Miscellaneous irritations

“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.

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.

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).

@JF
“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?

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.

@ 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.

http://www.sueddeutsche.de/wirtschaft/griechenland-das-sind-die-neuen-vorschlaege-aus-athen-1.2554715

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.

@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.

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.

@Sporthog

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.

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).

http://ec.europa.eu/eurostat/documents/2995521/6899478/2-07072015-AP-EN.pdf/797f4af9-c37f-4631-8211-5dd0b32fcb31

@SH

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.

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.

A recent FT video on market reactions:

@MH

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?

@ 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

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.

An interesting attempt by Simon-Wren Lewis to explain the hostility among neoliberals in general and Germany in particular towards Greece.

They took the doctors advice and got worse instead of better, and now the doctor is worried about her reputation.

http://mainlymacro.blogspot.ie/2015/07/why-germany-wants-rid-of-greece.html

Time to brush the evidence of the assault under the carpet and claim the victim committed suicide.

http://www.bloomberg.com/news/articles/2015-07-07/anxious-greeks-buy-macs-and-playstations-while-they-still-can

Spend it before Syriza haircuts it.

Appalling.

“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.

@Shay

Thanks for the Simon Wren-Lewis link. The generally great Steve Randy Waldman piece linked to in another thread aptly calls the phenomenon Wren-Lewis is describing “Loan Shark Theatre.”

@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.

@JohnTheOptimist

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?

Check Foreign Affairs magazine.
~~~~~~~~~~~~~~
Why Greece Isn’t to Blame for the Crisis

Mark Blyth writes in Foreign Affairs Magazine that Greece isn’t to blame for the crisis. In this lengthy piece, he suggests people should “follow the money” to find out where the crisis really started.

http://www.pappaspost.com/foreign-affairs-magazine-why-greece-isnt-to-blame-for-the-crisis/

@Jto
“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!

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.

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!

@ 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.

“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?

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.

@Zhou,

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.

@ 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.

@ 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.

http://www.statistics.gr/portal/page/portal/ESYE/BUCKET/General/NWS_ISI_JUNE_2015_EN.pdf

It would appear things are mobilizing for the next phase….

http://www.bloomberg.com/news/articles/2015-07-08/eu-floats-humanitarian-aid-as-possible-salve-to-greece-euro-exit

Humanitarian aid for Greece.

Just in case there are some objections from bloggers about the Bloomberg link… here is another from Businessinsider

http://www.businessinsider.com/europe-humanitarian-aid-greece-grexit-2015-7

Just for you Garo 🙂

@ Nocense et al

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

http://www.rte.ie/radio1/liveline/

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.

fyi
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.

http://www.counterpunch.org/2015/07/08/71809/

@all

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 ….

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.

@ 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.

@ DOCM

“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

http://www.ft.com/intl/cms/s/0/b7b3d6a2-2573-11e5-9c4e-a775d2b173ca.html?siteedition=intl#axzz3fDwt9vTU

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 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

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!

@Kevin,
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).

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?

“An 80% figure from a month ago means virtually nothing now.”

Poll published last Friday (by Alco) showed 75% in favour of remaining in Euro.

http://en.mercopress.com/2015/07/04/greece-yes-and-no-voters-tied-for-sunday-s-referendum-shows-latest-poll

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

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

@ 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.

“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” –

Spotted: Greece’s new finance minister, Euclid Tsakalotos, chatting with his predecessor Yanis Varoufakis in the Athens parliament today.

Euclid: What do you think of Biddy?

Yanis: One Hellenic Woman ….

Euclid: Knows her figures

Yanis; What is her figure?

ONE HUNDRED BILLION … and Euclid smiles! [h/t NSA]

http://www.theguardian.com/business/live/2015/jul/09/greek-crisis-reform-plan-grexit-tsipras-draghi-live#block-559e7ddee4b0f64a10a5a76b

@BEB
“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”.

@ DOD

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

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

http://www.independent.ie/business/irish/irelands-exposure-to-greek-debt-is-26bn-says-thinktank-31360026.html

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?

http://www.independent.ie/business/irish/irelands-exposure-to-greek-debt-is-26bn-says-thinktank-31360026.html

(Article 13.3!).

er, Greeks’

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.

Absolutely essential listening and getting wide attention!

http://www.newstalk.com/podcasts/The_Pat_Kenny_Show/The_Pat_Kenny_Show_Highlights/96696/Michael_Noonan_on_Greece_mortgage_rates__Budget_2016

@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]

http://www.counterpunch.org/2015/07/08/71809/

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.

@BEB,
“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.

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.

@ 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.

@ Veronica

This link may interest you and others.

http://www.brookings.edu/~/media/Projects/BPEA/Fall%202014/Fall2014BPEA_Guiso_Sapienza_Zingales.pdf

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.

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.”

@BEB

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.

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.

@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.

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.”

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.

@nocense
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.

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.

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.

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.

and

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?

Conclusion:

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?

Yesterday’s man.

Dan,
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.

@Ernie

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

@ DOCM

”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.

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

@ninap

A fourth reich would simply be superfluous for Germany. To what end?

@ 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!

http://www.nytimes.com/2015/07/12/business/greece-debt-plan-at-next-crucial-stage-as-finance-ministers-meet.html?_r=0

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!

A labour of Hercules!

http://www.telegraph.co.uk/news/worldnews/europe/greece/11731242/Greece-is-a-victim-of-its-own-cronyism-and-corruption.html

‘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.”

http://www.forbes.com/sites/francescoppola/2015/07/11/german-finance-minister-wants-greece-out/

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.
http://www.interfluidity.com/v2/5965.html

extract:

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.

@ Ernie

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

http://www.rte.ie/radio1/this-week/

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

@DOCM

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!

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!

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

@ 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).

“ON THE EUROPEAN UNION

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

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.

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?

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.

@Tull
“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.

@JF
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.

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.

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?

@skeptic

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.

@Nocense

+1

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.

… is rather unpleasant.

@Ernie

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.

@JF

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?

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.

Wow. You turn over a rock and look what crawls out.

Ernie,
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.

@JF

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

@skeptic
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).

@ 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.

Eureka,
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.