was the destiny of the missing digit in his own hands?

Utter rubbish.

McWilliams excellent article today gets to the heart of the matter which isn’t nearly as complicated as the technocrats would have us believe. The patent duplicitous nature of the German position v Ukraine and Greece is not at all shocking but truly reprehensible. It is absolutely appropriate that the Germans of reminded of there pretty recent history of statecraft and that perhaps they need to check themselves amidst their sanctimony once again.

The Leaked Red Line document makes it nearly impossible for Greece to sign up to the terms proposed. There is no way they can bring this back to the Greek people as there is no way to spin a story on the extent of the capitulation when it is written there in black and white (or rather red!)

see it on Guardian EZ crisis blog.

Whether what Tsipras is proposing is acceptable or not to Greece’s creditors did not remain to be seen for very long.Their answer is no; and for entirely understandable reasons. It is not part of their remit to resolve the internal political contradictions of any government, least of all the new government of Greece.

To use an age-old proverb ” he that pays the piper, calls the tune”.

It appears the real ‘adults in the room’ have stepped in – the Americans. This article in the NY Times couldn’t be any clearer – Merkel better make a deal or else.

NY Times article

Lots of great sly comments, such as Greece entering ‘the eurozone without European, German or other officials raising serious questions’.

But the best is the German minister complaining that the way the Greeks have ‘behaved has really damaged the mood’! Why can’t those pesky Greeks play nice!

@ Nocense

I will take the liberty of replying by borrowing a recent blog comment from the FT which sums up my view (without the effort on my part to set it out).

“Ideology is not government. Syriza does not know what it means to govern a country, nor does it know how. Their failure is in their inability to present any stable or clear ideas for businesses in Greece to succeed. All they want is more money to give to the people, but they offer no solution of where that money is going to come from other than taking it from others. Their dearth of any plan or system or incentives for business to succeed is detrimental to their socialist cause. There is nothing to socialize. There is no investment. There is a dwindling amount of business as there is no clear plan or ideas for the future. Syriza wants to raise taxes on what is left of business in order to pay out to those who support them in order to stay in power and continue draining the systems that these Greek businesses are trying to create. They need to be more focused on the rule of law, reform of the court system, reform of the public sector, reform of pension system, etc… This would give some clarity to business so that they are able to invest, earn, profit and reinvest. Syria hasn’t got a clue on how to achieve this, or if they do, they haven’t made it clear to those honest Greeks who are trying to succeed. Those Greeks, who are the ones paying their taxes, trying to do honest business in a corrupt environment and who try to negotiate the haphazard network of rules, laws and payola, are the ones that are the true patriots. Not those people clamoring at the gates supporting the bankrupt socialist cause of Syriza.”

I agree with u for the most part save political sense. It would be disaster for FG were Greeks with only a modicum of the leverage we had in 2012 to achieve a substantive deal on debt. This trumps all other concerns for Kenny and co. It is FF all over and not FF lite either. Full blown.


FG’s behaviour is all their own. I cannot imagine FF coming out and attacking Greece the way FG have. FF feel they and Ireland were screwed by the IMF and the ECB. It is highly unlikely they would have become Germany’s sidekicks like ‘Feta’ Noonan and Kenny.

Noonan’s desire to differentiate Ireland from those in trouble by making little of other countries in trouble may well come back to bite Ireland from a number of quarters in the EU.


You left out the signature I fear.

“…sincerely, Mr. Shcauble”.

“Ideology is not government” – Herr S opens with this and then goes on a ideological rant in pursuit of Utopia. No acknowledgement of the pain already taken on board – 25% fall in GDP, consistent budget surpluses, 27% unemployment….this is already a failed state – there is nothing left to give whatever of its profligate past. I truly hope they have the good sense to tear it down completely and start again.

As concluded by the Meltzer Commission in a report to US congress in 2000, which was highly critical of the tactics adopted by the IMF/World Bank…”a crisis country is motivated primarily by acquiring liquidity rather than the terms thereof”

This is precisely the weakness Greece’s creditors are seeking to exploit now. Strong governance will require Syriza to not cave into the weakness identified in the Meltzer report. They will have done their people a great service if they manage to do that because the alternative is still better than concession.

Irish position is mainstream. Debt reprofiking is return for proper reform & small primary surplus. Then Greece gets access to QE & yields come down.
What is not on offer is debt writedown & underwriting of Greek fiscal incontinence. Rest of EZ ad idem on that. Of course Greece may choose to do that unilaterally but it will gain no friends, esp East of Vienna.

Looks like missing a IMF payment is not such a calamity after all..

Taking up to 2 years to finally get booted out of the IMF scheme.

However economies which have lent to the IMF may not be happy that they are not getting their money back… China for example.

On the other side… the carnage ongoing in Greece is unsustainable for any society…

Greek businesses are getting destroyed as the Syriza communists are leading the country back into the stone age.

Hope is getting eroded quickly.

As for Ireland… the Greek situation could be a sign of things to come after a Dysfunctional Idealist Socialist Marxist Govt takes power in 2016.

History repeating itself!!

“Greek businesses are getting destroyed as the Syriza communists are leading the country back into the stone age.”

Because everything was going so swimmingly well for Greece before their arrival on the scene just 5 months ago. It reminds me of the man you is sick from the drink and blames the last pint he had in the nightclub on it. “Dirty communist black shhtuff that place serves”

@ ufc

Like a lot of what Varoufakis says, it does not seem to mean anything in particular. The idea that our esteemed minister of finance, with his colleagues, are collectively in the dark on the most recent – brilliant – Greek proposal (a theme he returned to on RTE this morning), is simply incredible.

@ All

The latest from Reuters.

We will see before Monday whether or not the blogger – writing under a pseudonym in the FT – whom I quoted above is right in his assessment that there is, in practical terms, no government in Athens i.e. in the sense that it can table a coherent proposal, stick to any agreement reached and defend it.

The key words are “staff level agreement” and adoption of “prior actions”.

Schaeuble is quoted in the German press as putting the chances of agreement at 50/50.


I wouldn’t worry too much. The likelihood of a “Dysfunctional Idealist Socialist Marxist Govt tak[ing] power in 2016” is negligible. Least, so I reckon.

For one, Sinn Fein has taken the populist challenger ‘space’ away from 2010 ‘opposition’ mainstream parties, who quickly changed their politically populist demeanour (FG & Labour) once they were confronted with the realities of government responsibility. SF are not going to concede this ground to other challengers from the left.

OK, so SF experienced a ‘blip’ in the Dublin South West by-election with the election of the SP-AAA’s Paul Murphy, contrary to their own expectations. In the remobilised, previously voting-abstentionist areas of marginalised Dublin communities, the competition for vote gains will thus lie between the disparate leftist groups and Sinn Fein. As we all know by now, SF has more money for campaigning than any of their on-the-ground competitors. That will tell in a GE context.

I would tend to regard SF’s populism, and their emphasis on social welfare concerns, as similar to the Labour Party positioning in the lead up to GE 2011. In the end, as Pat Leahy of the Sunday Business Post documented in his brilliant book, GE 2011 boiled down to a ‘promises contest’ between Labour and FG. Most interesting, the ultimate exchange of seats between the three mainstream parties was equivalent to the total which they had occupied prior to that election. The main parliamentary seat exchange occurred among the mainstream parties, not external to them. FF/FG and Labour won 132 seats, same as the total number they cumulatively held following the 2007 election. It’s just that the distribution among the parties differed.

Although FG and Labour poll ratings have respectively declined since 2011, the share of the deflected ‘left’/populist vote preference has not increased among SP, AAA, SWP etc. To the best of my knowledge, these so-called ‘fringe’ parties are still recording less than 2%, respectively, of the national vote in successive opinion polls. SF have been the main beneficiary of government parties’ voter appeal decline, and of apparent FF poll stagnation, in terms of national poll vote share. Hence, SF has experienced a consistent rise in their poll ratings up to and above a mean 20% over the past two years However, SF are vulnerable in other respects, not least in terms of the shadow of past paramilitarism. [That’s ‘For two’!]

For three, none of the mainstream parties will go into government with SF. It would kill their middle-class support base stone dead. Irrespective of what learned political pundits may speculate, it will not happen. Thus in the next GE, the left wing ‘alternative’ will continue to be squeezed by SF, which has no prospect of power in the immediate sense. Meanwhile, a plethora of more centrist alternatives has begun to emerge…which offer the prospect of reasonable ‘government partners’ to the centrist parties, depending on the configurations…

And, by the way in case you may not have noticed, the general election campaign is now in full swing; from a plethora of election ‘promises’, to setting the key issues agenda, to personally campaigning directly at railway stations…Oh, dear God Almighty, look after us!

We, the ordinary citizens, will be OK though. Think of it this way: we’ve survived our politicians since 1922.

@ Nocense,

I take it back, apparently the Greek negotiation team found out via Twitter that Tsipras had announced a referendum.

You’re right those communists are not in the Stone Age at all!

Talk about dysfunctional governance!

My money is on the referendum of Euro membership passing, and Syriza getting booted out in the following GE.

@ Veronica,

You never fail to put a smile on my snout!

A most insightful article, up to your usual high standard. But don’t underestimate the House Red….Ms Clare Daly.

Here’s hoping you are correct!

Thanks & Regards!

@ Veronica

‘….we’ve survived our politicians since 1922’

Agreed – and I would add – ‘ the senior non-electeds of administration at national, semi-state and local levels’.

Mind you that ‘survival’ has come at an extremely high social and financial cost.

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