Miscellaneous irritations

1. I see that Juncker is saying that it is a shame that the Greeks walked out of the negotiations last week; and yet the creditor negotiating stance seems to have been “give us everything we want, and maybe we will discuss what you want (debt relief) at some later date”. For an account of the negotiations, see here.

2. I see that Hugo Dixon was describing the parties that got Greece into this mess over the course of several decades as “pro-European”, implying that Syriza is anti-European. Come again? Since when does opposing a particular policy mix (in this case one that has failed disastrously over the course of several years) make you anti-European?

3. I see that Martin Schulz is now denying having said that a no vote meant that Greece would have to leave the euro.

4. I can’t count the number of times I have heard French friends tell me that the problem is that the Greeks don’t pay taxes. (All Greeks, you understand.) What about Troika officials?

5. Aside altogether from the immense catastrophe of the last several years, Greece’s GDP shrank 0.4% in the last quarter of 2014, before Syriza got to power. Just saying.

6. Like Paul Krugman, I gave a cheer when I read Wolfgang Münchau’s stating the obvious:

What I found most galling was the argument that Grexit would bring about an economic catastrophe, as though the catastrophe had not already happened.

Some of the crocodile tears being shed on Sunday night about the humanitarian catastrophe that the Greeks were now supposedly bringing down on themselves (as if the ECB’s refusal to ensure financial stability in that country is irrelevant) I found pretty hard to take. Where have these humanitarians been hiding for the last seven years?

7. No comment necessary:

SPIEGEL ONLINE: Herr Fuest, angenommen, Sie wären wahlberechtigt, wie würden Sie am Sonntag beim griechischen Referendum über die Reformpolitik abstimmen?

Fuest: Mit Ja. Nachdem Ministerpräsident Tsipras sein politisches Schicksal an den Ausgang der Wahl gebunden hat, wäre mein primäres Ziel, ihn und seine Regierung loszuwerden.

8. Faymann: “Europe is known for compromises. Renegotiation until the last minute. Greece didn’t do this when it walked out of negotation.” The Greeks have been making compromises for months; where is the German compromise on debt relief?

There, that feels better.

On the bright side, it seems that around 80% of young Greek voters voted no.



213 replies on “Miscellaneous irritations”

Paul Krugman urges Grexit and devaluation as the solution to Greece’s economic problems.

The same PK has been a major opponent of the Big A. But just in case folk mistake this as an opposition to the immediate human hardship of “A” let me defend the Nobel Laureate’s professional integrity. A 50% (say) devaluation in the new currency would wreak far more immediate misery on Greece’s pensioners than any austerity program would ever do. But that’s exactly what PK’s econometric models need to fix the system – the massive transfer from pensioners et al to the earning sector wrought by the sleight of hand of devaluation, you know the Zimbabwe school of thought.

Sometimes I think giving Nobel Prizes for economics is not doing humankind any favours. Laureates tend not to leverage off their prizes in say physics or literature, other than maybe to sell more books or go on lecture tours. Economics laureates on the other hand openly flaunt their gongs to influence gullible politicians, editors etc.

“On the bright side, it seems that around 80% of young Greek voters voted no.”

Also on the bright side, the arrogance of the Troika is likely to do the Greeks a favour by pushing them out of the Eurozone. Of course that will hurt the pensioners, but crumbly though I am, I must admit that it’s more important for any country to provide a future for the young than comfort for the old, if the choice has to be made.

The ECB Governing Council meetings of June 28th and July 6th took key decisions restricting ELA for Greek banks. Since the beginning of the year the ECB has been publishing accounts of GC meetings (but not voting records) with a 3/4 week lag. The accounts, unless they are withheld, should become available before the end of July. There would, one imagines, have been legal advice, which should be interesting.

So what is the deterrent for irresponsible / reckless economic management of a country to be?

The deterrent would normally be.. a day of reckoning followed by austerity, followed by (hopefully) economic realignment, adopting future growth strategies etc.

If the entire Greek debt was to be written down to zero today, unless there is adjustment as to how things are “done” in Greece the country will recommence bigger and bigger debt, so that in 15 years time… we are back to where we are now…. 330 billion odd underwater.

A modest proposal:
Future comments on the Greek problem should concentrate more on “what is now to be done?” and less on self-righteous indignation about the errors ( or worse ) of the assorted dramatis personae.

Greek politicians of all stripes have made a complete and utter mess of their economy. Therefore academic economists admire them. Irish politicians have taken hard decisions and rescued the economy. Therefore academic economists loath them.

But there is at least a small comfort to be taken in the fact that no one cares what academic economists think about politics (or economics if we’re being honest).

ATHENS – On September 6, 1946 US Secretary of State James F. Byrnes traveled to Stuttgart to deliver his historic “Speech of Hope.” Byrnes’ address marked America’s post-war change of heart vis-à-vis Germany and gave a fallen nation a chance to imagine recovery, growth, and a return to normalcy. Seven decades later, it is my country, Greece, that needs such a chance.
Read more at http://www.project-syndicate.org/commentary/speech-of-hope-for-greece-by-yanis-varoufakis-2015-06#vuoVX0dMPY6smxAY.99

The Irish-American Jimmy Byrnes was the 49th US Secretary of State for the period 1945-1947. He was confidant of US President Franklin D. Roosevelt, and one of the most powerful men in American domestic and foreign policy in the mid-1940’s


“Greek politicians of all stripes have made a complete and utter mess of their economy. Therefore academic economists admire them. Irish politicians have taken hard decisions and rescued the economy. Therefore academic economists loath them.”

Insightful, well substantiated arguments. Running in the next election per chance?

@ Geronimo

German ran record trade surplus again in 2014.

€217bn Euro v €194bn in 2013 and €188bn in 2012
Exports: €1.13trn v €1.093trn in 2013
Imports: €916bn v €898bn in 2013

Intra EZ Trade
€533bn v €513bn 2013
Intra EU trade surplus
€63bn v €61bn 2013.

Intra EU Trade
€771bn v €748bn 2013
Surplus €120bn v €115bn

Since 2010 Germany have run a trade surplus with its EZ “partners” of €915bn. In 2010 its intra-EZ trade accouted for almost 57% of its trade surplus, this has fallen to just under 30% in 2014….but here’s the kicker for those crafty germans…the relevant weakness of the Euro has seen its exports to China, USA and UK in particular rocket in 2014.

Germany’s trade deficit with China has fallen steadily from €23.5bn in 2010 to under €5bn in 2014.

Its surplus with the USA and UK has more than doubled since 2010 to €57bn and €40bn respectively.

So while the porportion of its surplus attributable to EZ members has fallen since 2010 from about 56% to 30% – the absolute level of EZ surplus has fallen just 22% in the last 4 years. It has more than been made up for by the its artificially low “Deutsche euro” which has seen huge growth in exports to the China, USA and UK…..

…but Germany taxpayers don’t want to pay for the party – I have seen some commentators on this site suggest the low euro value (which doesn’t take account of the low “duetsche euro”) explains little about Germany’s incredible trade statistics. That’s akin to saying price doesn’t matter….it is THE central part of the story….not sure if the will is there to explain it to German citizens however….”nien” to Greece’s “oxi”

CJH once opined that you give an economist a small office at the end of a long corridor and send a porter for his work on occasion. A man ahead of his time who would understand the Greek psyche.

@Johnny Foreigner:

The main problem in Ireland is the media, whose motto seems to be “Pas d’ennemis à gauche”. So Syriza will never get the scrutiny and criticism they deserve. As for academic economists, please don’t think that the voices you hear most often in the media are representative.

@ Peter Stapleton

Amen to that! However, there is little chance of your proposal being adopted.

Moving on, the inside information on what Euclid will propose.


All the Greek parties are, apparently, on board but leave the responsibility with the government. The changes on VAT (keeping the 13% for hotels and the cut-rate for the islands) will probably get through. The delay on the pension issue, probably not. The idea of not cutting defence spending in order to keep the right-wing junior partner happy borders on the Kafkaesque. (The only argument that could be made in support of the idea is that the – state supported – French and German defence industries did well out of the sale of unaffordable military equipment to the Greek military establishment).

One sceptical opposition member comments that what the government is looking for is “Juncker-lite” when what the Eurogroup is seeking is “Juncker plus”. It seems, nevertheless, that some common sense may finally have struck home in Athens.

As the Luxembourg finance minister commented (Luxembourg holds the EU presidency at the moment).

“We need to understand how [the Greek government] will resolve the contradiction – they want to stay in the eurozone but they say the proposals on the table are not acceptable.”

It is a tragedy for the Greeks that their financial system had to run out of road before the electorate fully understood the nature of this contradiction.


The usual line from academics is that politicians need to learn more about academic research. In fact the opposite is true – academics need to learn far more about policy making.

@John Sheehan

That and the fact that most academics and journalists have only a second-hand, filtered version of what life is like for the citizenry. Jobs in sectors like food production, tourism, retail, construction, agriculture – all this remains a complete mystery to those who cover politics and the economy in Ireland. It’s the same with social welfare issues – see latest debate on single parent payments. The whole debate is done in the abstract, from behind a desk, or with other herberts on twitter.

@ Nocense,

I’m not sure I fully understand your central point here.

If I understand you correctly…

1) Germany is good at engineering / fabrication of certain products, i.e.. BMW, Mercedes, Audi, Bosch, Siemens etc etc etc.

2) With a low value Euro…. export sales of these products has increased, both inside the EU and externally.

3) This makes a higher turnover of money in Germany.

You then comment…

“…but Germany taxpayers don’t want to pay for the party”

What party is this you refer to?

With a lower euro…. the energy costs to make such export products is higher (i.e. Gas from Russia etc), the raw materials which might be imported are higher (i.e. Tungsten from China) etc

From your post, you seem to be saying, Germany has a lot to blame for this crisis because..

1) It made products which sold well.
2) It made those products in a economical and efficient manner.
3) Germany was good a making those products.
4) Germany got money for making desirable / in demand products.
5) Germany made money from those products.
6) Other countries (i.e. Greece) which bought German products have been robbed of their money.

Please tell me I am wrong!

It now appears that Greece has snubbed the Eurogroup (shouldn’t have thrown Varoufakis out) and may submit a new proposal tomorrow to the Heads of State. Don’t suppose Schauble et al will be too pleased. In Greek tragedy Nemesis followed Hubris.


The full logic of the nocense analysis was revealed to me on a local radio call in show this morning.

Caller: “I don’t like the way the Germans are pushing everyone around. Especially after what they did in the war.”
Host: “But what exactly are they doing wrong?”
Caller: “They are too bossy. It rubs me up the wrong way.”


I think the issue is more that Germany is artificially undervalued within the context of EMU, and always has been (despite mutterings at the time). Were the Germans to leave the euro their currency value would appreciate.

Relying on export led growth is to demand out of other economies. If all economies were to do the same we would be at a net loss.

The counter side to this is financial lending. When you have consistent net exports you are lending to the world, and with net imports you are borrowing from the rest of the world.

The only way that peripheral economies can pay down domestic debts is through current account surpluses (i.e. net exports), otherwise you are just shifting debt around your domestic economy.

For this to happen Germany needs to loosen its belt and rebalance towards domestic consumption led growth.

Germany is a gross distortion in the Euro (being significantly undervalued vis a vis other core economies). The periphery is overvalued and Germany is grossly undervalued, and yet the full brunt of the adjustment has fallen on those who are less politically powerful.

In a sense, the Euro has allowed Germany to export bankruptcy to the periphery economies. Were Greece to leave the Euro then this could be halted.

I have to say since leaving university I have come to realise just how important exchange rates are, it is such an important relative price. Really the entire financial crisis of 2007 can be explained through the manipulation of echange rates over time.

So Greece basically showed up with either no proposals today or no new proposals. They said they would “maybe” bring some new ones tomorrow. For all the blame that can go around, this seems like a pretty strange way to go about “fresh” negotiations or get your banking system open again. They’re making it easy for the hawks to push for an exit.

Adding to the list

8. Do Eurocrats read Eurostats?

In 2014, the ratio of general government expenditure to GDP decreased in a majority of EU Member States compared with 2013. The highest increase in the ratio of general government expenditure to GDP was recorded by
far in Cyprus (+7.7 percentage points between 2013 and 2014), followed by Malta (+1.6 pp), and Austria (+1.4 pp). In contrast, significant decreases were registered in Greece (-10.7 pp) and Slovenia (-9.9 pp).



Firstly, my data was provided pursuant to a request from Geronimo. Draw your own conclusions.

Secondly – economics 101. Trade surplus and deficits is a zero sum game on a global scale. Deficit countries cannot not pay surplus country surpluses in perpetuity. Free floating exchange rates acted to a signficant (but not absolute) control mechanism to limit flows in either direction. A the height of the EZ crisis almost 60% of Germany’s trade surplus was with its EZ partners. It was a major contributory factor to perpetuating the EZ crisis because the redistribution of funds from German reached the peripheries through extraordinarily cheap credit in Spain, Ireland, Greece, Italy….

…but you know what, we’ve been through it all on this site so often before I can’t bring myself to type anymore….the whole thing is so bloody self evident. Anyone who purports to suggest that Germany has not been the number 1 benefactor of the EZ project, that Germany is not benefitting to an extraordinary degree today due to the weakness of the Euro (which is attributable to the crisis) are simply in denial…like the German people….although I suspect the top brass understand the equation perfectly.


Master of the anecdote. FG/Labour will be dragging you out before the election.

Are you related to “joe the plumber” by any chance.

and before the flood of clever retorts comes back on the previous post. Benefactor should read Beneficiary.

There is a tendency to take sides on an issue like this and a party on the other side e.g. Mario Draghi, is put in the gallery of rogues as for example he didn’t agree to provide liquidity for a potential bank run triggered by the sudden announcement of a referendum to take place after the expiry of an agreement with Greece.

Greece’s Financial Stability Council, which includes 2 ministers, agreed to introduce capital controls as there would have been a spike in withdrawals last week.

@ Nocense

You need to do more Googling, as Geronimo asked where was the German surplus invested?

Germany has achieved a goods surplus every year since 1952.

The type of goods that dominate its exports, the structure of its firms — more large and medium size firms than France, Italy or Spain — the reputation for quality in emerging markets, and also 3 times the number of exporting firms than France, are enduring factors whether the currency has been high or low.

German manufacturing wages are the highest of big manufacturing nations; in contrast with the UK, Germany’s recent rise in employment has been mainly in permanent jobs.

Since the euro was launched in 1999 private consumer spending as a share of GDP has been higher than in France in most years.

If Greece improves its inward investment to the average level of Romania, Bulgaria and Turkey in the past decade it would increase eight-fold.

France accounts for more than half of the Euro Area deficit.

The IMF says the euro is a continuation rather than a structural break and the Fund’s statistics show that since 1999, Germany’s trade surplus with the rest of the world has grown faster than its surplus with the other Eurozone countries – and faster still with European nations that have not adopted the euro.

The German economy is important for the rest of the Euro Area, Poland and the Czech Republic.

@ All

The German Current Account surplus reflects a number of factors – the decline in the growth of construction from the boom in the 19990s; the federal budget has turned to a small surplus while the non-financial business sector converted its net borrowing figure of 2.5% in the late 1990s into net lending of 1.0%. Household debt also fell from the 1990s boom.

European policymakers did sell the euro as a means for poor countries to converge rapidly to the richest but for a country without significant natural resources, that seldom happens.

The same applies within countries.

In 2014 per capita real GDP by state in the US ranged from a high of $66,160 in Alaska to a low of $31,551 in Mississippi. Per capita real GDP for the U.S. was $49,469 (BEA).

In Germany, the GDP of the former GDR is about 70% of the former West Germany.



It is a tragedy for the Greeks that their financial system had to run out of road before the electorate fully understood the nature of this contradiction.

I am searching for your expressions of sympathy for the effects of the last five years of the Troika program on Greece:

* GDP dropped by 25%
* Unemployment rose by 1.2M
* Youth unemployment rose to 60%
* Malaria returned to Greece
* Suicide rose by one third and has stayed there.

One could go on for a long time about the “successes” of the Troika program but strangely the right wing chorus remain silent on the real world effects of austerity.

The truth is that by almost every measure of the economy’s and the country’s health the Troika program has been a disaster and last years phantom growth spurt coincided with an easing of the fiscal contraction (possibly to make an ND victory possible). Add to this that the old program mandates increasing fiscal contraction during the next three years and you might wonder what exactly the Troika had planned for Greece – recovery or to be used as an example of the Troika (and Germany’s) power to inflict misery on the disobedient.

Aidan Regan put it very well here: http://europedebate.ie/greferendum-the-last-battle-of-economic-ideas-in-europe/

It is not responsible politics to implement failed economic policy.


Perhaps you can provide the data on where they are spending it? Google it even?

Ironically some of it is in loans to Greece? But if your looking for it all back its not a redistribution of surplus…especially when the money is used to pay its own banks.

“…are enduring factors whether the currency has been high or low.”

Not denied…but it is fact that the growth in the surplus has been exponential since joining the EZ. It is also a fact that the construct of the monetary union and the current crisis is adding enormously to its surplus coffers. I am totally perplexed as to why you always attribute so little relevance to these factors notwithstanding your justified position in extolling the other relevant variables – the denial undermines the value of the overall proposition around Germany you always put forward.

It is incorrect to say they have always had “good surpluses” since 1952. In the early 90s after the fall of the Berlin wall it was running very modest trade surpluses of around €10bn….the surplus has grown by 270% since 2000 and has doubled to 5.6% of GDP in the same time.

Good to see Pearse Doherty SF and Paul Murphy SP invited to Athens for the Referendum result …

One wonders why the following were not invited: Enda Kenny, Michael Noonan, John Bruton, Joan Burton, Brian Hayes, Danny McCoy, Dan O’Brien, etc and a gaggle of middlin hacks toeing the propagandized oligarchic line?

Ireland, and its present quislingesque admin, has missed an opportunity to ‘speak’ to the lunacy of the cultish ordoliberal doctrine which is destroying the European Project to benefit odious capital and diminishing the place of Europe in the world.

From a EuroCitizenCentric perspective – German Leadership (sic) has failed. So has French. Period. Lessons from the role of the Germanii barbarians in the fall of the Roman Empire have not been learned …. these barbarians have evolved into the upper echelons of capital and are pillaging left and right …. with the imprimatur of the leaders of the Germanii and the Gauls ….

p.s. anyone got any info on the rumour that Croke Park has been bought by a New York Hedge Fund?

Meanwhile, back at the ranch!


For the new finance minister to turn up without a written proposal is nothing short of incredible. Tsipras is in for a hot old time over dinner. Sigmar Gabriel is right. Greece should never have been allowed to join the euro zone. It is even doubtful whether it is mature enough as a country in western European terms to be a member of the EU given the lack of progress made in terms of integration since joining.

The jury is still out as to whether Tsipras simply does not know what he is doing or he has another agenda, which can only be to take the country back to the drachma but to leave the political blame with the Euro Group and Germany in particular. Given what is happening in Chinese stock markets, and the general situation internationally, the latter may no longer much care.

@ Nocense,

O.K.. I see your point now… however a low value Euro makes German products look cheaper to countries outside the Euro, i.e. UK, China, USA etc etc.

A low value Euro does not make German products cheaper in Greece or Ireland… this is because they are inside the Euro region.

In fact… it could be argued that German products should get more expensive as the Euro devalues, due to imported raw materials, imported oil + gas from Russia which have to go into the cost of said products etc.

It is not as if Greece is in direct competition with Germany, Germany is historically very good at Engineering / Chemical products i.e. Siemens, Krupps, Bayer, BASF, various automobile companies etc.

Greece to the best of my knowledge does not have this industrial base, either in heavy or light engineering. So if Germany is making a lot of money in exporting cars, it is not as if Greece is losing out… because Greece does not make any cars for export.

It could be argued, that the flood of credit from Asia, into Europe… allowed EU peripheral nations to borrow large sums to buy German products. But again it is not compulsory to buy German goods.

Interestingly enough anybody remember the exchange rates when the Euro was introduced?

1 Euro = 0.787564 Irish Punt.
1 Euro = 340.75 Greek Drachmae

From the Telegraph. Philip Johnston.


It is wrong, however, on a number of essential points notably (i) Greece is not symptomatic but atypical (ii) the logic that EMU leads inevitably to political union remains unproven and (iii) the European “constitution” (a flight of fancy by Giscard d’Estaing with, incidentally, an opening statement in Greek) was not dressed up in different clothes but in the correct ones i.e. those of an international treaty which is what it was in the first place.

One of the big revelations and one which is getting very little coverage is the remarkable unity in the Eurozone. This is 18 to 1. Listening to the reps of various countries on RTE News I was greatly heartened by the solidarity and totally unequivocal loss of patience with the Greek position.

The people of Greece, Nigel Farage, Sinn Fein and indeed many on this blog have bought into the narrative of Greece versus the WWII bully Germany, but it has cut no ice whatsoever with the overwhelming democratic consensus in the EZ. The more the Anglo Saxon pokes at it the greater the solidarity.

A good day for the EZ.

The net value of German state assets in 1991 was 800 billion euros against a
value of zero in 2012 (footnote 79 in Staatsschulden: Ursachen,
Wirkung und Grenzen, Berlin-Brandenburg Akademie der Wissenschaften,
April 2015). The effects are noticable in the deterioration of
schools, roads, bridges, railways and canals. Much is made of the
German balance of payments with positive and negative interpretations.
What is perhaps less well known is what the Germans did with
it. Between 2006 and 2012 the net value of its foreign assets
dropped by an amount equivalent to 20% of its yearly economic output
and this in spite of a large surplus in the balance of payments
during this period. About one third of this loss was due to bad
portfolio investments, loans to poor debtors perhaps. No wonder they
are eager to recuperate the money from the Greeks. (Verluste auf das
deutsche Nettoauslandsvermögen- wie sind sie entstanden? DIW
Wochenbericht 49/2013 vom 5. Dezember 2013).

The Greek economy has now completely imploded, It is virtually at a standstill.
The EZ and the media would have us believe that this is a result of “capital controls”. That, of course, is a complete lie.
The reason the Greek economy has imploded is because the ECB has decided to strangle it, by refusing to allow cash into the Greek banking system; there is no other reason.

The ECB has, in effect, shut down Greece, just as it threatened to shut down Ireland on a few occasions.

There is no reason an economy cannot continue to operate normally with capital controls in place. I am old enough to remember taking invoices to banks, in support of requests for payments abroad. Most people here are aware of customs stopping people on the way out to Cheltenham, with a bit of spending money, etc. Those were “capital controls”.

Ireland operated normally during these periods of “capital controls”. No problem.

But what Greece is experiencing from the EZ/ ECB is a full-on economic blockade, with the ECB as the big offshore gun boat, besieging the Greek people.

It is a shameful, shameful, episode in European history.

Greece, regrettably, has made a poor choice on behalf of its people, following its historic no vote. On Monday after the NO vote, as the Axis block dug it and intensified the siege, Greece should have gone to Drachma and hard default.

Greece no longer has ‘partners’, she has enemies besieging her. The sooner she realises that the better.

“On the bright side, it seems that around 80% of young Greek voters voted no.”

On the even brighter side the Left’s chances of making a breakthrough in the next general election in Ireland have taken a big hit as a result of events in Greece since Syriaz (Greece’s Sinn Fein) took over. Recent opinion polls confirm this, all of them showing FG and FF increasing and SF falling, and the other left-wing parties nowhere.

The Left in Ireland has skewered itself by its close association with the Syriaz government and with its holding up of Greece as the model for Ireland to follow.
The contrast between Ireland’s rebounding high-growth falling-deficit economy and the shambles in Greece could not be more stark.

Does the Left think that when the election in Ireland comes and people are faced with a choice of the ‘Irish way’ or the ‘Greek way’, they are going to say ‘Oh yes – if only we’d behaved as the Greeks, we’d now have a prosperous and growing economy just like the Greeks have’. They can not be Syriaz.

I trust that the pro-capitalist parties in Ireland have lots of video footage of people in Greece queuing at ATMs ready for release when the election in Ireland is called. That will surely finish SF off.

“If the entire Greek debt was to be written down to zero today, unless there is adjustment as to how things are “done” in Greece the country will recommence bigger and bigger debt, so that in 15 years time… we are back to where we are now…. 330 billion odd underwater.”

Wash. Rinse. Repeat.

Creditors never learn.

Relevant to all this are the figures Eurostat published today for public expenditure as a percentage of GDP in all 28 EU countries (link below):


Very informative the figure are.

Greece was 10th highest, with public expenditure at 49% of GDP, above the EU average, well above Germany, well above Ireland and miles above the Baltic countries, which have the lowest public expenditure to GDP ratios. This is madness. No wonder the Baltic countries are the most resistant to a debt write-off for Greece.

The idea that Greece has no further scope for cutting public expenditure is baloney. If they cut it to Germany’s, Ireland’s or the Baltic’s level, they’d be out of debt crisis immediately.

But, wouldn’t this cause their economy to collapse further?

NO, it wouldn’t.

Look at the chart. Nearly all the countries with public expenditure above the EU average are either in low-growth, in stagnation, or even in recession. Finland comes top, with public expenditure at almost 60% of GDP and its economy is in deep doodah. Similarily with France. In contrast, nearly all the countries with public expenditure below the EU average are doing well or actually booming (Germany, UK, Ireland and the Baltics).

Greece should only be given further loans if they promise to bring public expenditure as a percentage of GDP down to 40% (in Ireland its 39% and falling – its even lower in the Baltics). They might find it will actually do them good and do more than anything to facility the growth of their economy.

@the second

I would have to agree with you on the united front being put on by the 18 other members. It is indeed a notable feature of the current situation. However I would be cautious about mistAking a united front for a spirit of solidarity. There are motives at play beyond the need to teach Greece about moral hazard.

In Ireland’s case a greek write down on debt would a political disaster for the government given their own abject failures in this regard. “labours way or frankfurts way” is up there with “everything that can be invented has been invented” as the worst prophecy of the last 200 years.

I am not sure but Spain, Portugal and Italy could be similarly compromised to a greater or lesser extent. Germany and France are not going to fall out over a minnow and politically German politicos have to deal with a misguided narrative in its domestic media that Germany are the saviours of the euro zone rather than the reality that they are very substantial it’s main winners. Try selling that reality to a German voter – religious devotion to a misguided philosophy has form among this electorate.

There is also the political concerns associated with conceding anything to a far left party like syriza.

Latvia and Slovakia are poor nations who simply can’t sell to its citizenry helping the Greeks who on the face of it are still better off than they.

A united front it may be but I suspect at its heart is the beating pulse of national/party political self interest rather than the notion of solidarity as envisaged by the European treaties.

Greece was running a fiscal bubble and thus Greece’s overall economic output was artificially inflated with cheap credit. Thus a contractionary adjustment was in order.

I have never seen Profs Krugman or O’Rourke admit to this let alone quantify it.


Firstly left wing parties don’t need videos of ATMs to show austerity does not work, they have statistics.

Greece has had dire economic performance since the start of the first Troika program in 2010 and for the last three three of these five years it’s been under the rule of a thrusting, pro capitalist, barely post fascist, EPP franchise operation (New Democracy), people not afraid to take those famous “tough decisions”. The kind of people you might like.

Despite New Democracy’s impeccable pro capitalist credentials and obedience to Troika doctrine the economic results have not, to put it mildly, been impressive. That is why voters deserted them. They could not deliver. (see above).

What has happened in the last five months is that the Greek people elected a left wing party Syriza in the hope of mounting a democratic challenge to the European austerity consensus. They hoped that the evidence of the last five years would allow them to halt the failed programme and negotiate a better one (lets not forget that the programme originally called for the primary surplus rising to an insane 4.5% in 2018, Greece’s economy was guaranteed to deteriorate more).

However Syriza’s hope to win “Europe” over with an appeal to reason turned out to be optimistic.

This is because the position among European elites is that austerity (class warfare in a way) is a non negotiable part of Eurozone membership and that a left wing government that opposed it could not be allowed to succeed. “Europe” (the ECB, the European Commission and the Deutsche Bloc) was of one mind on this and through various mechanisms they have punished Greece (primarily ECB policy) in the hope of crushing Syriza or deposing it. When they were unable to scare the Greek population into submission (as they did to Ireland’s) in the recent referendum they were left with no option but to pursue their war against the left to the bitter end. There could be no danger of a good example.

So when you cheer the attacks on Syriza, and the attacks on Greece, what you are cheering is neoliberal imperialism, an attack on the idea of representative democracy and an attack organized by rich countries against a poor one.

If the Deutche Bloc and their allies in the EU institutions (“Europe”) do crush Syriza and make an example of Greece you might pause for a moment and ask yourself what exactly this kind of European Union might mean for a small country like Ireland.

What, for instance, if there is another economic or political crisis and, once again, Ireland’s interests do not align with “Europe’s”? What precedent will the right wing baying for the crushing of dissent have set for us? What then?

@ Kerchav

The most reliable of motivations is self interest. If I thought the united front was based on more altruistic foundations I would be nervous.

The case that Greece has no responsibility for its woes is farcical.

As in Argentina, the national statistics office Elstat has been subject to political control. After Eurostat approved procedures in 2010, Elstat with a new chief statistician, a former IMF official, in charge reported that the deficit for 2009 had in fact been over 15% of GDP, a figure verified by the EU statistics office.

According to the Wall Street Journal, Andreas Georgiou in 2011 was accused by a former Elstat board member of “overstating the deficit under pressure from German-led creditors to justify the austerity plan. A public prosecutor filed felony charges against Mr. Georgiou and two other Elstat officials for falsifying data and breach of duty. The charges carry prison terms of five to 10 years. The on-again, off-again probe appeared to stall last summer.”

Last September, the FT reported: “The case is backed by politicians in the coalition government who have branded Mr Georgiou “a traitor”.

Then in March this year, the Syriza-led government reactivated the case.

The Journal reports that Panos Kammenos, current defence minister, “last year called for Mr. Georgiou to resign from Elstat, accusing him of taking orders from Greece’s foreign lenders and saying that his prosecution would help release the country from its agonies.

‘From the moment there is a final court decision on the alteration of statistics, no lending agreement and no (bailout) memorandum will be valid and Greece will be free,’ Mr. Kammenos said.”

The former Elstat board member and accuser claims “Greece’s true deficit in 2009 was a mere 4% of GDP” and she now works as an auditor for Minister Kammenos in the defence ministry according to the Journal.


So the last government and the current government have treated the scorekeeper as an enemy of the state!

“The idea that Greece has no further scope for cutting public expenditure is baloney. If they cut it to Germany’s, Ireland’s or the Baltic’s level, they’d be out of debt crisis immediately.”

Whether or not that is true the implications of pursuing this course of action in a country that has already achieved a balanced budget would add to the declining GDP trends, consumer confidence, and increase unemployment. What exactly are you trying to achieve here….you want reform but only insofar as teh money is to pay debt on the mistakes of the past. Demand the reform by all means but the quid pro quo has to be debt write down…that is on the table and until it is Greece’s hands are tied…the EU is living in lala land if they think they can impose further cuts and not expect to be back at the table discussing a 4th bail out with debt relief!

Maybe our local EU publicist would like to address how the ECB’s behaviour with regard to Greek banks in the last two weeks comports with Article 127, Paragraph 2, Indent 4 of the EU Treaty. You’ll remember: that’s the part that has something to do with promoting “the smooth operation of payment systems.”

I’m looking forward to further exchanges between JtO and Shay Begorrah. There’s both entertainment and enlightenment to be had when two highly opinionated and articulate people get the wrong ends of two different sticks and wave them at each other. Bring it on please gentlemen.

@ Nocense

What I said in respect of a German goods trade surplus every year since 1952, is correct. This is the biggest component of the Current Account/ Balance of Payments.

Within the Current Account there is a smaller persistent services deficit and net income flows from investments.

The Bundesbank says that the “per capita income of the economy, the path
of which is likely to be increasingly dampened by ageing effects, can thus be supplemented by capital gains from abroad. The average return on German foreign assets in the period from 2005 to 2012 was 4½% per year. This
was somewhat more than foreign investors received on average on their investments in Germany (just over 4%).”


I see the next steps proposed by Syrizia are the seizure of the 17bn locked away in the CB. What is that?
Also there are noises about closing down the private anti-govt TV stations. Very Like Putin at this stage.
As regards taking the advice of Sach, Krugman etc. The Internet never forgets. We can all obtain a letter from Sachs praising Chavez. That worked out well!

@ Ernie

quite simple really. They can only lend to solvent banks. The banks are only solvent if the Greek government guarantee backing them up is credible. Greece has already gone into arrears with the IMF, is no longer in a financing program with the EU/IMF, and is likely, without a new deal being in place, to default on its upcoming obligations to various parties including the ECB. It would be bizarre for the ECB to not react to current events via tightening of their ELA access. And its disingenuous of you to not accept this.

@ Noncence

Greek debt relief (via reprofiling) is definitely on the table. The problem is that given the horrific inability of the Greek govt to either negotiate in good faith (they have clearly and deliberately used a chaotic and aggressive form of negotiation, which has failed miserably and only made matters worse) or stick to the previous deal (which, like it or not, they signed up to), the sequencing of events must see reforms agreed to first, enacted second, and debt relief only provided after that has been verified. That will be difficult politically for Tsipras, but i do not know anyone who does not expect some form of debt relief to arrive further down the tracks.

@ Eoin Bond,

As DOCM & others have repeatedly pointed out….. Trust is a central core of all things finance.

So it is in politics… ripping up previous Govt agreements, accusing EU / ECB / creditors of terrorism etc… does not build any form of trust.

The phrase ‘Greek Guarantee’ either from the Govt or Greek Central Bank is a contradiction in terms.

It is not possible to make any agreement with this infantile, immature hormonal teenager behavior.

Unless of course it is all part of the original ‘game plan’ which is to alienate Greece from the EU and set up some sort of Fidel Castro communist state on eastern Europe.

The Euro was based on the naive assumption that each member-state which joined would apply effective effective democratic governance of its economic and financial institutions and behaviour to avoid damaging the currency regime. Greece, Portugal and Ireland (and to an extent Spain and Italy) exhibited failures of democratic governance that were brutally revealed when the global financial system froze. With the exception of Greece, which is a failed state, these member-states have repaired some of the failings of economic governance. And they did so by taking ownership of the fiscal adjustment and reform programme under either the direct or indirect supervision of the Troika. In addition, both centre-left and centre-right parties pandered to the powerful special interest groups which could have derailed the fiscal adjustment and reform process. This is damaging and dangerous and stores up problems for the future, but it proved to be a short to medium term necessity. In Greece there is such a deep conflict between the powerful special interest groups and the political parties which pander to them and there is such a pervasive legacy of dysfunction that the country is effectively ungovernable.

All of the countries mentioned received considerable solidarity and fiscal transfers from the ‘core’ of Europe in the past to lift them out of ignorance, poverty and dictatorship. The least they should be asked to do is to ensure they can manage to govern themselves without damaging themselves and others. Greece is incapable of doing this.

It needs some time outside the Euro to see if its citizens will be able to agree what is needed to repair a profound failure of goverance. And the EU collectively needs to provide a generous economic and humanitarian support package.

“i do not know anyone who does not expect some form of debt relief to arrive further down the tracks.”

We’ve been sold that pup often enough in the past – remember the “seismic shift/game changer” speech…whats the odds on that being delivered now! Greece have good reason to be suspicious of verbal commitments on anything.

As for the bad faith there is no doubt some of what Greece has done could be construed as such but the EU has behaved equally poorly if not worse. The leaders of Belgium, Germany, Italy and Spain attempted to interfere with the demorcratic process in a sovereign state by attempting to spread fear through what we now know to be blatant lies – ‘a no vote means greece exiting euro’….if that was Germany, Italy et al’s position last Saturday what has changed – why are they wasting everyone’s time if what they told to the greek people was the truth….hows that for bad faith. Juncker took similar swipes too. The behaviour of the ECB is also unconscionable and their stance has been abused to force Greece’s hand.

In the fullness of time we will understand more about why Vaurofakis absence from the meetings is so important to the eurogroup but i have a strong suspicion they felt unarmed without their senior civil servants in the face of his ability to perfectly understand and articulate the situation from all angles….his detractors may well smuggly dismiss this but I have watched him carefully over the last couple of months being tested by the best from the world of finance journalism and have never once seen him hesitate while providing coherent responses to everything thrown at him. Now imagine Enda in the same spot light?

Contrast the tomfoolery of the Syriza fellas with the performance of George Osborne today. A national living wage – plus more people on low incomes lifted out of the tax system. 80% of young Greeks may have voted no, but if they want work and the chance to make something of themselves they’ll be on the first plane to London.

A few comments:

(1) Merkel et al are the people who insisted on policies that had the inevitable result that the main stream Greek parties who implemented them were demonised and electorally destroyed. It was Merkel, Schaeuble, Barroso, Dijsselbloem et al who got Syriza elected.

(2) The Troika has adopted the typical banker’s approach or turning somebody into a debt slave to break them and not offering any debt relief up front. This has been politically poisonous and is an abhorrent way for members of a political or economic union to behave towards their fellow members.

(3) Syriza has behaved appallingly in using emotive and deeply offensive language about its counterparts. This has destroyed trust and made it practically impossible for the EU to deal a reasonable deal with Syriza.

(4) The Greek Civil Service and the Greek Government are clearly hopelessly incompetent and strategically inept. Their inability to execute Grexit smoothly and their destruction of their holiday season will cost their creditors just as much as it hurts Greece. The creditors repeated resort to the use of economic and financial leverage against Greece is poisonous and ultimately counterproductive. They have manoeuvred Syriza into a noose on the mistaken assumption that Syriza won’t step off the scaffold.

(5) There have clearly been rotten short sighted failures all round by the IMF, the EZ states, the Troika and Syriza. There has been a lack of statesmanship, a lack of vision, bad faith, and harmful adherence to ideologies on both sides. The sins of the present are compounding the omissions of the past when a structurally flawed Euro was created and Greece fudged their figures to enter it.

(6) The crisis needs to be used to correct these ills. This is not happening. Rather German hegemony is being strengthened and the EZ exit and financial meltdown is now a Sword of Damocles hanging over other countries including Ireland. This will increase Germany’s economic strength further, as there is least uncertainty about Germany leaving the EZ.

(7) Germany got reunification at the cost of a single currency. It is using that single currency to enforce its will rather than to allow itself to be bound to others. It appears to have got over its old guilt and to found a renewed confidence in the merits of its own intellectual musings. It has also strengthened its hand with the addition of many eastern European countries who have German as a second language and who look to Germany as the centre of Europe.

What to do? Greece needs to be persuaded to fall on its sword and accept a deal in a way that allows the most of the EU to rally around Greece, and to isolate Germany and its cohorts, and to make good on the previousl false promises of debt relief in October. Tsipras then needs to do a volte face. He needs to tell his people that a technocratic Government is required for one year and that he has been persuaded by his counterparts that they will use all efforts to make Greek debt sustainable. He can promise that Syriza will return to Government in one year and will abide by any reasonable deal if debt is sustainable and the economy has stabilised, but will make good on Syriza’s promises of independence if the EU does not step up to the plate in the meantime. This is very unpalatable for Greece/Syriza but it is the only solution I can see for Europe.

We are in this with Greece now. The toothpaste is squirting out of the EU tube apace.

@ Noncence

almost all of your complaints about various EU behaviours have occurred in the last week and a half, and after the announcement of the referendum – what about all of the Greek behaviour in the previous five months of this administration??? The destruction of trust did not simply take place over the last 10 days or so. It has been continuously eroded since Syriza came to power and entered into an aggressive and erratic negotiating style where everything was framed in game theory terms and Greece vs EU language, and where any deals in place previously were deemed, unilaterally by the Greeks, to be unfair, unjust and unwilling to adhere to.

The Greeks based their negotiating stance almost exclusively on the idea that Grexit contagion would scare the EU into agreeing to large concessions on both austerity and debt. Framing the debate in actions and language somewhat alien to the nature and procedures of the EU saw Greece lose all of their friends and sympathisers, and the hawks in the EU were able to use this to eventually call their bluff. The Greek people then, surprisingly, called Tsipras’ bluff in the referendum, and asked him to deliver the reopening of their banks and strong negotiating position. Tsipras was again found wanting of delivering on his statements, and this is why he is now staring down the double barrels of either a much harsher deal or an exit from the Eurozone he knows he has no mandate to bring back to his people. It’s also why Varoufakis is now facing the relative pleasure of a global book tour.


The manual prepared by the European Commission to manage Grexit is reported to be an inch thick. Let them go.

This is a 2011 assessment of Greece by Transparency International:
” Government and politics
The public sector suffers from substantial integrity gaps in both law and practice. Some public officials have acted without transparency or effective oversight for decades. As a result, there is a trend to demand and accept bribes. But these actions tend to go unpunished. A 2010 report indicates that only 2% of misbehaved civil servants are subject to disciplinary procedures.

Recent large scale corruption scandals also highlight the risk of conflicts of interest between public office and the private sector. Due to the volume of scandals, citizens’ distrust in public service has proliferated.

Tax evasion
A poor system of tax inspections, aided by an opaque tax code, allows individuals and companies to bribe inspectors and evade taxes. According to a 2011 survey, the cost of bribing tax inspectors to “arrange” tax audit activities is reported to range from €100 to €20,000. And estimates show that €120 billion may have been lost to illicit money from bribes and tax evasion in the first decade of 2000.

Private sector
The business sector’s complex legal and fiscal environment, excessive bureaucracy, and frequent policy changes create an atmosphere conducive to corruption. This in turn prevents effective competition, development and growth. Furthermore, while listed Athens Stock Exchange companies operate with reasonable corporate governance, non-listed firms function in a state of almost complete opacity.

Public procurement
Due to a lack of access to public contracts and procedures, public procurement in Greece remains vulnerable to corruption. Weaknesses are furthered by the country’s inadequate transparency requirements and enforcement. Effective implementation of public contracting rules and processes is also absent.”

There is nothing to suggest things have improved in any meaningful sense since then. It was madness on the part of the Troika to think that the extent of the fiscal adjustment from the bubble peak could be effected in any manageable, efficient or equitable manner in such a dysfunctional polity. It couldn’t be done without tackling the glaring gap between the trappings of the institutions and procedures of goverance and the actual substance. Greece should have been taken outside the Euro in 2010 and provided with the support required to repair its governance failures – but only if a majority of Greek citizens were prepared to consent. However, I expect they would have been so affronted to be confronted with the extent of woeful misgovernance that they’d have angrily rejected such a proposal.

But after all this unnecessary suffering that’s where they’ve ended up now.

In addition the Germany-bashing angers me. Germany is far from perfect but it is attempting to shoulder the responsibility of positioning the EU strategically in relation to the non-European OECD economies, the BRICS and the other rapidly emerging economies. It has considerable support from like-minded politieis in northern, central and eastern Europe and quite rightly resents being distracted by misgoverned politiies on the EU periphery.


If the proverbial martian were to read your synopsis of the situation, they would ask who are these all powerful unreasonable greeks that has the poor europeans cowering about what to do next.

“Greeks based their negotiating stance almost exclusively on the idea that Grexit contagion would scare the EU into agreeing to large concessions on both austerity and debt”

I’m sorry but I’ve got to take issue with that – Greece’s negotiating position was not based on this it was consistently based on the unsustainable nature of their debt – something that virtually anyone with a brain and calculator can appreciate and the IMF and just in the last hour the US treasury secretary happen to agree with them (now there is a country that knows how to deal with a crisis – read Geithner’s autobiography…no EU faffing there!)…it is true that Greece saw their ‘stick’ to be Grexit contagion but to a much lesser degree than the EU see’s the threat of expulsion its primary card.

Finally, in any negotiation it is as you are approaching the finishing line that the true import of what you have to say matters most and in this regard the last 10 days has been days of great shame for the EU. They have overtly and aggressively interfered in the democratic process of a sovereign state…they cry about references to financial terrorism – but this was a mere description of the act of the ECB….words are cheap, the act itself has been devastating…and for me well described.

@ Paul Hunt,

When one is a member of a family / organisation / institution / club etc.

One has a certain responsibility to behave in such a manner so as not to be damaging to said organisation.

Your comment…

‘The Euro was based on the naive assumption that each member-state which joined would apply effective effective democratic governance of its economic and financial institutions and behaviour to avoid damaging the currency regime’

Basically spells this out…. the EU periphery failed to understand the responsibility they took on when they joined the Euro.

The trouble with Responsibility is that it is exceptionally rare. It is always somebody else’s fault.

A culture of allowing people to shirk their responsibilities and getting the state to take over is all too common. From absent fathers to entire governments. The entire spectrum so to speak.

Irritations, Irritations, IRRITATIONS …

So many … and on this thread … the BB_BAU are having a field day …. concerns on the mental health of too many ….


Austerity Is An Integral Part Of The Greek Tragedy

by Simon Wren-Lewis on 8 July 2015

Too many people, including many in the Troika, see the Greek struggle as just about transfers from one debtor nation to lots of creditor nations. That is why they perhaps saw the Greek referendum as an unhelpful move, as just inflaming nationalist sentiment. As Dani Rodrik puts it “What the Greeks call democracy comes across in many other – equally democratic – countries as irresponsible unilateralism.”

It is, however, not just about transfers, or what economists call a zero sum game. It is also fundamentally about austerity, as Dani Rodrik, Thomas Picketty, Heiner Flassbeck, Jeffrey Sachs and I say in this letter [LINK INC.] jointly published in The Guardian, Le Monde, The Nation and Der Tagesspiegel (and thanks to Avaaz for making this happen).

I think many people believe that a debtor country must somehow inevitably suffer large scale unemployment as a result of having to pay back at least some of its debts. But this comes more from a moralistic view than thinking about the macroeconomics.

[…] The Troika has yet to acknowledge its own part in making this tragedy.


Link to ‘letter’ inc.


Scratch, scratch …. Ahhhh

@ Nocense

It’s short to medium term economic growth that is the priority not debt relief.

Absent a growth plan to rise from a dismal performance in exporting and inward investment, debt relief will provide no remedy because of the very low annual servicing cost and long maturities.

Tspiras is making a big issue of it to placate the hardliners.

So has the government a credible growth policy/ strategy in place?

Do not use the word ‘democratic’ to attack one side of this issue while conveniently ignoring transgressions on the other side.

Being anonymous of course, there is not a fear of being dubbed what used to be called one of Lenin’s “useful idiots.”

There isn’t much democratic about the harassment of the head of the national statistics office who upset the old guard and the little emperors who did not welcome a service that presented the truth.

This is a June 2015 statement from the International Statistical Institute.


Franco – German split?


I’m repeating myself but while the French are no match for the Germans on many levels, diplomacy has always been their greatest attribute and the revel in the role of peacemaker…when push comes to shove they can usually see the bigger picture. The fact the US has weighed in line with (their own) IMF is bringing pressure to bear on Germany…..life imitating…. game theory perchance?

Flawed Irritating Deutsche Perceptions and REALITY

Tuesday, 7 July 2015
Why Germany wants rid of Greece
When I recently visited Berlin, it quickly became clear the extent to which Germany had created a fantasy story about Greece. It was an image of Greeks as a privileged and lazy people, who kept on taking ‘bailouts’ while refusing to do anything to correct their situation. I heard this fantasy from talking to people who were otherwise well informed and knowledgeable about economics.

So powerful has this fantasy become, it is now driving German policy (and policy in a few other countries as well) in totally irrational ways. In particular, Germany refuses to discuss debt relief with Greece, yet seems quite happy to see Greece leave the Eurozone, the inevitable consequence of which would be that Greece would obtain much greater debt relief through default. Talk about cutting off your nose to spite your face. What is driving Germany’s desperate need to rid itself of the Greek problem?

One possible answer is that Germany finds the truth about Greece too upsetting, too challenging. This is because since 2010 Greece has done most of what the Troika asked of it. In particular, changes in its government’s underlying primary budget balance (i.e. the degree of austerity enacted) have been greater, by a long distance, than any other European economy. For many outside Germany what has happened to Greece as a result is hardly surprising: austerity is contractionary, and austerity on steroids is ruinous. Yet Germany is a country where the ideas of Keynes, and therefore mainstream macroeconomics in the rest of the world, are considered profoundly wrong and are described as ‘Anglo-Saxon economics’. Greece then becomes a kind of experiment to see which is right: the German view, or ‘Anglo-Saxon economics’.

The results of the experiment are not to Germany’s liking. Just as ‘Anglo-Saxon economics’ would have predicted, the results for Greece under the Troika have been a disaster. After dutifully taking the medicine for years, and seeing the collapse of their economy, finally the Greek people could take no more. Confronting this reality has been too much for Germany. So instead it has created its fantasy, a fantasy that allows it to cast its failed experiment to one side, blaming the character of the patient.

The only thing particularly German about this process is the minority status of Keynesian economics within German economic policy advice. In the past I have drawn parallels between what is going on here and the much more universal tendency for poverty to be explained in terms of the personal failings of the poor. These attempts to deflect criticism of economic systems are encouraged by political interests and a media that supports them, as we are currently seeing in the UK. So much easier to pretend that the problems of Greece lie with its people, or culture, or politicians, or its resistance to particular ‘structural reforms’, than to admit that Greece’s real problem is of your making.


@Simon Wren-Lewis


@Kevin O’Rourke

Have you met this guy? He sounds sound!

@ Nocense et al

FYI item on Greece, especially the straw poll at the end.


France has not balanced its budget since 1974. (Michael Hennigan will correct me if I am wrong). Hollande may huff and puff but it is doubtful whether he will risk a rupture with Germany.

Economists that have hitched their theoretical wagon – even unintentionally – to the Syriza cavalcade risk a degree of disappointment.

Michael Hudson in fine ‘irritated’ form; a must read

[T]here is no legal framework for writing down debts owed to the IMF, the European Central Bank (ECB), or to European and American creditor governments. Since the 1960s entire nations have been subjected to austerity and economic shrinkage that makes it less and less possible to extricate themselves from debt. Governments are unforgiving, and the IMF and ECB act on behalf of banks and bondholders – and are ideologically captured by anti-labor, anti-government financial warriors.

The result is not the “free market economy” it pretends to be, nor is it the rule of economically rational law. A genuine market economy would recognize financial reality and write down debts in keeping with their ability to be paid. But inter-government debt overrides markets and refuses to acknowledge the need for a Clean Slate. Today’s guiding theory – backed by monetarist junk economics – is that debts of any size can be paid, simply by reducing labor’s wages and living standards, plus by selling off a nation’s public domain – its land, oil and gas reserves, minerals and water distribution, roads and transport systems, power plants and sewage systems, and public infrastructure of all forms.



Observed the visages of Juncker and Weber as Tsirpas spoke in EU Parl. today. Haven’t chuckled as much since Joe Higgins tore into Barosso and Bould Ian tore into the Pope ….

To quote from Junker. “We all know what to do, we just don’t know how to get reelected after we’ve done it.” Syriza appears to have solved this puzzle for the case of ‘what to do’ being getting out of the euro, and the problem with getting reelected being an irrational attachment to the euro among the electorate.

Tsipras knows well that he has a mandate to do as he thinks best so long it includes copious spitting in the faces of his country’s enemies. The referendum was a back me or sack me move. They backed him, not because of the specific promises he made, but because they had an accurate understanding of the man and how he would behave in negotiations with Greece’s enemies.

It would appear the more loans creditors hand over to Greeks, the bigger the villain creditors are portrayed as.

Biting the hand that feeds you.

Losing 330 odd billion is bad, but it’s better than 400 billion or 500 billion.

Once Greece is isolated, they will be pointless to vilify the Troika, it will then starting turning in on itself, focusing its destructive energy on its own people, or anybody who is suspected as being against the new regime.

@ BeeCeeTee

“Tsipras knows well that he has a mandate to do as he thinks best so long it includes copious spitting in the faces of his country’s enemies.”

I disagree. 80% of Greeks wish to remain in the Euro, with around 50% of that “at any cost”. Tsipras does not have a mandate to risk Euro exit, this always being the Achilles Heel of the Greek negotiation stance (as well as the lack of contagion). The backed him because, unfortunately, they believed his spin that a No vote would support further their negotiating postion and that the EZ would never risk exiting Greece. That bluff (on the part of the Greek negotiating position) has now been called, and hence the abrupt about turn over the last 72 hours.


“Economists that have hitched their theoretical wagon – even unintentionally – to the Syriza cavalcade risk a degree of disappointment.”

I’d say they risk a degree of embarrassment when the post mortem on all of this is conducted.

Countdown! By Peter Spiegel


Where is Varoufakis when you really need him?

Helena Smith of the Guardian is reporting that a team of French officials are in Athens helping with the homework. A vote in the Greek parliament is not needed to agree whatever emerges but the “prior actions” will have to be agreed there (cf. the essential sequencing set out by BEB).

The relief that will hit all concerned when the motor of the barely airborne Greek economy is restarted just before it hits the ground should see the country over the hump of the next few weeks (with some moving around of existing funds to cover the ECB and IMF repayments). And take care of any opposition in the Greek parliament. That in the parliaments of other countries can only be guessed at, especially if Syriza attempt to dress up a total failure as some kind of victory.

If Syriza sticks together, and remains in government, it will be a much chastened party and might get down to the process of radical reform but of the modern social democratic variety rather than that of the far left.

This, of course, is the optimistic scenario.

I regret writing the second last paragraph of my above post. On reflection, I think that Greece’s democratically elected Government needs to do the deal and that the other parties need to respect that. If they feel they cannot trust the Greeks then they need to design a package which has safeguards in this regard, i.e. immediate enactment of key reforms.

For the record, apart from the appalling rhetoric which is a very serious matter if translated correctly, I consider the bulk of the Greek Governments arguments to be cogent and valid and not to be extremist or Marxist. If this works out the Greeks will have done the EU a huge service. A faint heart never won a fair lady.

I find it rather quaint that you can look EZ 18 taxpayers in the eye and say write off half of that 200 plus billion that we owe you plus give us another 50bn, no make it 75bn. Btw we are a sovereign state so no peeking.
Still think inviting Greece to leave home is the best option for all

Fair play to the French if they have sent over a team of officials to help.

The future of the Euro now rests on French shoulders…De gaulle is watching….but I am starting to lose faith.

Germany intransigence looking insurmountable – if they can hold on to the EZ together absent greece (which they seem to believe is doable) then there is a lot of exporting they can still get on with….Fill those coffers up….because in a n extraordinary DISPLAY of generosity they will to kick a few billion Greeces to assist with any humanitarian crisis….think of it as the parachute payment clubs in the premiership get when they are relegated.

The Geo-politic concerns held by the US seems to be of secondary concern to Merkel – or at least her electorate…you can just picture Putin sitting back watching it all stroking his white cat!

Nay I fear rather than agree to the blindingly obvious need for debt relief Germany will be opting for the 2015 version of the “scorched earth” doctrine.
Tsipras could put his proverbials up on a plate to them and if it comes with a condition in any shape or form around debt relief he will be torched!


apologies about poor grammar in previous post…really need to learn to reread before submitting!

Here’s another irritation – the claim that “61% of Greeks voted No”
The electorate was 9.9 million and 3.6 million (that is 36% of the electorate) voted No. I am not sure how strong a democratic mandate that gives the Government (nor am I sure what the mandate is for).

@Bond. Eoin Bond.

Would the pollsters you’re relying on in your determination that 80% of the Greek people want to remain in the euro be the same ones that told us that the referendum result was “too close to call”?

Never mind that the situation is evolving rapidly. An 80% figure from a month ago means virtually nothing now.

Tusk, IMF institutionally, La Garde personally and now the US in the clearest terms possible. Debt restructuring a must!

This is all turning horribly difficult for Merkel/Schauble.

Is Vaurofakis watching from the sidelines with a knowing smirk?

The 36% of the Greek electorate that voted ‘No’ in the Bail-out Referendum is very close to the 37.6% of the Irish electorate that voted ‘Yes’ in our Same-sex Referendum!

@ Nocense,

Intransigence is not due to Germany alone.

Several other countries are reluctant to commit more money to Greece, in particular Eastern European and Nordic nations.

But perhaps it is just easier to leave this out… and just blame Frau Merkel instead.

The people require metaphors of Hero (Tsipras) and Villian (Merkel) to understand the process.

Part of communist propaganda and all that etc etc.

On another point… does the EU still have food mountains, beef mountains etc…??

I hope so as it may be required for next week.

“In 2012 we dealt with the issue of debt sustainability. We stretched out the maturities, we pushed back the repayment requirement for EFSF loans out to 2020. So we are not dealing with debt sustainability for the first time,” Merkel said when asked about differences with the International Monetary Fund (IMF) over a debt writedown for Greece.

“I have said that a classic haircut is out of the question for me and that hasn’t changed between yesterday and today.”

Except Angie you are forgetting one very pertinent fact….when you dealt with debt sustainability before your analysts forecasts on Greece growth were so far off the mark Walt Wittman raised questions as to the degree of fantasy employed.

Her remarks truly betrays a delusion brilliantly captured in DOD’s post above.

“vee have rules, ze rules verk, they always verk, if they don’t verk they were not properly applied!”

@ Nocence

debt relief will come in the form of long term extensions. Everyone knows this (and hence Merkels reference to “classic haircuts”). The only question is the sequencing of events and whether Tsipras is willing to sign up to a deal that will be politically difficult (more so post referendum) and which will afford the Greeks no ability to underdeliver in the future.

Breaking Newz:

Wolfgang is very worried about Angela’s reshuffle (u heard it here first!); Jean-Claude is back on the fags; Martin S. is seeking advice from FF on ‘mature reflections’; Mario can’t figure out how to get from zero to two; Francois is terrified of the implications of the impact of the ordoliberal catechism on French youth and the secular tradition; the Phoenix Park has been bought by a New York Hedge fund (Bond pls advise); Yanis has joined the board of the Blind Biddy Hedge Fund; a Munster fan just found Jean-Claude’s Grexit File on the back seat of a taxi and passed it on to Biddy in Athens; Jean-Claude is now smoking Cuban cigars (a gift from Yanis); Enda is feverishly making representations to Leo and the HSE to get Ould Molly Kenny in Castlebar a new bed and is not to be disturbed; Leo won’t budge unless Brendan gives him another billion; Michael is attending a wine and cheese tasting competition in the Greek Quarter of Limerick; Nieztsche’s eternal recurring banking inquiry recurs again and again and again …. and nothing happens; and the wittgensteinian grammar on this blog is shocking … truly shockin; Aoife and Anto intend to emigrate when they grow up …. “not my bleed1n debt” says Anto; “Quite” murmurs Aoife …’ “ONE HUNDRED BLEED1N BILLION (allegedly The Guv’nor)

100 Billion Euros – The Hibernian Bill … beyond irritating …

Ballyhea says OXI

“The people require metaphors of Hero (Tsipras) and Villian (Merkel) to understand the process.”

‘The People’ indeed – they really ought to stay out of matters that doesn’t concern them.

…reminds me of Scooby Doo….”if it wasn’t for those pesky [Greek] kids we would have got away with it” –


Again, was that an outfit that predicted a dead heat on the referendum?


Very interesting anonymous interview (in English) of a senior Greek gov’t official involved in the negotiations: http://www.mediapart.fr/en/journal/international/080715/we-underestimated-their-power-greek-government-insider-lifts-lid-five-months-humiliation-and-blackm?onglet=full

In the middle of March, finally, some Brussels sources said to the correspondents in Brussels that “yes, the institutions – the EBD, IMF, European Commission, are using credit asphyxiation in order to force the government to comply, accept the reforms, do it quickly, et cetera.”. For me it was an admission that they were using the worst king of economic blackmail to the country. The worst kind of economic sanctions. If we [take] Iraq, and instead of doing a trade embargo they said “we cut all your assets, your banks have no money, no dollars, no anything, you have to rely on printing money, you’re going to have an exposure”. But they didn’t do that in Iraq. It was a trade embargo, not a financial or credit asphyxiation. Because at any moment, gradually, there comes a time you die. You can’t survive this much longer. Varoufakis has even called it “waterboarding”, financial and fiscal waterboarding.

The assumption is that by pulling the plug, they pull the plug of the whole world. This has not happened and I am sorry. I was following how the euro was going, how it was reacting, because they did experiments. [German finance minister Wolfgang] Schäuble and Berlin are clever, they enforce artificial crises into the negotiations now and then: “Oh, the Greeks are not cooperating, they haven’t understood what to do, they are not giving any figures”. And instead of falling, the euro is going up. The same with European stock exchanges.

Today it’s too late. It is a matter of political and ideological hegemony. Varoufakis alone, with his appeal and arguments, managed to turn public opinion in Europe, even in Germany. The Eurogroup people stood back. In the beginning of February, [Dutch finance minister and Eurogroup president Jeroen] Dijsselbloem told Varoufakis “You either sign the memorandum that the others have signed too, or your economy is going to collapse”. How? “We are going to collapse your banks”. He had said that. In his last interview to ERT, the national [Greek public] TV [channel], two days ago, Varoufakis said: “I didn’t denounce that then, because I was hoping that reason would prevail in the negotiations with all of the Eurogroup”. So he went on with the numerous agreements. And credibility as well as money was lost.

[…] The Eurogroup is not a proper democratically-functioning body. They [the Greek government of Alexis Tsipras] discovered that, again, very late, when they [the Eurogroup] wanted to throw Varoufakis out after the referendum announcement. Which was basically a gesture to humiliate. Varoufakis says “Who decides that?” Dijsselbloem says “I decide”. Shouldn’t there be a vote, shouldn’t there be unanimity? Yes but it’s not necessarily recorded, there are no minutes taken. He was taping, others too. Why? Because there are no minutes taken. So there is nothing formal.

You can’t say “I went to the Eurogroup and Italy said that, Cyprus said that” et cetera. So everybody can come out and say anything they like. No-one can say: “Are you sure you said that? Let’s look at the minutes”. There are no minutes. Of course, nobody can come out with a tape recorder. Varoufakis said that of course he kept the minutes of his own, because he was to report to the prime minister, and the others do it too. And the others came shouting “Oh! Varoufakis admitted this, and that”.

The other countries in such a set-up had to think [German finance minister Wolfgang] Schäuble is the king, he controls the others, he can raise his voice and say “no”. Varoufakis has described incidents that show really how the Eurozone is completely undemocratic, an almost neo-fascist euro dictatorship. You cannot rely on what the others are saying. Varoufakis says that if he could negotiate with one at a time for an hour, the deal would be struck in a day. But you can’t do that because each one has different priorities and different people telling him “no”.

You cannot argue too much with Schäuble. It would be dangerous, because you won’t get finance, German banks will want their money back, and so on. So it’s a institution where you cannot make your voice heard, so what’s the point in encountering [them]? There was no-one else but Varoufakis talking straight. Schäuble has said “How much money do you want [in order] to leave the euro?” He doesn’t want Greece in the euro at all. He was the first to raise the issue of a Grexit back in 2011.

We went to a war thinking we had the same weapons as them. We have underestimated their power […] It’s a power that enters the very fabric of society, the way people think. It controls and blackmails. We have very few levers. The European edifice is already Kafkaesque.

“Debt relief will come in the form of long term extensions. Everyone knows this (and hence Merkels reference to “classic haircuts”)”

I agreed she has hedged her bets in this way – it all amounts to the same thing anyway. Not sure Germany has convinced itself it is willing to allow it though – not sure “everyone knows” this – it certainly wasn’t on the table last Saturday. The world has changed much in the last few days thought – Uncle Sam, IMF and now the institutions (Tusk) going against the creed of a week ago.

If you are right, however, Syrizia and Vaurofakis has called the outcome of a “no” vote correctly and to borrow the words of charlie haughey “done their country some service”.

@ Nocence

I really strongly disagree. Debt extension/reprofiling was always there in the background. Juncker apparently pled with Tsipras to agree a deal now and take up the debt relief pledge in the Autumn. The result of capital controls/referendum etc has been pretty much a wipeout of what was left of the Greek banking system. How much do you think that will cost? How much do you think other Greek assets have been devalued and risk premiums on foreign investment increased as a result of the last two weeks of chaos? They will get at least as tough a deal as was already available, with the same debt relief that would have arrived anyway, but a huge long term cost from the now long term redenomination risk.

@ Ernie

yes, they got the election result wrong. It must be very difficult to understand this from your tenured infallibility of academia. We’ll go with your guy instinct (cos you haven’t an iota of evidence) that the Greeks secretly aren’t all that pushed on Euro membership after all.


Here is a quote from one of your links:
“– creditor financial leverage has become the 21st century’s new mode of warfare. It is as devastating as military war in its effect on population: ”
Ask any Syrian refugees to Greece if they agree with this. The fact that you feed yourself on this diet explains a lot, I must be

A quote from one of your links:
“– creditor financial leverage has become the 21st century’s new mode of warfare. It is as devastating as military war in its effect on population: ”
Ask a Syrian refugee to Greece if they agree. The fact that you nourish on this diet explains a lot.

Interesting item on Ireland’s total exposure to Greek debt.


We have, of course, borrowed the money to enable us to lend it or, rather, piggy-backing on the creditworthiness of the EA as a whole, and of Germany in particular, have participated in the various joint efforts and raised the money required in the financial markets.

Assuming that there is an agreement, and the chances must be at least better than 50/50 (the widely quoted view of our MOF), two particular aspects will come into focus (i) the “prior actions” that will have to be adopted in the Greek parliament before a cent of extra lending is approved and (ii) the future of capital controls.

With regard to (i), these are definitely on the way as they are a sine qua non, although Schaeuble says he has not yet seen any.

With regard to (ii) Weidmann has stated the obvious i.e. that they have to be maintained until economic conditions allow them to be lifted. This will require, one would assume, the setting up of immediate administrative procedures to manage the system. The newly announced limit for money leaving the country is 1,000 euros. This is clearly insufficient to keep the wheels of Greece’s international commerce, such as it is, turning.

Their very existence puts Greece into a form of tutelage of the EA, the very fate that Syriza was supposed to avoid.

The government’s signature on a new MOU for ESM lending will be essential. How will the most recalcitrant elements in the coalition sell that?


(Article 13.3!).


The issue isn’t whether I have any evidence one way or another about Greek’s desire to remain in the euro. I haven’t made any claims on the matter.

You, on the other hand, have. What I’ve been trying to point out to you is that you don’t have much in the way of evidence and are, yourself, relying on little more than “guy instinct” and wishful thinking.

A more fine-grained poll with questions like “are you in favour of continued euro membership if it requires the implementation of the Institutions’ programme in full?” might be more revealing.

“Juncker apparently pled with Tsipras to agree a deal now and take up the debt relief pledge in the Autumn”

Two crucial points on that sentence – “Juncker apparently…” Juncker is the only one that made this claim, I haven’t seen that position being confirmed by anyone else. Juncker said a lot of things in his bizzare “don’t commit suicide because your afraid of death” press conference. For me, he seems like a kindly old uncle that no one is really listening to anyway.

Secondly “pledge in the autumn”….there was no way Greece was going to take that to the bank and with good reason. Enda Kenny would have been able to advise them (if he had their interests at heart rather than his own reelection) to reject such lightweight nonsense.

If debt relief comes as part of a deal this week, it will truly have been a seismic shift in the creditors position (unlike the seismic shift we were “pledged” here in Ireland)…those that decried Vaurofakis an idiot who should go back to teaching game theory will not be eager to admit this though.

Meanwhile, here’s Schaüble, destroying the euro to save it:

Wolfgang Schäuble, Germany’s hardline finance minister, warned Athens that its euro membership was “not etched in stone” as he vowed to use the Greek debt crisis to shore up the structure of monetary and fiscal union.

Because nothing shores up the structure of a monetary and fiscal union like disseminating doubts about its irreversibility.

@ Ernie

“You, on the other hand, have. What I’ve been trying to point out to you is that you don’t have much in the way of evidence and are, yourself, relying on little more than “gut instinct” and wishful thinking.”

I have polling figures Ernie. You can choose to believe them or not, but it is nonetheless evidence which most people would feel is at least somewhat important. If you don’t believe the pollsters, then it doesn’t matter what question you ask the electorate.

@ Nocence

sequencing here is probably the most important aspect of all of this. It is a simple fact that implementation has been a major problem with all of the previous Greek reforms. While they have indeed implemented a lot, they have also failed to implement a lot, and Syriza has not exactly built up much trust or confidence in their ability or willingness to enact reforms in their short period in office. As such, for political as well as practical reasons, the Institutions are requiring verification first, and debt relief later. Remember, its close to impossible to unwind a debt haircut, but relatively easy to not follow through on reform implementation.

@The Second

Glad you enjoyed the tutorial. Never too late to learn u know. As for Syria, and those really responsible for the carnage in Iraq, Syria, Yemen, Libya, Bahrain, Ukraine etc why not check out the corkonian Patrick Cockburn in The Independent ….

Now, I’m certainly no fan of Skinner, but at times a little positive reinforcement is useful in these cases where an actor such as your good self has been institutionalized in a war_zone, without apparently realising it, for a long period of time:

‘The result is not the “free market economy” it pretends to be, nor is it the rule of economically rational law. A genuine market economy would recognize financial reality and write down debts in keeping with their ability to be paid. But inter-government debt overrides markets and refuses to acknowledge the need for a Clean Slate. Today’s guiding theory – backed by monetarist junk economics – is that debts of any size can be paid, simply by reducing labor’s wages and living standards, plus by selling off a nation’s public domain – its land, oil and gas reserves, minerals and water distribution, roads and transport systems, power plants and sewage systems, and public infrastructure of all forms.

Imposed by the monopoly of inter-governmental financial institutions – the IMF, ECB, U.S. Treasury, and so forth – creditor financial leverage has become the 21st century’s new mode of warfare. It is as devastating as military war in its effect on population: rising suicide rates, shorter lifespans, and emigration of the age-cohort that always have been the major casualties of war, young adults. Instead of being drafted into the army to fight foreign foes, they are driven from their homes to find work abroad. What used to be a rural exodus from the land to the cities from the 17th century onward is now a “debtor exodus” from countries whose governments owe unpayably high sums to creditor governments and to the banks and bondholders on whose behalf they impose their policy.

While pushing the world economy into a state of war internationally, high finance also is waging a class war against labor – and ultimately against governments and thus against democracy. The ECB’s policy has been brutal toward Greece this year: “If you do not re-elect a right-wing party or coalition, we will destroy your banking system. If you do not sell off your public domain to buyers we will make life even harder for you.”

No wonder Greece’s former Finance Minister Janis Varoufakis called the Troika’s negotiating position “financial terrorism.” Their idea of “negotiation” is surrender. They are unyielding. Official creditor institutions threaten to isolate, sanction and destroy entire economies, including their industry as well as labor. It transforms the 19th-century class war into a purely destructive meltdown.

That is the great difference between today and 1929-31. Then, the world’s leading governments finally recognized that debts could not be paid and suspended German reparations and Inter-Ally debts. Today’s the unpayability of debts is used as leverage in class war.

The immediate political aim of this financial warfare in Greece is to replace its elected government (supported by a remarkable July 5 referendum vote of 61 to 39) with foreign creditor control by “technocrats,” that is, bank lobbyists, factotums and former Goldman Sachs managers. The long-term aim is to impose a war against labor – in the form of austerity – and against the power of governments to determine their own tax policy, financial policy and public regulatory policy.

Fortunately, there is an alternative. [Michael Hudson]


p.s. Blind Biddy not answering her phone! Sommat goin on in Athens …

I think it is desirable to note that the URL the ECB poster included on Ireland’s putative exposure to Greek default omits a decimal point, and therefore gives the impression of being 10 times what the analysis behind it actually claims.

@SH: I have no problem with Bllomberg. I use it every day. I have a problem with lazy journalists who quote random hedgies as figures of authority.

“I disagree. 80% of Greeks wish to remain in the Euro, with around 50% of that “at any cost”. Tsipras does not have a mandate to risk Euro exit, this always being the Achilles Heel of the Greek negotiation stance (as well as the lack of contagion). The backed him because, unfortunately, they believed his spin that a No vote would support further their negotiating postion and that the EZ would never risk exiting Greece. That bluff (on the part of the Greek negotiating position) has now been called, and hence the abrupt about turn over the last 72 hours.”

My Greek contacts tell me that most of their compatriots who voted “no” knew what they were voting for, and it wasn’t the fairytale that Tsipras spun.

I don’t see an about turn in the last few days. I see a shift in position carefully judged to show movement, while being equally carefully judged to avoid being acceptable to the rest of the Eurogroup. It has happened several times before, but being closer to the denouement, it was possible to move a bit further on this occasion.

It may be that I will be proven wrong. On the bright side, I don’t have client funds on the line.


Sorry, but that account from an ‘anonymous’ Greek official kinda reads like: ‘And as they marched up the hill, they were all out of step except our Yanis!’


In all the stuff that’s been broadcast and written, blogged, tweeted etc.over the past couple of weeks it seems to be that there is something understated but becoming more obvious about this debate: it’s all being projected from various national, institutional or supposedly ideological (left/right) perspectives, all of which are narrowly construed and serve only to entrench particular dispositions on the crisis. Some of it has been disturbingly racist. Regretably, far left and far right factions have a lot in common and nothing to be proud of on that score.

There’s an absence of any coherent ‘European’ perspective (?). Certainly there’s a rules -based eurozone position. The greek authorities, finally, are having to take that on board.

People have been lamenting the ‘democratic deficit’ of the EU institutions for 20 years or more, at this stage. Yet Mr Tsipras spent some three hours yesterday before the European Parliament, an EU instituion which, as several pundits point out, is completely irrelevant to decision-making on the current crisis. To my mind, he’d have been better off at home.

European political and social values are enshrined in the Treaties. For sure, they’ve been a positive force, certainly as regards greater equality for women and minorities, basic human rights, social freedom and preservation of the environment etc. But again, that stuff is usually articulated within a rules-based format. Plus, by now all the rights and freedoms are taken for granted, especially by young people who, for example, can enjoy freedom of movement without having to think about it, which you couldn’t do 40 years ago.

There needs to be a broader concept of what Europe ‘is’. And fast.

What I find incredible in all this is that there is a dual narrative that on the one hand suggests greece should not get a further bailout because they don’t collect their taxes….on the other hand if greece did implement reform ( collected their taxes) their current problem would be significantly mitigated.

Let’s think about that for a second. They moved from a 16% deficit to a primary surplus in 10 years that has accompanied a 25% decrease in GDP. Now if they had sucked up more taxes from the economy to drive even bigger surpluses and dampen domestic demand even further…..it doesn’t take a genius to figure GDP is going to take an even bigger hit. The only reason the creditors therefore want greece to run even greater surpluses through tax collection is to redistribute such uncollected taxes back to them. Having balanced the budget through poor tax collection policy highlights just how much of an adjustment greece has made in the last 5 years. Ah do u know what!

Was it really worth driving the Greek economy into the ditch to get a formula of words on maturity extension & rate concession that they were going to get anyway? Did the Rockstar bail because staying would damage his rep and his post politics earnings potential.

Our our Deppity Paul Murphy has all but condemned Syrizia.


It’s always most important to focus on aesthetic criticism, personality conflicts, fashion, and the like in such matters. I hear that Varoufakis was professorial and tended to lecture. And he wore a backpack and no tie and rode a motorcycle! Is it any wonder, in such circumstances, that the Eurogroup were left no choice but to violate every principle of democratic decision making or that individual ministers resorted to mortal threats to the Greek people?

@ BeeCeeTee

“I don’t see an about turn in the last few days”

The documents Tsipras forwarded to the EU last night look to be essentially about 95% of what the EU deal offered to them on June 26th. There is no request for debt relief, though something on that may arrive separately over the weekend, its level of clarity/specification the more complicated part.

Ordinarily, you could say that Tsipras hasn’t really lost out, and maybe even managed to eek out some concessions. But this would need to completely ignore the damage done to the banking system over the last couple of weeks, with much of their capital base being burnt through via a weak short term economy and their inability to actually conduct business over the coming months (capital controls will remain a medium term issue, ala Cyprus/Iceland). Further, what are the long term costs to risk premiums and investments in Greece over the next decade, now that the re-denomination risk in Greece is backed in for the long term? These will massively outweigh any of the minor concession he will earn in the deal, with any debt relief arriving this weekend something which would have been arrived at further down the line anyway.

These are Greece’s proposals:


They look more harsh than the ones rejected last month.

There are deadlines for privatisation bids and if the government hadn’t suspended the program last Feb, it could have had a few billion to alleviate austerity.

On pensions, keep in mind, Ireland has the worst private sector coverage in the 34 OECD countries, according to the OECD – not everyone knows that!!

@ Veronica

This link may interest you and others.


The one fact that stands out, and is confirmed by the attitude of the average Greek, is that all want to hang on the euro or, rather, a currency likely to hold its value (within reasonable fluctuations) without much regard to how it is manged or where it comes from.

As the French say now “l’argent n’a pas d’odeur” and Vespasien said originally “pecunia non olet”. (Wikipedia is a wonderful invention!).

As to the disaffection of the young across Europe, who could blame them? Their elders have stolen their futures, either locking them out of the jobs market or saddling them with the burden of un-affordable pensions.

While one needs to be sceptical about the quality and accuracy of the reporting (particularly that of the Grauniad) this:
appears to include more severe adjustments than the package Greek voters rejected last Sunday.

It may be that Tsipras is prepared to lose some of Syriza’s extreme left headbangers and lock in ND and what’s left of PASOK. He’ll need that broad-based support as it will probably take a generation to turn around this failed state. I can only wish him and his colleagues in government well.

Tsipras, if nothing else, is a very skillful politician as his dramatic change of tack indicates.

Courtesy the Guardian, his remarks in parliament just now.

Tsipras said:

“We are confronted with crucial decisions,”

We got a mandate to bring a better deal than the ultimatum that the Eurogroup gave us,but certainly not given a mandate to take Greece out of the eurozone.”

And there was an appeal for party unity:

“We are all in this together.”


It’s not as simplistic as believing or not believing the pollsters. The Greek public is clearly in a situation where they will have to prioritise, which is to say decide which tradeoffs they are prepared to make.

A poll that asks “Would you like to have your cake?” and another that asks “Would you like to eat your cake?” might both get 100% assent from the electorate. What you cannot adduce from those results is that 100% are in favour of having their cake.

In short, I don’t believe a poll on a question as blunt as “do you want to retain the euro?” in the current situation is evidence of much of anything where a more nuanced question (or, god forbid, set of questions) might be.

@ Tull,

Tsipras has managed to keep ‘Red Betty’ and children under his roof this time.

Perhaps it was all a charade, taking a stand, flying close to the wind etc to keep the motley crew of ‘leftists’ on side.

But the proof will be in the pudding…. will reforms be delivered, FDI strategies be implemented, spending on defense reduced, tax collection etc etc.

Otherwise we will be back at square one again in 24 months time… blogging on IE.ie with quotes about how dare the Troika do this that or whatever, how democracies are getting subjugated and how your word should never be your bond etc.

Resident Marxists will of course recognise this defeat for Syriza as yet another step on the road to ultimate victory. In theory. Pity the poor Greeks who have to suffer the ‘Marxist Reading Group’ approach to governance which has been adopted by their leaders.

A good day for Ireland. The Syriza debacle shows that nihilism doesn’t work. Whilst Sinn Fein will undoubtedly hold on to their nihilist core support they will make no more inroads with those who have a stake in our country. Government is now extremely remote for SF.

A good day too for the euro. If exit is a red line for looneys like Syriza it seems to me the euro is as irreversible as you can get in this world despite the academic fantasies of Krugman, McWilliams et al

@The second

Its a very sad day for Ireland and indeed the EU (and not just the EZ). This is the death kneel of the european project really. The portents of the Czech PM should be well heeded…but they won’t. Germany has lost sight of the big picture and has lived in the deluded world outlined so brilliantly by Wren-Lewis (see DOD post above). The economics of Keynes is anathema to their psychology and they successfully outlawed Keynesian policies through fast tracking through the fiscal treaty – which the Irish people signed up to only through the politics of fear – Lucinda Creighton take a bow! Unfortunately Germany is plain wrong – the US has shown them up in this regard time and again.

Greece are facing disaster upon disaster as what they have proposed absent very substantial debt restructing is simply unachievable. Their economy will continue to decline and it will be nothing to do with having a left wing government.

It is hugely disappointing that for all the principles on which the EU was founded that Greece has felt it had to capitulate to such an extraordinary extent. And I appreciate some of this is yet to play out on the debt discussions in particular.

Triumphalist remarks about the ‘rockstar’ changes nothing about the fact that he is 100% correct about “extending and pretending” going to end in tears. He will be right about that – I have absolutely no doubt about that, and I fully appreciate that counts for nought.

Germany trade surplus will continue to soar over the next couple of years and they will continue to get away with spinning the narrative that they are europe’s paymasters, when the truth is patently the opposite. The Euro has served them extraordinarily well and even more so in times of crisis.

But while the Germans are obstinate and driven entirely by self interest, they are not stupid and I suspect they know that Greece simply cannot succeed based on these proposals – and perhaps their end game has really been Grexit all along and relying on a “far left” government not capitulating. One wonders if Tsipras has recognised this and has been pushed to the limit in offering a deal (calling their bluff to avoid Grexit) that the Germans must except is better that what was being asked for a week ago….if so what will be the catalyst to prompt a Grexit from Germany’s perspective? If Grexit was their goal then they find themselves in an awkward spot now with their other EZ “partners” – many of which have clearly come over to the Greek side.

If Grexit is not the goal than they will happily accept the “extend and pretend” proposal on the table. Failure to accept “extend and pretend” will strongly suggest that the only outcome the Germans were ever after was the one that was the default were there a failure to reach agreement i.e. Grexit.

Simon Wren-Lewis on the blackmail carried out by the ECB that many of you persist in thinking (against all evidence) is a neutral, rule-bound actor:

Imagine that the Scottish National Party (SNP) had won the independence referendum. The SNP starts negotiating with the remaining UK (rUK) government over issues like how to split up national debt. On some issue the negotiations get bogged down. Rumours start circulating that this might mean that rUK will not form a monetary union with Scotland, and that Scotland might have to create its own currency. People in Scotland start withdrawing money from Scottish banks.

Now it is almost the definition of a private bank that if everyone who has an account at the bank wants to withdraw their money, the bank will run out of cash and go bust. That is why bank runs are so dangerous. It is also why one of the key roles of a central bank is to supply an otherwise solvent private bank with all the cash they need, so they will never deny depositors their money. (To be a lender of last resort.) If they did not do this, anyone could start a rumour that a bank was insolvent, and as people withdrew their cash just in case the rumour was true, the bank would run out of money and go bust anyway.

So in my hypothetical story, as people started withdrawing cash from Scottish banks, the Bank of England should supply these banks with all the cash they need. Except suppose it did not. Suppose it put a limit to the amount of cash it would supply. The Scottish banks would protest – you agreed we were solvent before independence, they would say, so why are you rationing our liquidity? The Bank of England replies that although they might have been solvent before independence, if there is no agreement solvency is less clear. The Bank of England says that the limit on cash will remain until the Scottish and rUK government come to an agreement.

This announcement of course leads everyone in Scotland to try and get their money out, and the Scottish Banks have to close. The Scottish economy begins to grind to a halt. The English media report that Scotland is running out of money because the Bank of England will not ‘lend’ any more to the Scottish banks. The Scottish government is forced to agree to the rUK’s terms. The English media say look what happens when you elect a radical government. In Scotland they call it blackmail. What would you call it?

In short: accede to Germany’s demands or we destroy your banking system. The same ECB in 2010 to Ireland: accede to a bailout or we destroy your banking system. This is one of the reasons it is laughable to:

1) Pretend that the contemporary EU resembles a democracy in any ways other than the most superficial;
2) Act as though the destruction of Greece’s banks were somehow Tsipras’s doing.

Just out:

“The IMF’s outgoing chief economist, Olivier Blanchard, has published a defence of the Fund’s role in the Greek bailout saga.

It includes a pop at the eurozone for ignoring the need for Greek debt relief:

Until the referendum and its potential implications for growth, we believed that, under these assumptions about the primary surplus, debt sustainability could be achieved through the rescheduling of existing debt, and long maturities for new debt. This was reflected in the preliminary debt sustainability analysis (DSA) we put out before the referendum. Our assessment was seen as too pessimistic by our European partners to whom we had communicated our views about the need for debt relief long before publishing the debt sustainability analysis. We believe that current developments may well imply the need for even more financing, not least in support of the banks, and for even more debt relief than in our DSA.
Blanchard gives rather less attention to ghastly forecasting record of Greece’s lenders, arguing:

The decrease in output was indeed much larger than had been forecast. Multipliers were larger than initially assumed. But fiscal consolidation explains only a fraction of the output decline. Output above potential to start, political crises, inconsistent policies, insufficient reforms, Grexit fears, low business confidence, weak banks, all contributed to the outcome.”

@the 2nd

“A good day too for the euro. If exit is a red line for looneys like Syriza it seems to me the euro is as irreversible as you can get in this world despite the academic fantasies of Krugman, McWilliams et al”

Fitch now regard greek eventual exit from the EZ as “probable”….they must not have got the memo you sent out to Krugman and McWilliams (both of whom have had very poor forecasting records….haven’t they? eh….)

Good that the Baltic minister who is reputed to have said “Marxism does not work” has been vindicated. They should know. Perhaps we are witnessing the emergence of a less Latin EZ dominated by northern Europe and the small accession States. Great if that is true.
There are some unresolved questions for example who pays to recap Greek banks. Depositors, trade buyers or ESM?
Ultimately the euro has survived to fight another day – probably in Italy. The lesson is despite all its obvious flaws, the populace seem happy to keep it given it is a better store of value than the Argie peso.
Bad day for the various Depts of Applied Marxism that seem to exist in the groves of Irish academe.

fyi Yves Smith

‘The net effect is to give Germany, its retrograde ordoliberals, and its neoliberal allies freer rein to continue their destructive austerity policies. Despite how counterproductive austerity clearly is, Greece will be used as tangible proof that the cost of Euroexit is vastly higher. And that means that Germany will be able keep pursuing policies destined to destroy the Eurozone going well beyond their sell-by date: running large trade surpluses, refusing to finance its trade partners, and bucking all measures to move to meaningful Federal fiscal spending that might buffer national differences in performance and stealthily recycle some of the German trade surpluses. The end result will be more oppression, more suffering, and a more catastrophic eventual Eurozone breakup.


Complete detail on the proposals included.

The European ‘Solidarity Principle’ is in tatters; vichyquislingesque remains the lot of the lumpen European plebs; methinks me granchilder will be Ozzies.


You, and Simon Lewis, are perfectly correct about the ECB.
it is not a central bank. It has pulled liquidity from an entire country, on behalf of external creditor interests.
The lesson, as far as I can see, is do not put your funds in peripheral banks. The ECB cannot be trusted to support either your bank or your country’s banks with liquidity. In fact, in times of stress, the ECB is much more likely to starc spinning against both your banks and your country, thereby exacerbating any difficulties you may have.
The ECB actions in the past two weeks, of shutting down the banking system of an entire country amount to nothing less than an organised attack on an entire people.
The lesson will not be lost on other peripheral countries.
The ECB is not a central bank, it is a creditor’s stooge.

Larry Elliot of the Guardian says five months of brinkmanship has caused untold damage to the Greek economy for no purpose whatsoever.


Alexis Tsipras and his colleagues didn’t have a Plan B but then, journalists and academics as sideline observers did not also have any degree of certainty as to  how an exit from the euro would work and Argentina’s luck of a commodities super cycle could not be replicated by Europe’ worst exporter.

Greece needs a growth plan and ignorant ranting about Germany is not going to change that imperative.

It would be good to have eurobonds but then Ireland opposes tax harmonisation while allowing for example Apple to be “stateless'” for tax purposes from 2007.

During good times, big countries tend to ignore tax cheating and Jean-Claude Juncker did a very good job in making Luxembourg a tax haven in also two decades as prime minister.

It wasn’t solidarity of course and the European project like much else in life is a mix of idealism and self interest — during a crisis period this becomes self-evident.

It is grating that the first Greek bailout in particular was used to fund banks but French banks owned 2 big Greek banks and there was little in the deposit fund that would compensate customers in a bankruptcy.

The British bailed-out Irish-based banks, Ulster Bank and Bank of Scotland Ireland, at a cost of about €16bn.

@ Nocense

[Fitch now regard greek eventual exit from the EZ as “probable”]

…and some other paid flunkey analyst somewhere else may think the opposite.

You don’t appear to understand that in the short to medium term, debt relief is not going to make any difference — of course it’s a good mantra to sing in the amen corner.

Your rant suggests that most of the Euro Area countries are puppets of Germany — people like you invoke democracy but only when it’s convenient.

Can Germany afford to bail-out Italy?

I would tend to take a more pessimistic view, it’s another 50 odd billion wasted, along with the previous 330 billion odd.

The important thing now is Greece gets serious about developing a financially sustainable economy, jobs ( & a future) for the working population, etc etc.

Unless this occurs, we are wasting our time & money & the spectre of a Greek default will arise again in the next 24 months.

Apparently the Geek proposal is for a €53.5bn loan, covering the money owed to the ECB (via SMP) and the IMF plus the €7.2bn due under the previous plan. It therefore takes no account of any likely deficit financing (this year’s forecast primary surplus is unlikely to materialize) or any bank recap.

Syriza’s actions were not in vain. There will be uncertainty for creditors until the debt is restructured. The banks will be put back on life support and the ECB will end up more in the hole.

Syriza were simply not prepared for a Grexit. Their Minister and Civil Service had not done the work. The timing was appalling leading into the holiday season.

They will be better prepared [to exit] and better supported [by the IMF, France, USA and others] later in the year. Their foes will also have more time to back down and concede on the debt issue. If not, they can pull the trigger. OXI sentiment will get stronger if things don’t improve.

It’s a marathon not a sprint.

@ Ernie

Quite a few people building castles in the air should quit while they are ahead. The latest poll shows that 84% of Greeks wish to retain the euro. In short, the penny, or rather the cent, has dropped.


TMD poses the next essential question. Who pays to rescue Greek banks from the death’s door to which Syriza has brought them?

The descent under Syriza has been rapid, the recovery will be slow. The essential leverage that has been missing hitherto is now in place; capital controls (even if inventive ways around them are, apparently, already being found).

Yanis Varoufakis weighs in. Some tidbits:

In my first week as minister for finance I was visited by Jeroen Dijsselbloem, president of the Eurogroup (the eurozone finance ministers), who put a stark choice to me: accept the bailout’s “logic” and drop any demands for debt restructuring or your loan agreement will “crash” – the unsaid repercussion being that Greece’s banks would be boarded up.

Five months of negotiations ensued under conditions of monetary asphyxiation and an induced bank-run supervised and administered by the European Central Bank. The writing was on the wall: unless we capitulated, we would soon be facing capital controls, quasi-functioning cash machines, a prolonged bank holiday and, ultimately, Grexit.


With Grexit reinforcing the ECB-induced bank run, our attempts to put debt restructuring back on the negotiating table fell on deaf ears. Time and again we were told that this was a matter for an unspecified future that would follow the “programme’s successful completion” – a stupendous Catch-22 since the “programme” could never succeed without a debt restructure.

This weekend brings the climax of the talks as Euclid Tsakalotos, my successor, strives, again, to put the horse before the cart – to convince a hostile Eurogroup that debt restructuring is a prerequisite of success for reforming Greece, not an ex-post reward for it. Why is this so hard to get across?


Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.

Yathink, Yanis?


I think what you meant to say is this:

“The descent under Syriza Schäuble and his jackbooted thugs in the ECB has been rapid, the recovery will be slow.”

And for the tenth time, I don’t doubt that a large percentage of Greeks want the euro when asked that question. What I doubt is that large numbers of them accept that this is also an expression of a desire for further austerity. But I guess I should be used to such transparent and pathetic spin from the resident spin doctor.

@ Ernie

The chief castle builder in the air, in particular!

Hubris (in Greek tragedy, excessive pride towards or defiance of the gods, leading to nemesis) hardly comes near to an adequate description. His conviction may matter to other castle builders but not in the real world, which has been around for some time. As the old saying has it, a point worth repeating, “he who pays the piper calls the tune”.

In other words the plan is DOA, much more money is needed and a depositor bail in is likely. Also one cannot trust Syrizia to implement any of the necessary measures. The best option for all concerned is to let the Greeks go.


Yes, keen insights from Yanis. And Germany wants to establish a Fourth Reich, dontcha know.


They will be better prepared [to exit] and better supported…It’s a marathon not a sprint.

Sticking it to the nefarious other Europeans seems a lot more exciting than the boring process and patience in raising the export level and diversifying through improving on the dismal inward investment record. If a hames was to be made of an exit, the outsiders could move on while life could get a lot worse for the locals.

Where are the once international cheerleaders of Hugo Chávez’s Venezuela now, as the country becomes another Zimbabwe?

Reuters reports that Venezuela’s bolivar tumbled to a rate of more than 600 per US dollar on Thursday, less than a week after it broke 500. The unofficial rate is now 98 times the strongest official level of 6.3 bolivars and inflation is over 300%.

Venezuela has the largest proven oil reserves in the world. It should be rich but it is an example of how economic mismanagement can wreck an economy.

Ricardo Hausmann, a former Venezuelan minister, and now a Harvard professor, wrote in the FT last January that “By 2012, when Venezuelan oil averaged $103, the country was spending as if the price was $194, running up a fiscal deficit of 17.5% of gross domestic product. That is why the economy went into crisis in early 2014, when the oil price was still $100.”

The government has a three-tiered exchange rate system to try to control prices, profits, and production in the economy but it doesn’t work.

Oil accounts for about 95% of exports.

Vladimir Lenin is reputed to have said: “The best way to destroy the capitalist system is to debauch the currency.”

Venezuela shows that it can also destroy a socialist economy.

The World Bank’s ease of doing business index for 2015 has Venezuela at 182 of 189 countries. Greece is at 61, behind Tunisia but up from 109 in 2010. Ireland is at 13.

Devaluation is no substitute for competent governance and as elsewhere, it’s only the Greeks who can make their own country a better one.


”TMD poses the next essential question. Who pays to rescue Greek banks from the death’s door to which Syriza has brought them?

The descent under Syriza has been rapid, the recovery will be slow’

So the Greek banks were terrifically solvent back in 2010 when they held tons of Greek state bonds ? What a distortion of history to blame Syriza for the state Greece is in.

The Greek state has had chronic governance problems, but it was convenient to overlook them when business needed to be done. Castlereagh would have understood it all.

Recovery my foot. The most likely outcome of the new bailout is further debt deflation, and a bigger and more intractable political mess.

Very interesting article today in the FT.

Angela Merkel faces a ‘lose-lose’ choice on Greece

Stefan Wagstyl in Berlin July 10, 2015 3:29 pm

Frau Merkel will chose the lesser of two evils… pay up 50 odd billion face down grumbling among those who oppose it… or face social chaos in Greece which might spill over into the Balkans and upset the US.

Interesting perspective from Constantin Gurdgiev


Does anybody here believe Syriza can reform the Greek economy in the next 2 to 3 years? I don’t believe they have the capacity to do it.

Other European nations will just have to get used to putting their hands in their pockets for a ‘dig out’ every 2 years or so.

It’s always worth repeating:
This is a banking crisis – banks lent without due diligence. Now bankers enjoy the opposite of austerity.
This is financialism!

I hope the Germans resist their impulses – they lose big time if Greece goes. The Euro is a permanently devalued Deutschmark for them. They will lose either way in this but they will lose everything if they capitulate to financialism and let Greece go


It’s a little rich to call me a “castle builder” and to condescend to give me lessons about the “real world” (and about hubris!) when you’re the one here that thinks yet another round of “extend and pretend” (this time obtained only by means of the basest of blackmail) is some sort of return to realistic prudence. You’re living in fantasy land if you think that even an agreement now settles anything. All it does is postpone (again) the inevitable in the hopes (yes, hopes) of . . .

Answer me this (yes or no): would Greek debt have been sustainable (absent relief/restructuring, etc. which was not on offer) under the proposals insisted on by the institutions at the end of June? Yes or no?


‘The circumstance of Greece today is an economic and moral catastrophe, but it is an engineered catastrophe. In the half-century that the IMF was implementing austerity economics before the creation of the European Monetary Union there was never the pretense that austerity was intended to benefit indebted nations. Austerity is gangster economics intended to pay off creditors no matter how destructive the consequences were / are to the masses of people who are forced to suffer it but that had no part in incurring the debt and saw no benefit from it. As seamless as the neoliberal project at times appears, it is always within a short distance of joining radical nationalism through conflation of poorly engineered economic interests with joint political interests. The German view toward the European periphery now borders on rigid nationalism in the context of unreflective adherence to radical capitalist ideology. And the neoliberal project is proceeding apace in the U.S. Absent an enthusiastic revival of left political economy, the future appears grim.


Very Grimm.

@ PQ

I did not blame Syriza for the state that Greece is in. I did blame it for making the state, especially that of Greek banks, much worse.

Our US cousins get it in one word; distrust!


Our esteemed MOF has been putting the situation well in factual, logical and measured tones. The Greek political class has taken the pitcher to the well once too often. The room for manouevre that will be left to it under any new loan arrangements will be minimal. To the benefit of the Greek people!

‘German Finance Minister Wants Greece Out Of Euro’
Frances Coppola

“Slovakia’s Peter Kazimir, Austria’s Hans-Joerg Schelling and Germany’s Wolfgang Schaeuble all rejected debt relief outright. Herr Schaueble even said that debt relief could break the “no bailout” requirement in EU treaty legislation.

“I find this extraordinary. A bailout is the granting of loans, not the subsequent restructuring of those loans. The no-bailout clause was breached in 2010, 2011 and again in 2012 for Greece, not only through lending by the EFSF but also through bilateral loans, the largest of which came from Germany. When the European banking system was at risk, the no-bailout clause was an inconvenience that could quietly be ignored. But now the banks are believed to be secure, the no-bailout clause can apparently be invoked with impunity to deny debt relief that everyone knows is not only needed by Greece but also by the rest of the Eurozone. Without it, the creditors stand to lose their shirts. I fail to understand why 100% loss through default and disorderly Grexit is better than an agreed restructuring that may mean no loss at all, just a very long wait. But that’s Eurozone politics for you.”


And following para.

“But it’s not just debt relief that the hardliners want to reject. It is the whole proposal. The fatal flaw in the Franco-Grecian plan is that there is no agreed benchmark for a “good enough” proposal. So hardliners who really want Grexit can refuse to accept not only this proposal but any other on the grounds of inadequacy. Nothing the Greek government proposes is ever going to be good enough for those who are determined to see Greece leave the Eurozone. Unless clear criteria can be established for acceptance of the Greek proposals, the hardliners can simply drive Greece out of the Euro through a process of attrition.”

Absolutely correct Eureka.
It was the banks, THE BANKS!!

The best article on the Greek crisis is here, by Steve Randy Waldman; cannot recommend it highly enough.


With respect to Greece, the precise thing that European elites did to set the current chain of events in motion was to replace private debt with public during the 2010 first “bailout of Greece”. Prior to that event, it was obvious that blame was multipolar. Here are the banks, in France, in Germany, that foolishly lent. Not just to Greece, but to Goldman’s synthetic CDOs and every other piece of idiot paper they could carry with low risk-weights. In 2010, the EU, ECB, and IMF laundered a bailout of mostly French and German banks through the Greek fisc. Cash flowed into Greece only so it could flow out to rickety banks. Now, suddenly, the banks were absolved. There were very few bad loans left on the books of European lenders, everyone was clean, no bad actors at all. Except one. There were the institutions, the “troika”, clearly the good guys, so “helpful” with their generous offer of funds. And then there was Greece. What had been a mudwrestling match, everybody dirty, was transformed into mass of powdered wigs accusing a single filthy penitent (or, when the people with their savings in just-rescued banks decide to be generous, a petulant misbehaving child). [antidote]

Among creditors, a big catchphrase now is “moral hazard”. We cannot be too kind to Greece, we cannot forgive their debt with few string attached, because what kind of precedent would that set? If bad borrowers, other sovereigns, got the idea that they can overborrow without consequence, if Spanish and Portuguese populists perceive perhaps a better deal is on offer, they might demand that. They might continue to borrow and expect forgiveness, and where would it end except for the bankruptcy of the good Europeans who actually produce and save?

The nerve. The fücking nerve. Lenders, having been made nearly whole on their ill-conceived, profit-motivated punts, now fear that if anybody is nice to somebody who doesn’t deserve it, where will it end? I’d resort to that cliché about chutspa, the kid who murders his parents then seeks leniency ‘cuz he’s an orphan. But it’s really too cute for the occasion.

Mary Lou on RTE heaping praise on our Colm McC. The Greek tragedy is all down to not burning the bondholders in 2010. Then Colm himself comes on to spin this narrative for the umpteenth time.
Had to wait for a German MP before I heard some sense. A promise from Syriza to implement a reform in 2022 isn’t worth the paper it’s written on.

@ Ernie

I will let the representative of Syriza on RTE This Week broadcast today answer your question.


P.S. Could you drop the xenophobic comments about Germany? They further undermine what is already a very poor line of argumentation.


It appears we’re in the inverted world (that’s a reference to Hegel, doncha know): up is down, black is white, unsustainable debt is sustainable and all those who say it isn’t are building castles in the air.

Now, what was that you were saying about weak arguments?

Speaking of weak, the new eurogroup document is not to be believed. It adduces as the cause of the “sustainability questions” a slacking off by Greece in the last 12 months. That’s the kind of rigorous thinking I’m sure DOCM can get behind!

Oh, and regarding xenophobia: do you think that any crude national stereotypes may have been used by the German leadership to make their case regarding Greece to their electorate? Couldn’t happen: they’re all a perfectly splendid and ganz menschlich group of people.

On the issue of the Marshal plan for Europe post WWII wikipedia has a few interesting points.

1) In those times 13 billion dollars, in today’s terms $148 Billion approx.
2) Germany got 11% of this 148 Billion.
3) France received 18%
4) UK received 26%.
5) In all 18 European nations received aid.

A lot of the aid was used to rebuild ports / harbors / rail links / rail networks / bridges so that food and raw materials could be moved around.

Initially much of the money was used to buy American made products, fuel, food and goods for reconstruction.

Of course…. in today’s blogo sphere… it is popular to portray Germany as being the majority recipient.

Germany got the lions share… the USA was good to Germany… why can’t Germany be good to Greece!

All very simple indeed!

@ The Second

It is worth recalling that CMcC is right on one essential point, there is a hole in the euro bucket.


The error of the Greeks, all tendencies confounded, is that they tried to exploit it. Big mistake!

As Ciarán O’Hagan pointed out in a note some time ago, the existential question is now posed as to whether others i.e France will try to do the same.

Incidentally, there should be a “terrier competition” among the various players involved for those yapping around as the real dogfight is taking place.

It looks like the only option open to the Marxist/fascist coalition in Greece is to take an version of the Schauble offer.
At least that will make our next GE a proper clash of ideas. Vote to retain a foothold in a strong currency with good governance or vote to become an impoverished Celtic Venezuela

I’m having difficulty understanding the lunacy coming out of Brussels at the mo … a 5 year divorce how are ya!

Colm McCarthy and Paul Sommerville are correct in the medja today … 2010 and the basic Laws of what used to be known as Capitalism …. were smashed as they were in Ireland ….

Prior to this the other major error was facilitated by the lady below:


@The Second

Methinks you have a ‘thing’ about Mary Lou ….


Law is a social construction …. so are Ruules …. the logic of Wolfgang borders on the absolute absurd at times … and Frau Merkel’s spin to the Volk has now come back to haunt her … the ‘True’ Finns, of course, have some form in this area ….

@Greek Citizenry

In solidarity.

@ The Second

On the issue of which way Hollande will hop, it is worth recalling the terms governing France’s involvement in the EU (which is an example of French legal clarity sadly lacking in the equivalent stipulations in the Irish constitution. after the ministrations of Irish legal eagles over the decades).


Article 88-1.

The Republic shall participate in the European Union constituted by States which have freely chosen to exercise some of their powers in common by virtue of the Treaty on European Union and of the Treaty on the Functioning of the European Union, as they result from the treaty signed in Lisbon on 13 December, 2007.”

The Greeks have effectively signed up to the same commitments. Blather about national sovereignty in conflict with matters to which the sovereign has signed up is just that. blather!

@ Be a Debaser

Very good piece – thanks for referring – will not be given credence by many contributors to this blog!

@ Be A Debaser
So why is it just us two stating that this is a banking crisis.

Here are the theories:
1: It’s easier to pick on Greek pensioners than banks
2: Humans are a nasty old bunch and seek advantage rather than solutions.

I find the treatment of the Greeks disgusting!
Goldman cooked the books. Banks lent without due diligence.
Europe is morally evil. It stood by for Sebrenica. Has armed ISIS and now twists the knife in Greece.
And they’re all as bad as each other

“Could you drop the xenophobic comments about Germany? They further undermine what is already a very poor line of argumentation.”

Easy on the censorship there Doc Misrepresent. These are extraordinary times and Germany deserve to be put under the microscope when one considers there absolute annexation of power over European institutions and it’s EZ partners. There is no doubt they have deluded themselves about their contribution to the EZ and their central role in the genesis of the EZ crisis for which they appear to accept no responsibility – even for their banks. It has been accepted by all but the absolute absolutes out their heads on absolut that the Euro was a fatally flawed project from the outset…if that is universally agreed then why must irish, Spanish, Portuguese and Greek people pay for the crimes of that misconstruct? Would a car manufacturer that fully accepts it’s product was severely defective attempt to still seek complete abdication from blame when the same product is involved in a fatal crash and attempt to pass on full accountability to the driver? That is precisely Analogous to Germany’s position with the EZ periphery for 5 years now – it is an abuse of power and one that deserves greater scrutiny.

Is it okay that Angela bandies around words like “mistrust” with respect to one of their EZ partners while at the same time it ought to be considered xenophobic if anyone raises their distrust of Germany for historical reasons. If it walks like a duck and quacks like a duck it may still not be a duck but my money is starting to veer towards being put on the duck hypotheses!

A critical element of the “institutions” new plans for Greece is putting the fear of God into the rest of the PIIGS. Most likely this will eventually backfire. Fine Gael/Labor/Fianna Fail will not gain ultimate advantage — far from it.

The Irish government, public policy institutions, and public intellectuals must begin to plan for “how do we exit this failure — the Euro.” No need to exit tomorrow nor two years from now, but at a time when it is best for Ireland. The corner has been turned and the signpost arrow goes in the direction of eventual Euro termination. Just a matter of time and manner. What Irish electorate in 100 years will vote in favor of any new treaty coming from Brussels?

It would be utterly shortsighted and irresponsible if we don’t start seeing some serious conferences agenda, policy papers, insightful public intellectual essays, refereed journal special issues, and government white papers on “Strategies for Ireland as the Euro dies.”

The last thing Ireland needs is another panicked and poorly advised government making awful decisions in the middle of the night as was done in October 2008.

I see “Lebenbraum” is now underway but not as we knew it! Germany has the allies marching in step behind them this time.

Let the asset stripping commence!

While the detail of the planned asset stripping is only just coming out one has to wonder what constitutional implications there are for any Greek government signing up to such an arrangement…can they really effectively sign away Greek land to a bloc of nations without going to the people?

This really requires no commentary…

Q: How does Brussels feel about being accused of launching a coup against Greece?

Juncker: “I said before the referendum that the situation would be worse after the referendum, Juncker replies, and it is.

This is a compromise, there are no winners and losers…

It is a typical European arrangement”

We now know why V-FAK ran away. Being present for a defeat of this magnitude would damage his earning potential.
At least we now know several new facts. The EU will never be a transfer Union – no unconditional free money will be avaiable. Schauble paper offers a way out- leave and have debt restructuring. Others may choose this route in time.
Irish political system will have to discuss pro & con of EU/Z membership now.

It will come as a great comfort to Syriza to know that, despite getting utterly destroyed in the real world, they achieved a decisive victory on left-wing twitter, especially among the people who really matter – academic economists. All those snarky tweets about Schäuble’s disability, Merkel’s weight and the 4th Reich will be of great value to the Greek people when they do their shopping next week.

“At least we now know several new facts. The EU will never be a transfer Union – no unconditional free money will be avaiable.”

You truly are capable of an extraordinary degree of “suspending disbelief”

unconditional free money for profligate lenders has been copper fastened by the actions of the last 5 years. What could be more unconditional than entirely risk free lending against rates of return that reflect a risk that isn’t present!….beggars belief that you could convince yourself this didn’t happen and won’t again.

eh…what does one say to a post like that. Congratulations???

But why stop there…lets burn the books and start with Keynes “General Theory” – the people that “really matter” (Angela ‘n Enda) can rally around the bonfire as they send the siren for the next round of treaties to be passed and trampled on.

Naifs will of course look at this issue in good and evil terms while being blind to a pertinent fact: the Greek government has been guilty of an epic miscalculation in running out the clock on the second bailout.

It is true that the German finance ministry paper on effectively ejecting Greek from the euro irrespective what concessions it would make was over the top. However, naifs ignore the fact that it wasn’t Germany alone that was demanding a stricter regime of enforcement of terms but the majority of the 19 countries in the Euro Area.

There is a provision on “the safeguarding of the full legal independence of ELSTAT,” the national statistics office as the current and last governments have intimidated the senior staff by launching criminal investigations against them for telling the truth.

It was reported at the weekend that there had been no discussions between the Bank of Greece and the Greek authorities on the mechanics of a Grexit.

Up until the referendum was called, it would at least have been a bargaining chip to have been ready for an alternative.

@ Kerchav

German policy should no doubt be subject to scrutiny, hopefully by people knowledgeable enough to get beyond merely likening it to the policies of the 3rd Reich.

To DOCM, JF, tull, sporthog or any other self-anointed “hard-headed realists”: please answer these two questions:

Is Greek debt sustainable under the new proposals?
Was it sustainable before the new proposals?

@Michael Hennigan

One of the things that “naifs” believe is that the fact that the hegemon is able to rally a majority of supplicants to its cause is some sort of triumph of democracy.


We should not be too sensitive about the language used in assessing the motives of Germany – dominion can be achieved without putting boots on the ground and it is entirely reasonable to query whether the pyschology of a nation in their quest for dominion in a non-violent way shares characteristic of one that previously has tried to achieve it in a violent way? If the characteristic of violence is removed does the motives remain the same, does removing the violent aspect of the quest for dominion prohibit drawing any paralells between the violent and non-violent regime. Hubris and self rigtheousness and a complete failure to recognise its own role in catastrophe are themes appear to be repetitive themes.

We have heard often enough in recent weeks – “greeks don’t pay their taxes”, “greeks are corrupt” “greeks are not to be trusted” etc…etc…there is consternation when Greece in turn uses phrases like ‘blackmail’ ‘financial terrorism’ – both of which appear to be very accurate descriptions now.

Varoufakis has indicated last night that Germany’s intention was to remove Greece from the EZ according to discussions he had with Schauble. You may say his word against Herr Schuable but it will be interesting to see if the latter makes any effort to deny this….I suspect he won’t and it won’t be because he is adopting any high moral ground.

@ Ernie Ball

The public debt is unsustainable long-term as raising the growth rate through improving exports and inward foreign investment levels would not show results for a significant period when debt repayments and possibly higher interest rates would have to be addressed — and be a damper on growth.

In the short to medium term Greece hasn’t a problem with debt as maturities are long and annual interest is about 2% of GDP.

Countries like Ireland today oppose debt relief for Greece but the hope would be that if Greece runs its economy competently in coming years, the other members would be more amenable to relief.



The causes of the third reich are still very much an open question. Especially open is the question of what, if anything, in the German psyche led to such a horror.

In addition to the hubris and self-righteous blindness pointed out by Nocense, there is the constant search for and vilification of scapegoats who become irredeemable once identified. So it was with Schäuble’s attitude to the Greeks: the sentence has been pronounced so nothing these people might bring to the table will make any difference. There will be no negotiating and no compromise. They are fit only to be crushed.


Do enlighten us on what you mean by German culture? I would like to hear what you think the national characteristics of the German people are, and how they differ from people of other nationalities.

@ Ernie,

As you know very few countries pay back their debt in full. It is just rolled over, inflation eats away at it and serviced in the mean time.

It is the cost of servicing the debt which is the kernel.

Borrow 100 billion at 6% and you pay 6 billion / year interest.

Borrow 300 billion at 2% and you pay 6 billion / year interest.

The Greek situation is bad, and in my opinion is unsustainable. We will be back arguing over Greece within the next 36 months. But that is not the important point.

Greece requires to recognise where it is and having a independent statistical office will help.

They require to develop a national plan of action which will move the country into economical viability.

Lies, dishonesty, deceit, bullying of Statisticians or anybody who tells the truth for that matter is wrong. Constantly borrowing, defaulting, devaluing, or re neighing on debt is also unsustainable… eventually the you run out of places to borrow from… which is why the Troika stepped in.

It is entirely probable that the best thing to happen is for the Greek Govt to be suspended by Brussels. For Greece to be transferred into the care of the EU, to be governed and reformed by Brussels / Berlin financially and economically.

A bit like Westminster did with Stormont in the 1970’s.

When the crisis has passed the Greek Parliament could be recalled.

A hypothetical scenario I agree… but perhaps if only financial control of the country were to be handed over then it could be more workable.


Sorry what is unpleasant with the idea of “german pysche” precisely? Whatever you may believe is entailed or not in that pysche are we now denying any such thing exists…is this where we’ve come to?

Yes we are denying that such things exist, because they are deeply offensive racist constructs, the kind of thing on which the third reich thrived. Treat people as individuals.

No need to be so sensitive about the “German Culture” reference.
The “Greek Culture” has been dragged through the mud by the neolibs for at least the last six months… if not six years.

The German culture is primarily focussed on ordoliberal economic theories, supported and driven by a mercantilist approach to trade, which they then amalgamate and support with moralistic labelling:
Surplus = good, deficit = bad; failing to realise that one begets the other, so they are morally equivalent.


I’ve never heard such nonsense.

Everyday of the week I read in our own press comments like “the irish has an unhealthy relationship with the drink”. I accept as an Irish man that on some level that is probably true. I presume you are suitability outraged by the racist self loathing comments of our own media in this regard and make your feelings known as a result.

There absolutely is an Irish, German, Japanese, Chinese, Alabama, Northern Irish and many many many other pysches – so please don’t be so naive as to deny it – it is to deny the nuture side of the nature v nuture evolutionary process. If you want to hide yourself from that fact, you have little hope in understanding the way global politics and much much more works.

@ Nocense

You end up participating in a debate about whether Germans have a domineering culture or Greeks have a lazy culture. That is not only offensive but also a waste of time, since both characterizations are false. As can be quickly verified by anyone who actually knows some Germans or Greeks.

Greek debt was sustainable before the Marxist/fascist coalition came to power. Due to their grandstanding, the economy went into a tail spin and debt became a problem.
After this deal, it probably is not due to the need to recap the banks. But why is that.
For the record, I would prefer if Greece was ejected from the Euro. I see Merit in Schauble’s offer. It could devalue and default to its hearts content.


Your definition of what counts as “racist” is, er, idiosyncratic. Any anthropologist will tell you that there are cultural differences among peoples. So, for example, thanks in part to the influence of Calvinism, Germans have an abhorrence of debt and conflate it with a kind of moral failing on the part of the debtor where other countries (the US, say) do not. There’s nothing racist in pointing such differing values out. Indeed, that comparative anthropological perspective was instrumental in allowing for the rooting out of ethnocentrism and some forms of racism as anyone who knows anything about the history of anthropology could tell you.

If you’d like to know more about the German mind, I recommend The German Ideology by the French comparative anthropologist, Louis Dumont.


Reverting to insulting the individual I see. Easier than dealing with the reality of the world we live in I guess.

My intention is not to offend anyone but equally I am not going to be ushered into some ultra PC box by a whirlwind of contrived indignation. For someone to suggest that evoking a debate on the notion of a “collective pysche” is offensive is not just an advocate of censorship but are a danger to the privilege of free speech and worst of all they are willing to ignore the world around them simply to feel better about the person they think they are.

I give you Ireland of now or 30 years ago – would a gay marraige referendum have passed in 1985? I think we all know the answer to that question and yet you would posit it was “individuals” and not an nation that voted in the referendum a few weeks ago. Why then are the individuals of 2015 so different from the those of 1985. The answer of course is that we as a nation went on a journey of evolution – our national pysche altered over that period for too many reasons to go into here. It continues to evolve in different ways over time – that our national pysche still harbours elements of post colonial syndrome I believe to still be true although it is less prevalent than 30 years ago too.

I have worked in third world countries – and I can tell you the national pysche of many of their peoples is still deeply affected by their colonial pasts. I have witnessed subservience by liberated races still today as a consequence of what used to be. We are of course all individuals and individuals are capable of escaping any collective pysche to greater or lesser degrees but even in expressing their individuality it is easy to consider how many retain the hue of their collective pysche. I don’t exclude myself from this by the way – I have no doubt I betray many traits of a national pysche notwithstanding my individuality – it is the environment I grew up in. Of course it affects who I am and how I think.

The Germans are no different. An exploration of their national pysche too should not be off limits because someone is offended by the very notion of such a thing. But it is a reality and if you want to really understand things you don’t eliminate one hyopthesis over another simply because it just ain’t PC (Political Correctness of course is one of the greatest example of the cult of a collective pysche).

“Borrow 100 billion at 6% and you pay 6 billion / year interest.”

“Borrow 300 billion at 2% and you pay 6 billion / year interest.”

Borrow 600 billion at 1% and you only have to pay 6 bill.

Borrow 1200 billion at 0.5% and you only have to pay 6 bill.

Now that’s what I call real sustainable economic growth. So, what do you do with the 1200 bill then? Oh, you invest it in financial products – after skimming off your commission of course. Hey, that’s a real cool game. Especially if the original money is of the fiat variety.

“It is the cost of servicing the debt which is the kernel.”

No. Its actually the mathematical and physical impossibilities of the Permagrowth economic paradigm. But sure what the hell. We are all dead in the long run. Carpe Diem!

@ Tull: “Greek debt was sustainable before the Marxist/fascist coalition came to power. Due to their grandstanding, the economy went into a tail spin and debt became a problem.”

This is just plain wrong Tull. Perhaps I should sing the Swedish national anthem to you?

@ Brian Woods Senior,

Borrow 1200 billion @ 0.5% and pay 6 billion / year.

That is where things are heading, it would appear!

We will be back here again in 24 months time, maybe before then!

@ Sporthog: I sure hope you are wrong – ’cause if interest rates were to rise (which they cannot do) – then the effluent would surely fly all over the shop!

Looks like we are heading up Excrement Alley.

Time to perform a chemical analysis of the main contributors. On a pH scale (0 to 14) I put DOD on 0, Me on 9 Dan McL on 7. The chemists would describe us as acidic, fairly basic and neutral resp. Left to right is a loose proxy. So in order of appearance:
KD 2
CMcC 5
Sport 10
JF 9
Noc 1
Tull 9
MH 7 (?)
Shay 1
JtO 10
EB 1
Kerchav 4
PH 7
Zhou 4
Veronica 7
PQ 3
GK 4
Be a D 3

Average 5, quite acidic

The lesson is that you can elect any crackpot fascist or marxist admin or both in the case of Greece. However, you are on your own. No transfers. You make your own bed.
I think this deal is a mistake. The EZ should have followed the road advocated by Schauble & cut Greece loose & restructured debt outside the EZ. The lessons from Iraq, Syria etc are potent. The West has no biz trying to fix failed states.

The Second: But, but – not all acids are equal. Monoprotiotic, diprotiotic or triptotiotic? HF and HCOOH are two dillys! But nice one though.

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