More miscellaneous irritations

1.  “We averted the plan of a financial choking and banking system collapse.” (Tspiras)

You are the prime minister Mr Tspiras. Did you not have a plan B to deal with ECB blackmail? If not, why not? Did you really think that the others would back down because of the possibility of Grexit, when it was so clear that you would be willing to do almost anything to avoid it?

2. The new (and conveniently self-interested) German doctrine that defaults are impossible within the Eurozone. Remember the no bailout clause? Ashoka Mody is surely right: these negotiations will kill the entire European project sooner or later. Better to let countries default when that is what is required.

3. Nice to hear Merkel saying that Greece may win back her trust. If I were Greek I might not trust European promises regarding debt rescheduling. Have we not heard those before?

4. How high is Greece’s debt to GDP ratio going to be now? Over 200%? Even if there is some reprofiling, does anyone think this makes sense?

All in all a great day for Golden Dawn. As for the rest of us: I don’t suppose that any other left wing party that may come to power in the future seeking to challenge the current European economic policy mix will be as feckless as the Tspiras government. The lesson that they will draw from this debacle is: negotiating with Germany is a waste of time; be willing to act unilaterally, be willing to default unilaterally, have a plan for achieving primary surplus if you haven’t already achieved it, have a hard default and euro exit (now possible, thanks to the Germans) option in your back pocket, and be willing to use it at the first sign of hassle from the ECB. A deal could have been done today that would have strengthened the Eurozone, but instead it has just become a lot more fragile.

Update: Wolfgang Münchau is well worth reading, here.

Update: this is also well worth a read.

Update: Charles Wyplosz is well worth reading here. Good to see someone pointing out the obvious about this extraordinary programme, and also taking on the (to my mind bizarre) argument that the headline debt/GDP ratio is irrelevant.

Update: Dae Woong Kang and Ashoka Mody offer a historical perspective here.

173 replies on “More miscellaneous irritations”


was all of this not entirely predictable? I’m not just referring to from Tsipras/Varoufakis’ point of view, but also from internet/political commentariat as well?

The Syriza negotiating strategy was cheered on from the terraces by so many people out there who should have known better, even though it was from the start obviously too aggressive, too naive, and too blinded by its fervent ideology. Meanwhile, the central point being made by those more skeptical of Syriza’s ability to win, that Greece was unwilling to countenance EZ-exit and so its strategy was always doomed to failure, were constantly shushed by claims of ‘contagion’, ‘democratic mandate’, ‘EU outmaneuvered’ etc which ultimately turned out to be horrifically misguided.

This is, overall, a bad result for Europe and Greece, given that the ideas of solidarity have been hammered and the ideas of EZ/EU-exit progressed so much, but it could also easily have been avoided. Greece was as much an experiment of those in favour of austerity as of those against it (if you’re so much in favour of Grexit, why don’t you move all ur assets down there first?), and ultimately its the people of Greece who will pay most of the R&D costs attached to both sides of that.

Tsipras talks about having fought hard abroad that there is now a fight at home against vested interests. Some of the most recalcitrant are behind him. The Greek parliament has two days to enact legislation to convey the impression of being a functioning economic polity subject to effective democratic governance. Good luck with that.

Rather than the EZ having become a lot more fragile, I would contend it has become more resilient. Social democracy in Europe is going though its death throes – partly as a result of its own success and partly due to the baleful influence of the powerful special interest groups which have subverted it.

It was fitting that Donald Tusk attempted to extract a laugh by referring to “AGreekment” in his press conference this morning – yes, he paused and smiled, positively waiting for the approval of the gathered audience. One wonders did he think it up on the spot and was pleased with how spontaneous he was. Had he planned it earlier, even days earlier and wondered how it would play with the scribes…did he discuss it with Juncker with whom he shared the stage in advance – a masterly orator himself old Juck!….

Perhaps its farcical to spend too much time analysing how “Agreekment” came to be uttered by Tusk….but farce appears to be in keeping with the general tone of the last several weeks and in particular with the conclusion to last nights talks.

Bit premature to refer to a eurozone ‘deal’ on Greece, given the hoops that have to be gone through before negotiations start and the extraordinary conditions that Greece have to accept, including ceding a huge amount of control to Brussels and moving €50bn worth of assets into a separate fund to be used for privatization. More grounds for a referendum now than a few weeks ago I would have thought. Wonder what Mr Varoufakis thinks of it all?

Kevin O’Rourke is absolutely right that any country should have a plan for a hard default and exit ready if they are going to talk the talk. I think Varoukakis was ready to go even without a plan. I would suggest that now that it is established that expulsion of a member state from the Eurozone is a live option, the Commission and the Eurogroup should also have published contingency plans for exits by member states to ease the pain.

Everybody has lost something here.

The Germans have committed to providing more money to a State which everybody knows cannot pay them back. The Germans further appear to have betrayed the Eurozone by promoting a Grexit, and to have gambled needlessly with the Greeks leaving the Euro at great risk to many other EU countries. Some will feel that the Germans have betrayed the underlying principles and raison d’etre of the European Union. Germany’s image is thus tarnished for a whole generation of Europeans. It is also surely tarnished in the eyes of the USA too but I doubt that bothers then as much.

Syriza and their fellow travellers (Sinn Fein and the Irish communists Ruth Coppinger, Joe Higgins and Paul Murphy) have been exposed as having catastrophically misjudged the dynamics of EU politics.

The Greek people have been needlessly, but totally, humiliated at the hands of domestic egomaniacs and of European officialdom and intransigent creditors.

The Eurozone has been redefined as temporary construct without unanimous support from its members. The ECB will now be perceived by many as a tool of oppression or of enforcing the political and economic views of larger nations on the smaller nations.

The UK referendum could well be in doubt after the UK population have seen the steel in the heart of resurgent Germany that has left its national guilt behind.

The aspiration of democracy within smaller states Europe has been destroyed. People must now realise that the Fiscal compact rules will be applied remorselessly to smaller nations.

The only silver lining is that the illness in the body politic of the EU has been exposed to the light. Also, whatever way you look at it, the Greeks will have to get debt relief down the line.

As well as not having an exit strategy, Syriza’s strategy had many additional flaws:

1. They assumed that markets would erupt in turmoil as Grexit approached, forcing the EZ to make concessions. Didn’t happen.

2. They assumed that popular political movements in other peripheral countries would rapidly gain strength and help Syriza to extract concessions. Didn’t happen.

3. They assumed that the political cost of Grexit would force the EZ to keep them in, but instead several members now plainly see keeping them in as the more costly option.

Radical parties in other EZ countries have operated under the same assumptions and it will be interesting to see if they now have a changed view.

It will be interesting to see how electorates will react when faced with an in-out option. Keep the currency with some costs or step off the dock and face a Zimbabwe outcome.
Europhiles have always trumpeted the ideals of ever closer union. Well we have it now, just without copious amounts of OPM.

Janey, another whinge about why [insert left-wing party of choice] didn’t follow the advice of academics and lost. Same myopic reaction happened on twitter after the UK election (“why didn’t Labour say it was a banking crisis like I told them to???”). Hint: the centre isn’t where it used to be.

I’d say that this outcome is still good for other anti-austerity left parties such as SF in a “heighten the contradictions” sense, looking for more votes and TDs than at the last election. It doesn’t bode well for their policy options if they actually get into office of course.

@ JF

think the problem here is that they DID follow the advice of academics and lost. So there’s a need to change the original advice (“You mean you didn’t have a plan for exit??? Feck democracy and all that, you should have planned for it…”)

Perhaps the Government should stop the banking inquiry and start an Inquiry about where we are going in Europe, and particularly about the report from the five presidents on further integration in the Eurozone. We need a properly informed Oireachtas now more than ever.

@ Paul Hunt

I agree with your view that euro area governance is strengthened by this episode. It is, however, remarkable how naive the designers of the euro (finance ministries and central banks) were, especially when it came to the Target 2 system. It is based on absolute trust between the parties, including governments. The danger is that the system – almost organically – rejecting any party that does not meet this criterion will be misinterpreted as bullying behaviour, loss of sovereignty etc. etc. in the popular mind.

The irony is that Tsipras is probably the only political leader that can make the transition to a new era for Greece despite the fact that Syriza as a political grouping has made the economic situation of the country much worse.

Part of the problem lies in the constant parroting by politicians, especially in Ireland, of the supposed objective of separating banks from their sovereigns. The actual phrase agreed by the European Council in June 2012 is “We affirm that it is imperative to break the vicious circle between banks and sovereigns”. It is the vicious nature of the circle which matters. Banks and sovereigns,whether acting independently or together within an EMU, are inextricably linked. If nothing else, the decision by the Greek government to close their banks – and it had to be a decision at national level to avail of the public interest argument in breach of the EU principle of the free movement of capital – must drive home this point.

There can be no solid banks without solid government finances and tight supervision both nationally and through the EU. This supposedly solely German thesis is hardly open to serious questioning.

Assuming Tsipras can deliver his side of the bargain, attention will now turn to how to get the banks re-opened. Capital controls, however, are likely to remain indefinitely.

I posted this WSJ link on the other thread. Wall Street keeps its eye on things!

“…be willing to default unilaterally,…”

Yep! Political Realism: POL 101.

” ..have a plan for achieving primary surplus if you haven’t already achieved it ..”

Ah, yes. Now there is a bit of a problemo here. Achieving primary surplus works quite well in theory but the physical reality is very different. Only a few states will be able to do this on a continuous basis*. The rest of us have to make do with increasing deficits – buttressed by borrowing (additional deficits!) until our leaky fiscal dyke gives way under the pressure of rising debt. Thought this might be obvious to politicians and economists. Apparently not.

Exhorting your populace to “tighten belts” is not a good electoral career move. Better to promise them “tax cuts” and privatizations – you know, like, “littler government”. Eh? Now if’n Robin Hood had robbed the poor to support the rich; he’d still be hero? Sure would. Life is funny like that.

Have the Socialists failed politically and economically? Sure they have. But so also the Capitalists before them. So what have we got now? Neo-Capitalism … to be followed by? You guessed it? – and it will not be Neo-socialism. More like Militarized Capitalism.

*If the rest actually ran balanced budgets on a continuous basis the few would not be able to run their primary surpluses on a continuous basis.

Reading some of the comments on various sites which contain colorful metaphors.

“Beaten Dog, Predator to Prey, humiliated, bowing to outside economic forces, 17 hours of Inquisition” etc.

Truly disgraceful comments, even if true.

If the Troika / EU / ECB creditors wish for Syriza to pass this new agreement… then using words above to describe Alexis Tsipras is counter productive.

The Greek Govt may collapse at the horror of the ‘optics’ of it all.

In victory… one has to be magnanimous, other wise it will be a hollow victory which will not last the course of history.

Alexis Tsipras may have demonstrated a slightly double cross nature in the past (calling referendum), but he is now the main man in Greece, and he has to be supported, as he now has to win over the Greek parliament.

Allowing him to be portrayed as a ‘beaten dog’ will not do the Troika any favors.

Having read the EU Summit statement (SN 4070/15), much of it commits the Greek to delivering on what many of us thought they had already agreed to, but singularly failed to do.

One item in particular stands out by way of example: “the safeguarding of the full legal independence of ELSTAT”. This refers to the Greek Statistical Authority, which apparently has not had the promised reforms and independence, and whose director (Andreas Georgiou) has been subjected to politically-motivated prosecution, which has lead to protests from European professional statistician associations.

A pity that the 100 signatories to this morning’s Irish Times letter did not see fit to stand up for professional autonomy.

Here’s Yanis Varoufakis describing what went on behind the scenes:

HL: What was it like? Did you like any aspect of it?

YV: Oh well a lot of it. But the inside information one gets… to have your worst fears confirmed … To have “the powers that be” speak to you directly, and it be as you feared – the situation was worse than you imagined! So that was fun, to have the front row seat.

HL: What are you referring to?

YV: The complete lack of any democratic scruples, on behalf of the supposed defenders of Europe’s democracy. The quite clear understanding on the other side that we are on the same page analytically – of course it will never come out at present. [And yet] To have very powerful figures look at you in the eye and say “You’re right in what you’re saying, but we’re going to crunch you anyway.”

HL: You’ve said creditors objected to you because “I try and talk economics in the Eurogroup, which nobody does.” What happened when you did?

YV: It’s not that it didn’t go down well – it’s that there was point blank refusal to engage in economic arguments. Point blank. … You put forward an argument that you’ve really worked on – to make sure it’s logically coherent – and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply. And that’s startling, for somebody who’s used to academic debate. … The other side always engages. Well there was no engagement at all. It was not even annoyance, it was as if one had not spoken.


HL: And Merkel?

YV: You have to understand I never had anything to do with Merkel, finance ministers talk to finance ministers, prime ministers talk to Chancellors. From my understanding, she was very different. She tried to placate the Prime Minister [Tsipras] – she said “We’ll find a solution, don’t worry about it, I won’t let anything awful happen, just do your homework and work with the institutions, work with the Troika; there can be no dead end here.”

This is not what I heard from my counterpart – both from the head of the Eurogroup and Dr Schäuble, they were very clear. At some point it was put to me very unequivocally: “This is a horse and either you get on it or it is dead.”


The negotiations took ages, because the other side was refusing to negotiate. They insisted on a “comprehensive agreement”, which meant they wanted to talk about everything. My interpretation is that when you want to talk about everything, you don’t want to talk about anything. But we went along with that.

And look there were absolutely no positions put forward on anything by them. So they would… let me give you an example. They would say we need all your data on the fiscal path on which Greek finds itself, we need all the data on state-owned enterprises. So we spent a lot of time trying to provide them with all the data and answering questionnaires and having countless meetings providing the data.

So that would be the first phase. The second phase was where they’d ask us what we intended to do on VAT. They would then reject our proposal but wouldn’t come up with a proposal of their own. And then, before we would get a chance to agree on VAT with them, they would shift to another issue, like privatisation. They would ask what we want to do about privatisation, we put something forward, they would reject it. Then they’d move onto another topic, like pensions, from there to product markets, from there to labour relations, from labour relations to all sorts of things right? So it was like a cat chasing its own tail.

We felt, the government felt, that we couldn’t discontinue the process. Look, my suggestion from the beginning was this: This is a country that has run aground, that ran aground a long time ago. … Surely we need to reform this country – we are in agreement on this. Because time is of the essence, and because during negotiations the central bank was squeezing liquidity [on Greek banks] in order pressurise us, in order to succumb, my constant proposal to the Troika was very simple: let us agree on three or four important reforms that we agree upon, like the tax system, like VAT, and let’s implement them immediately. And you relax the restrictions on liqiuidity from the ECB. You want a comprehensive agreement – let’s carry on negotiating – and in the meantime let us introduce these reforms in parliament by agreement between us and you.

And they said “No, no, no, this has to be a comprehensive review. Nothing will be implemented if you dare introduce any legislation. It will be considered unilateral action inimical to the process of reaching an agreement.” And then of course a few months later they would leak to the media that we had not reformed the country and that we were wasting time! And so… [chuckles] we were set up, in a sense, in an important sense.

So by the time the liquidity almost ran out completely, and we were in default, or quasi-default, to the IMF, they introduced their proposals, which were absolutely impossible… totally non-viable and toxic. So they delayed and then came up with the kind of proposal you present to another side when you don’t want an agreement.

Well worth reading. Oh, but I know: he’s an academic and a prima donna and, didn’t you hear?, he work a backpack!

text from Blind Biddy in Vienna [with the One-Eyed Shia Sheik…]

Sad to witness the demise of The European Solidarity Principle; very sad.

Even sadder to witness the vichyquislingesque supine stance of Fine Gael, Labour Party, Fianna Fail et al. Much empirical support recently [‘mental waterboarding’ etc.] for the Euro_CRITICAL stance of Sinn Fein and a few notable other local exceptions …. blind adherence to nonsensical deutsche ruules is the road to further serfdom for the generations ….

Ireland, all of Ireland, needs a serious revolution in thought and action. We’ve gone soft, supine, stupid and flatulent.

p.s. The Sheik is cautiously optimistic on developments here in Vienna.

@Greek Citizenry

In solidarity.

@Hibernian Quislings


Here’s some more pie-in-the-sky, airy-fairy, irrealist claptrap from the backpack-wearing, motorcycle-riding academic rockstar:

But I’m not going to betray my own view, that I honed back in 2010, that this country must stop extending and pretending, we must stop taking on new loans pretending that we’ve solved the problem, when we haven’t; when we have made our debt even less sustainable on condition of further austerity that even further shrinks the economy; and shifts the burden further onto the have nots, creating a humanitarian crisis. It’s something I’m not going to accept. I’m not going to be party to.


The weeping and gnashing of teeth by so many about how Greece has been treated appears to be based either on an assumption that it has long been a well functioning economic polity subject to sensible democratic governance complying with all EU norms which, through no fault of its own, has fallen upon hard times or a disingenuous refusal to accept the reality of its profound failures of governance. Even when these are obliquely referred to, their relevance is dismissed as rapidly as possible.

Greece used its well-documented and significant contribution to humanity during a few centuries prior to the Christian Era combined with blatant deception to secure membership of the EU in 1981 and the EZ in 2001. No other aspiring member has been or would be treated so leniently. The day of reckoning for this indulgence has been postponed for a long time, but it has finally arrived.

With ND effectively rudderless, PASOK a shadow of its former self and despite the defection of some of Syriza’s left-wing headbangers Tsipras left Athens in a politically unassailable position. It’s not clear that he will be able to retain this on his return by means of a government of national unity. But if he can he has a once in a century opportunity to implement the changes in the institutions and procedures of governance that are long overdue.

Thanks for post. I doubt even YV’s greatest detractors could argue with accuracy of his answer to this query…

HL: Did you try working together with the governments of other indebted countries?

YV: The answer is no, and the reason is very simple: from the very beginning those particular countries made it abundantly clear that they were the most energetic enemies of our government, from the very beginning. And the reason of course was their greatest nightmare was our success: were we to succeed in negotiating a better deal for Greece, that would of course obliterate them politically, they would have to answer to their own people why they didn’t negotiate like we were doing.

The Creditors have to take some responsibility for failure of the Greek plans, just as a manager or business owner must take responsibility for the failings of his staff or company. Schaeuble has been there for a number of years whereas Tsipras and Syriza have only been in power for about six months.

If the Greeks did not implement things then the question as to why must be addressed. One reason appears to be a serious lack of competence in the Greek civil service. Real assistance, like the French provided last weekend, needs to be provided. This should have been dealt with in previous bailouts.

@David O’Donnell

Is Blind Biddy ogling Pearse’s intellectual heirs, beguiled by their beautiful fantasies and lusting after a blood sacrifice?

@Paul Hunt

Did Germany have a history of “democratic governance” and was it through “no fault of its own” that it fell on “hard times” leading up to its debt write-off in 1953?

Or is it your view that the price to be paid for insufficiently-democratic governance (by the high standards set within the eurogroup, no doubt) is never to have one’s unsustainable debt written off? And you think that this is somehow going to bring Greece around to the virtues of “democratic governance” rather than open the doors to Golden Dawn?

It is a fact, however, that the other governments had no problems with previous clientelist right-wing and (incompetent) technocratic governments in Greece. It was only when a left-wing government got elected and said the unsayable–this debt is not sustainable–that they got exercised.

Meanwhile, do you suppose Mario Draghi, who was Chairman and Managing Director of Goldman Sachs at the price moment when they were helping Greece cook their books, has a lot of respect for norms of governance, democratic or otherwise?

‘Three unedifying lessons of the Greek deal’
Martin Sandbu

“Greece unquestionably needs reform. But remember where the country was just a year ago. Austerity was paused in 2014, which allowed growth to return. Athens was in a primary surplus and needed no further financial aid — only extensions to smooth out the steep repayment cliffs in 2015 and 2016 that the eurozone and the International Monetary Fund recklessly left unchanged in the 2012 restructuring. Would it really have been so hard to simply grant the extensions (without haircuts), let the growth rebound continue (which would have increased the ability to service the debt) and leave Greeks to fight out whether and how to fix their country (or not)?”

This has always been an intellectual battle between German rules-based hard-money dogma and a Keynesian informed appreciation of depression economics – the end result is hardly a shock.

What is surprising however, is the viciousness and spitefulness of the German government which seems to be backed by an ugly public mood in Germany that seeks the humiliation and destruction of those that oppose its world view.

We should not forget that we had our chance to voice our opinion in this intellectual battle during the Fiscal Treaty referendum – a referendum that was backed by all (or almost all) contributors to this blog, who really should have known better.

@Kevin O’Rourke

You are 100% correct.
All countries should now prepare detail plans and preparations for exit. The minute to use them is when the ECB first mentions ELA. Get out within 24 hours, of that mention.
Otherwise it is too late.
Forget about Europe now. Germany rules. This will be a long war.

@ Paul Hunt

I used the word “tutelage” to describe the likely outcome for Greece some weeks or so ago once the fatal decision to close the banks was forced upon them. (The creditors could hardly allow the ELA system to continue to be used as a euro “siphon” to their eventual increased financial detriment. with zero improvement in the economic situation of Greece but, rather, a further rapid deterioration). I think that most Greeks will accept that the downward spiral had to be stopped. The reversal of the reversal of measures by Syriza to satisfy their particular clientele, i.e. the bloated and inefficient public sector, will be the toughest nut for Tsipras to crack as there is a clear ideological cleavage at play in Greece (and elsewhere, as the debate on this blog clearly indicates) between the far left and and what would be widely understood as social democracy. The pensions issue is also a likely political minefield.

Once the banks reopen, my guess would be that the sense of relief will be such that the return of confidence may be rapid. According to reports, incidentally, some 500,000 new bank cards have been issued.

Pitchforked into modernity?

People I think often underestimate how much political and financial decisions impact real lives. With Syriza (and previous Greek governments) we have a prime example of how to wreck an economy.
But the 2008 Irish banking guarantee was an even better case study, not because there was a guarantee but because – and the inquiry seems to miss this – because it was cast in iron in the days after. Other countries at the time offered guarantees but implemented them competently and with less bravado.
Today we can still hear some Irish economists (who should know far better) that the 2012 Greek deal bailed out foreign investment funds, when instead those funds had to make astounding write offs on Greek debt, and the euro area authorities were left to fund the large Greek budget deficits etc from 2009 onwards. Austerity my foot!
And you can also hear some Irish economists saying that Greece has made great efforts to cut civil service numbers… but most went into retirement, many in their 50s… and it continues to this day. If that is 500,000 since 2009, with pensions of a present value of half a million euros or more, clearly there remains a ginormous problem… (these Irish economists could also usefully calculate the collective PV of some of my friends and others in Ireland in their 50s that also retired (not that I begrudge their rationality personally! ..and welcome the closing of such schemes and loopholes)). Greece remains of particular concern as up until now, many pension rights remain grandfathered.

.. also hear is a good read from the Telegraph (even if I prefer the Guardian usually ) which can be googled …
“No, the Greek Agreement Is Not a Coup #thisisacoup And If You Think It Is, You’re An Idiot Likening today’s German government to the Nazi regime is offensively stupid Arguing with Twitter hashtags is like urinating into a hurricane, and a particularly stupid and self-righteous hurricane at that. But sometimes, you just have to do these things anway, and dry yourself off afterwards. So here goes: no, this is not a coup….”

@ paul hunt

Good points but you need to remind yourself that monetary union carries little or no “governance” obligations, apart that is, from box ticking. One would be hard pressed to find any substantive improvements in EZ governance since 2001. Ireland would also be a failed state by your criterion.

You are correct to say that the EZ is now more resilient than ever – but it’s nothing to do with governance. Reserve holdings of the Euro have been virtually unchanged throughout the crisis – Greece or no Greece. Rather it’s the sustenance of the recycling arrangement that is at the heart of every currency area – for all their faults the Greek Left have grasped this simple fact – but not apparently by our great leaders.

From the interview Ernie posted some excerpts of above. Given zero mandate to risk Grexit, and having promoted the referendum on that basis (ie Oxi was not a vote for Grexit), how does one square up the (now open) opinions of Varoufakis with his democratic ideals? Is it not more and more clear that Varoufakis had his own ideas very distinct from the mandate upon which Syriza was elected, and he eventually resigned because those ideas (possible Grexit) were pushed off the table? He is no hero.

“HL: Right. So there were two options as far as I can see – an immediate Grexit, or printing IOUs and taking bank control of the Bank of Greece [potentially but not necessarily precipitating a Grexit]?

YV: Sure, sure. I never believed we should go straight to a new currency. My view was – and I put this to the government – that if they dared shut our banks down, which I considered to be an aggressive move of incredible potency, we should respond aggressively but without crossing the point of no return.

We should issue our own IOUs, or even at least announce that we’re going to issue our own euro-denominated liquidity; we should haircut the Greek 2012 bonds that the ECB held, or announce we were going to do it; and we should take control of the Bank of Greece. This was the triptych, the three things, which I thought we should respond with if the ECB shut down our banks.

… I was warning the Cabinet this was going to happen [the ECB shut our banks] for a month, in order to drag us into a humiliating agreement. When it happened – and many of my colleagues couldn’t believe it happened – my recommendation for responding “energetically”, let’s say, was voted down.

HL: And how close was it to happening?

YV: Well let me say that out of six people we were in a minority of two. … Once it didn’t happen I got my orders to close down the banks consensually with the ECB and the Bank of Greece, which I was against, but I did because I’m a team player, I believe in collective responsibility.

And then the referendum happened, and the referendum gave us an amazing boost, one that would have justified this type of energetic response [his plan] against the ECB, but then that very night the government decided that the will of the people, this resounding ‘No’, should not be what energised the energetic approach [his plan].

Instead it should lead to major concessions to the other side: the meeting of the council of political leaders, with our Prime Minister accepting the premise that whatever happens, whatever the other side does, we will never respond in any way that challenges them. And essentially that means folding. … You cease to negotiate.”

I think the British (ok excluding the Scots perhaps) will be aghast at the rise of German monetary (and fiscal also in time) totalitarianism. And the Brits will be much harder to bully. Increased /ing risk of Brexit is the result.

@DOCM – you can argue rules ’til the cows some home (and ignore that those rules have been bent to favor the strong), but you are seriously missing the political implications. Wolfgang Münchau’s analysis is spot on.

The Greeks may still pull the plug…..they have nothing much left to lose, as we have already seen by last week’s referendum. However, don’t expect any change from the Germans – one only has to look at personal insolvency rules in Germany and the Netherlands to understand how entrenched is their “debt = mortal sin” approach.


You’re going to distress yourself unnecessarily with all this what-aboutery, flailing around, scare-mongering and tilting at windmills that only you (and possibly a few others) can see.

You might get 5-10% of voters across all member-states swallowing this nonsense, but that’s about it. It’s highly unlikely that the approx. 36% of Greek voters who supported Syriza last Jan. all swallowed it. Tsispras has an opportuntity to be a genuinely reforming PM – laying in to the powerful special interest groups across the political spectrum which have played a major part in bringing Greece to its current pass.

The European project as we understood it (naively for many) has been seen as a simple tool that underpins the export interests of Germany – this may have always been tacitly understood, yet, the way in which a nation, which is too big for Europe and too small for the world has behaved toward its weakest members (Ireland included) is instructive. The dysfunction at the heart of the single currency is now destroying the social and civic fabric of a continent and igniting political fractures that we thought had been consigned to the history books. The unprecedented and deliberate destruction of the Greek economy – to send a message to those who may seek alternatives to the idiocy of austerity – is a defining moment in the modern history of Europe. A two-tier Euro looks more likely as the outcome of this saga looks to find some kind of resolution. The wider credibility of EU institutions and the role of the IMF throughout this period will undoubtedly now come under serious scrutiny. The inability to resolve these issues five-years-ago and the problematic hegemony that Germany offers the EU in light of this crisis will have played very will within the Brexit camp in the UK, their hand and the hands of others across the European populist left and right will only be strengthened by the incompetence of the technocrats – former experts – who have gleefully turned over the European project to the interests of financial institutions and Corporate interests without even trying to pretend, real shame.


Text from Blind Biddy in Vienna:

Your deutscher overlords in Frankfurt have already sent in the invoice for a HUNDRED BILLION EURO ‘blood sacrifice’ from the Hibernian Citizen-serfs which was signed off by your ‘fearless’ (sic) leaders (sic) in Fianna Fail!

Since the wise men and women of no property have not spoken

We have become but a nation of fools ….

The fools, the fools, they knew not what to do …

But fumble in the galway tent and add the ha’pence to their pence …

And sell us out to u no who!


Thanks for posting that Varoufakis interview.

I am with Varoufakis. The other cabinet members clearly did not recognise the devastating effect that closing the banks would have. [Varoufakis did, and knew that it demanded an immediate response.] On the contrary the ECB (and creditors) did, and went ahead anyway.

The Greek govt should have recognised, as every other govt should now recognise, that the ability to shut down both banks and country, now resides outside national boundaries; and outside of the national interest of the country affected.

The lesson will not be lost on the EZ leaders returning from their night of German led Hácha-esque brutalization of the Greek Prime Minister.

@Paul Hunt

Yes the problem in every country and every situation is “special interests.” And the solution everywhere is “reform.”

If you were elected dogcatcher, you’d spend your time rooting out the special interests and trying to reform them.

@ Paul W

My point relates to the payment system underpinning the very existence of the euro. The rules governing its operation, as for any other credible payments system, are not up for discussion. The vainglorious self-exculpatory twaddle that Varoufakis continues to spout does not change that reality.

“What is the worst-case scenario?” is a useful question that is often ignored but in many areas of life trying to answer it can help folk at least avoid some reckless decisions — gamblers are a different story.

In Ireland during the bust, there were calls for abandoning the euro, sticking it to the ECB and so on, but folk seldom or ever had an answer to what happens if it doesn’t work as you had hoped?

It was a hassle to work out different scenarios and anyway what journalist would quiz you about it?

I saw an interview with Stiglitz last May on Bloomberg Television which raised another question that has often struck me that journalists don’t answer.

“Professor, if you were the chief buck cat of bailout decision making in respect of Greece and Ireland in 2010, how would you close a double-digit budget deficit while asking various parties to chip in multi-year funding that they want to get back?”

A separate issue has been the bailout of banks. French banks owned two of the big Greek banks and as in Ireland there was little in the deposit guarantee fund.

Wolfgang Münchau says in respect of Italy and the euro: “But for Italy, it has been an unmitigated economic disaster” — this is a ridiculous statement.

He also cites Finland which has been hit by the fall in newsprint since the rise of the Internet, the Chinese steel glut, the EU sanctions on Russia and the demise of Nokia — it needs to retool but it is still one of Europe’s knowledge economies and it has minus net public debt.

Italy made a effort to reform in advance of joining the euro however it has few big and medium size companies and traditional industries have lost out to Chinese competition – up to 50,000 of them moved to Prato in Tuscany and took over the rag trade there.

Italy has been compared with Jonathan Swift’s Gulliver – a giant strangled by red tape and transportation operates as if the country had never been united with forms having to be filled for freight crossing regional borders.

Mario Draghi, then governor of the Banca d’Italia, in May 2011, said: “In the course of the past ten years, Italy’s gross domestic product has increased by less than 3%; that of France, with about the same population, by 12%.

The gap perfectly reflects the difference in hourly productivity — stationary in Italy, up by 9% in France. Italy’s disappointing result applies to the country as a whole, North and South alike.

If productivity stagnates, our economy cannot grow. The productive economy loses competitiveness; widening deficits appear in the current account of the balance of payments. Foreign direct investment dries up. In the course of a decade, Italy received foreign direct investment inflows equal to 11% of GDP (gross domestic product), compared with 27% in France.

Wage growth is modest in Italy, as it cannot diverge too sharply from productivity growth: this has repercussions on domestic demand. The real earnings of employees in Italy have been virtually stationary over the past decade, compared with a gain of 9% in France; real household consumption, which has risen by 18% in France, has grown by less than 5% in Italy and only by eroding the propensity to save.

Productivity in Italy is stagnating because the system has not yet adapted sufficiently to the new technologies, or to globalization. Understanding the reasons for this has been the aim of much of the research conducted by the Banca d’Italia in recent years.

The problem of the inefficiency of civil justice has to be tackled at the root. Ordinary lower court cases are now estimated to last more than 1,200 days, putting Italy in the World Bank rankings for ease of doing business at 158 of 183 countries worldwide for enforcing contracts and an 87th rank overall.”

In recent years that ranking has improved.

The Headlines in the German papers say a lot. Even though they have forced a complete and humiliating capitulation they are still baying for blood and unsatisfied. Dan O Brien said in his piece in the Indo yesterday that Rule 1 in the Eurozone is that there will be no debt write downs but Colm McCarthy reminds him that Rule A states that those that cannot pay will not pay. The cans been kicked again but the fudge on the road means it hasnt gone far. But we must continue to kick or CDS’s blow the whole thing apart.

I think its fairly clear that Tsipras was confident of getting and wanted a yes vote. Varifakus said Tsipras and others in cabinet were down and resigned last Sunday after the No result and thats why he left.

While you say that WM’s statement that the euro has been an “unmitigated economic disaster” is a ridiculous statement, you then make a long list of Italy’s relative poor economic underperformance since the euro……!

Bottom line – what we are currently witnessing is not capitalism in any traditional sense. Right wing nationalism has emerged with a bang in Europe, this time with monetary totalitarianism orchestrated by the Germans (rather than war, thankfully). That clearly now has a “dominant” following (including you apparently) in Europe, but it’s not the only voice (thankfully).

“Do you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?” Wolfgang Münchau

Rhetorical one assumes!

I’m appalled at the deal.

But then I am also appalled at Syriza’s antics.

They were appealing to European solidarity while simultaneously courting Putin and meddling in the domestic politics of other member states.
They were demanding debt forgiveness while simultaneously demanding German War reparations -unburying long forgiven conflicts.
They were appealing for deficit financing while doing nothing about domestic reform and promising expenditure increases to the electorate.

All in all, I don’t see how anyone could do a deal with such a government. Which is reflected in the absurdly draconian terms of this deal. This looks nothing like a typical European deal -where everyone wins and loses somewhat and there is trust that any relative losers will get sorted out at the next deal.

This deal is winner takes all, devoid of intergovernmental trust and with no eye on future negotiations. It looks nothing like a European deal, and indeed, relations between this government and the others looks nothing like a European member state.

The deal is designed to destroy Syriza -and indeed they are no great asset for Greece or Europe.

I don’t imagine this deal will outlive the current government. If any reasonable government comes to power, it will have to be renegotiated.

But what are the chances of a reasonable government coming to power out of this process? Just about anything could come out of Greek politics right now.

Browsing through the FT blog posts on the WM article, I am inclined to agree with the view of one blogger that it must be “the worst article that WM has ever written”. On the other hand, the two most recommended blog posts take totally opposed views on its worth. One just posted, however, [by Big Picture] would sum up what might be described as the realist view.

“Welcome to the real world Mr. Munchau. You’re not in Kansas anymore.

As for ‘the strong pushing around the weak’… I don’t hear Portugal or Netherlands complaining. Perhaps in reality, it is the competent pushing around the incompetent. And that is not a bad thing.

If there is a criticism to be made of the euro project, it is the fact that there was no mechanism built into the euro membership to leave or be ejected. All good organizations know that eventually someone will go off the rails and must be disciplined, so we need a mechanism to do this. To be so naïve… bordering on stupid… to think that everyone will always behave themselves and never take advantage of others flies in the face of human nature. So we know now what happens when political self discipline is ignored for decades on end. And we have a model for what happens when you screw up: does anyone else want to go through this? any takers? no? Then don’t do what the Greeks did.

Perhaps, after the wounds have healed a little, we have a more pragmatic and robust currency after all. Time to buy euros.”

As the views expressed happen to tally with my own, it is not surprising that I should pick it as my favourite.

For those of an opposing view, the really interesting question they must answer is whether the position they take makes for a good predictor of events!

You may be reading too much into Target2. It is merely the recording mechanism for the operation of LOLR. One can argue that LOLR itself and especially ELA is too loose. But contrary to one of your links Greece does owe its Target2 liability albeit it is supposed to be collateralised and ultimately the ELA underwritten by the Greek State. Clearly given the shenanigans of that party the covenant looked anything but reliable. In short the ECB had no option but to cap ELA.

Meh…Profs O’Rourke, Krugman et al promulgated Plan B, #Grexit as viable. Yet they never presented the most basic econometric modelling of how it would work out. Meanwhile Syriza’s brinksmanship has cost the Greek economy tens of billions of money they didn’t have.

Sure the Greek debt is unsustainable but forgive it only when the lunatics are no longer in charge of the asylum.

Kevin O’Rourke

I don’t suppose that any other left wing party that may come to power in the future seeking to challenge the current European economic policy mix will be as feckless as Syriza. The lesson that they will draw from this debacle is: negotiating with Germany is a waste of time; be willing to act unilaterally, be willing to default unilaterally, have a plan for achieving primary surplus if you haven’t already achieved it, have a hard default and euro exit (now possible, thanks to the Germans) option in your back pocket, and be willing to use it at the first sign of hassle from the ECB.

Just so, going forward no progressive government in the Eurozone can allow its country to be without a plausible escape plan from EMU and defensive economic space to execute it in. Even if it never has to be used a strategic economic reserve would have deterrent value against German and/or ECB political adventurism.

In the worst case when the next crisis comes for a left wing government in Ireland (Let’s say that Germany decides EU corporation tax needs to be “rules based” or that we engaged in monetary financing) we had better have six month reserves of fuel and medicines so that if a financial blockade is deployed we can survive it while readying a transition from EMU.

Obviously to prepare the defences the “pro European” rightist parties in the peripheries will need to be defeated first and that will not be easy.

Firstly we can expect the EU institutions and Germany to give the EPP franchise operations in Spain, Portugal and Ireland moral support and some slack from austerity before the elections to provide a feel good factor. Something similar was actually tried in Greece, hence their temporary “return to growth” in 2014.

Secondly the Deutsche Bloc has made clear it will not tolerate left wing government and that the ECB will back it up in its efforts. This is intended to cause voter alienation and despair – why bother voting for Podemos if Germany is just going to make life miserable for Spain afterwards?

It is going to be dirty, the left will have to turn alienation to rage to fight the right and win.

Also well worth reading …

A young Greek man visits the Australian consulate in Athens and asks for a work visa. “Why do you want to leave Greece?” asks the official.

“For two reasons,” replies the Greek. “First, I am worried that Greece will leave the EU, which will lead to new poverty and chaos in the country . . .”

“But,” interrupts the official, “this is pure nonsense: Greece will remain in the EU and submit to financial discipline!”

“Well,” responds the Greek calmly, “this is my second reason.”

‘Everything becomes and recurs eternally – escape is impossible! – Supposing we could judge value, what follows? The idea of recurrence as a selective principle, in the service of strength (and barbarism!!)… [Nietzsche]

Barbarism! Quite!

Thank God we have NATO to keep us safe from crazy leaders who stir up trouble in other countries and then come in with “offers” to “stabilize” the situation ….

@ Paul W

I am all for competing views. The world would be a dull place without them. If you have arguments to back up your thesis, please advance them. The fact that a group of countries – including Ireland – would agree to sign up to a further aid package of €89 billion for a nation that has shown little inclination to right its own ship of state does not support it.

The reaction to the deal is verging on the hysterical (the coup talk etc). 90% of the Summit document is concerned with basic reforms which are necessary and long overdue (and shouldn’t be controversial), eg:

• upfront measures to improve long-term sustainability of the pension system as part of a comprehensive pension reform programme;
• the safeguarding of the full legal independence of ELSTAT;
• overhaul of procedures and arrangements for the civil justice system
• product market reforms, including Sunday trade, sales periods, pharmacy ownership, milk and bakeries, opening of macro-critical closed professions (e.g. ferry transportation).

Greece could rebuild a lot of trust by implementing these and other reforms. It is implicit in the deal that debt relief will be granted once serious reforms have been achieved. (This has not occurred heretofore because of the absence of reforms. And it will have to be granted at some point due to the reality that the debt is unsustainable. Giving Tsipras a free pass now would not encourage any decisive action at home.)


They have agreed no such “aid package.” They have agreed only to start talking about it once the Greeks lick their boots.

Still waiting for your answer about whether the debt was before or is now sustainable. Don’t be coy.

There are many ways to skin the cat. The current proposal is clearly not the optimal way forward. Bleeding stone doesn’t work, by any measure. The situation will again be “broken” by Wednesday.

But continue to “feel good” about your “rules”.

The end play here will be terrible on the Greeks…but watch out everyone else too. Question – is the overall EZ/EU situation better or worse than it was a mere say 2 weeks ago? Then looking wider – is the world economy in a better or worse place than it was 6 months ago?

Sad to see the spirit of censorship is alive and well on this site.

Doc Martin can characterise Greeks as ‘the incompetent’ being pushed around by the competent but the mention of a nations ‘psyche’ is purely taboo. Hmmmm.

And again, your constant bleating to effectively burn the Greeks (via your “rules”) puts you on the face of it very far right, bordering on that “dark place” that I mentioned before. As a capitalist, I find it offensive. You are preaching a form of neo fascism here….The last time the Germans were in a like position, it ended badly for the Jews, economically first, but then with human lives.

Finally for today, are you paid to troll here? Are you earning a fee from govt /govt agency? What is your mandate?
You appear to have far too much time on your hands to be able to blog here all day, all year.

Irrespective of the rights and wrongs of the Greek and German strategies, isn’t the bottom line here that the Irish strategy – recognising the superior forces we were up against and employing diplomacy rather than pointless rhetoric – was correct? (I’m not arguing the Ireland=Greece point as I take Frank Barry’s point on that) but that the attitude taken was the right one. And that in the end, the Promissory note deal+refinancing+confidence in markets achieved just as much as a headline “debt writedown”.
The Greeks may have been done in through a combination of intimidation and their own messing, but the end result proves how far the Germans were willing to go and therefore we responded more appropriately. Stability 1 Rhetoric 0.

Depends on what seat you have in Ireland, doesn’t it. Some (fewer) have done better than others (majority I would say).

It also depends on time….and history takes time. It has only been a short few years, afterall…and the future is very uncertain. If the Greek situation plays out badly for EZ (and that is now an increased risk), people of a certain age will be 5-10 years older and will be facing significantly increased interest rates, at a minimum eg remember too that the Irish govt has spent the last few years raiding privately funded pension funds (of the private sector)…It’s a thin line at best.

@ Sarah Carey
It’s easy to win in Europe, provided you’re willing to let others be winners too. Thus Ireland is a ‘success story’ for EZ policy, even though we whittled away continuously to get concessions on debt.

Neither Germany nor Greece seem to be winning at the moment.

There is one other crucial difference between ireland and greece. When ireland were (not) negotiating a potential deal for us we had enormous leverage wrt to the EZ ability to deal with a crisis. The esm efsf were not set up. The markets were extremely volatile (remember the Goldman Sachs rule the world rastini interview?), the Greeks getting a significant write down was not far back in the mirror, we did not carry the baggage of being perceived as tax dodging slackers by our “partners”, we had the option to fail banks of non systemic importance….the list goes on…while greece has been negotiating the markets has barely blinked and this has emboldened the creditors this last couple of weeks. The market could have withstood grexit….it potentially could have brought down the euro had ireland not rolled over….this is also pre draghi “whatever it takes” speech and it is not as though draghi had that card in his pocket during at the zenith of the “irish crisis” because the legality of American style QE was not even considered legal.

Finally u are presupposing irish exit from the EZ would be a catastrophe but while the counter factual is not possible to comprehensively consider it is an argument I find far from convincing. We chose to be best boys…aiming to please big boys is in the irish psyche I’m afraid. The EZ is still a fatally flawed construct, we are still in it, but like a Gerry Adams portent….the problem hasn’t gone away. The solution is greater fiscal integration….France will push hard on this given its weak competitive position in Europe – irish corporate tax on their radar. But greater fiscal integration is something I would hope is a harder sell to our electorate given the events of this last few weeks. For me the vision of Maastricht is now mutated into something very ugly indeed.

@paul W

And again, your constant bleating to effectively burn the Greeks (via your “rules”) puts you on the face of it very far right, bordering on that “dark place” that I mentioned before.

The spirit of Eoin O’Duffy is not dead in Ireland at all, Fine Gael has dropped its mask in a major way over Syriza and their very worst instincts are on display. Noonan’s snide glee at kicking Greece while its down for purely domestic political advantage is truly disgusting.

Otto said above that the Greek crisis has server to usefully “heighten the contradictions” in Europe and he is absolutely correct, nobody will be forgetting the five month hate that Syriza has experienced from Europe’s right wing or the connivance of the EU institutions in bringing them to heel.

It has been five months of snarling, invective filled rage at a party that dared defy the new neoliberal consensus. It has been coupled with unembarrassed attempts to force regime change (#thisisacoup) and the contemptuous dismissal of Syriza’s attempt to confirm the democratic legitimacy of its approach through a referendum (plebiscites are only for plebs after all). It’s been an example of the rights worst authoritarian urges (It’s a Europe of rules don’t you know!) and also their new found pride in how they have made the EU their own (We make the rules!).

Perhaps it should be no surprise that with Germany and the EU institutions returning the Eurozone to the economics of the 1930s that they have brought back the politics too.

Europe is Dead. The Euro has destroyed it.

The Devil take your markets, your bonds, and especially your technocrats. Naked fascists all. This was a coup no matter how the West-Krauts and their lickspittle newspapers try to spin it. I’d accept Fianna Fail before I’ll accept a German boot on my neck like the Greeks have.

This country needs to get out of the euro before the inevitable political earthquake erupts. Pick your noses over your spreadsheet figures all you want. They’ll be worth F**k all when nationalism starts sprouting up all over the continent again, and the Great Powers go back to making demands. We need to be long gone before that happens.


“For those of an opposing view, the really interesting question they must answer is whether the position they take makes for a good predictor of events!”

We do have the advantage now of a few years of the blog and if any preppy research student fancies it they can look at predictions and outcomes over the last five years. My recollection of it is that in the early days of the bail-outs there was an argument over the economic effects of same. After discussion I agreed with the proposition that in the peculiar case of the eurozone that austerity (cutting spending and raising taxes in a recession) would have a more strongly negative impact than that predicted by the Troika, etc. This would result in higher public debt ratios than predicted. I know you tend to adopt a ‘so what, who cares’ approach to this but I do think you’re on record as calling Greece’s ‘recovery’ more than once as an example of the reforms work thing. In crafting the ‘it was all about to come good before those crazy lefties with their moderate demands got in narrative, I do think it is important to note, as Shay does above that that the incipient recovery had more to do with the easing of austerity.

The eurozone has done worse economically through the crisis than the EU area in general for reasons much discussed. Up ’til now you have argued, if I have you right, that other countries wanting to join the euro is evidence that it must be doing something right. Personally I think we’ll see a cooling of that desire now. Why would I wish my country to join an organisation that thinks that ‘Fight Club’ is an admirable model for decision making?

The piece you quote admiringly by ‘Big Picture’ espouses a form of collective punishment which is morally repugnant. The idea that the Eurogroup or anyone involved with the new deal is on the side of the ‘competent’ is jaw-dropping.


The point is that If you’re in a cheap seat now wouldn’t you be in an even worse position if we’d had a Syriza style approach? If we’d daced of with the ecb, closed banks etc. that’s going to affect the worse off worse, right?

An interesting range of views here:

To an extent they reflect the range of views expressed here, but, mercifully, lack any unjustified and plainly insulting references to the Third Reich.

My sense, and it gives me no pleasure to express it, is that it will take a generation (if not longer) to change the manifest failures of governance in Greece and to expunge the embedded and endemic culture of corruption. Without these changes no effective economic policies may be implemented. And external attempts to force the implementation of these changes will simply provoke insurmountable resistance. A plurality of Greek voters will have to consent to these changes.

Paul W
Ever hear of Godwin’s Law.
Anyway, those Germans & their lickspittle lackeys are so evil. Another 80bn going to bail out the pay & rations of a corrupt failing state. Near enough 1bn from here. Not a chance that any of the reforms will ever be implemented.

@ Paul W

“While you say that WM’s statement that the euro has been an “unmitigated economic disaster” is a ridiculous statement, you then make a long list of Italy’s relative poor economic underperformance since the euro……!”

I quoted Mario Draghi who compared the performance with France and problems identified by the then Bank of Italy governor did not just materialise on Jan 1 1999.

Because of its high public debt, Italy spent 12% of GDP in interest costs in the early 1990s – that figure had halved a decade later and is lower still today despite a rise in the debt.

I note the US Congress is in no rush to allow sub-commonwealth entities to declare bankruptcy in Puerto Rico as mainland investors would be hit with haircuts.

Seems familiar 😯

@ Gavin

“My recollection of it is that in the early days of the bail-outs there was an argument over the economic effects of same. After discussion I agreed with the proposition that in the peculiar case of the eurozone that austerity (cutting spending and raising taxes in a recession) would have a more strongly negative impact than that predicted by the Troika, etc. This would result in higher public debt ratios than predicted.”

How this a similar commentary-review exercise work out with the Irish bailout?

@ GK

You misunderstand the point I was making. I referred to events i.e. how did things turn out? Whether austerity failed or succeeded is more a matter of opinion than fact. How events turned out in Greece and elsewhere is not. The commentators immediately above are jumping up and down because they did not turn out as they desired and indulging in what might be charitably described as less than useful contributions.

The usual media commentators are doing the same.

It is a fact of life that people in general never joke about money. States never do.

I happen to believe that the course of recent events is very likely to benefit the Greek people. A de facto national government is on the way in Greece with all the parties willing to participate now fully aware that they cannot continue as before. And, more importantly, so is the electorate.

That is, of course, only a prediction.

The great majority of the electorate will note that playing the game beats throwing the toys out of the pram any day. Getting Mario to say he notes what the paddies have done is cute hoor politics at its best.
There will be a minority who will vote for nihilism, the disaffected and those academics who see their place in society enhanced in a Marxist meltdown.

@ MH

France’s lost leader speaks out!

All developed economies suffer from the “Greek disease” to some extent. It flares up even in the best run economies, especially before elections. (Ireland is suffering a bad episode at the moment, putting a small – borrowed – amount of budgetary leeway to the worst possible use).

Another very notable feature of developments in Europe is the coincidence of views between the extreme left and the extreme right in relation to the handling of the Greek crisis. A very bad omen!

At last the elites driven ‘European Project’ has been well and truly exposed for what it is – a stupid currency ‘union’ piled on top of a so-called ‘political union’ driven by neo-liberal technocrats reporting to the major economic powers.
‘European Democracy and Solidarity’ ?
Nothing more than P.R. Spin.
The end of this ‘project’ is fast approaching – great.

@Sarah Carey
Not true Sarah.
In 2011/12 the EU and ECB were terrified of the market reaction in countries like France of an escalation of the crisis. This would have been the perfect time to play hardball with the prom note. Also recall that Greece got a big write down on its debt at that time and was allowed to default on private creditors.

Remember, that we still have to pay the value of the prom note all back and it will not be inflated away.
We better hope that in the middle of the next decade, Ireland’s economy will be in a rip-roaring state because we have now learned there will be absolutely no mercy when Germany has nothing to lose.

As a matter of interest, do you think Fine Gael would be so sanguine about the recent crisis if it was Britain, rather than Germany, who was the aggressor, humiliating and plundering a smaller nation? If Britain were the aggressor, would Fine Gael be saying “might=right so we should just doff the cap and toe the line as best we can”. What do you think your forefathers would say about that?

@ bwt

“This would have been the perfect time to play hardball with the prom note. Also recall that Greece got a big write down on its debt at that time and was allowed to default on private creditors.”

We’re aware that Greece got an horrifically severe adjustment program in return for this debt haircut, and that the two are related? Also, with a nascent recovery starting to form in Ireland in Q1 2012, would it really have made sense to “do a Syriza” and risk destroying that recovery with a solo run on the prom note? We took the safe option and, with debt/unemployment/deficit falling, it would appear that it has paid off.

At the risk of sounding like that Laurence Olivier character in Marathon Man (“Is it safe?”), I have to ask DOCM once again:

Is it sustainable?

FO’T in the Times today:

“In 2012, the former German chancellor Helmut Schmidt warned that the EU would be “crippled” if “we Germans allow ourselves to be seduced into claiming a political leading role in Europe or at least playing first among equals”.

Many of Germany’s leading thinkers, from Günter Grass to Jürgen Habermas, have issued similar warnings. It is not accidental that these warnings came from men old enough to remember Nazism and their country’s physical and moral post-war devastation.

The generation now in power in Germany seems to have forgotten everything. It is now not even a case of being “first among equals” – Germany is first in a new Europe of unequals.

And all for what? Why has the European Union been so radically redefined? Not for the sake of the Greek people, of course. No sane person believes that austerity and asset-stripping are the recipe for Greek recovery.
For international financial discipline, then, to prove that all debts must be paid? Hardly – consider that in March the IMF, with almost no fuss, announced a financial package for a European country that is far more corrupt, unstable and oligarchic than Greece.

Ukraine write-offs
Ukraine got €36.1 billion in assistance from the IMF, including write-offs of previous IMF loans worth between €13.5 billion and €18 billion. There is little chance of any of this money ever being paid back. And yet Angela Merkel and the other EU hardliners had no problem with any of this.
Why? It’s the politics stupid. Pouring money into corrupt and oligarchic Ukraine was about sending a political message. And tormenting Greece is also about sending a political message.

The message is that we are in a new EU now, one that has a dominant power at its centre and a single acceptable ideology. Those who founded it believed that such a union could not survive. The current leadership apparently knows better.

Plot thickens as Brits ain’t going to carry the can….and why should they. The Euro is not their mess so EFSM funds ought not be used.

Schauble et al has done their best to precipitate a Grexit – is it inconceivable that Brexit too is part of his grand plan? Like the Greeks I foolishly thought that Grexit was something Germany wanted to avoid but what hope really did they have in negotiations when in fact Greece’s negotiating card proved to be Germany’s strongest suit.

Remove the pesky greeks from the Euro and pesky Brits from the EU, cut your losses in pursuit of dominion and spread the word among the weak.

@The 2nd
“There will be a minority who will vote for nihilism, the disaffected and those academics who see their place in society enhanced in a Marxist meltdown.”

Unless of course it is the majority that vote for it, in which case we will scare the bejaysus and that ol’ nihilism* out of them and give them another crack at it.

*I really question whether you understand what Nihilism means given the utterly paradoxical manner in which you appear to use the noun….

“You see a lot, Doctor [Lecter]. But are you strong enough to point that high-powered perception at yourself? What about it? Why don’t you – why don’t you look at yourself and write down what you see? Or maybe you’re afraid to.”


“Whether austerity failed or succeeded is more a matter of opinion than fact.”

I think it is more an empirical matter.

“How this a similar commentary-review exercise work out with the Irish bailout?”

I don’t quite follow your grammar if you’re asking what I think you’re asking, from a roughly Keynsian view, very well from the start. That is, in Ireland, due to the constraints of the euro the initial impact of bail-out austerity was predictably much worse (GDP, unemployment) than initially predicted by such bodies as IMF, Commission, OECD, etc but it was also noted, eg by Simon Wren Lewis in ‘The Fruits of European Austerity’, Mainly Macro from 2012 which is well worth reading for its accuracy (and by more detailed posts by JTO tbh) that the one EZ country in which austerity wouldn’t be ultimately self defeating, for example in government debt ratio spiraling out of control, is Ireland. For example due to links to UK, US, demographics, tradition of emigration, big FDI/export, etc.

@ DOCM: “Whether austerity failed or succeeded is more a matter of opinion than fact”

That’s your opinion … thing vary according to ones experiences. It’s almost like attempting to substitute petrol for diesel as a motor fuel. Your engine will re-start and sputter along. Just do not shut off the engine after a few minutes. It will refuse to re-start.

Reducing various state revenues is the mathematical equivalent of substraction – at least it was the last time I thought about it. However, some folk consider it to be addition. Can’t think why. And as for those pesky percentages, percents of percentages and exponentials. Nerdy stuff not worthy of consideration. Indeed.

So why are western developed economies (and Japan) not exhibiting economic rates-of-growth in excess of the required 3% annual, compounding? You know, the rate needed for political stability. Or perhaps like Mao you believe that political and economic stability comes out of the business end of a gun barrel. Well it may do.

Realism, a well known and much debated and very contentious paradigm of political science mandates that any state (through its leaders – whether they be elected or not) shall deploy any and all means, up to and including military force, to protect the state. This is what Germany is engaged in – political Realism. Only this time its fiat money that is the weapon of choice. Nifty one that.

Never, never, underestimate the power of money.


You can ask the question a hundred times and you won’t get an answer.

It is no different to the ‘realist’ on this site that support the moral hazard doctrine that says Greece cannot be let off with the sins of its fathers but fail to address the questions as to why private creditors MUST be forgiven at all costs (our cost)…its classical a la carte righteous indignation. I find it somewhat amusing that I get classified as a left wing advocate (see the Second’s acid test on previous thread!) when in fact I could not be a more capitalist/free market advocate. I do not support bailing in citizens to private creditor bets whatever the consequences – that is ruthless capitalism at its purest yet somewhere along the line the EU/ECB/Troika/German apologists has somehow managed to subvert the narrative to write off that sort of thinking as ‘left wing looney’….as I said i find it more than a little amusing – I have passed through the frustration phase of it all though.

@ GK

Were the issue ever to be decided, the only place to start IMHO would be with an agreement on definitions. My shorthand suggestions would be to use the correct term of “budgetary consolidation” to start with and then to debate the best macroeconomic means (essentially the balance between tax increases and expenditure reductions in terms of whether it aided or hindered economic recovery) and, finally, deciding where the cuts, and possible increases, in the budget should fall, the decisive consideration being, again, whether they aided or hindered recovery. (Top-level pensions restoration would not qualify!)

The current performance of the Irish government overall in this respect leaves a lot to be desired. Ask the Fiscal Advisory Council and/or the members of the troika!

We have an underlying chronic case of the Greek disease. Fear of a further outbreak, were the external conditions to change, is fully justified.

@ Nosense
It is possible that I misunderstand “nihilism”. I thought it came from the Latin for “nothing” as in nothing in the ATM machines but please correct me.

There are a few strands which deserve further attention:

1) The Creditors were always going to take a very hard line on the final review of the last programme whether it was Syriza in power or not in circumstances where key reforms had not been implemented. This is perhaps to be welcomed as the creditors would be part responsible for the reforms not being implemented if they released funds without implementation. However, it does suggest that everything other than the pesky Greferendum was part of the Creditors’ plan.

2) As such it is conceivable that the uncertainty which damaged the Greek economy and which has led to a harsh third bailout was introduced by the creditors intentionally. It follows that there was always going to be Grexit uncertainty leading up to the final review and that Syriza are not wholly responsible for same. Their dreadful rhetoric (blackmail, terrorism) of course made things much worse.

3) Perhaps the Germans should be commended for once again proposing the solution which many of their putative opponents agree with, i.e. Grexit + default. The question is whether they meant to offer a real choice ( in which case one might have expected them to have negotiated in good faith and suggested Syriza draw up contingency plans long ago with EZ assistance) or whether it was a false offer in the nature of a gun to the head. I am not sure about this.

Blind Biddy has been added to my list of got to guys and gals for potential ‘fearless leaders of the Nation’ along with the Notorious Conor McGregor and Paul ‘Rupture Rapture’ Murphy. Other nominations welcome subject to the below.

Joan Collins fell off the list because she lets on she is worried what happens to the poor. She cannot be relied upon to follow through on her communist policies which would leave them starving.

Sinn Fein are edging away from Syriza after the Sinn Fein negotiating strategy failed miserably. I note they are not saying Greece should go full Grexit. They have clearly gone soft and cannot be relied upon to be fearless leaders.

When will Blind Biddy with her nobleness made simple as a fire come back home to hurl the little streets upon the great?


I doubt very much if anyone here would disagree with your contention that taxpayers should not bail out private sector lenders when their loans go sour. However, when the US authorities left Lehman Bros go and the fiscal and monetary authorities everywhere were forced to deal with the outcome, they panicked and put citizens and residents on the hook. US citizens have made a profit on the support they provided. Some European, but non-EZ, citizens may have made or are close to making a profit; others, such as those in the UK, may never see a return. In many EZ economies the extent of citizen support has been concealed. There has been marginally more transparency for those countries which entered formal official support programmes such as Greece, Ireland, Portugal and Cyprus – and other more specific programmes such as Spain, Hungary, etc.

The expectation was that countries would emerge reasonably rapidly from their support programmes and that the institutional and procedural changes would be made to prevent ordinary citizens being on the hook in the future. And so, with the glaring exception of Greece, it has proved to be the case. As Dan O’Brien pointed out in the piece I linked to above, while the failings of governance in Ireland are many, the institutional capacity (both political and economic) was sufficient to effect the necessary fiscal adjustment – even if the implementation was far from as efficient, as equitable or as effective as it should have been (there was far too much pandering to powerful special interest groups). And this also happened in the other member states – with the exception of Greece. The Troika tragically assumed that the institutions and processes of governance in Greece would be as capable of implementing the process of adjustment as they were in the other programme countries.

That’s the source of the problem. Cutting the debt burden won’t solve the problem. The cost of servicing Greek debt is already lower than that of economies with much lower debt to GDP ratios.

It’s up to Greek citizens and the politicians they have elected to fix these problems. I’m not optimistic while many of them continue to flaunt their own particular brand of victimhood – and get support from many outside of Greece who should know better. And while they continue to fail to tackle their problems the division within Europe between those who want to keep them in and those who want to provide a support package outside of the EZ will only become more rancorous.

Schäuble: I don’t know if EU budget could be used to provide bridge funding to Greece, I’m not an expert in EU law.

I have to say i have some respect for this man – there is no politic-speak out of him. He is clear about the way he sees the world – it is also clear he is no expert in EU law as he said and he doesn’t even appear to have a cursory awareness of the principles that underpins European treaties. Neither would it seem that he cares.

Indeed Vaurofakis expressed his respect for Schuable’s forthrightness in his one to one discussions with him on Australian radio yesterday – does anyone doubt that Schauble told Vaurofakis that his objective was Grexit? I think not.

I fear that the most depressing part of this is that few members of the press understand the problem as it has developed and the treatments that may be required. It is much easier to apply “The Greeks borrowed too much and if my household borrows too much….” argument ad nauseum. The fact that Germany (as well as Greece) did not meet the convergence criteria upon entry is never mentioned. The fact that it broke the Stability and Growth pact for 3 out of 4 of the first few years (and never paid the 0.5% on Gdp tax) would eventually give it no authority (or so we thought) to play the moral high ground when Greece’s budget and debt became worrisome following 2004. The fact that Germany runs a trade account surplus of near on 10% of Gdp and by some measures has inflation of close to 1% is viewed as “sensible” and “prudent” by those (the vast majority) who do not understand “the rules of the game” of a monetary union, be it the gold standard or Euro. Much easier to blame Greece for everything….and they do deserve a lot of blame. However, huge transfers to French and German banks on the original bailout, debited to the Greek exchequer is problematic. Why should businesses who have lent insane amounts to a country that has been in default for more than 100 out of 200 years, be bailed out at a stroke? Germany has technically defaulted more times than Greece in the same period (Reinhart + Roghoff, 2009). The tragedy will persist because of the “country is a company” approach which has persisted due to its ease of digestion by the public, and the lack of political will to explain to a public what is normally required in a currency union. The public might rightfully ask, “shouldn’t those things have been set up before entry into the Euro?”

Paul Hunt: “That’s the source of the problem. Cutting the debt burden won’t solve the problem. The cost of servicing Greek debt is already lower than that of economies with much lower debt to GDP ratios.”

That view has been overtaken by the newly-leaked secret (why?) IMF report that says Greek debt will soon be over 200% of GDP. And would need either a 30-year grace period on repayments or deep haircuts.


Which is why DOCM hasn’t answered my question. Because the answer is clearly: it’s not sustainable. All of the high-minded rationalisations and moralising ignores that fact. The debt is not sustainable. And therefore it will not be sustained. More loans or bailouts won’t help. Maybe Germany should just annex the whole country instead.

One does have to wonder why Christine Lagarde, who was present at the talks, couldn’t have made the points contained in that report at the time. It might’ve (might’ve!) cut the legs out from under the “extend and pretend” brigade, of which every other country in the EZ is apparently a member (represented locally by our own DOCM).

Meanwhile, Yanis has a few truths he’d like to speak to power:

*The Euro Summit statement of yesterday morning reads like a document committing to paper Greece’s Terms of Surrender. It is meant as a statement confirming that Greece acquiesces to becoming a vassal of the Eurogroup.

*The Euro Summit statement of yesterday morning has nothing to do with economics, nor with any concern for the type of reform agenda capable of lifting Greece out of its mire. It is purely and simply a manifestation of the politics of humiliation in action. Even if one loathes our government one must see that the Eurogroup’s list of demands represents a major departure from decency and reason.

* The Euro Summit statement of yesterday morning signalled a complete annulment of national sovereignty, without putting in its place a supra-national, pan-European, sovereign body politic. Europeans, even those who give not a damn for Greece, ought to beware.

* Much energy is expended by the media on whether the Terms of Surrender will pass through Greek Parliament, and in particular on whether MPs like myself will toe the line and vote in favour of the relevant legislation. I do not think this is the most interesting of questions. The crucial question is: Does the Greek economy stand any chance of recovery under these terms? This is the question that will preoccupy me during the Parliamentary sessions that follow in the next hours and days. The greatest worry is that even a complete surrender on our part would lead to a deepening of the never-ending crisis.

Privatise all public assets; socialise all private liabilities. That seems to be the name of the game here.

References here to ‘failures of governance in Ireland’ – accepted – no references to governance failures within EU/EZ/ECB/IMF et al….

The ‘project’ is too sacred to be held to account?

Sporthog rates in at a 10!!!!.. Well I never!

Getting back on topic with our Greek friends..

by Nikos Chrysoloras & Paul Tugwell July 14, 2015 — 3:57 AM BRT Updated on July 14, 2015

Tsipras will have to rely on the opposition to get the deal through parliament, debate today, vote tomorrow.

“What matters is that today, Tuesday, deposits haven’t been annihilated and there’s no full blown humanitarian crisis,” Interior Minister Nikolaos Voutsis told reporters in Athens, when asked about the prospect of defections within Syriza. “Things aren’t black or white,” he said, adding that the government will adopt counterweight measures to offset the painful austerity package.

The UK it would appear is not going to help Greece out this time…

By James G Neuger 14th July 2015

While the U.K. would likely struggle to muster the votes required to block such a move, the euro nations may blanch at the political costs of ramming a payment through against British wishes. Voters in the U.K. are already railing at Europe’s power to interfere in their affairs and will have a referendum on whether to leave the EU by 2017

@ Nocense

Schaeuble is actually a qualified lawyer. That he favoured Grexit is hardly news. Maybe to Varoufakis but nothing would surprise me from that quarter.

@ Ernie

I did answer your question or, rather, I invited you to listen to the view of a Syriza representative on the issue with which I concur.

Opening exchanges on “Syriza’s stance on Greek bailout deal”.

The immediate problem is to get the Greek political class, and the various interests that have maintained it in power, to recognise the need to go about the process of “budgetary consolidation” in a manner which improves the economic capacity of the Greek economy and, in the process, its capacity to repay its debts.

The IMF also identified their failure to do so as the other major reason, apart from borrowing too much, for its near collapse.

The issue of the sustainability of Greek debt is a major issue. But is is not the most immediate one because of the easing of the terms already agreed
and likely in the future once the Greek players in question demonstrate to their creditors that they are not pouring their taxpayers money down a bottomless pit.


Having had quite a bit of exposure over the years to Greek commercial and political practices – and no, I haven’t spent time on vacations there, I’ve always held the view that Greece should not have been allowed to join the Community (as it was then) without major changes to its institutions and processes of governance, not to mind the EZ. I don’t agree with this ‘unanimous’ decision of EZ governments re Greece. I’m simply following the logic of what they’ve agreed. My preference would be an EU special support package for Greece outside of the EZ with a write-down of its debt to say 60% of GDP. This would allow Greek citizens to decide what sort of society and economy they want.

It’s interesting though that so many economies which in the past experienced the lash of Soviet totalitarian marxism seem to be so accepting of the disciplines imposed by EMU.

As the hours pass, it is becoming blindingly obvious that the Schauble option is the only rational option. Greece, inter alia, does not belong in a single currency & another fiscal transfer is deeply unfair on other EZ taxpayers.


So you invited me to listen to tape to get your answer?

I have something absolutely life-changing for you to hear. It’s in hour 7, minute 12 of Claude Lanzmann’s film Shoah. But you have to watch all of the preceding for it to make sense.

The EU haters or people who have a propensity to put all the blame for individual country woes on Brussels or Frankfurt, try and restrain the knee-jerk calamity howling.

In better times, Ireland for example got CAP welfare + billions in structural funds and Germany paid the bill — in the early 1990s it was worth over 6% of GDP annually and from 1973 to 2020, Ireland will not have contributed 1 net penny or cent to the EU budget — 47 years: not a bad deal free for membership of the club never mind intangible benefits.

Armchair experts also need some perspective when it comes to being wise after the event or opining about consequential decisions that may be far above their own pay grade.

As Paul Hunt noted, the financial and economic fallout from the Lehman Brothers collapse was not expected and in 2010 neither the Central Bank of Ireland or the Bank of Greece had not funds to pay out depositors of filed banks.

French banks owned 2 of the big Greek banks but like Ulster Bank and Bank of Scotland Ireland, which were bailed out by the UK government, the parent companies were not obliged to bailout Greek depositors.


Text from Blind Biddy in Vienna … relaxing with the One_Eyed Shia Sheik and Paddy Zhukov ….

Me methods are strange, they may cause surprise

To make the blind see, I throw dust in their eyes

@Sarah Carey

Tut tut Sarah … that lite blue thirties style chiffon slip is showing again … very becoming … if somewhat politically transparent …

@Greek Citizenry

Text from Munster RFC:

remember the 200!”Stand up and fight.” “Nothing is impossible.”

@Iranian Citizenry

In solidarity.

@Hibernian Quislings


This is really depressing. I seriously overestimated Syriza. If they were only bluffing, their strategy made no sense.

I guess one lesson is that all EU countries should now have formal plans for how to cope with being frozen out by the gang, for how to manage switching currencies, and for disruption to food and pharmaceutical supply chains, to go with their existing contingency plans. If their governments will not produce satisfactory plans, academics and independent think tanks should plug the gap.

Despite coming at it from a position of near-zero sympathy with everyone involved in the mess other than the Greeks, I am inclined to agree with Tull that the Schauble option is the only rational one. Hoping that at least one national parliament is sufficiently brassed off with the negative sum game of wrecking Greece and incinerating vast taxpayer value to refuse to play.


You’ve modified your gripes about Germany and all its works!

Whether Greece is in or out, it’s going to cost EZ citizens. As I’ve indicated, my preference is out, but only the EZ members at the time of Greece’s admission should be forced to cough up. There’s no way, in my opinion, that the Balts, the Slovaks or the Slovenes should be forced to pay any more for this mess.


I understand your point and ‘too big to fail’ philosophy may have merit but in the context of europe the risk was regional not national, the blame was regional not national….the pain was doled out to the weak and the region took no responsibility. There was no solidarity – Germany continues to side step the lessons of moral hazard because they batted it to the periphery – whose leaders betray all the symptoms of stockholm syndrome. Let me give you some evidence on that front:

Enda Kenny – 15 December 2010
“Between Bank of Ireland, AIB and Anglo Irish Bank alone, there is €25 billion in unguaranteed, unsecured junior debts of €10 billion and senior debts of €15 billion. These debts are not Ireland’s debts….These debts were issued by the banks under private ownership to private investors, including other European banks. A large share of the unsecured senior and junior bonds have now been sold on by the original investors to hedge funds and other risk investors at a fraction of their original value. They are gambling that a weak Irish Government can be strong-armed into paying these bank debts in full. We support a more aggressive bail-in strategy for the banks that forces owners of these debts to participate in the recapitalisation of selected financial institutions.”

Enda Kenny Feb 7, 2015:
“Greece should follow Ireland’s lead and not ask for a debt write-down.”

It is very clear Kenny has either been brain-washed by his frequent trips to Brussels since becoming Taoiseach or he has privately caved into the “reality” that the voice of Ireland and the peripheral nations at Europes top table barely amount to a whimper – if that is the case then it is incumbent on him to let the electorate know that this is the europe we live in today and this is the future of Europe under mainly German control. The conditions and history of the unfair burden placed on Irish citizenry at the behest of the European establishment remain shocking…over time Irish citizens has accepted their fate and just got on with it. But we could have been Greece in this new Europe – it isn’t hard to imagine a scenario of europe having performed well this last 5 years, and interest rates of 2.5-3% in place by the ECB – where would that leave all our tracker mortgage holders – where would that leave our servicing on national debt notwithstanding Draghi’s commitments – we are also fortune like so often in the past that we have the safety valve of emmigration because Irish people are willing to get on the plane more than any other given our history.

If what we have seen this last few weeks is the “real world” that many on this site extol the virtues of they really ought to have more self esteem – talk about nihilism!

“Schaeuble is actually a qualified lawyer. That he favoured Grexit is hardly news. Maybe to Varoufakis but nothing would surprise me from that quarter”

All the more extraordinary in that case Doc Muddled Notions. So Schauble clearly understands that what he was cooking up was contrary to all treaties his country was party to since Maastricht. His behaviour is bordering on criminal….nay not bordering.

“….Greek players in question demonstrate to their creditors that they are not pouring their taxpayers money down a bottomless pit”

Do you know what a primary surplus is. Isn’t this the holy grail of where Greece needed to get to – they got there. Now how much do you reckon they should be supposed to take out of the economy to pour down the bottomless pit of debt servicing – how big ought that surplus be. It matters not one jot how Greek government achieves a surplus – it only matters that they achieve it.

What level of annual surplus to service debt would you deem to be unsustainable? Is it a question of squeeze as hard has you can 3-4-5-6% and we’ll see how much blood we can take from this stone…all the while GDP declining and debt to GDP increasing. Lets do some real world maths here and be done with the philosophy.

A lot of decisions taken in the wee small hours look very different in the light of day and this latest ‘deal’ may well fall apart sooner rather than later. The degree of surveillance and control from Brussels is unlikely to be tolerated by the locals for long, if at all. From a creditor perspective the ‘victory’ over the new Greek government still means paying over another €50bn at least. It is also hard to see how Lagarde can survive her developing world critics in the IMF if the Fund lends any more without the debt write down implied in the latest DSA. Grexit looks more likely now, I suspect, not less.

The Schauble option has its own logic but unfortunately the first post-Grexit act of Greece will likely be to apply for an EU bailout. Like EZ bailouts, the EU bailouts come with austerity conditions and IMF involvement. “Blackmail and humiliation!” On the bight side, the UK will be required to contribute.

@ Ernie

You are incorrigible! I invited you to listen to the tape because I was too lazy to transcribe it for your convenience. A not unreasonable position. To sum up, the interviewer asked if Syriza was still looking for a debt write-down or whether “the goal posts had changed” and this was no longer the case. the reply was “The main question these days is not the question of the debt. A very crucial question but for the time being in the background”. That is the view with which I concur. I do not agree with the rest of what the interviewee had to say.

Neither do I agree with the latest pronouncements from Ashoka Mody on Drivetime just now more or less on the same topic. Whatever planet he is on, it is not the same one as the leaders of Europe are presently occupying. Proposing that Germany leave the euro as his ultimate solution to the existential problems he imagines are confronting the euro is a measure of how divorced from reality some academic commentators are, a fact to which I would guess their general audience is waking up, or I would at least hope so. He may not be aware, but they may be, that the Italian finance minister has confirmed that the only countries willing to cede any ground to Tsipras were France, Italy; and Cyprus!

More gratuitous advice from the British sidelines courtesy of the FT.

What do they know about whether the euro project is “utilitarian” (the word used by Wolfgang Munchau) or not? They are not in it.

One certain prediction that can be made, even at this stage, is that when push comes to shove, the UK will not exit the EU.

As to Osborne’s refusal to contemplate UK participation in financial assistance to Greece, even at this critical juncture, Byron must be turning in his grave.


Just racing through the comments now.

To refer to forefathers & the Brits

De Valera in a populist move didn’t pay the land annuities, thus kicking off the economic war which kept the country poor for 30 years.

My personal forefathers never forgave him.

I’m not trying to rerun history. Simply taking Greece as it is now. Normal capitalism would demand a large haircut on Greece’s debt. Those who deny and go beyond that by baying for “blood” are not supporting capitalism. I agree with Gavin that they are morally repugnant.

“If we’d daced of with the ecb, closed banks etc. that’s going to affect the worse off worse, right?”
That has been discussed ad nauseum at this point. Nobody knows what would have happened if Ireland had burnt the bondholders, etc in defiance of the ECB et al. It would certainly have been rough for awhile…Nobody knows really though. My point about time and history is that Ireland may not have too bright a future if EU/EZ cracks and its interest rates rise……all that debt (public and private) will not be looked upon so “benignly” then. Unlikely? Not improbable actually…Grexit, Brexit, etc, etc are already “moving”…..That uncertainly will do one any good, at a minimum.
Also, when (not if) Ireland’s tax competitiveness is removed or eroded…..that’s coming at some point.
I suppose what I am saying is that I think many in Ireland are being very complacent about the status quo being maintained. However, that surely largely depends on the wider EU/EZ and international status quo.

In this case Ich Bein ein Berliner. The Greek political class is notoriously corrupt, untrustworthy and unreliable. They will renege on this deal at the earlies opportunity. Giving them another 50bn after they have defaulted for the 7th time in their history is the height of folly.
The country should not be in the EZ and whether it merits inclusion in the EU or even the Eurovision is debateable.
We are on the hook for over a billion in addition to the 400m already send to Athens. This so completely nuts.


I know the pointlessness of arguing the counterfactual, but this is how people will decided to vote in the next election. So it’s useful to have something to compare it against. People say “what if we had had some bottle and fought! we had a moral case!”. Well, we get to see how someone else tried, and how it worked out. The Greeks need debt relief. Not arguing that point at all. I’m saying that despite their moral case, the fight they’ve made, the referendum they’ve had, everything – it did no good and harmed the people.

Of course the story ain’t over yet. Far from.

We’ll still be talking about Greek debt next year 🙂

oh apologies for the “daced of” I meant of course “faced off” Was on the phone..

hey, just want to throw something back in the pot that I know we discussed on and off over the years.

I know this is politically unrealistic, but is it the Germans who should leave?

Simply because we are in some form of cruise control in ireland after a lost decade (almost) there is absolute complacency about (1) the persistent shortcomings of the euro for a small country like ireland (mind u the 300k variable rate mortgage holders may already have spotted some of the flaws) and (2) what is planned for the EZ.

The ‘Project’ has self destructed – long live ‘The Project’ – and a life of austerity to those who cling to the wreckage….elites ok, with minor inconveniences, ‘the great unwashed’ ? – who cares?

@Paul W

I suppose what I am saying is that I think many in Ireland are being very complacent about the status quo being maintained. However, that surely largely depends on the wider EU/EZ and international status quo.

This, as they say in the hood, wrecks my head.

When Noonan is joining in on the attack on Syriza what the hell does he think the effect will be? That the EU will develop in a way that is beneficial to Ireland if we support the interests of larger countries against those of the smaller ones?

Perhaps he thinks that if Ireland helps reduce European Union policy making to a cynical exercise in realpolitik it will build up a reservoir of goodwill for us with the great powers, because goodwill is so very useful in realpolitik.

The same people who now admit that the overdeveloped financial sector made us a hostage to fortune because of the structure of EMU seem completely oblivious to the fact we still have those very same liabilities, except to official lenders, in an economic and political environment that we have even less control over and that is even more favourable to the core.

For instance if Hollande was trying to play the hard man on corporate tax (and Merkel indulged him) how many more policy levers do the core now have over us? The ECB giveth “as much as it takes” and, if it receives signals, the ECB can taketh away.

As KO’R says, we better have an escape plan ready for when the Deutsche Bloc, ECB or European Commission are looking for a small country to pick up and make an example of (and perhaps, as with Greece, to experiment on too).

Relatedly there is a terrific article from JWMason here with some useful theses on the purpose of EMU:


Please keep up that logic assault on Dangers Of CommuNism. He will never respond with anything other than a change of topic (or an attempt to portray objective facts as matters of opinion) but it is still very enjoyable to read.

@Kevin O’R

A couple of suggested [amendments]:

“…be [presumed by other states] to be willing to act unilaterally, be [apparently] willing to default unilaterally, have a plan for achieving primary surplus if you haven’t already achieved it, have a hard default and euro exit (now possible, thanks to the Germans) option in your back pocket [with the probable consent of your electorate -as opposed to the opposite – evident for analysts from other states to observe and report] , and be [evidently, and likely with popular support] willing to use it at the first sign of hassle from the ECB.

I must say I made these points repeatedly on here 4 & 5 years ago in the context of the transparently non-existent negotiating position the Irish had manoeuvred themselves into, and yet were being urged to ‘exploit’. Not many seemed to be receptive to the logic at the time, but maybe time and distance will facilitate that.


I agree, but if there’s a Grexit most of the money advanced ultimately by other member-states is gone. On that issue alone there’s a choice between recognising the hit now or, as the IMF suggests, agree a 30+ year grace period. And they can’t be cast totally adrift. They will need something possibly larger than the current proposed 3rd bail-out. Ms. Lagarde will be toast if there’s any question about repaying what the IMF has advanced already. (There is one potential benefit; there is no way the US and Europe will be able to hog the presidencies of the Bretton Wood twins after this.)

The Greek parliament is likely to pass the legislation, but anyone who thinks it will be implemented is a fair few sandwiches short of the full picnic. There is a strong possibility that one of the other member-state’s parliaments which has to ratify this can-kicking will decide to pull the plug.

It’s gone well past ridiculous when bureaucrats in Brussels (and some possibly in Washington) will be monitoring shop-opening hours in cities and towns in Greece.

Krugman, on the money in a blog post on “faithocrats“:

But let me note, as I have before, that what Europe calls technocrats aren’t people who know how the world works; they’re people who subscribe to the approved fantasies, and never change their minds no matter how badly wrong things go. Despite the overwhelming evidence that austerity has exactly the dire effects basic textbook macro says it will, they cling to belief in the confidence fairy. Despite a striking lack of evidence that “structural reform” delivers much of a growth boost, especially in an economy suffering from a huge output gap, they continue to present structural reform — mainly in the form of disempowering workers — as a sovereign remedy for all ills. Despite a clear record of past failure, they continue to push for asset sales as a supposed answer to debt overhang.


Great to see you back. You’ve been missed. Your amdments to Prof. O’Rourke’s initially text are valid and useful. But they all hinge on securing popular consent to the nature and pace of fiscal adjustment to achieve a primary fiscal balance and to being prepared to exit the EZ.

In Ireland the nature and pace of fiscal adjustment secured sufficient, if grudging, consent because FG and Labour simply continued what FF and the Greens had started – and there was sufficient institutional capacity and underlying economic flexibility. (The opposition was an is from the usual suspects who have nothing useful or sensible to offer.) The adjustment could have been more efficient, effective and equitable – there was far, far too much pandering to powerful special interest groups, but it has met the primary requirements.

(It is ironic that the Government ran in to most political trouble when it focused too much on pandering to powerful special interest groups in the semi-states and the local authorities during the establishment of Irish Water and the sale of the BGE’s non-network activities and foolishly thought that levying water charges well below the gloriously inflated cost recovery level would not upset voters. It was so pleased at how it was going to pull the wool over the eyes of the Troika and Eurostat that it forgot about the long-suffering ordinary voters.)

In addition, similar in some respects to Greece, there was and is no evidence of popular support for an EZ exit.

These are the fundamental political economy differences and similarities between Greece and Ireland. The Greek tragedy is that most Greek voters want to stay in the EZ, but they don’t want to consent to what is required to keep them in.



It was crystal clear at the time that we had nowhere to run without a domestic bank resolution plan and a domestic plan for euro exit.

The big question is whether any such plan can be implemented such that one can withstand the period of pain and can get the benefits of a free floating currency thereafter.

Could we keep the international companies here through such a maelstrom? Are there contingency measures, or pre-existing structures, which could be put in place to deal with it? Planning for these eventualities should not be delayed – now is the time to get cracking.

Of course, there is not a snowballs that our Civil Service would take this on, let alone be able to achieve it. Like the hedgehog, they know only one course of action when the going gets tough.

I’d say the conservative politicians in the EU are baffled at Tsipras’s continued popularity despite their efforts to slander, besmirch and humiliate him. He may have lost the fight but at least he fought and let the people fight too. The people are probably glad that he backed down when the deal could not be done. Better to have fought and be beaten than to have surrendered before a shot was fired. Also, his struggle may yet not have been in vain. He has blown open the whole debate and all the previously double-speaking players have been smoked out and the issues have been clarified.

@Sarah Carey

Why should we have paid the British for stolen Irish Land? Blind Biddy Abu.


Yes, the Greeks are “untrustworthy.” Not like that nice Angela Merkel who foisted €55 billion of German bank liabilities on the Greeks. You can trust her to always do what’s right.

Not like any of those upstanding people who helped the Greeks cook their books, wherever they may be…

This is a set up: the Greeks “will renege on this deal” because the “deal” is designed to be impossible to fulfil.

Fortunately, the IMF seem to have rowed in (several days late) to point out the Emperor’s nudity at just the time that you and DOCM and all the “adults in the room” were just about to ask him who his haberdasher was.

Brussels’ proposed used of the EFSM to give a bridge loan to Greece will only accelerate Brexit and overall collapse. I think DMcW is correct – Ireland’s Plan B needs to be up and ready in the next (very) few months.


Saving Greece, Saving Europe

by Barry Eichengreen on 14 July 2015


Howlin has now joined Noonan and John Bruton in whacking Greeks with his slippers

After over a 100 yrs Irish Labour Party has still not learned …. with a bit of backbone a few yrs ago they could now be looking to lead next Gov rather than being practically wiped out in 2016 …

Re sustainability – the IMF are right to stay out. However, if the loan is unsustainable before it is made then it is surely not unreasonable for the person handing over the additional dosh to say that they will not consider writing down any debt owed to them until they are satisfied that the debtor is taking all the steps they have asked for in return.

The Greeks aren’t really entitled as a right to €240b of loans from the rest of the EU are they? Why would the other countries agree to hand over the dosh AND give a write-down, thereby giving up control, immediately? The additional austerity requirements may be a disaster but the principle of maintain control is surely justified. If the credotrs are wrong about the policy mix they will of course suffer for it.

The fact that they are getting any money when their debt to the creditors is wholly unsustainable is quite an amazing result if you think about it.

@Ernie Ball

Are you factoring in the write down Greece already got when you talk about foisting? Also, Greece will get approx. €240b altogether. It’s not all going to Banks.

Dontcha just love the Yanks (e.g., DOD’s link above) pontificating on this mess. They might be able to preach more forcefully from the pulpit when they sort out the little local difficulty in Puerto Rico.

Since the tide went out so rapidly in 2008 and they were exposed so clearly Greek politicians have failed to take ownership of the changes in governance required to survive within the EZ – and Greek citizens have refused to replace them with politicians who would and could. Politicians and voters in all other troubled member-states did. But the challenge was far greater in Greece than in any of the others. It is a failed state that needs a long time in the treatment room.

@ Ernie Ball

“Not like that nice Angela Merkel who foisted €55 billion of German bank liabilities on the Greeks.”

Just to be, eh, accurate, the 55 billion of German bank liabilities was already on the Greeks. They borrowed it in the first place. They always owed 55 billion. U seem to have trouble understanding this point. Its the German people who should be annoyed – their bank assets were foisted on to them when they became sovereign assets instead.


I don’t think I’m getting it wrong.

Deutsche Bank and a few others, all capitalists and big boys, made some speculative bets on Greece that didn’t pan out. They got slightly higher interest rates but ran a slightly (so they though) risk. The way this system is supposed to work–in order to avoid moral hazard, which primarily is a concept applied to creditors–those who make bad investments of this kind take the loss.

These guys were chasing profit (because Germany was awash with money that had to go somewhere) and they screwed up.

Yet, strangely, they were made whole. As were French banks and lots of hedge funds. Instead, the entire €55 billion was foisted, as I said, on the Greek people. Similar things happened in Ireland…

Effectively, what happened was a German bailout of German private actors but laundered through the Greek government. If Germans should be annoyed about something it is that their government chose to bail out such private actors rather than let them take the loss. But, politically, it was much more convenient for Angela Merkel to scapegoat the Greeks and fan the misplaced German rage that one finds even among people who ought to know better but that was clearly motivating German behaviour over the weekend.

Which part of that have I not understood? And are you sure that you’ve understood?

@ SC: “I know this is politically unrealistic, but is it the Germans who should leave?”

Well, I’d put it this way: “Did they ever join?”

Germany was, and still is, the EU and EZ economic and financial hegemon – by a long distance. So, they regard the euro as THEIR currency. And their political leaders will use the euro as they see fit in the interest of Germany. Its an offensive weapon at this stage. The other EZ members have two (well maybe three) options: support the hegemon unconditionally; band together to oppose the hegemon; or go it alone with their own currency ( eg: the UK, Denmark, etc.).

Interesting times!

@ Ernie

Your narrative that the Greeks were duped by canny Teutons borders on racism in its contempt for the lack of savvy of the former.

The Greeks bit the hand of the institutions for the bail outs. They had the choice to default instead. They have that choice now. But even with putinistas in charge they choose the bail out route. Under threat? Well yes, but not the gunboat threat that you and others imply but from the natural and justifiable threat of the financial consequences which would flow for anyone who doesn’t meet their financial commitments.

Drop the German bully theme, it’s getting boring. All 18 other members of the EZ had gotten thoroughly cheesed off with the “throw the toys out” tactics of Syriza.

@The Second

You haven’t got a clue what racism looks like. For one thing, it’s arguably racist to describe the Germans as a race. They’re not a race.

Whether the Greeks wanted the bailouts or not is irrelevant to German behaviour and the effective laundering of bailouts of their own banks through the Greek government (which is much the same thing they did with Ireland).

I’m sorry you’re bored. Maybe you should consider a trip to Syntagma Square this evening. You’ll probably find it equally boring.

You may be bored like a teenager with the German bully theme, but it is a fact that most of the Germans who are outraged about the “moral hazard” of debt write-offs for the Greek sovereign had no problem at all with much much larger bailouts (and much much greater moral hazard) of European banks and hedge funds.

As for who was “cheesed off,” are these people adults or, again, teenagers? This is an economic matter easily resolved (as it is everyday) by certain basic rules of how debt functions in a capitalist system. Whether Varoufakis rode a motorcycle or tended to hector or picked his nose or all of the above is utterly irrelevant. The fact is that the summit came up with a vindictive and personalized agreement that made no economic sense because Germany demanded it for domestic political reasons which were themselves tinged with a certain bigotry toward and stereotyping of those swarthy, feckless, lazy Greeks. As are your infantilising comments about “toys.”

If the agreement goes through, here’s hoping Syriza seizes all German assets in Greece, including holiday homes, by eminent domain and puts them in with the €50 billion of “public assets” to be sold off by the EU.


“Yet, strangely, they were made whole. As were French banks and lots of hedge funds. Instead, the entire €55 billion was foisted, as I said, on the Greek people.”

I know no one likes to recall it, but there was in fact a private sector debt restructuring of Greek government debt. Reasonably significant too, perhaps the largest sovereign debt restructure in history, where creditors were not, in fact, made whole. Let’s start with this repeated error in your litany of mistakes.


So you think Greece got €240 billion or a large fraction of it? You’ll have to explain to me how a country that size that got €240 billion or a large fraction thereof could possibly see a decline in GDP of 25%.

Here’s the best analysis of where the money went:

By that analysis, about 6% (€15bn based on an overall bailout figure of €226bn) of the two bailouts was used by Greece for state operations, i.e. to make up for the primary deficit from 2010-2012.


Because those thieves were the only ones buying our cattle…..We ended up throwing calves into the lakes because there was no point rearing them.

Moral: default = economic suicide.

Isn’t the Greek problem not the primary surplus but the fact they import so much food and energy and a devalued drachma would mean they’d be spending a lot more on the basics?

The translation of Tsipras’s speech and the New Democracy leader’s speech last night included the words ‘enemies’, ‘blackmail’ and ‘extortion’. Suspiciously there were no moderate words. I suspect that the translator has a modest but dramatic vocabulary. They should sort that out if it is the case.

All this talk of hegemony reminds me of the Delian League, with Germany in the role of Athens, and with the shift in the locus of power from the Commission in Brussels to the ECB in Frankfurt reprising the move of the League treasury from Delos to Athens. It all came famously apart in the Peloponnesian War.


I’m glad you brought up the 2012 debt “write-down.” Do you realise that more bailout money has been spent on “sweeteners” (€34.5bn) to get private debt holders to accept the haircuts than has been spent on the Greek people?

Never mind that, while the haircuts were not imposed on the institutions whose loans, again, were imposed on the Greek state to allow it to make whole some of the foreign creditors (others had already been made whole on the backs of the Greek state by that time), they were also imposed on Greek banks, resulting in them needing further Greek government money (borrowed from the Troika again).

Never mind the British-based “vulture funds” that used legal loopholes (abetted by the British government) to avoid the haircuts and that are still being paid, making astronomical profits in the process.

The result of all this “debt relief” was, predictably, an increase in debt/GDP ratio, not a decrease. Some debt relief.


I think your analogy on land commission payments is distracting and not really appropriate. There were far deeper issues at play there for a state not a decade old that had to find its independent way in the world – the soul of a nation was not something to be discounted against economic arguments – but i’m not going to get into the metaphysical here.

What you have not dealt with in reaching conclusions on your “Moral” was points made by myself and others with respect to the significantly stronger negotiating position Ireland enjoyed compared to Greece at the heights of our respective crises. To go down the dangerous over simplified route of analogies again, your position on seems to be on having viewed the wreckage of a car on a back country road that was going 60MPH….”Don’t drive at 60MPH, it will end in tears” – and that might be good advice on back country roads – but if your on the motorway you need to reevaluate that position for the new circumstance.

Greece has a negative trade balance in food, but it is trivial – not much more than a billion euros a year. If trade shut down, the country would essentially be self-sufficient in food. For the economy as a whole, devaluing the drachma would help as much as hurt.

In energy, a lot of what is imported is re-exported. Reintroducing the drachma would have a somewhat positive net impact on this, by reducing the cost of processing. Greek exports of “mineral fuels, oils, distillation products, etc.” amount to almost two thirds of imports. The negative trade balance for commodities in this category is significant, but not overwhelming, at about €7.6bn per year.

Across all goods, Greece has a negative trade balance of about USD26 billion per annum. Across all services, it has a trade surplus of about USD27 billion. What it loses on higher cost imports after devaluation, it should at minimum gain on exports.

@ Ernie

I am not a supporter of some of your views on other issues but you are putting forward good arguments here – and well researched…

John Bruton does not see eye to eye with you…

A friend of mine pointed me towards another incident in the Peloponnesian War, in 416-415BC, as described by Thucydides in the Melian Dialogues.

It’s available in its entirety at, or a digest is available on Wikipedia.

Syriza’s leaders might have done well to study history along with economics.

@ Ernie

“Never mind that, while the haircuts were not imposed on the institutions whose loans, again, were imposed on the Greek state to allow it to make whole some of the foreign creditors (others had already been made whole on the backs of the Greek state by that time), they were also imposed on Greek banks, resulting in them needing further Greek government money (borrowed from the Troika again).”

This is gibberish. The facts are simple – private sector holders of domestic law Greek government debt, whether they were foreign or domestic investors, suffered losses equivalent to ~60% in NPV terms. 83.5% of bond holders participated in the original operation, with participation rising to 97% once further related operations are included. This includes 70% of holders of the international law bonds which were legally protected. This operation saw a €100 billion reduction in Greek debt in PV terms (over 50% of 2012 GDP)

The total value of bond hold outs was 6.4 billion. It is not some enormous sum that would have solved the Greek crisis, now or then. It is barely enough to keep Greece expenditure going for a month. It is worth around 4% of GDP. Please stop with this nonsense that there is a huge army of French and German investors who were made whole on their Greek government debt or “British based vulture funds” who are somehow a primary cause of Greece’s current problems.

The problem with the previous Greek bailouts is much the same then as it is now – can the Greek economy sustain (then)/expand (now) its level of GDP (and so service its accompanying level of debt) into the long term, absent either large scale external support (now being provided, but reluctantly and with accompanying austerity) or significant deficit spending (no longer allowed if it wishes to remain within the Eurozone)?

References to Greece’s pre-crisis GDP levels are spurious at best and more likely idiotic. The Greek economy cannot sustain GDP levels of that nature any time soon, or service any large level of debt referenced to that. Hence why Greece was given a debt writedown of such a large magnitude in 2012. However, the question is now where should Greece’s GDP reset to, if the economy can be stabilised and reformed and eventually given the opportunity to grow again? This dictates where the appropriate level of debt should also be set to, in terms of debt burden (ie % of GDP required to service it).

The answer from most parties, on either side of the debate, is that Greece cannot expand its GDP or repay its debt based on the current structure of the Greek economy and the current structure of the Greek debt, even allowing for changes to both in the last few years. Either or both of these must therefore be further ‘re-structured’.

The Troika is attempting to restructure both its economy (now) and debt (eventually) so as to retain Greek membership of the EZ. This however will be a long term project, taking at least a decade and probably more likely another 15+ years.

It seems foolhardy of the Greeks to choose a way out of their problems that will optimistically take another 15+ years to resolve over one that could resolve very much faster if Argentinian precedents are any guide.

“However, the question is now where should Greece’s GDP reset to, if the economy can be stabilised and reformed and eventually given the opportunity to grow again?”

Surely the answer to that is simple within the framework of the current european treaties – and that is where it runs a moderate 2-3% budget deficit. Its there already – but debt sustainability is unachievable at this level. So I agree with much of what you are saying – the thickos looking for 3-4% surpluses (which would still render the debt unsustainable due the accompanying drops in GDP) seem unable to get it however.

In Asia for a few weeks so just catching up, but it appears I got this completely wrong – I thought Syriza was in a strong negotiating position and would get a write down.

Instead, Greece is humiliated and we will probably eventually see the rise of some form of extreme politics (left or right) in Greece in the coming years.

Varoufakis appears to be saying Tsipras lost his nerve and that Grexit was never a real option. That was a major mistake. They should have pulled out of the euro.

Germany is back to its old ways and will eventually tear Europe apart. Merkel even makes little girls cry!

@Eoin Bond
“The facts are simple – private sector holders of domestic law Greek government debt, whether they were foreign or domestic investors, suffered losses equivalent to ~60% in NPV terms. 83.5% of bond holders participated in the original operation, with participation rising to 97% once further related operations are included. This includes 70% of holders of the international law bonds which were legally protected. This operation saw a €100 billion reduction in Greek debt in PV terms (over 50% of 2012 GDP)”

You then go on to explain and acknowledge that this writedown was clearly not enough.
So why must the subsequent losses be incurred by the public sector?
The initial investors took a loss, yes; but the loss was not enough.

@ Noncense

“Surely the answer to that is simple within the framework of the current european treaties – and that is where it runs a moderate 2-3% budget deficit”

Serious question – do u believe that the Greek state, in its current format, from an economic/fiscal position, could be trusted/able to run a debt-reducing-fiscal policy (even if at a very low debt-reduction level) right now and over the next 5-10 years? I personally do not. I don’t blame EU/EZ for wanting a framework which ensures, rather than ‘requires’, that.

@ BeeCeeTee

“It seems foolhardy of the Greeks to choose a way out of their problems that will optimistically take another 15+ years to resolve over one that could resolve very much faster if Argentinian precedents are any guide.”

I assume this is a joke. Argentina remains a basket case. Anyone who suggests Argentina as the route out deserves a mix of scorn and unseriousness.

So what is ur answer?

They have gone from 16% deficit to primary surplus over 5 years and u can’t trust them to run 2-3% deficits over the next 5? Why? And that is against a backdrop of 25% GDP fall! Yeah, they really are out of control these guys spending all Germany’s trade surplus (well a fraction of it anyway). Ur comment betrays a dangerous sentiment…all the more so in that I fear u are not alone.

Big picture view, Europe or the Eurozone need to move forward with fiscal and political union rapidly for the sake of the unemployed and youth in southern Europe. Over the longer term the northern European countries and the world would benefit from a strong Europe to challenge US dominance. As far as I can see the past few years the US has been getting stronger and Europe is lagging. The S and P 500 is up 300% since the crisis This is not just due to monetary policy, US companies are getting more innovative productive and dominant more quickly. Philanthropists are donating 100s of millions to ivy league universities. It is no coincidence that the US dominate both the University rankings and global company indexes.
The challenge is getting taxpayers in wealthier countries to transfer both money and knowhow and realize they are on the same team as their southern friends. There are well educated and talented young people in Southern Europe. There was an implicit understanding when countries went into an economic and monetary union that fiscal and political union would happen. Also countries recently made the fiscal pact giving up some control of their budget again under the understanding of a future union.
As for the current situation there are a number of well qualified impartial academics like Eichengreen, Wyplosz, sachs, Krugman, stiglitz, roubini, O’Rourke, and so on who have been consistently right about the Greek situation and will be right again.

Argentina is a basket case as a vendor of government bonds. As a country to live in, it’s not doing too badly. Distinguish between the impact of its debt defaults, the impact of long term crappy government, and the weak export market conditions it is currently suffering, and it makes serial default look downright attractive.

The internet has gone long on criticisms, short on solutions.

If not adding debt to Greece then what?
Greek banks collapse or bailout?
Greece immediately left to close it’s own deficit or funded?
Who funds?
Debt writedown? Who funds Greek banks?
Who recaps the ECB?
Which european countries with lower standards of living than Greece get to have their national debt increased to fund Greece…?

There are difficult questions; there aren’t easy answers, not even in theory…

@Be a Debaser
“So why must the subsequent losses be incurred by the public sector?”
Perhaps because only the public sector (apart from the Greek banks) holds significant amounts of debt?

fyi The Bungee Loan – now u see it – now u don’t …

Peter Spiegel (@SpiegelPeter)
July 20, 2015
The €7.16bn bridge loan just sent to #Greece, says @Mina_Andreeva

But over in the Greek capital, the money is already being spent to address Greece’s latest debt demands.

Government officials have confirmed that the process of repaying $4.2bn to the European Central Bank today has begun. That means Greece will avoid defaulting on its obligations to the ECB, which would have had very serious consequences.

Greece also plans to clear its arrears to the International Monetary Fund, by sending €2.05bn over to Washington. That will cover the €1.6bn repayments due in June, which was missed as Greece staggered out of its previous bailout, plus a second payment due last week.

So in short, Greece’s creditors have loaned it more money, so it can repay its creditors.

The cash spends hardly any time in Athens at all, before being yanked back out again. Maybe it should be renamed a bungee loan…..

@ Bond
Serious question – do u believe that the Greek state, in its current format, from an economic/fiscal position, could be trusted/able to run a debt-reducing-fiscal policy…”

So why did banks lend it money in the first place then?
No due diligence.
Banks should not have lent the money – it’s actually that simple – it really is

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