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FTR #788 Greek Tragedy, Part 2: “Clausewitzian Economics–The Continuation of War by Other Means”

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Side 1  Side 2

This descrip­tion con­tains infor­ma­tion not con­tained in the orig­i­nal broad­cast.

Greeks protest­ing aus­ter­i­ty

Intro­duc­tion: Fur­ther devel­op­ing mate­r­i­al pre­sent­ed in FTR #746, this pro­gram details the hor­ri­fy­ing devel­op­ments unfold­ing in Greece. Being hailed as a “suc­cess,” due to its recent re-entry into the bond mar­ket, Greece is actu­al­ly a cru­el and depress­ing exam­ple of the long-stand­ing strat­e­gy of German/Underground Reich geopol­i­tics.

Real­iz­ing a strat­e­gy for Ger­man polit­i­cal dom­i­na­tion of Europe and the world, the EU and EMU are direct man­i­fes­ta­tions of the strat­e­gy first advo­cat­ed by Friedrich List in the 19th cen­tu­ry.

List advo­cat­ed a pan-Euro­pean eco­nom­ic union–dominated by Germany–as a means to con­trol first Europe and then the world. Imple­ment­ing the List strate­gic doc­trine through a series of mil­i­tary adven­tures and sub­se­quent eco­nom­ic and polit­i­cal con­sol­i­da­tion, Ger­many has uti­lized the con­cepts for­mu­lat­ed by Pruss­ian mil­i­tary the­o­rist Carl von Clause­witz in order to do so.

Hav­ing orig­i­nat­ed the con­cept of “Total War,” von Clause­witz posit­ed the fun­da­men­tal impor­tance of a “post-war” to suc­cess­ful real­iza­tion of strat­e­gy.

Aus­ter­i­ty advo­cates inspect­ing Greek assets

In All Hon­or­able MenJames Stew­art Mar­tin high­lighted an impor­tant aspect of von Clausewitz’s phi­los­o­phy, that war and diplo­macy are two sides of the same coin. When diplo­macy is no longer effec­tive, the pol­icy goal is pur­sued through the use of armed force. When war and mil­i­tary pow­er have reached the lim­its of their effec­tive­ness, diplo­macy con­tin­ues the pur­suit of the goal.

Gen­er­a­tions of Ger­mans have under­stood this and incor­po­rated that con­cept into the method­ol­ogy of Ger­man pow­er struc­ture.

All Hon­or­able Men by James Stew­art Mar­tin; Lit­tle, Brown [HC]; Copy­right 1950 by James Stew­art Mar­tin; p. 235.

. . . . The end of bat­tle in 1945 had sig­naled the start of a new kind of war–a  post-war. Germany’s clas­si­cal  mil­i­tary the­o­rist, von Clause­witz, is famous for hav­ing declared that “war is the con­tin­u­a­tion of diplo­macy by oth­er means.”  In deal­ing with a Ger­many which had gone to school with von Clause­witz for gen­er­a­tions, we knew that, con­versely, a post-war is the con­tin­u­a­tion of war by oth­er means.  Since Bis­marck, wars and post-wars have formed a con­tin­u­ous series, chang­ing the qual­ity of the events only slight­ly from year to year, with no  such thing as a clear dis­tinc­tion between  heat of  bat­tle and calm of  peace.  This  post-war of  the Ger­man occu­pa­tion was  dif­fer­ent from the  “cold war”  between the Unit­ed States and Rus­sia, which broke out at about  the same time. The lat­ter com­pli­cated  the  diag­no­sis, like a man get­ting typhoid fever and pneu­mo­nia at the same time. . . .

Hav­ing inflict­ed enor­mous dam­age on the infra­struc­ture and pop­u­la­tions of Europe and hav­ing appro­pri­at­ed the liq­uid cap­i­tal of those coun­tries and secret­ed it into the Bor­mann flight cap­i­tal net­work, Ger­man cor­po­rate struc­ture cement­ed their con­trol over the remain­ing wealth of the con­ti­nent through licens­ing agree­ments and cor­po­rate alliances.

Not con­cep­tu­al­ized as an eco­nom­ic the­o­rist, von Clause­witz’s doc­trines of “total war” and “post-war” apply direct­ly to the political/economic dom­i­na­tion of Europe by Ger­many.

Greece is but one exam­ple of that pol­i­cy, albeit one of the most salient and shock­ing. We present what has been done to Greece as rep­re­sen­ta­tive of “Clause­witz­ian eco­nom­ics.”

Pro­gram High­lights Include:

  • The instal­la­tion by the Troi­ka (read “Ger­many”) of the Greek neo-Nazi LAOS par­ty as part of the pro­vi­sion­al Greek gov­ern­ment cre­at­ed to impose “aus­ter­i­ty” on the unwill­ing Greek pop­u­lace. Note that the cit­i­zens of Greece–the cra­dle of democracy–had no input in this!
  • Greek insis­tence that Ger­many pay back the bil­lions it stole dur­ing World War II–this flight cap­i­tal is part of the Bor­mann orga­ni­za­tion about which we speak so often.
  • STERN’s claim that Greece is owed some 300 bil­lion euros from the war.
  • The Greek pop­u­la­tion’s sup­port for the pay­ment of repa­ra­tions by Ger­many.
  • The fact that the “bailouts” being pro­vid­ed to Greece are being used to repay the banks–many of them German–that are cred­i­tors of that unfor­tu­nate nation. The bailouts are NOT going to the Greek cit­i­zen­ry them­selves.
  • Ger­many’s own delib­er­ate default on debt owed on bond issues that helped re-build its econ­o­my after World War I.
  • Charges by a Greek ana­lyst that Ger­many delib­er­ate­ly inflat­ed Greece’s debt, lead­ing to “a new kind of occu­pa­tion.”
  • Recount­ing of the bru­tal real­i­ty of the “aus­ter­i­ty” (i.e. Clause­witz­ian eco­nom­ic real­i­ty) imposed in Greece, includ­ing: the fact that Greek phys­i­cal edu­ca­tion teach­ers no longer require their stu­dents to par­tic­i­pate, because so many of them are too under­fed to exer­cise prop­er­ly; the neces­si­ty for Greeks enter­ing hos­pi­tals to bring their own sheets and pil­low­cas­es due to bud­get slash­ing; the inabil­i­ty of Greeks to bury their dead, due to impov­er­ish­ment.
  • A reca­pit­u­la­tion of the incre­men­tal Ger­man imple­men­ta­tion of List’s the­o­ries through the Clause­witz­ian “con­tin­u­a­tion of war by oth­er means”: the Ger­man geopo­lit­i­cal strat­e­gy dur­ing World War I; the Ger­man strat­e­gy in 1940; the Ger­man post­war plans in 1942; the Ger­man geopo­lit­i­cal strat­e­gy in 1945.
  • Analy­sis of Ger­man strat­e­gy toward the EU as being anal­o­gous to the occu­pa­tion of Poland dur­ing World War II.
  • Analy­sis of Ger­man strat­e­gy by a for­mer vice-cha­ri­man of Moody’s, who said that mod­ern Ger­many is doing the same thing as the Third Reich.
  • A high­ly con­tro­ver­sial Greek pro­pos­al to solve the youth unem­ploy­ment prob­lem (between 55 and 60 per­cent) by imple­ment­ing what is, essen­tial­ly, a form of slav­ery.
  • In an update, we learn that for­mer LAOS part mem­ber and doc­tri­naire fas­cist Makis Voridis has been appoint­ed Health Min­is­ter.

1. We begin by not­ing that the pro­vi­sional Greek “aus­ter­ity” gov­ern­ment includes the Greek neo-Nazi LAOS par­ty, installed with no input what­so­ever from the pop­u­la­tion of “the cra­dle of democ­ra­cy.”

. . . Recent­ly, a rightwing extrem­ist par­ty was again made a direct coali­tion part­ner in a country’s gov­ern­ment — in Greece. The new­ly installed tran­si­tional gov­ern­ment — imposed under the super­vi­sion of Berlin and Brus­sels — includes not only the con­ser­v­a­tive and social demo­c­ra­tic par­ties but also the LAOS Par­ty (Laikós Orthó­doxos Synager­més, “Ortho­dox People’s Alarm”). The LAOS Par­ty musters also par­ti­sans of the for­mer mil­i­tary dic­ta­tor­ship and is known for its racist and anti-Semit­ic invec­tives. Gior­gos Karatzaferis, LAOS Par­ty Chair­per­son, is quot­ed to have pro­claimed that he is proud “not to be Jew­ish, homo­sex­ual and com­mu­nist,” which “only few can claim.“[5] He is said to have called out to the Israeli ambas­sador: “Jew ambas­sador, watch out where you tread! Let’s dis­cuss the Holo­caust, let’s talk about all the fairy tales about Auschwitz and Dachau.“[6] Makis Voridis, a mem­ber of the LAOS Par­ty and min­is­ter of trans­porta­tion in the Greek gov­ern­ment, imposed by Berlin and Brus­sels, began his polit­i­cal career as the leader of a youth orga­ni­za­tion of the par­ty presided over by Geor­gios Papadopou­los. Papadopou­los had been the mil­i­tary com­man­der of the jun­ta. He found­ed that par­ty after he had been released from prison, in the after­math of the over­throw of his dic­ta­tor­ship. The Ger­man gov­ern­ment evi­dently con­sid­ers the LAOS Par­ty help­ful for imple­ment­ing its aus­ter­ity dic­tate. . . .

2a. The first of sev­er­al arti­cles notes that the issue of Ger­man war repa­ra­tions owed to Greece has come back into focus in con­nec­tion with the aus­ter­i­ty pack­age imposed by the Troi­ka.

Note that, accord­ing to Albrecht Ritschl, Ger­many is the great­est debt trans­gres­sor in the world, as a result of World War Two debts.

“Pro­tec­torate-Like”; german-foreign-policy.com; 2/13/2012.

Last night, under strong pop­u­lar protests, the Greek par­lia­ment accept­ed the lat­est “aus­ter­ity pack­age,” that the Ger­man gov­ern­ment had pro­moted in the form of an ulti­ma­tum. This “aus­ter­ity pack­age” will lead to a 20 per­cent cut in pri­vate rev­enue and the min­i­mum wage, there­fore also in the pub­lic sec­tor wages, which are depen­dent on the min­i­mum wage. One hun­dred fifty thou­sand gov­ern­ment employ­ees will be laid off. Crit­i­cism of Berlin has become sharp­er because of its efforts to trans­form Athens into a de fac­to EU finance pro­tec­torate, using so-called aus­ter­ity com­mis­sion­ers. Demon­stra­tors burned Ger­man flags; Greek par­lia­men­tar­i­ans have announced an ini­tia­tive to remind that Ger­man World War II repa­ra­tions are still out­stand­ing. Since 1945, the Fed­eral Repub­lic of Ger­many has con­sis­tently refused not only to pay repa­ra­tions, but also Nazi debts, even those undis­puted by the Ger­man Reichs­bank at the end of the war. These would amount to more than three bil­lion Euros today. But, the debate con­tin­ues in the Ger­man cap­i­tal about the sus­pen­sion of democ­racy in Greece.

Protests against Berlin

Berlin’s bru­tal aus­ter­ity dic­tate and the Ger­man media’s on-going rab­ble-rous­ing anti-Greek (“bank­rupt Greeks”) pro­pa­ganda has enflamed Greek protests against Ger­many for quite some time. Last sum­mer, Greek demon­stra­tors chant­ed “Ger­many out of the EU!”, and dis­played “Merkel = Nazi” ban­ners at ral­lies. EU flags with a swasti­ka in the cen­ter were occa­sion­ally seen. The mem­ory that this is not the first time that Berlin has dic­tated Athens’s poli­cies, has recent­ly been accom­pa­nied by ref­er­ences to Nazi rule in occu­pied Europe. Last week demon­stra­tors out­side of the Greek par­lia­men­tary build­ing again chant­ed “Nazis Out!” while burn­ing a Ger­man flag. Trade union­ists also occu­pied the Athen­ian offices used by the Ger­man Horst Reichen­bach and his “task force Greece,” mon­i­tor­ing Athens’s aus­ter­ity mea­sures, in the name of the EU Com­mis­sion. These protests against Berlin’s hege­monic dic­tate are defamed in the Ger­man media sim­ply as “anti-Ger­man pro­pa­gan­da.”

Old Debts

A few days ago, a group of twen­ty-eight Greek par­lia­men­tar­i­ans, from var­i­ous par­ties, react­ed to Berlin’s per­sis­tent pres­sure by tabling a res­o­lu­tion, call­ing on the par­lia­ment to debate Nazi Germany’s plun­der of Greece, which has nev­er received indem­ni­ties. The indem­ni­ties not only refer to repa­ra­tions in gen­eral, but also to the com­pul­sory loans to the Reichsbank’s clear­ing account. Short­ly before the end of World War II, Nazi bankers were still in pos­ses­sion of Greek assets worth 476 mil­lion Reichs­mark, which has nev­er been repaid by the Fed­eral Repub­lic of Ger­many. Accord­ing to experts, this would today amount to 3.4 bil­lion Euros with inter­ests includ­ed. Greece is not the only coun­try that has waived Germany’s old Nazi debts with­out receiv­ing any­thing in return. As the econ­o­mist Albrecht Ritschl, who teach­es at the Lon­don School of Eco­nom­ics, con­firmed, Nazi Germany’s unpaid debts to its wartime adver­saries would today range between 700 bil­lion and 1.4 tril­lion Euros with inter­ests includ­ed, depend­ing on the method of calculation.[1] This does not even include the repa­ra­tions for war dam­ages.

Debt Can­ce­la­tion

Because of the Fed­eral Repub­lic of Germany’s long­stand­ing pol­icy of refusal, even total­ly indis­putable Nazi debts have nev­er been paid. Bonn scored a deci­sive suc­cess in 1953 with the so-called Lon­don Debt Agree­ment, achiev­ing a gigan­tic debt can­ce­la­tion, in the frame­work of which Greece also waived its for­mer occupier’s enor­mous debts. That agree­ment per­mit­ted the Fed­eral Repub­lic of Ger­many the expunc­tion of enor­mous debts, cre­ated both before and since World War II. The agree­ment also stip­u­lated that the ques­tion of the pay­ment of Nazi debts and repa­ra­tions would first be solved with a peace treaty con­cluded with a “reunit­ed” Ger­many. [The Fed­eral Repub­lic of] “Ger­many has been in a very good posi­tion ever since, even as oth­er Euro­peans were forced to endure the bur­dens of World War II and the con­se­quences of the Ger­man occu­pa­tion,” says the econ­o­mist Ritschl. This has made the resur­gence of the “great­est debt trans­gres­sor of the 20th Cen­tury,” name­ly, Ger­many, possible.[2] . . . .

2b. Accord­ing to STERN mag­a­zine, Ger­many owes Greece the equiv­a­lent of 300 bil­lion Euros from World War II.

“Ger­many’s STERN — Ger­many Owes Greece 300 Bil­lion Euros from WWII” by Hel­las Frappe; hellasfrappe.blogspot.uk; 9/27/2012.

The week­ly Ger­man “Stern” mag­a­zine this week ded­i­cat­ed one of its columns to the issue of Ger­man war repa­ra­tions to Greece, while it also at the same time notes that Berlin has only giv­en Greece 37 mil­lion Euros to save the almighty Euro. The arti­cle said reveals that Greeks wish Ger­many would final­ly pay the war repa­ra­tions because it believes Berlin owes much to the coun­try for the dam­ages and atroc­i­ties it caused dur­ing World War II.

The issue of war repa­ra­tions appears reg­u­lar­ly in Greek news­pa­pers, claims the arti­cle, but notes that no such dis­cus­sion (or claim) has been raised by both Athens and Berlin. The mag­a­zine also blast­ed the deci­sion by the Ger­man gov­ern­ment which said two weeks ago that the issue of war repa­ra­tions to Greece has lost its mean­ing. A spokesman for the Ger­man Min­istry of For­eign Affairs said that “the fed­er­a­tion of Ger­man believes that after many decades, the issue of war repa­ra­tions has lost its mean­ing.” The state­ment was made of course after Athens estab­lished a work­ing group in order to study old doc­u­ments and esti­mate the exact amount of the repa­ra­tions.

“The fact is, the Greeks are among the nations that suf­fered the most under Nazi occu­pa­tion. Their will to resist was fatal. First up was a leg­endary telegram that the Athens dic­ta­tor Gen­er­al Metaxas sent in Octo­ber 1940 to Fas­cist Italy — in response to Mus­solin­i’s ulti­ma­tum to sur­ren­der. It con­tained the plain text “ochi” (no), which is why the Greeks cel­e­brate to this day every Octo­ber to “Ochi Day”. Short­ly there­after, the Ital­ians attacked Greece and although numer­i­cal­ly more supe­ri­or, were total­ly pushed back behind the Alban­ian bor­der.

Then Hitler sent his troops and was also met with mas­sive oppo­si­tion. When the Nazis final­ly tri­umphed, they set up a bru­tal occu­pa­tion regime in order to show the world what can hap­pen when small coun­tries do not sub­mit. In Crete, which was par­tic­u­lar­ly com­pet­i­tive, an order was giv­en that said that for every fall­en Wehrma­cht sol­dier, ten Cre­tans should die. (As a result) 30 island vil­lages were destroyed. On the over­all, more than 80,000 Greeks. or 7.2 per­cent of the pop­u­la­tion died between 1941–1944.”

The arti­cle then speaks about the “inter­est-free loan” to Hitler.

The fas­cists, claims the same arti­cle, attacked, pil­laged and destroyed Greece’s indus­tri­al pro­duc­tion equip­ment, crops, etc. Hitler, it adds, even forced the Nation­al Bank of Greece, to lend Ger­many inter­est-free mon­ey. The total amount “of these gov­ern­ment bonds totaled 476 mil­lion Reichs­marks, which today cor­re­sponds to ten bil­lion euros.”

The sub­ject of war repa­ra­tions was first nego­ti­at­ed in the autumn of 1945 in Paris. At the time, adds the same arti­cle, Greece was ask­ing for ten bil­lion US dol­lars, which was viewed by all con­fer­ence par­tic­i­pants to be a lit­tle over exag­ger­at­ed, espe­cial­ly the US, so Greece was appar­ent­ly award­ed with 30,000 tons of Ger­man indus­tri­al goods with an esti­mat­ed val­ue of approx­i­mate­ly US $25 mil­lion (or two bil­lion euros at today’s rates). But, the same arti­cle writes “these prod­ucts have nev­er made it to Greece.” . . .

2c. Tagesspiegel main­tains that the dam­age done to Greece “destroyed” the coun­try.

Tagesspiegel Says Nazis Destroyed Greece” by Maria Korol­o­gou; Greek Reporter [Europe]; 4/11/2013.

The clas­si­cal lib­er­al Ger­man news­pa­per Tagesspiegel, crit­i­ciz­ing Germany’s refusal to pay more war repa­ra­tions to Greece for World War II, said the Nazis did more dam­age there than in any oth­er coun­try.

Tagesspiegel cat­a­logued the hor­ror and suf­fer­ing that Hitler’s forces brought to Greece: “130,000 civil­ians, women and chil­dren, were exe­cut­ed in retal­i­a­tion for rebel attacks. 70,000 Jews were tak­en to con­cen­tra­tion camps, 300,000 suf­fered frost­bite and hunger, because the Ger­mans con­fis­cat­ed food and fuel. Fifty per­cent of the country’s infra­struc­ture and 75% of indus­try were destroyed”. . . .

. . . . The paper said that if Ger­many paid Greece what it is alleged to owe, it would dra­mat­i­cal­ly improve Greece’s like­li­hood of over­com­ing its crush­ing eco­nom­ic cri­sis.

“The Greek gov­ern­ment appears to push­es the issue away. After the con­clu­sion of a group of experts on the top­ic, the Greek Min­istry of For­eign Affairs will ask the opin­ion of the state’s law offi­cials, in order for the deci­sion to be post­poned in every way,” it added.

2d. The Greek par­lia­ment has unan­i­mous­ly vot­ed that Greece must ask Ger­many to pay war repa­ra­tions.

“It’s A Mir­a­cle — Greek Par­lia­ment Unan­i­mous­ly Agrees — Greece Must Ask Ger­many To Pay War Repa­ra­tions” by Hel­las Frappe; hellasfrappeblogspot.gr;   4/12/2013.

For the first time in decades every sin­gle par­ty in the Greek par­lia­ment is in unan­i­mous agree­ment. Greece needs to for­mal­ly ask Ger­many to pay back the mon­ey owed from the Sec­ond World War. This includes the war repa­ra­tions as well as a forced occu­pa­tion loan. A provoca­tive state­ment made by Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble on Thurs­day not­ing that Greece should avoid the issue of war repa­ra­tions and rather con­cen­trate on reforms only ignit­ed the flame which is now grow­ing into a fire.

Schaeu­ble was refer­ring to a top-secret report com­piled at the behest of the Finance Min­istry in Athens. Leaked by To Vima news­pa­per on Sun­day, the report sug­gest­ed that Ger­many owes Greece 162 bil­lion euros in World War II repa­ra­tions.

In essence, the polit­i­cal par­ties are urg­ing the gov­ern­ment to take the nec­es­sary legal steps to claim the 162 bil­lion Euros (with­out the inter­est), that are due to Greece as a result of Nazi occu­pa­tion and a forced war loan. (The 108 bil­lion for Greece’s infra­struc­ture and 54 bil­lion for the forced loan).

Respond­ing to Schaeuble’s state­ments, For­eign Min­is­ter Dim­itris Avramopou­los said that the reforms being car­ried out in Greece bear no rela­tion – and can bear no rela­tion – to the issue of Ger­man repa­ra­tions, adding that the Greek state has been rais­ing the issue for many years.
“Whether this case has been resolved or not is deter­mined by inter­na­tion­al jus­tice, giv­en that, by its nature, this issue con­cerns inter­na­tion­al law and the inter­na­tion­al jus­tice organs,” Avramopou­los said.

“Greece is not ‘los­ing its focus’ on the reform pol­i­cy, despite the great sac­ri­fices the Greek peo­ple are shoul­der­ing,” he added.

In com­ments made to Ger­many’s Neue Osnabruck­er Zeitung news­pa­per, Schaeu­ble said the issue of war com­pen­sa­tions has already been “set­tled.”

Mean­while, the Ger­man Tagesspiegel news­pa­per, slammed the Berlin gov­ern­men­t’s stance on the issue not­ing that the Nazis did more dam­age in Greece than in any oth­er coun­try they occu­pied. The news­pa­per said that Hitler’s forces were respon­si­ble for the death of many men, women and chil­dren.

Specif­i­cal­ly it said 70,000 Jews were tak­en to con­cen­tra­tion camps, 300,000 suf­fered frost­bite and hunger because the Ger­man forces con­fis­cat­ed all food and fuel, 50 per­cent of Greece’s infra­struc­ture and 75 per­cent of the coun­try’s indus­try were total­ly destroyed.

The issue of war repa­ra­tions has been a con­tentious and legal­ly com­pli­cat­ed one for decades. Nazi Ger­many, which occu­pied Greece from 1941–44, forced Athens to extend it loans and give up gold reserves. There was also the ques­tion of the destruc­tion of infra­struc­ture and com­pen­sa­tion claims filed by indi­vid­u­als who sur­vived Nazi atroc­i­ties. As a result, Greece suf­fered great­ly and unlike every oth­er coun­try Ger­many went to war with, only Greece has nev­er been paid com­pen­sa­tion. [This is not entire­ly cor­rect. The for­mer U.S.S.R. was nev­er com­pen­sat­ed either–D.E.]

Cam­paign­ers say the Paris Repa­ra­tions Agree­ment of 1946 oblig­es Ger­many to pay Greece around bil­lions of Euro.

There has long been a vocif­er­ous lob­by call­ing for war repa­ra­tions from Ger­many, with the so-called “Nation­al Coun­cil” call­ing for more than 500 bil­lion Euros in war repa­ra­tions (with inter­ests), as well as the forced loan (with inter­est), but also for oth­er com­modi­ties such as stolen art work and the loss of 50pc of eco­nom­ic out­put over almost four years. . . .

2e. The Greek cit­i­zen­ry is in agree­ment with that coun­try’s par­lia­ment.

“Most Greeks Want Gov­ern­ment to Pur­sue Ger­many for War Repa­ra­tions” by Kate­ri­na Niko­las; Dig­i­tal Jour­nal; 4/17/2013.

Eight out of 10 Greeks believe the gov­ern­ment should pur­sue Ger­many over war repa­ra­tions, fol­low­ing a clas­si­fied report by the Greek Finance Min­istry indi­cat­ing the debt stands at €162 bil­lion.

Ekathimeri­ni report­ed almost 90 per­cent of Greeks con­sid­er dam­ages should be sought. Last week Dig­i­tal Jour­nal report­ed leaked details of the clas­si­fied report com­mis­sioned by the Greek gov­ern­ment con­clud­ed “the out­stand­ing debt is com­prised of €108 bil­lion for dam­age to infra­struc­ture and €54 bil­lion for the forced loans demand­ed by the Nazis.”

Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble respond­ed to the issue of war repa­ra­tions by dis­miss­ing the issue as already set­tled, say­ing: “I deem that such state­ments are irre­spon­si­ble. Instead of mis­lead­ing the peo­ple in Greece it would be bet­ter to show them the road to reforms.”

His words drew a strong response from Greek For­eign Min­is­ter Dim­itris Avramopou­los who stat­ed: “The reforms being car­ried out in Greece bear no rela­tion – and can bear no rela­tion – to the issue of Ger­man repa­ra­tions. Whether this case has been resolved or not is deter­mined by inter­na­tion­al jus­tice, giv­en that, by its nature, this issue con­cerns inter­na­tion­al law and the inter­na­tion­al jus­tice organs.”

Accord­ing to Hel­las Frappe (which out­lines the details of the repa­ra­tions due) every sin­gle par­ty in the Greek Par­lia­ment is in unan­i­mous agree­ment that Greece should ask Ger­many to pay back the mon­ey owed.

DW [Deutsche Welle] reports Ger­man his­to­ri­an Hagen Fleis­ch­er argues the issue is not set­tled but believes Greece should focus on the forced occu­pa­tion loan, esti­mat­ed to be €7 bil­lion with­out inter­est. Fleis­ch­er says that whilst Ger­many will not allow Greece to set a prece­dent over repa­ra­tion demands, the loan should be pur­sued. . . .

2f. Note that Ger­many itself default­ed on the bonds it issued to revi­tal­ize its econ­o­my after World War II.

“Ger­many Defaults–and Lies about It;” Ger­many Watch; 4/17/2013. 

. . . . It start­ed in the 1920’s when Ger­many issued series of bear­er bonds in the USA for revi­tal­i­sa­tion of its econ­o­my fol­low­ing the dev­as­tat­ing effects of WWI. Act­ing as trustees, finan­cial insti­tu­tions such as JP Mor­gan and Lee Hig­gins & Co. pro­duced and sold bonds in Amer­i­ca rais­ing funds that would be invest­ed in Ger­many.

These bonds cor­re­spond­ed to Agri­cul­tur­al Loans signed by 14 Ger­man banks and guar­an­teed by the Ger­man gov­ern­ment. Of these 14 banks four are still active and are part of the troi­ka mech­a­nism.

From 1933, Ger­many default­ed on inter­est repay­ments to Bond­hold­ers, as the new Nazi lead­er­ship con­sid­ered the debt that Ger­many faced fol­low­ing WWI as ille­gal and issued a mora­to­ri­um on bonds owed to for­eign investors.

In 1953 fol­low­ing years of Ger­man debt cri­sis, the Lon­don Debt Agree­ment restruc­tured Germany’s debt to be sus­tain­able by the agree­ment of its cred­i­tors.

The way this deal would func­tion was to pro­vide the option to the bond­hold­ers of Ger­man debt, to either accept the repay­ment terms of the LDA, or to forego attempts to claim their debt until 1993. The ratio­nale being, that you can cash in today from a weak Ger­many, or wait for a full set­tle­ment after 40 years of Ger­man growth and devel­op­ment.

Assent­ing Bond­hold­ers: For bond­hold­ers who want­ed to cash in their bonds imme­di­ate­ly, they could receive par­tial pay­ment, and new bonds, with a dis­count on the val­ue of their bonds (depend­ing on the issue, between 20% — 60%). For this to be imple­ment­ed cor­rect­ly, a pro­ce­dure of Val­i­da­tion was set up to ensure that any­one pre­sent­ing bonds for pay­ment, could prove that they were indeed the ben­e­fi­cial own­er. This would guar­an­tee that all of the dis­burse­ments paid went direct­ly to Germany’s cred­i­tors in the cor­rect manor.

Non Assent­ing Bond­hold­ers: For bond­hold­ers who chose to wait for full set­tle­ment by their next gen­er­a­tion in the future, their course of action was to main­tain the debt instru­ments (the bonds) safe­ly, and not request a set­tle­ment until the 40-year grace peri­od had expired.

Val­i­da­tion boards were estab­lished in the three US states (where the bonds were ini­tial­ly sold) to car­ry out the com­pli­ance require­ments for the bond­hold­ers who chose to accept the option pre­sent­ed in the LDA. Hav­ing per­formed their role, these boards were sub­se­quent­ly closed a few years lat­er.

By 1993 the Ger­man gov­ern­ment had suc­ceed­ed in revi­tal­is­ing its econ­o­my and began to respond to requests for pay­ment. Unfor­tu­nate­ly, they chose not to hon­our their debt. To the sur­prise of many bond­hold­ers, Ger­many would receive pay­ment appli­ca­tions with the phys­i­cal bonds attached, per­fo­rate the bonds, and stamp them as invalid.

The rea­sons giv­en by the Ger­man Gov­ern­ment and its sub­sidiary bod­ies are: Ger­many has com­piled a list of Bond ser­i­al num­bers that Ger­many con­sid­ers stolen, and hence invalid. The pro­ce­dure of val­i­da­tion must be com­plied with.

The Ger­man gov­ern­ment claims that dur­ing WWII Russ­ian sol­diers loot­ed the Reichs­bank vault, where many bonds were kept, and that these bonds were rein­tro­duced into the mar­ket for pay­ment. The sim­ple prob­lem with this claim is that the only bonds that were in the Ger­man vault, had already been paid off or pledged, for which there is a pub­lic record, and no active bond­hold­ers had their bonds phys­i­cal­ly in Ger­many. Fur­ther­more, the build­ing which housed the Reichs­bank had been com­plete­ly destroyed, the con­tents of which had been removed by Ger­many before the arrival of Russ­ian sol­diers to Berlin.

The bonds were “bear­er” instru­ments, and bond­hold­ers would cut off the coupons from the papers for their inter­est repay­ments. This claim how­ev­er, was accept­able in the few years imme­di­ate­ly fol­low­ing the war, as it was obvi­ous bond­hold­ers would not be able to recov­er their prin­ci­pal or inter­est at the time, and was the rea­sons for the Val­i­da­tion Pro­ce­dure out­lined in the Lon­don Debt Agree­ments.

The so-called ‘Val­i­da­tion Pro­ce­dure’ which was intend­ed to apply to bonds that would be sub­mit­ted for pay­ment in 1953 added addi­tion­al secu­ri­ty require­ments for the bond­hold­er to com­ply with. Not only was it clear in the leg­is­la­tion that this only applied to Assent­ing Bond­hold­ers in 1953, sub­se­quent­ly indi­cat­ed by the clo­sure of the Val­i­da­tion boards, but it would be sim­ply impos­si­ble for any bond­hold­er to com­ply with them 40 years lat­er.

When bond­hold­ers and cred­i­tors have asked to see this list, the Ger­man gov­ern­ment cat­e­gor­i­cal­ly denied access, stat­ing that it is not in their nation­al inter­est, and has clas­si­fied this list as a “nation­al secret”.

What fol­lowed was a series of law­suits in the US where Ger­man legal defence has nev­er denied the lia­bil­i­ty for its debt, but has sys­tem­at­i­cal­ly used tech­ni­cal issues and delayed court cas­es, to the point that many bond­hold­ers have paid mil­lions more in legal expens­es. Many of these claims con­tin­ue today, by some of the sur­viv­ing bond­hold­ers, and the acquir­ers of that debt, and will be mak­ing appeals to the Euro­pean Courts in the near future.

There is no ques­tion in the minds of the many experts in bank­ing and law, with sub­stan­tial knowl­edge of inter­na­tion­al finan­cial instru­ments, that these bonds rep­re­sent unpaid debt of the Ger­man gov­ern­ment and its sub­sidiary bod­ies. . . .

3. The details of the agree­ment to which the Greeks are being sub­jected might be polite­ly described as stun­ning. The coun­try is being used as a vehi­cle for shoring up weak­ened Euro­pean finan­cial insti­tu­tions!

“Scan­dal: Greece to Receive ‘Neg­a­tive Cash’ from ‘Sec­ond Bailout’ as It Funds Insol­vent Euro­pean Banks” by Tyler Dur­den; zerohedge.com; 2/22/2012

Ear­lier today, we learned the first stun­ner of the Greek “bailout pack­age”, which cour­tesy of some con­vo­luted trans­mis­sion mech­a­nisms would result in some, poten­tially quite many, Greek work­ers actu­ally pay­ing to retain their jobs: i.e., neg­a­tive salaries. Now, hav­ing looked at the Eurogroup’s state­ment on the Greek bailout, we find anoth­er very cre­ative use of “neg­a­tive” num­bers. And by cre­ative we mean absolute­ly shock­ing and scan­dalous. First, as a reminder, even before the cur­rent bailout mech­a­nism was in place, Greece bare­ly saw 20% of any actu­al fund­ing, with the bulk of the mon­ey going to Euro­pean and Greek banks (of which the for­mer ulti­mately also end­ed up fund­ing the ECB and thus Euro­pean banks). Fur­ther­more, we already know that as part of the lat­est set of con­di­tions of the sec­ond Greek bailout, an’ ‘Escrow Account” would be estab­lished: this is sim­ply a means for Greek cred­i­tors to have a senior claims over any “bailout” cash that is actu­ally dis­bursed for things such as, you know, a Greek bailout, where the mon­ey actu­ally trick­les down where it is most need­ed — the Greek cit­i­zens. Here is where it just got sur­real. It turns out that not only will Greece not see a sin­gle pen­ny from the Sec­ond Greek bailout, whose entire Use of Pro­ceeds will be lim­ited to fund­ing debt inter­est and matu­rity pay­ments, but the coun­try will actu­ally have to fund said escrow! You read that right: the Greek bailout #2 is noth­ing but a Greek-fund­ed bailout of Europe’s insol­vent banks... and the Greek con­sti­tu­tion is about to be changed to reflect this! . . .

4a. Just how acute is the sit­u­a­tion in Greece? So bad that phys­i­cal edu­ca­tion teach­ers are excus­ing chil­dren from par­tic­i­pat­ing due to the fact that mal­nu­tri­tion pre­vents them from exer­cis­ing with­out becom­ing dizzy. These chil­dren may very well expe­ri­ence long-term effects from their “aus­tere” diet.

This is a text­book exam­ple of pol­i­tics as the con­tin­u­a­tion of war by “oth­er means”–applied von Clause­witz.

“Greece on the Bread­line: Chil­dren of Athens too Hun­gry to Do PE” by Jon Hen­ley; The Guardian; 3/13/2012.

. . . It has been a com­mon secret among PE teach­ers for some time now that they don’t expect pupils to do PE any more, because many of them are under­fed and get dizzy. . . .

4b. Sta­tis­ti­cal analy­sis of the toll of aus­ter­i­ty on the health of the Greek cit­i­zen­ry is stag­ger­ing.

“Squeeze Dry and Obscure”; german-foreign-policy.com; 12/17/2012.

. . . . A trau­ma ther­a­pist, fol­low­ing his trip to Athens, has described the social con­se­quences and the total col­lapse of the Greek econ­omy, pro­voked by the Ger­man aus­ter­ity dic­tate. The ther­a­pist pro­vided sup­ple­men­tary train­ing for his Greek col­leagues, which was deemed exceed­ingly nec­es­sary because of the con­se­quences of the cri­sis. In the process, he also became acquaint­ed with the Greek social sit­u­a­tion and since has been com­plain­ing of the “gigan­tic obscu­ran­tist capac­ity” of West­ern Europe, where the aus­ter­ity pol­icy is being con­tin­ued, in spite of the cat­a­strophic sit­u­a­tion in Greece. For exam­ple, “entire res­i­den­tial blocks (...) are deprived of oil deliv­er­ies for finan­cial rea­sons.” Ille­gally felled trees are the sole source of heat­ing. Who­ever must go to the hos­pi­tal, “must bring his own sheets and bed cov­ers, as well as the own food.” “Since the clean­ing per­son­nel was fired, doc­tors, nurs­es and order­lies, who, for months, have not been paid, are clean­ing the toi­lettes.” The EU is warn­ing of “the dan­ger of an out­break of infec­tious dis­eases because of the dev­as­tat­ing hygien­ic con­di­tions.” The trau­ma ther­a­pist report­ed that “women, in their late preg­nan­cies, have to beg from hos­pi­tal to hos­pi­tal, because, hav­ing nei­ther health insur­ance nor enough mon­ey no one wants to help them.” The elder­ly, whose pen­sions have been cut in half, can­not even afford impor­tant med­i­cine. Since the cri­sis began, the rate of sui­cides, on the oth­er hand, has not been cut in half, it has doubled.[3]

Tremen­dous Rage

Accord­ing to the report, one need be “nei­ther a pes­simist nor an expert, to imag­ine what this means for inter­per­sonal rela­tions” as well as “for the cohe­sion of Greek soci­ety.” Rage against Greek politi­cians and “inter­na­tional pol­icy of finan­cial install­ments flow­ing into bail­ing out the banks, but not the peo­ple,” is “tremen­dous and con­tin­ues to grow.” A soci­ety that can pro­vide at least pro­tec­tion from the worst, would be able to absorb this rage, but Greece no longer has even this pos­si­bil­ity, explains the trau­ma ther­a­pist. In Greece “the func­tional soci­ety was pro­gres­sively under­mined until it col­lapsed like a dilap­i­dated house,” because “the cri­sis has destroyed the wel­fare state.” Rage is now turn­ing into aggres­sion and vio­lence. As a mat­ter of fact, in tra­di­tion­ally hos­pitable Greece, attacks — par­tic­u­larly against migrants — have suf­fered a vast increase. “The num­ber of vio­lent mobs that attack minori­ties is growing.“[4]

Racist Vio­lence

Human rights orga­ni­za­tions have already been com­plain­ing about this for months. For exam­ple, fol­low­ing the mur­der of an Iraqi refugee in Greece, Amnesty Inter­na­tional dis­cerned a grow­ing fre­quency of racist-moti­vat­ed attacks.[5] The UN High Com­mis­sion on Refugees report­ed in Octo­ber that between Jan­u­ary and Sep­tem­ber, alone, 87 xeno­pho­bic-moti­vat­ed attacks had been count­ed. This is “excep­tion­ally alarm­ing,” par­tic­u­larly in con­sid­er­a­tion of the fact that the actu­al num­bers are like­ly to be far high­er, since vic­tims were either too scared to report attacks to the police or were turned away, when they did.[6] The repres­sive forces are also using exces­sive force against migrants. In mid-Novem­ber, the US Embassy in Athens issued a trav­el warn­ing against a rise in vio­lent attacks against per­sons who, because of their com­plex­ion, are per­ceived to be for­eign migrants.[7] Cer­tain neigh­bor­hoods of Athens are con­sid­ered “no go areas” for migrants.

Plans for a Putsch

In the throes of the cri­sis, the rapid rise of xeno­pho­bia that has over­come Greece is flanked by a just as rapid rise of the extreme right. The neo-Nazi Chrysi Avgi par­ty (“Gold­en Dawn”), which is par­tic­u­larly known for its vio­lence against migrants, won 18 seats in par­lia­ment in the last elec­tions and — accord­ing to opin­ion polls — could win 12 per­cent today. Last fall, one of their par­lia­men­tar­i­ans declared that the par­ty is wag­ing a “civ­il war” against migrants and the left. Accord­ing to pub­li­cist, Dim­itris Psar­ras, who, for the past 20 years has been doing research on the Chrysi Avgi, “the esca­la­tion strat­egy (...) has a pri­mary sig­nif­i­cance” for that par­ty. “It is sim­i­lar to the strat­egy of Ital­ian neo-fas­cists in the 1970s and 80s: esca­late the con­flict on the streets, between the right-wingers and left-wingers — and in the case of Greece, the migrants — to cre­ate a cli­mate of inse­cu­rity, so that a putsch can be jus­ti­fied.” Psar­ras points out that not only the Greek neo-Nazis, but even “seri­ous media organs (...) are spec­u­lat­ing on pos­si­ble plans for a putsch.” He finds, “if the polit­i­cal and eco­nomic sit­u­a­tion becomes even more insta­ble and the soci­ety, more polar­ized, any­thing is possible.“[8]

4c. Greek fam­i­lies can no longer to bury their dead.

“Greek Pover­ty So Bad Fam­i­lies ‘Can no Longer Afford to Bury their Dead’” by Hele­na Smith; The Guardian; 10/18/2012.

Van­na Men­daleni is a mid­dle aged Greek woman who until now has not had vehe­ment feel­ings about the cri­sis that has engulfed her coun­try. But that changed when the soft­ly spo­ken under­taker, clos­ing her fam­i­ly-run funer­al par­lour, joined thou­sands of pro­test­ers on Thurs­day in a mass out­pour­ing of fury over aus­ter­ity poli­cies that have plunged ever grow­ing num­bers of Greeks into pover­ty and fear.

“After three years of non-stop tax­es and wage cuts it’s got to the point where noth­ing has been left stand­ing,” she said draw­ing on a cig­a­rette. “It’s so bad fam­i­lies can no longer afford to even bury their dead. Bod­ies lie unclaimed at pub­lic hos­pi­tals so that the local munic­i­pal­ity can bury them.” . . .

4d. The toll on the health of the Greek cit­i­zen­ry stems from the fact that the require­ments for Greek health expen­di­tures are being cal­cu­lat­ed as an abstract bud­getary require­ment, rather than as what is actu­al­ly need­ed to sus­tain the health of the Greek pop­u­la­tion.“Aus­ter­ity Kills”; german-foreign-policy.com; 7/25/2013.

The reor­ga­ni­za­tion of the Greece’s health sys­tem, under Ger­man direc­tion, is advanc­ing. “A final timetable is to be pre­sented in the sec­ond half of this year,” declared the Ger­man Health Min­istry (BMG). The Ger­man gov­ern­ment sees deficits also in the lack of an “effec­tive cost man­age­ment,” but most of all in the lack of “com­pet­i­tive ele­ments.” In a “Mem­o­ran­dum of Under­stand­ing” (MoU), the BMG and the Task Force for Greece (TFGR) have reached an agree­ment with the Greek gov­ern­ment on the intro­duc­tion of the high­ly crit­i­cized Ger­man-mod­eled so-called case flat-rates. The crit­i­cisms stem from the fact that patients are not being treat­ed in response to their med­ical needs but on the basis of eco­nomic effi­ciency. The mas­sive con­se­quences the aus­ter­ity mea­sures are hav­ing on the pub­lic health in Greece are becom­ing more evi­dent. A grow­ing num­ber of Greek cit­i­zens are los­ing their health insur­ance, due to unem­ploy­ment and there­fore must pay med­ical costs them­selves. The short­age of med­ical aid, for exam­ple, has caused an increase of 40 per­cent in the child mor­tal­ity rate since 2009. Dis­eases such as malar­ia or AIDS are spread­ing more rapid­ly. The Ger­man gov­ern­ment con­tin­ues to insist on its aus­ter­ity course in spite of these ram­i­fi­ca­tions.

With­in the frame­work of the EU aus­ter­ity dic­tates, Ger­many took the lead in the reor­ga­ni­za­tion of the Greek health sys­tem back in March 2010. “The Ger­man Min­istry of Health is in sup­port of the Greek government’s mea­sures to increase the effi­ciency and effec­tive­ness of long-term health care, by sub­stan­tial and effec­tive trans­for­ma­tions in the orga­ni­za­tion of its health sys­tem,” declared the State Sec­re­tary in the Min­istry of Health, Ste­fan Kapfer­er in Feb­ru­ary 2011, on the occa­sion of the sign­ing of the cor­re­spond­ing “Dec­la­ra­tion of Intent.” [1] The con­crete mea­sures had been spec­i­fied by the Ger­man Min­istry of Health and the Task Force for Greece (TFGR) in the April 2012 “Mem­o­ran­dum of Under­stand­ing” (MoU) with the Greek gov­ern­ment. These mea­sures include the intro­duc­tion of case flat-rates, a change in hos­pi­tal man­age­ment struc­tures, the reor­ga­ni­za­tion of the Nation­al Orga­ni­za­tion for Health­care Pro­vi­sion insur­ance (EOPYY) and new pric­ing mod­els for med­i­cine. The Ger­man GIZ devel­op­ment aid agency was giv­en the respon­si­bil­ity of the final elab­o­ra­tion of these plans, which there­by opens “new mar­kets in indus­tri­al­ized coun­tries.” .. . .

. . . . These pro­posed trans­for­ma­tions are being imple­mented with­in the frame­work of the aus­ter­ity mea­sures being enforced by Berlin. Accord­ing to the stip­u­la­tions hand­ed down by the Troi­ka, Greece’s health expen­di­tures should not sur­pass six per­cent of the country’s gross nation­al prod­uct — in Ger­many these expen­di­tures were at 11.3 per­cent in 2011. Since, as a result of the aus­ter­ity pol­icy imposed on that coun­try, the Greek GNP has been on the decline for years, the expen­di­tures for the health sys­tem are sink­ing dras­ti­cally. By 2012, these expen­di­tures were reduced to around 9.5 bil­lion Euros, from 14 bil­lion Euros in 2009.[5] The Greek gov­ern­ment has already shut down 46 of its 130 hos­pi­tals and cut the bud­get by 40 per­cent for those remain­ing. This has added thou­sands more to the unem­ployed cre­ated by the dev­as­ta­tion of the health sec­tor. . . .

. . . . Dr. Gior­gos Vichas, speaks of a “human­i­tar­ian crisis.“[7] Since 2008, the child mor­tal­ity rate has risen by 40 per­cent. The num­ber of HIV pos­i­tive drug users has risen from 10 — 15 in 2007 to 314 in the first eight months of 2012 alone — main­ly due to the dras­tic cut­backs in pre­ven­tive pro­grams. Malar­ia and tuber­cu­lo­sis, the West Nile and dengue fevers are con­tin­u­ing to spread. . . .

. . . . “The inter­ac­tion between aus­ter­ity pol­icy, eco­nomic shock treat­ments and defi­cient social pro­tec­tive mea­sures seems to ulti­mately lead to an esca­la­tion of the health and social crises in Europe,” con­cluded a study by sev­eral schol­ars pub­lished in the renowned “The Lancet” med­ical journal,[8] Epi­demi­ol­o­gists, David Stuck­ler and San­jay Basu drew the same con­clu­sion in their book “The Body Eco­nomic — Why Aus­ter­ity Kills.” . . .

6. Charg­ing that Ger­many delib­er­ate­ly exag­ger­at­ed analy­sis of the Greek debt, Zoe Geor­gan­ta not­ed that Greece was expe­ri­enc­ing “a new kind of occu­pa­tion by the Ger­mans.”

“Greece Revamps Sta­tis­tics Ser­vice Board after Row” by George Geor­giopou­los; Reuters; 9/16/2011.

Greece said on Fri­day it would replace the board of its inde­pen­dent sta­tis­tics ser­vice (ELSTAT) after two mem­bers resigned and anoth­er was quot­ed as alleg­ing that 2009 deficit data had been arti­fi­cially inflat­ed.

It said ELSTAT chief Andreas Geor­giou would keep his post.

The upward revi­sion of Greece’s bud­get deficit in 2009 to 15.4 per­cent of gross domes­tic prod­uct exposed the scale of the country’s fis­cal derail­ment and sped up the debt cri­sis which is still rock­ing the euro zone.

“The 2009 deficit was arti­fi­cially inflat­ed to show that the coun­try had the biggest fis­cal short­fall in all of Europe, even high­er than Ireland’s which was 14 per­cent,” ELSTAT board mem­ber Zoe Geor­ganta was quot­ed as say­ing by the Eleft­herotypia news­pa­per. Geor­ganta said the inclu­sion of a num­ber of util­i­ties under the gen­eral gov­ern­ment inflat­ed the deficit. She said this had not been han­dled accord­ing to Euro­stat guide­lines and that the chair­man reject­ed the board’s objec­tions.

“We have a new kind of occu­pa­tion in Europe by the Ger­mans,” Geor­ganta told Real FM radio, adding that Ger­man offi­cials at Euro­stat put pres­sure on the gov­ern­ment to inflate the 2009 deficit to jus­tify harsh aus­ter­ity mea­sures. . . .

8a. The pro­gram reviews the Euro­pean Mon­e­tary Union as the real­iza­tion of the the­o­ries of Pan-Ger­man the­o­reti­cian Friedrich List.

Writ­ing in 1943, Paul Win­kler fore­saw that the Prus­so-Teu­ton­ics would real­ize their goals through the cre­ation of a Ger­man-dom­i­nat­ed cen­tral Euro­pean eco­nom­ic union (bear­ing a strik­ing resem­blance to today’s Euro­pean Mon­e­tary Union.) One of the prin­ci­pal influ­ences on List’s think­ing was the “con­ti­nen­tal” con­cept of Napoleon, who attempt­ed to eco­nom­i­cal­ly unite Europe under French influ­ence.

The Thou­sand-Year Con­spir­a­cy; by Paul Win­kler; Charles Scribner’s Sons [HC]; 1943; pp. 15–16.

Charles Andler, a French author, summed up cer­tain ideas of List in his work, The Ori­gins of Pan-Ger­man­ism, (pub­lished in 1915.) ‘It is nec­es­sary to orga­nize con­ti­nen­tal Europe against Eng­land. Napoleon I, a great strate­gist, also knew the meth­ods of eco­nom­ic hege­mo­ny. His con­ti­nen­tal sys­tem, which met with oppo­si­tion even from coun­tries which might have prof­it­ed from such an arrange­ment should be revived, but, this time, not as an instru­ment of Napoleon­ic dom­i­na­tion. The idea of unit­ed Europe in a closed trade bloc is no longer shock­ing if Ger­many assumes dom­i­na­tion over such a bloc—and not France. [Empha­sis added.] Bel­gium, Hol­land, Switzer­land, will­ing­ly or by force, will enter this ‘Cus­toms Fed­er­a­tion.’ Aus­tria is assumed to be won over at the out­set. Even France, if she gets rid of her notions of mil­i­tary con­quest, will not be exclud­ed. The first steps the Con­fed­er­a­tion would take to assure uni­ty of thought and action would be to estab­lish a joint rep­re­sen­ta­tive body, as well as to orga­nize a com­mon fleet. But of course, both the head­quar­ters of the Fed­er­a­tion and its par­lia­men­tary seat would be in Ger­many. [Empha­sis added.]”

8b. List’s doc­trine was in full swing dur­ing Ger­many’s pros­e­cu­tion of the First World War:

“WW1 Cen­te­nary — His­tor­i­cal Revi­sion In British Gov­ern­ment Cir­cles”; Ger­many Watch; 6/11/2013.

. . . . This is a direct trans­la­tion of [Ger­man Chan­cel­lor] Bethman-Hollweg’s inter­nal memo on Germany’s war aims, from Sep­tem­ber 1914. . . .

“. . . . We must cre­ate a cen­tral Euro­pean eco­nomic asso­ci­a­tion through com­mon cus­toms treaties, to include France, Bel­gium, Hol­land, Den­mark, Aus­tria-Hun­gary, Poland and per­haps Italy, Swe­den and Nor­way. This asso­ci­a­tion will not have any com­mon con­sti­tu­tional supreme author­ity and all its mem­bers will be for­mally equal, but in prac­tice will be under Ger­man lead­er­ship and must sta­bi­lize Germany’s eco­nomic dom­i­nance over ‘Mid­dle Europe’ . . .”

9a. The Lis­t­ian mod­el was put into effect by the Third Reich, as can be gleaned by read­ing Dorothy Thompson’s analy­sis of Germany’s plans for world dom­i­nance by a cen­tral­ized Euro­pean eco­nomic union. Ms. Thomp­son was writ­ing in The New York Her­ald Tri­bune on May 31, 1940! Her com­ments are repro­duced by Tetens on page 92.

Ger­many Plots with the Krem­lin; T.H. Tetens; Hen­ry Schu­man [HC]; 1953; p. 92.

. . . . The Ger­mans have a clear plan of what they intend to do in case of vic­tory. I believe that I know the essen­tial details of that plan. I have heard it from a suf­fi­cient num­ber of impor­tant Ger­mans to cred­it its authen­tic­ity . . . Germany’s plan is to make a cus­toms union of Europe, with com­plete finan­cial and eco­nomic con­trol cen­tered in Berlin. This will cre­ate at once the largest free trade area and the largest planned econ­omy in the world. In West­ern Europe alone . . . there will be an eco­nomic uni­ty of 400 mil­lion per­sons . . . To these will be added the resources of the British, French, Dutch and Bel­gian empires. These will be pooled in the name of Europa Ger­man­i­ca . . .

“The Ger­mans count upon polit­i­cal pow­er fol­low­ing eco­nomic pow­er, and not vice ver­sa. Ter­ri­to­r­ial changes do not con­cern them, because there will be no ‘France’ or ‘Eng­land,’ except as lan­guage groups. Lit­tle imme­di­ate con­cern is felt regard­ing polit­i­cal orga­ni­za­tions . . . . No nation will have the con­trol of its own finan­cial or eco­nomic sys­tem or of its cus­toms. [Ital­ics are mine–D.E.] The Naz­i­fi­ca­tion of all coun­tries will be accom­plished by eco­nomic pres­sure. In all coun­tries, con­tacts have been estab­lished long ago with sym­pa­thetic busi­ness­men and indus­tri­al­ists . . . . As far as the Unit­ed States is con­cerned, the plan­ners of the World Ger­man­ica laugh off the idea of any armed inva­sion. They say that it will be com­pletely unnec­es­sary to take mil­i­tary action against the Unit­ed States to force it to play ball with this sys­tem. . . . Here, as in every oth­er coun­try, they have estab­lished rela­tions with numer­ous indus­tries and com­mer­cial orga­ni­za­tions, to whom they will offer advan­tages in co-oper­a­tion with Ger­many. . . .

9b. The Euro­pean Eco­nom­ic Com­mu­ni­ty was for­mal­ly artic­u­lat­ed by Reich offi­cials dur­ing the war, with the clear design to extend and ampli­fy the arrange­ment after the war. Below, we quote Gus­tave Koenigs, Sec­re­tary of State at a 1942 con­fer­ence about the Euro­pean Eco­nom­ic Com­mu­ni­ty.

Europais­che Wirtschafts Gemein­schaft (Euro­pean Eco­nom­ic Community–translation).

. . . At the moment the so-called “Euro­pean Eco­nom­ic Com­mu­ni­ty” is not yet fact; there is no pact, no organ­i­sa­tion, no coun­cil and no Gen­er­al Sec­re­tary. How­ev­er, it is not just a part of our imag­i­na­tion or some dream by a politi­cian — it is very real. . . .

. . .  Its roots are in the eco­nom­ic co-oper­a­tion of the Euro­pean nations and it will devel­op after the war into a per­ma­nent Euro­pean eco­nom­ic com­mu­ni­ty. . . .

9c. A  cap­tured Ger­man doc­u­ment from April of 1945–a few weeks before the end of World War II–that very suc­cinct­ly lays out the plans for post­war Europe.

Ger­many Plots with the Krem­lin; T.H. Tetens; Hen­ry Schu­man [HC]; 1953; p. 240.

Doc­u­ment II

THE EUROPEAN PEACE-ORDER

1. Lib­er­a­tion of the Ger­man peo­ple from sup­pres­sion and occu­pa­tion.

2. Repa­tra­tion of the expellees (Heimhol­ung der Ver­schleppten) [These are the ver­triebene groups and the Ger­man min­istry for Expellees–D.E.]

3. An inte­gral Ger­man racial com­mu­ni­ty.

4. Elim­i­na­tion of all arbi­trary acts by the ene­my.

5. Euro­pean Union on a fed­er­al­is­tic basis. [That IS the EU–D.E.]

6. Right to racial auton­o­my. [Note that, in the most recent Ger­man elec­tion, Pol­ish cit­i­zens of Ger­man extrac­tion were allowed to vote–D.E..]

7. Euro­pean Com­mon-Weal (“Gemein­nutz”).

8. Euro­pean Court of Arbi­tra­tion [The ICC is fund­ed by Ger­many and is essen­tial­ly a real­iza­tion of this!–D.E.]

9. Com­mu­ni­ty of relat­ed peo­ples with the final aim to cre­ate a Ger­man­ic Reich.

10. Com­mon-wealth between Ger­many and Bohemia and Moravia.

11. Guar­an­teed pro­tec­tion of racial groups (“Volks­grup­pen-recht”).

12. Eco­nom­ic inte­gra­tion of Europe. [That is the EMU–D.E.]

 

10. As not­ed in the remark­able piece repro­duced in its entire­ty below, the pro­gram Deutsch­land is impos­ing on Europe under­mines the secu­rity of any wealth invest­ed in the afflict­ed nations. Any­one or any­thing fool­ish enough to invest in Europe should be pre­pared to have their assets appro­pri­ated and/or negat­ed at some point.

In addi­tion, one should not lose sight of the fact that the “Final Solu­tion to the Greek and Cypri­ot Crises” will, like pre­vi­ous, super­fi­cial steps to resolve the cri­sis, keep the Euro weak, ben­e­fit­ing Germany’s export-dri­ven econ­o­my.

One won­ders how much expo­sure U.S. banks have to Euro­pean finan­cial insti­tu­tions. If the fears of a con­ta­gion of bank runs and cap­i­tal flight destroys banks in the weak­er Euro­zone coun­tries, how will that affect Amer­i­can lenders?

The “Europa Ger­man­ica” is delib­er­ate and, to any hon­est ana­lyst famil­iar with the his­tor­i­cal record, pre­con­ceived.

The post below also notes the rel­a­tive eco­nomic weak­ness of Ger­many itself. Suf­fice it to say that most Ger­mans have not shared in the largesse of the past decade, although they have been spared the trau­ma vis­ited upon oth­er Euro­pean cit­i­zens. They are exceed­ingly vul­ner­a­ble to the pro­pa­ganda of their own media estab­lish­ment.

“The Mind­set” by Mark J. Grant [Author of Out of the Box] and Tyler Dur­den; Zero Hedge; 3/26/2013.

In all of the tor­tu­ous moments that have tak­en place with the Euro­pean Union the one thing that has become appar­ent is a rad­i­cal change of mind­set. In the begin­ning there was a kind of demo­c­ra­tic view­point. All nations had a voice and while some were loud­er than oth­ers; all were heard. This is no longer the case.
There is but one mind­set now and it is decid­edly Ger­man. It is not that this is good or bad or even some­place in between. That is not the real issue. The crux of the mat­ter is that not all of the peo­ple in the EU are Ger­mans and so they are not used to being treat­ed in the Ger­man fash­ion, they do not live their lives like Ger­mans and, quite impor­tantly, they do not wish to be Ger­mans.

There is the prob­lem.

The Ger­mans will do what is nec­es­sary to accom­plish their goals. There is noth­ing inher­ently bad or evil about this but it is tak­ing its toll on many nations in Europe. In the case of Greece they went back and retroac­tively changed the covenants of the bond con­tract. They did not actu­ally admit this of course and they called it oth­er names but that is what they forced on Greece. In doing so they got the bond hold­ers to shoul­der a good deal of the expense of the bailout of Greece. You can say, “Right,” you can say, “Wrong,” but that is what they did. They accom­plished their goal.

Always remem­ber that the Ger­mans are under severe finan­cial pres­sure. They are still pay­ing the bill for the East Ger­mans. They sup­port Target2 and their econ­omy is just $3.6 tril­lion which is a frac­tion of the entire Euro­zone. They are try­ing to sup­port a house with less than desir­able sup­ports.

Then we come to Cyprus and they make it com­pli­cated and put one bank with anoth­er bank and take mon­ey from depos­i­tors and call it a “Tax” and say that peo­ple and insti­tu­tions are liable for where they keep their mon­ey when it is more than 100M Euros. All true of course but they do not allow for any “Rule of Law” or “Due Process” by the judi­cial sys­tem but just man­date that the mon­ey will be used to help pay Europe for a loan to the sov­er­eign gov­ern­ment. Then they also tagged senior bond hold­ers revers­ing their posi­tion of the last years so now, so that it can now be said with accu­racy; every­one is at risk. Con­se­quently they have to pay less and they have accom­plished sev­eral goals which are to pun­ish a “Casi­no Econ­omy,” to put Cyprus in the same posi­tion as Greece, which is not only bank­rupt but a ward of the Euro­pean Union, and final­ly to insist, by the use of mon­ey, that Cyprus suc­cumbs to the Ger­man demands. Note that CDS in Europe (Mark­it iTraxx Finan­cial Index) has jumped 22% in just one week.

It is the occu­pa­tion of Poland in a very real sense just accom­plished with­out tanks or blood­shed as mon­ey is used instead of arma­ments to dom­i­nate and con­trol a nation. Polit­i­cally you may “Hiss” or you may “Applaud” but there are con­se­quences here for investors that must be under­stood.

First and fore­most is that they will not stop. Noth­ing will be allowed to get in their way. It can be senior bond hold­ers one day, bank depos­i­tors the next, the dis­man­tling of some Par­lia­ment on the day after that, a wealth tax on cor­po­ra­tions on Thurs­day, the dis­al­lowance of div­i­dends on Fri­day; with every announce­ment to come on Sat­ur­day evening. The next week can be a cap on bank bonus­es, a demand that the cap on bank bonus sav­ings be returned to the State, a finan­cial trans­ac­tion tax that gets expand­ed and tax­es all bond coupons and the list goes on.What might be, could be, and noth­ing, absolute­ly noth­ing, will be allowed between Ger­many and her desire to con­trol all of Europe.

I do not speak of moti­va­tion here. I am not bash­ing Ger­many in the fur­ther­ance of their desires. That is a use­less and unnec­es­sary exer­cise. How­ever, what is pro­foundly nec­es­sary, if you invest in Europe, is to under­stand the risks that you are tak­ing. If you place mon­ey in secu­ri­ties on the Con­ti­nent then what is yours is theirs when they want it. I sug­gest you clear­ly under­stand that propo­si­tion and allow for that occur­rence.

You no longer have any excuse after Greece and Cyprus. Every­thing may be called “one-off” but noth­ing is “one-off” as Ger­many expands its pow­er wher­ever they can and by any means nec­es­sary. If you believe the pro­pa­ganda, if you believe what you are told every day by the Press then I can vir­tu­ally assure you that you will suf­fer dire con­se­quences at some point and you will now have no one to blame but your­self.

There is also one “unin­tended con­se­quence” of Cyprus and Greece. No one is going to invest in the local banks. Keep­ing mon­ey in the Ger­man banks, the Swiss banks or maybe even the French banks may go on but the local banks in each coun­try are fin­ished. In a clever move, the prob­lems with Greece and Cyprus will dri­ve the mon­ey from the local bank­ing insti­tu­tions in the trou­bled coun­tries. Watch for cap­i­tal flights in Spain, Por­tu­gal and Italy as their banks will be found unsafe and with good rea­son.

It is unknown, as of yet, if Ger­many can win this game. What can be said though is that, nation or investor, you will put your­self at per­il by get­ting in their way. The cur­rent risks, in my opin­ion, are dra­mat­i­cally more than imag­ined by many or gen­er­ally thought to be the case. There is no more invest­ing in Europe just gam­bling and spec­u­lat­ing and suf­fer­ing the con­se­quence of either. Any­thing can be changed, any­thing can be mod­i­fied, and when the for­fei­ture of people’s sav­ings is trum­peted as a “Tax” then even the Eng­lish lan­guage has lost some of its mean­ing.

“Bet­ter to be safe than sor­ry,” has nev­er had such impor­tant con­se­quences as it does now in the Euro­pean are­na of the Great Game.

11. For those who con­sider our analy­sis to be extreme and man­i­fest­ing hyper­bole, we present a dev­as­tat­ing cri­tique of Ger­man EMU pol­icy vis a vis the periph­eral economies of the euro­zone. Dis­cussing Cyprus as exem­plary of Ger­man method­ol­ogy and intent, Christo­pher T. Mahoney couch­es his cri­tique in alto­gether unam­bigu­ous lan­guage.

Mahoney is a for­mer Vice Chair­man of Moody’s! In the arti­cle below, he sounds very much like–well–Dave Emory!

“Cyprus: Vic­tim Of Ger­man Colo­nial­ism” by Christo­pher T. Mahoney; Project Syn­di­cate; 7/26/2013.

ENTIRE TEXT: “We antic­i­pate the bank­ing res­o­lu­tion mech­a­nism for the Cypri­ot bank­ing sec­tor to result in a sig­nif­i­cant down­siz­ing of banks’ activ­i­ties and there­fore to severe­ly affect the eco­nomic per­for­mance of the island from 2013 onwards. We expect an accel­er­a­tion in the con­trac­tion of the Cypri­ot econ­omy in 2013, with a neg­a­tive real growth rate in the low dou­ble-dig­its and no return to pos­i­tive growth before 2016. Our view is fur­ther sup­ported by the neg­a­tive feed­back loop that expen­di­ture cuts may have on the econ­omy giv­en the impor­tance of pub­lic ser­vices, hence poten­tially chal­leng­ing future con­sen­sus on fis­cal strat­egy. We note that large uncer­tain­ties remain regard­ing the mag­ni­tude of fur­ther recap­i­tal­iza­tion needs for the finan­cial sec­tor giv­en the expect­ed sharp dete­ri­o­ra­tion in the oper­at­ing envi­ron­ment which will erode asset qual­ity, as well as the behav­ioural respons­es of all eco­nomic actors to the shocks expe­ri­enced by the finan­cial sec­tor (includ­ing risks of finan­cial dis­rup­tion relat­ed to the tim­ing and approach for lift­ing of cap­i­tal con­trols). In light of all the down­side risks and the lim­ited num­ber of upsides, we view Cyprus as like­ly to default again in the com­ing years, as reflect­ed by the rat­ing lev­el and neg­a­tive out­look. Although it is not its cen­tral sce­nario, Moody’s also sees a mate­r­ial risk of a Cypri­ot exit from the euro area which is cap­tured in the Caa2 coun­try ceil­ing. As a result of the imme­di­ate down­siz­ing of the bank­ing sec­tor and the expect­ed spillovers to rest of the econ­omy, espe­cially in terms of weak­ened con­sumer and investor con­fi­dence, we fore­cast that the econ­omy will con­tract by 12% this year and anoth­er 6.4% next year.”

–Moody’s, 15 July 2013

The pur­pose of EMU is to reduce the occu­pied states to penury in order to make them more like Ger­many, or Ethiopia. Ulti­mately the ques­tion is is: how low can per capi­ta income decline until “Europe” becomes a dirty word, and “lib­erty” becomes the pop­u­lar desider­a­tum. Cyprus is the lab­o­ra­tory of this exper­i­ment, along with Greece and Por­tu­gal. Here is the exper­i­ment: How many peo­ple must eat out of garbage cans before the euro elites under­stand that EMU is destroy­ing lives?

It must be pleas­ing to be ingest­ing a nice Brus­sels din­ner while dis­cussing how sub­hu­man the Cypri­ots are, and how they must be “taught a valu­able les­son”. That was how Stal­in felt about the “rich peas­ants” of the Ukraine: sur­plus emp­ty mouths to feed. Wouldn’t the world be a bet­ter place with­out so many peas­ants?

Per­haps, in a per­fect world, Cypri­ots wouldn’t exist, like the kulaks and the Crimean Tatars. All Cypri­ots do is enable Russ­ian plu­to­crats. Why should they exist? Liq­ui­date them. Indeed, liq­ui­date all of the par­a­site states of the Euro­zone.

So we now know that the pur­pose of EMU is not to enrich the vas­sal states, but to occu­py them and to make them penu­ri­ous colonies of the hege­mon. Periph­eral Europe is Germany’s Latin Amer­ica. But there is a cru­cial dif­fer­ence: the US has not forced its Latin Amer­i­can colonies to join the dol­lar zone. Latin Amer­ica, despite its colo­nial sta­tus, retains mon­e­tary sov­er­eignty. Aside from the Bol­she­vik lab­o­ra­to­ries of Argenti­na and Venezuela, Latin Amer­ica is out­per­form­ing its colo­nial par­ents. Por­tu­gal and Spain should have mon­e­tary union with Brazil and Mex­ico, instead of Fin­land and Ger­many.

What Ger­many is doing to Cyprus is a crime.

12a.  A very omi­nous pro­posal has been float­ed by the Greek gov­ern­ment. (See text excerpts below.) Not only does it sug­gest the pos­si­bil­ity that the stag­ger­ing unem­ploy­ment rate among Greek youth be solved by “unpaid” employ­ment, but floats the pos­si­bil­ity that job­less young peo­ple be shipped abroad!

We won­der to where they will be shipped? What are they sup­posed to do when they get there?

All is not well in the “Cra­dle of Democ­ra­cy!”

“Europe’s Mod­est Pro­posal To End Unem­ploy­ment: Slav­ery” by Tyler Dur­den; zerohedge.com; 1/24/2014.

EXCERPT: Hav­ing spent weeks talk­ing amongst them­selves about the chron­ic and dan­ger­ous rise of youth unem­ploy­ment in Europe (as we warned here), the Cen­ter of Plan­ning and Eco­nomic Research in Greece has pro­posed a con­tro­ver­sial mea­sure. As GreekRe­porter reports, the mea­sure includes unpaid work for the young and unem­ployed up to 24 years old, so that com­pa­nies would have a strong motive to hire young employ­ees.

“Unpaid” work sounds a lot like slav­ery to us... but it gets bet­ter; the report also sug­gested “export­ing young unem­ployed per­sons.”

“Cen­tre of Plan­ning and Eco­nomic Research in Greece has pro­posed a con­tro­ver­sial mea­sure in order to deal with the prob­lem of increas­ing unem­ploy­ment in the coun­try.

The mea­sure includes unpaid work for the young and unem­ployed up to 24 years old, so that com­pa­nies would have a strong motive to hire young employ­ees. Prac­ti­cally, what is pro­posed is the abo­li­tion of the basic salary for a year. At the same time the “export” of young unem­ployed per­sons was also pro­posed to oth­er coun­tries abroad, as Greek busi­nesses do not appear able to hire new per­son­nel.“
***

Whether it’s Europe in the 1930’s or the US dur­ing the same peri­od (con­flicts between strik­ers, the Nation­al Guard and armed mili­tias), unem­ploy­ment can cre­ate a pow­er­ful cock­tail of unrest. But turn­ing your nation’s young into slaves does not seem like a good solu­tion to us. . . .

12b. More about the pro­pos­al for de fac­to slav­ery for Greek youth:

“Con­tro­ver­sial Pro­posal for Tack­ling Unem­ploy­ment” by Niko­leta Kalmou­ki; Greek Reporter; 1/24/2014.

EXCERPT: Cen­tre of Plan­ning and Eco­nomic Research in Greece has pro­posed a con­tro­ver­sial mea­sure in order to deal with the prob­lem of increas­ing unem­ploy­ment in the coun­try.

The mea­sure includes unpaid work for the young and unem­ployed up to 24 years old, so that com­pa­nies would have a strong motive to hire young employ­ees. Prac­ti­cally, what is pro­posed is the abo­li­tion of the basic salary for a year. At the same time the “export” of young unem­ployed per­sons was also pro­posed to oth­er coun­tries abroad, as Greek busi­nesses do not appear able to hire new per­son­nel.

Accord­ing to the Nation­al Con­fed­er­a­tion of Hel­lenic Com­merce, unem­ploy­ment espe­cially hits the ages between 15–24. The unem­ploy­ment rate in Greece stands at 24.6% while 57.2% of young peo­ple are with­out a job. The major­ity of the unem­ployed (71%) have had no work for 12 months or more, while 23.3 % of the total have nev­er worked. There were 3,635,905 peo­ple employed and 1,345,387 unem­ployed. . . .

13. Bod­ing ill for Greek cit­i­zens, for­mer LAOS par­ty mem­ber and ded­i­cat­ed fas­cist Makis Voridis has been appoint­ed Health Min­is­ter.

“Yacht Apps and Anti-Semit­ic Min­is­ters in the Birth­place of Democ­ra­cy” by Mark Ames; Pan­do Dai­ly; 6/15/2014.

Good and bad eco­nom­ics news out of the birth­place of democ­ra­cy.

The good news: Accord­ing to the Wall Street Jour­nal, Greece is see­ing a boom in tech star­tups. Of course, that boom starts from a very low num­ber, as the Jour­nal reports:

“there were 144 star­tups in Greece in 2013, up from just 16 in 2010. The mon­ey invest­ed in them has climbed to €42 mil­lion ($57 mil­lion), com­pared with just €500,000 three years ago.”

Most of the fund­ing is geared towards ser­vic­ing the sec­tor of Greece that hasn’t been ruined by the past few years of EU-imposed aus­ter­ity, which rules out a large per­cent­age of under-35s, the pre­sumed Inter­net gen­er­a­tion. The unem­ploy­ment rate for young Greeks aged 15–24 is 58.3%, while for 25–34 year old Greeks, the unem­ploy­ment rate is 35.5%. Excit­ing new Greek star­tups attract­ing out­side VC cap­i­tal, like incred­i­blue— an online yacht book­ing ser­vice — and Tax­ibeat, a mobile taxi­cab hail­ing app — aren’t going to be much use to them.

Still, Greece’s “boom­ing” tech sec­tor is the good news.

Now, the bad news: Greece’s pro-EU rul­ing con­ser­v­a­tive par­ty, the New Democ­rats, just named an actu­al neo-Nazi, Makis “The Ham­mer” Voridis, as Greece’s new Health Min­is­terJew­ish groups are out­raged over the news that Voridis—a long­time neo-fas­cist activist and anti-Semi­te who has pub­licly pro­moted the Pro­to­cols of the Elders of Zion as wor­thy of schol­ar­ship, and doubt­ed the authen­tic­ity of the Diary of Anne Frank—is serv­ing as a promi­nent min­is­ter in the rul­ing party’s cab­i­net, in charge of an impor­tant min­istry at a time when Greece has been gut­ting its health care bud­gets, caus­ing wide­spread mis­ery.

I wrote about Voridis in Novem­ber 2011, because I was shocked that a gov­ern­ment coali­tion essen­tially imposed on Greece by the EU and West­ern cred­i­tors would demand that the alleged­ly tech­no­cratic “aus­ter­ity coali­tion” includ­ed mem­bers of Greece’s anti-Semit­ic, neo-fas­cist LAOS par­tyInclud­ing Makis “The Ham­mer” Voridis, who served as min­is­ter of infra­struc­ture and trans­port.

I call him “The Ham­mer” because pho­tographs sur­faced show­ing Voridis as a Uni­ver­sity of Athens law stu­dent, car­ry­ing a makeshift stone ham­mer in hand which he used to bash sus­pected left­wing stu­dents with. That was in 1985, when Voridis was in a fas­cist group called “Stu­dent Alter­na­tive” which sup­ported Greece’s bloody mil­i­tary coup and mil­i­tary jun­ta that ruled from 1967–1974.

Voridis was expelled from law school for club­bing left­ist stu­dents, and went on to Big Things in the world of neo-fas­cist Greek pol­i­tics. In 1994, he found­ed the far-right Hel­lenic Front, which in 2004 formed a coali­tion with a self-described Nazi, Kon­stan­ti­nos Plevris, who open­ly advo­cated for the exter­mi­na­tion of Greece’s remain­ing Jews. In 2005, Voridis merged his par­ty into the LAOS par­ty, whose leader, Geor­gios Karatzaferis, pub­licly mocked Auschwitz and Dachau death camps as “myths,” blamed Jews for 9/11 dur­ing a speech in par­lia­ment, and said “the Jews have no legit­i­macy to speak in Greece.”

In late 2011, as Greece pol­i­tics col­lapsed under the weight of its debts and the harsh EU-imposed aus­ter­ity mea­sures, the EU imposed a new “aus­ter­ity” gov­ern­ment that includ­ed “The Ham­mer” Voridis and oth­er mem­bers of the neo-fas­cist LAOS par­ty. The aus­ter­ity gov­ern­ment ran Greece until new elec­tions were called in mid-2012. In those inter­im months, the aus­ter­ity coali­tion pushed through rad­i­cal aus­ter­ity mea­sures that caused LAOS’ fas­cist vot­ers to desert them for an even more vio­lent, more extreme neo-Nazi par­ty, the Gold­en Dawn Par­ty. One would’ve thought that’d be the end of Makis Voridis.

But Voridis is one of the sly­er fas­cists. He joined the aus­ter­ity cab­i­net and served from Novem­ber 2011 through June 2012. In the June 2012 elec­tions, after LAOS was oblit­er­ated for par­tic­i­pat­ing in the aus­ter­ity gov­ern­ment, Voridis aban­doned LAOS and joined the new rul­ing par­ty that won the elec­tions, the respectable right-wing New Democ­racy par­ty.

And now New Democ­racy is pay­ing back the favor to their favorite aus­ter­ity fas­cist.

...

Discussion

32 comments for “FTR #788 Greek Tragedy, Part 2: “Clausewitzian Economics–The Continuation of War by Other Means””

  1. Step by step, the Clause­witz­ian dream march­es into real­i­ty:

    Bloomberg
    Ukraine Is Urged to Extend Auton­o­my for Eth­nic Hun­gar­i­ans
    By Zoltan Simon May 12, 2014 9:57 AM CT

    Ukraine must grant auton­o­my to eth­nic Hun­gar­i­ans liv­ing there, Hun­gar­i­an Prime Min­is­ter Vik­tor Orban said, adding to demands on the lead­er­ship in Kiev that’s try­ing to fight off pro-Russ­ian sep­a­ratists in the country’s east.

    Eth­nic Hun­gar­i­ans liv­ing in west­ern Ukraine, who Orban says num­ber about 200,000, “must be grant­ed dual cit­i­zen­ship, must enjoy all of the com­mu­ni­ty rights and must be grant­ed the oppor­tu­ni­ty for auton­o­my,” the Hun­gar­i­an pre­mier said in a speech in par­lia­ment.

    Ukrain­ian troops are bat­tling pro-Russ­ian rebels who are try­ing to wrest con­trol of the country’s east­ern­most provinces, which held two dis­put­ed ref­er­en­dums yes­ter­day that sep­a­ratists said backed inde­pen­dence. Unlike the Russ­ian sym­pa­thiz­ers who want to break away from Ukraine, Hun­gary is urg­ing auton­o­my for its eth­nic kin liv­ing in coun­tries in the Carpathi­an basin.

    “This is our clear expec­ta­tion of a new Ukraine that’s being formed right now,” Orban said on May 10 after tak­ing the oath of office fol­low­ing his re-elec­tion last month. Ukraine holds a pres­i­den­tial elec­tion on May 25.

    Hun­gary has a pop­u­la­tion of 10 mil­lion and an addi­tion­al 2.5 mil­lion Hun­gar­i­ans live beyond the country’s bor­ders in neigh­bor­ing states, most­ly in Roma­nia and Slo­va­kia. They are descen­dants of Hun­gar­i­ans who lost their cit­i­zen­ship in 1920, when the coun­try lost two-thirds of its ter­ri­to­ry under the Tri­anon peace treaty signed in France at the end of World War I.

    New Vot­ers

    Eth­nic Hun­gar­i­ans are gain­ing polit­i­cal impor­tance after Orban start­ed extend­ing Hun­gar­i­an cit­i­zen­ship to them dur­ing the past four years. Nine­ty-five per­cent of these new vot­ers vot­ed for Orban’s rul­ing par­ty on April 6.

    ...

    Orban took a “clear and deci­sive” posi­tion on what sort of auton­o­my he favors for eth­nic Hun­gar­i­ans in neigh­bor­ing coun­tries, Berta­lan Havasi, his spokesman, said in an e‑mailed response to ques­tions. He didn’t pro­vide fur­ther details.

    Note that Orban was­n’t just call­ing for auton­o­my to be grant­ed to eth­nic Hun­gar­i­ans in Ukraine. He wants it to apply to ALL eth­nic Hun­gar­i­ans liv­ing in cen­tral Europe. “Greater Hun­gary” has a grow­ing appetite.

    Posted by Pterrafractyl | May 13, 2014, 11:42 am
  2. A month ago the Greek high court ruled that the Gold­en Dawn could par­tic­i­pate in the EU elec­tions after months of spec­u­la­tion that the par­ty would be banned for oper­at­ing as a crim­i­nal orga­ni­za­tion. Fol­low­ing the elec­tions, Gold­en Dawn is now the third largest par­ty in Greece. And it shows:

    The Guardian
    SS songs and anti­semitism: the week Gold­en Dawn turned open­ly Nazi
    Sup­port­ers of the far-right par­ty gave Hitler salutes and sang the Horst Wes­sel song out­side par­lia­ment last week. Hele­na Smith reports from Athens on how Gold­en Dawn has tak­en on a sin­is­ter new tone

    Hele­na Smith
    The Observ­er, Sat­ur­day 7 June 2014 16.14 EDT

    It has been a bad week for democ­ra­cy in Athens. All around this great Greek city, the pol­i­tics of hate now lurk. On Fri­day I got a taste of it in the tiny Ital­ian-style cafe I fre­quent off Syn­tag­ma Square.

    ...

    Last Wednes­day Greece got that jolt when Nikos Michalo­li­akos, Gold­en Dawn’s impris­oned leader – who stands accused of mur­der and assault – made his first pub­lic appear­ance in almost nine months. The pol­i­tics of hate took over Athens as the 58-year-old was hauled before par­lia­ment, ahead of a vote to lift his immu­ni­ty from pros­e­cu­tion, on fur­ther charges of ille­gal weapons pos­ses­sion.

    Embold­ened by its recent suc­cess in Euro­pean and local elec­tions – in which the par­ty emerged as the coun­try’s third biggest polit­i­cal force, thanks to a soft­en­ing of image that has attract­ed ever-grow­ing num­bers of the mid­dle class – the extrem­ists drove home the mes­sage that they were not only on the rebound but here to stay. And as they ran roughshod through the house of democ­ra­cy, hurl­ing abuse at oth­er MPs in an unprece­dent­ed dis­play of vio­lence and vul­gar­i­ty, there was no mis­tak­ing what Gold­en Dawn is: a par­ty of neo-Nazi creed deter­mined to over­turn the demo­c­ra­t­ic order. For, far from being con­trite, the hand­cuffed Michalo­li­akos was in unusu­al­ly aggres­sive mood, giv­ing Nazi salutes, telling the house speak­er to “shut up”, and instruct­ing guards to take their hands off him.

    Out­side, black-shirt­ed Gold­en Dawn sup­port­ers, lined up in mil­i­tary for­ma­tion in Syn­tag­ma Square, gave a hearty ren­di­tion of the Nazi Horst Wes­sel song – albeit with Greek lyrics. All this was a far cry from the par­ty’s recent efforts to dis­tance itself from the thug­gery and racist rhetoric from which it was born.

    “That day democ­ra­cy felt a bit weak,” said Pav­los Tzi­mas, a polit­i­cal com­men­ta­tor who has watched the par­ty’s rise from its fringe group begin­nings in the ear­ly 1980s. He has watched it grow from mar­gin­al group to main­stream par­ty over the past three decades. “After all the rev­e­la­tions [about crim­i­nal activ­i­ty], after all the pros­e­cu­tions against its MPs, it still has the nerve to act in such a way, in scenes of hate that, frankly, I can­not recall ever being seen inside the par­lia­ment,” he sighed. “Gold­en Dawn is not a pass­ing phase, it will not dis­ap­pear with the end of the cri­sis, it feels untouch­able, it fears noth­ing, and what we saw this week is its real face. It is not like oth­er extrem­ist par­ties in Europe. It is a true neo-Nazi force whose aim is to use democ­ra­cy to destroy democ­ra­cy.”

    The crack­down against Gold­en Dawn – trig­gered by the killing of an anti-fas­cist rap­per at the hands of a self-con­fessed par­ty cadre last Sep­tem­ber – was meant not only to bring offend­ers to jus­tice but reverse the group’s seem­ing­ly unstop­pable ascent. At first the round-up of par­ty lead­ers seemed to dent the ultra­na­tion­al­ists’ pop­u­lar­i­ty. For the first time since June 2012, when it was cat­a­pult­ed into par­lia­ment with 6.9% of the vote and 18 deputies, its rat­ings dipped. But in an alarm­ing dis­play of reha­bil­i­ta­tion, the neo-fas­cists won 9.4% of the vote in the Euro­pean elec­tions on 25 May and, in the race for the Athens may­oral­ty on 18 May, were backed by 16.1% of the elec­torate even though its can­di­date, Ilias Kasidiaris, sports a swasti­ka tat­too and assault­ed two left­wing female politi­cians dur­ing a live TV show. In both cas­es the results were the most shock­ing endorse­ment yet of the anti-lib­er­al par­ty.

    What wor­ries Tzi­mas most is not just the coars­en­ing of pub­lic debate but the “banal­i­sa­tion of vio­lence” that is now stalk­ing Greece. “We seem to be get­ting used to it, and that fright­ens me,” he said.

    In an explo­sive polit­i­cal cli­mate, where pop­u­lar rage is at boil­ing point near­ly five years into the coun­try’s worst cri­sis in liv­ing mem­o­ry, the pol­i­tics of hate so embod­ied by Gold­en Dawn is becom­ing increas­ing­ly per­va­sive. “Who cares if six mil­lion Jews were exter­mi­nat­ed?” asked the busi­ness­man back at the cafe, in a shock­ing endorse­ment of that real­i­ty. “I don’t care if they were turned into soap. What I care about is the salary I have lost, the nev­er-end­ing tax­es I am forced to pay, the crim­i­nals who rule this coun­try, the anger I car­ry inside.”

    In a glob­al sur­vey released by the Anti-Defama­tion League last month, Greece at 69% was found to be the most anti­se­mit­ic coun­try in Europe.

    “This is the deep­er expla­na­tion for the growth of Gold­en Dawn,” says Dim­itris Psar­ras, author of The Black Bible of Gold­en Dawn, which chron­i­cles the par­ty’s mete­oric rise. “Greece has deep cul­tur­al dif­fer­ences with the rest of Europe. After the sec­ond world war, it did not under­go real democ­ra­ti­sa­tion because we had civ­il war [1946–49]. And after that the deep state was nev­er real­ly purged [of extreme rightwing ele­ments]. Even when it was a small group, Gold­en Dawn had ties to the Greek state.”

    The par­ty’s field­ing of two retired gen­er­als on its Euro­pean elec­tion tick­et was tes­ti­mo­ny to those ties. With three Gold­en Dawn MEPs now about to take seats in Brus­sels, the burn­ing ques­tion for many is how to con­front the extrem­ists. Fol­low­ing the poll, even France’s Front Nation­al leader, Marine Le Pen, ruled out rela­tions with them.

    The inde­pen­dent MP and promi­nent nov­el­ist Pet­ros Tat­sopou­los, him­self the focus of much of the fas­cists’ fury in par­lia­ment last week, thinks there is no oth­er way but to ban Gold­en Dawn. “It was a huge, his­toric mis­take on the part of our par­lia­ment not to de-legit­imise Gold­en Dawn,” said Tat­sopou­los, until recent­ly an MP with the rad­i­cal left. “It should have been banned, not for its Nazi ide­ol­o­gy but because it is a para­mil­i­tary force … who, if it could, would press ahead with a coup d’é­tat,” he told the Observ­er. “We know how these peo­ple work. The fas­cist poi­son that Greece is expe­ri­enc­ing is not just polit­i­cal, it is poi­son­ing every aspect of social life, the way peo­ple think, the way they behave. I hon­est­ly believe that the 500,000 Greeks who vot­ed for Gold­en Dawn were very con­scious of what they were doing.”

    Was democ­ra­cy in its own birth­place now under threat? “Gold­en Dawn is on stand-by,” he averred. “I don’t know how long it will take, but if this vol­un­tary blind­ness con­tin­ues, if the cri­sis goes on, it will be a real threat to democ­ra­cy in the near future.”

    Note that 223 out of 224 mem­bers of the Greek par­lia­ment vot­ed to lift immu­ni­ty on Nikos Michalo­li­akos and two oth­er Gold­en Dawn deputies, so at least the Nazi salutes did­n’t appear to be help­ing their case. But that may not mat­ter when it comes to Gold­en Dawn’s grow­ing pop­u­lar appeal. Exter­nal fac­tors are like­ly to dom­i­nate:

    euronews
    Think again warn cred­i­tors after Greeks mull eas­ing aus­ter­i­ty

    June 2, 2014 16:12 CET

    The Greeks had been look­ing for­ward to some cheer from their gov­ern­ment soon, with finances improv­ing and encour­ag­ing signs of a return of con­fi­dence, and growth to the econ­o­my.

    The gov­ern­ment had been hint­ing that after years of aus­ter­i­ty some of the pain was about the be relieved, for exam­ple by tax cuts.

    How­ev­er that idea has been shot down by Germany’s Finance Min­is­ter Wolf­gang Schaeu­ble. He has urged con­tin­ued dis­ci­pline and in any case has not ruled out a third bailout before 2022, when the troi­ka cred­i­tors’ group – the Euro­pean Union, Inter­na­tion­al Mon­e­tary Fund and the Euro­pean Cen­tral Bank – says Greek debt will be at a sus­tain­able lev­el.

    The IMF, which agreed with Schaeu­ble about keep­ing the screws tight in Greece, along with the ECB and Euro­pean Com­mis­sion, are in effect run­ning pol­i­cy in Athens.

    How­ev­er polit­i­cal­ly if last week’s Euro­pean elec­tions are a fair barom­e­ter, sen­ti­ment in Greece has shift­ed from mak­ing sac­ri­fices to say­ing enough is enough. Syriza, the left-wing win­ners of the Euro­pean poll, argue for very dif­fer­ent EU poli­cies to com­bat the finan­cial cri­sis.

    “Schaeuble’s warn­ings and the IMF’s sup­port­ing con­tin­ued cau­tion might dis­turb the Greek government’s plans. Fol­low­ing defeat at the Euro­pean elec­tions, it planned to announce the end of aus­ter­i­ty, start­ing by cut­ting tax bur­dens. There had also been rumours that the finance min­is­ter was to be replaced. That’s now on hold and fresh ques­tions about when the Greek aus­ter­i­ty pro­gramme could end are being raised,” says euronews’ Symela Touchti­dou in Athens.

    Posted by Pterrafractyl | June 8, 2014, 3:04 pm
  3. @Pterrafractyl and SWAMP–

    This com­ment goes to the very heart of a point I made–incompletely–in my analy­sis of a par­tial­ly-use­ful comment/post by SWAMP on Ukraine:

    The EU and EMU are cul­mi­na­tions of Pan-Ger­man, impe­ri­al­ist and Clause­witz­ian realpoli­tik stretch­ing over cen­turies.

    The bru­tal­i­ties and grind­ing suf­fer­ing brought about by “Aus­tere­witz” are delib­er­ate.

    In addi­tion to elim­i­nat­ing the weak, elder­ly and infirm, the social dis­lo­ca­tion is ide­al for eth­nic and/or reli­gious scape­goat­ing to dis­tract the cit­i­zen­ry from the real source of their dif­fi­cul­ties.

    The insti­tu­tion­al­iza­tion of eco­nom­ic decline for a sig­nif­i­cant por­tion of the pop­u­la­tion is ide­al for cre­at­ing a ready pool of cheap labor, as well.

    “Let ’em eat fas­cism!”

    Best,

    Dave

    Posted by Dave Emory | June 8, 2014, 3:27 pm
  4. @Dave: One of the big open ques­tions for the EU, and espe­cial­ly the EMU, going for­ward is how ethnic/religious scape­goat­ing is going to be achieved that can actu­al­ly sta­bi­lize the EU/EMU in the long run and not dri­ve the con­ti­nent towards inter­nal divi­sion.

    Cur­rent­ly, the eco­nom­ics being imposed (the “Fis­cal Com­pact”, the Troikas, and the ECB’s “sin­gle man­date” that ignore unem­ploy­ment) are so wild­ly desta­bi­liz­ing and seem­ing­ly designed to exac­er­bate the crises that we real­ly have no com­pelling rea­son to believe that the euro­zone will ever be tru­ly eco­nom­i­cal­ly sta­ble. Sure, the cur­rent cri­sis will even­tu­al­ly bot­tom out and there will be tem­po­rary recov­er­ies, but it’s look­ing like the EU has cho­sen a cri­sis-prone path that is going to result in a long-term slow-grind down for the weak­est mem­ber nations with many future eco­nom­ic crises.

    And, as you point out, the social dis­lo­ca­tion caused by these poli­cies is ide­al for eth­nic and/or reli­gious scape­goat­ing to dis­tract the cit­i­zen­ry from the real source of their dif­fi­cul­ties (the insane poli­cies and the peo­ple like Merkel, Schauble, and Jens Wei­d­mann that demand­ed them). And yet quite a bit of that far right frus­tra­tion and anger being gen­er­at­ed from groups like the Gold­en Dawn and the Nation­al Front is being direct­ed at offi­cials in Brus­sels and Berlin in addi­tion to immi­grants and minori­ties. And of course Merkel was at the fore­front of push­ing the “those lazy South­ern Europeans”-meme back in 2011.

    So it’s going to be fas­ci­nat­ing to watch the behav­ior of the oppo­si­tion far right par­ties as they get clos­er and clos­er to being able to seize con­trol of a mem­ber state and tru­ly steer it in the direc­tion of aban­don­ing the EU or EMU because it’s not clear what the next phase is going to be in the rise of the Euro­pean far right as a counter-EU force.

    Hun­gary’s far right tem­plate might not be the same approach even­tu­al­ly seen in France or the Nether­lands but with Marine Le Pen open­ly talk­ing about France ditch­ing the euro and destroy­ing the EU we could be enter­ing a peri­od where the main argu­ments for and against the cur­rent Euro­pean agen­da — a more cen­tral­ized EU and EMU on aus­ter­i­ty-autopi­lot — become increas­ing­ly syn­ony­mous with the far right ideals. Whether you’re talk­ing about the cryp­to-far right/Clausewitizian nature of the ordolib­er­al eco­nom­ics demand­ed by Berlin and get­ting baked into EU law or the anti-EU oppo­si­tion led by peo­ple like Le Pen and the larg­er far right “euroskep­tic” con­tin­gent in the EU par­lia­ment, the far right’s solu­tions are well posi­tioned to be Europe’s next step for­ward, regard­less of the direc­tion. So while we don’t know how the pro and anti-EU far right might behave in a future face off, we can be pret­ty sure that new forms of “divide and con­quer” tech­nique involv­ing ethnic/religious scape­goat­ing are prob­a­bly on the way. Yikes.

    Posted by Pterrafractyl | June 8, 2014, 8:50 pm
  5. “The Ham­mer” is back, and you will not believe which part of Greek soci­ety he’s tasked to smash this time: Makis “The Ham­mer” Voridis is Greece’s new Health Min­is­ter:

    Pan­do Dai­ly
    Yacht apps and anti-Semit­ic min­is­ters in the birth­place of democ­ra­cy

    By Mark Ames
    On June 15, 2014

    Good and bad eco­nom­ics news out of the birth­place of democ­ra­cy.

    The good news: Accord­ing to the Wall Street Jour­nal, Greece is see­ing a boom in tech star­tups. Of course, that boom starts from a very low num­ber, as the Jour­nal reports:

    “there were 144 star­tups in Greece in 2013, up from just 16 in 2010. The mon­ey invest­ed in them has climbed to €42 mil­lion ($57 mil­lion), com­pared with just €500,000 three years ago.”

    Most of the fund­ing is geared towards ser­vic­ing the sec­tor of Greece that hasn’t been ruined by the past few years of EU-imposed aus­ter­i­ty, which rules out a large per­cent­age of under-35s, the pre­sumed Inter­net gen­er­a­tion. The unem­ploy­ment rate for young Greeks aged 15–24 is 58.3%, while for 25–34 year old Greeks, the unem­ploy­ment rate is 35.5%. Excit­ing new Greek star­tups attract­ing out­side VC cap­i­tal, like incred­i­blue — an online yacht book­ing ser­vice — and Tax­ibeat, a mobile taxi­cab hail­ing app — aren’t going to be much use to them.

    Still, Greece’s “boom­ing” tech sec­tor is the good news.

    Now, the bad news: Greece’s pro-EU rul­ing con­ser­v­a­tive par­ty, the New Democ­rats, just named an actu­al neo-Nazi, Makis “The Ham­mer” Voridis, as Greece’s new Health Min­is­ter. Jew­ish groups are out­raged over the news that Voridis—a long­time neo-fas­cist activist and anti-Semi­te who has pub­licly pro­mot­ed the Pro­to­cols of the Elders of Zion as wor­thy of schol­ar­ship, and doubt­ed the authen­tic­i­ty of the Diary of Anne Frank—is serv­ing as a promi­nent min­is­ter in the rul­ing party’s cab­i­net, in charge of an impor­tant min­istry at a time when Greece has been gut­ting its health care bud­gets, caus­ing wide­spread mis­ery.

    I wrote about Voridis in Novem­ber 2011, because I was shocked that a gov­ern­ment coali­tion essen­tial­ly imposed on Greece by the EU and West­ern cred­i­tors would demand that the alleged­ly tech­no­crat­ic “aus­ter­i­ty coali­tion” includ­ed mem­bers of Greece’s anti-Semit­ic, neo-fas­cist LAOS par­ty. Includ­ing Makis “The Ham­mer” Voridis, who served as min­is­ter of infra­struc­ture and trans­port.

    I call him “The Ham­mer” because pho­tographs sur­faced show­ing Voridis as a Uni­ver­si­ty of Athens law stu­dent, car­ry­ing a makeshift stone ham­mer in hand which he used to bash sus­pect­ed left­wing stu­dents with. That was in 1985, when Voridis was in a fas­cist group called “Stu­dent Alter­na­tive” which sup­port­ed Greece’s bloody mil­i­tary coup and mil­i­tary jun­ta that ruled from 1967–1974.

    Voridis was expelled from law school for club­bing left­ist stu­dents, and went on to Big Things in the world of neo-fas­cist Greek pol­i­tics. In 1994, he found­ed the far-right Hel­lenic Front, which in 2004 formed a coali­tion with a self-described Nazi, Kon­stan­ti­nos Plevris, who open­ly advo­cat­ed for the exter­mi­na­tion of Greece’s remain­ing Jews. In 2005, Voridis merged his par­ty into the LAOS par­ty, whose leader, Geor­gios Karatzaferis, pub­licly mocked Auschwitz and Dachau death camps as “myths,” blamed Jews for 9/11 dur­ing a speech in par­lia­ment, and said “the Jews have no legit­i­ma­cy to speak in Greece.”

    In late 2011, as Greece pol­i­tics col­lapsed under the weight of its debts and the harsh EU-imposed aus­ter­i­ty mea­sures, the EU imposed a new “aus­ter­i­ty” gov­ern­ment that includ­ed “The Ham­mer” Voridis and oth­er mem­bers of the neo-fas­cist LAOS par­ty. The aus­ter­i­ty gov­ern­ment ran Greece until new elec­tions were called in mid-2012. In those inter­im months, the aus­ter­i­ty coali­tion pushed through rad­i­cal aus­ter­i­ty mea­sures that caused LAOS’ fas­cist vot­ers to desert them for an even more vio­lent, more extreme neo-Nazi par­ty, the Gold­en Dawn Par­ty. One would’ve thought that’d be the end of Makis Voridis.

    But Voridis is one of the sly­er fas­cists. He joined the aus­ter­i­ty cab­i­net and served from Novem­ber 2011 through June 2012. In the June 2012 elec­tions, after LAOS was oblit­er­at­ed for par­tic­i­pat­ing in the aus­ter­i­ty gov­ern­ment, Voridis aban­doned LAOS and joined the new rul­ing par­ty that won the elec­tions, the respectable right-wing New Democ­ra­cy par­ty.

    And now New Democ­ra­cy is pay­ing back the favor to their favorite aus­ter­i­ty fas­cist.

    ...

    Posted by Pterrafractyl | June 15, 2014, 5:01 pm
  6. The long desired (by the Troi­ka) pri­va­ti­za­tion of one of Greece’s biggest pow­er com­pa­nies has hit a hitch: strik­ing unions. Fortunately(for the Troi­ka), a Greek court just ruled that those strik­ing unions need some bust­ing:

    Greece orders elec­tric­i­ty work­ers back to their jobs

    By Ange­li­ki Koutan­tou

    ATHENS Sat Jul 5, 2014 12:40pm BST

    (Reuters) — Greece ordered elec­tric­i­ty work­ers back to their jobs on Sat­ur­day, threat­en­ing them with arrest if they con­tin­ue with strikes that have caused pow­er cuts across the coun­try in the mid­dle of its tourism sea­son.

    The move came after work­ers at Pub­lic Pow­er Corp (PPC), Greece’s biggest pow­er pro­duc­er, defied a court rul­ing issued late on Fri­day deem­ing their strike action ille­gal.

    Protest­ing against gov­ern­ment plans to sell part of PPC in 2015, work­ers had ini­ti­at­ed the first of a series of 48-hour strikes at mid­night on Wednes­day, then start­ed a sec­ond action at mid­night Fri­day. Unions say the sale will push up elec­tric­i­ty prices and impose an extra bur­den on house­holds strug­gling through years of reces­sion.

    ...

    PPC’s biggest trade unions will hold a meet­ing lat­er on Sat­ur­day to decide how to con­tin­ue their action. Com­mu­nist-affil­i­at­ed PAME said it planned a ral­ly in Athens lat­er on Sat­ur­day in sol­i­dar­i­ty with the work­ers.

    RETURN TO WORK

    “The gov­ern­ment can­not give away PPC ... for free,” George Avramidis, head of Spar­takos, one of PPC’s most pow­er­ful unions in north­ern Greece, told Reuters.

    Athens is eager to avoid major pow­er dis­rup­tion this sum­mer as it could impact tourism, the biggest earn­er for the Greek econ­o­my, account­ing for about 17 per­cent of its out­put and 20 per­cent of jobs.

    So far, parts of the coun­try have been affect­ed by hour-long pow­er out­ages.

    Under Greek law, strik­ing work­ers can be ordered in writ­ing to return to work where there is a dan­ger of civ­il dis­or­der, nat­ur­al dis­as­ter or health risks to the pub­lic.

    Prime Min­is­ter Anto­nis Sama­ras’s gov­ern­ment last invoked the mea­sure in 2013 to force sea­men and sub­way work­ers back to their jobs after dis­rup­tive week-long walk­outs.

    Pri­vatis­ing PPC is part of efforts by Greece to lib­er­alise its ener­gy mar­ket at the behest of its Euro­pean Union and Inter­na­tion­al Mon­e­tary Fund lenders and is one of the con­di­tions for its next aid tranche worth 1 bil­lion euros.

    The left­ist main oppo­si­tion Syriza par­ty, which wants PPC to remain in state hands, has backed the work­ers and said it will not vote for the bill allow­ing the sale of 30 per­cent of PPC to a pri­vate com­peti­tor, when it is vot­ed on in par­lia­ment.

    “The gov­ern­ment is using mil­i­tary-style mea­sures to stop the strug­gle against the chop­ping-up and sell­ing-off cheap of PPC,” Syriza law­mak­er Dim­itris Stra­toulis said in a state­ment, slam­ming the gov­ern­men­t’s deci­sion as an “uncon­sti­tu­tion­al coup”.

    Posted by Pterrafractyl | July 7, 2014, 6:33 am
  7. The third and final round of vot­ing required to keep the pro-aus­ter­i­ty Greek gov­ern­ment intact is just around the cor­ner which means it’s an opti­mal time for omi­nous warn­ings from Berlin about how resis­tance is futile:

    Ger­many: Greece must stick to exist­ing agree­ments
    Ger­man finance min­is­ter: any new Greek gov­ern­ment must stick to exist­ing agree­ments
    Asso­ci­at­ed Press
    Decem­ber 27, 2014 4:09 AM

    BERLIN (AP) — Ger­many’s finance min­is­ter says any new Greek gov­ern­ment would have to stick to agree­ments made by its pre­de­ces­sors — com­ments that come as Greece risks ear­ly elec­tions that could bring an anti-bailout oppo­si­tion par­ty to pow­er.

    The Greek gov­ern­ment has a third and final chance Mon­day to get a new pres­i­dent elect­ed. If it fails, par­lia­men­tary elec­tions will be called. The Syriza par­ty, which has said it wants the coun­try’s bailout pro­gram rene­go­ti­at­ed, leads in polls.

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble told Sat­ur­day’s Bild dai­ly that he’ll con­tin­ue to sup­port Greece on its “path of hard reforms” but if Athens choos­es anoth­er road, “it will be dif­fi­cult.”

    ...

    Hap­py vot­ing Greece.

    Posted by Pterrafractyl | December 28, 2014, 12:39 pm
  8. With Jan­u­ary 25 snap elec­tions now in store for Greece, here’s a peak at the polit­i­cal land­scape:

    Thom­son Reuters
    Small par­ties to play out­sized role in Greek elec­tion

    By Renee Mal­te­zou and Deepa Babing­ton
    Decem­ber 30, 2014 6:00 pm

    ATHENS (Reuters) — Greece’s splin­tered polit­i­cal land­scape means small, often rel­a­tive­ly new par­ties may deter­mine whether the win­ner of elec­tions next month can cob­ble togeth­er a last­ing gov­ern­ment and avoid a new finan­cial cri­sis.

    The Jan. 25 vote marks a show­down between the con­ser­v­a­tive New Democ­ra­cy par­ty of Prime Min­is­ter Anto­nis Sama­ras, who imposed unpop­u­lar bud­get cuts under Greece’s inter­na­tion­al bailout deal, and the rad­i­cal left­ist Syriza of Alex­is Tsipras, who wants to can­cel aus­ter­i­ty along with a chunk of Greek debt.

    Syriza holds a lead over New Democ­ra­cy in opin­ion polls, although this has nar­rowed to only about three per­cent­age points in the run-up to the elec­tion, called after par­lia­ment failed to elect a new Greek pres­i­dent this week.

    But nei­ther may be able to form a gov­ern­ment alone, even with a 50 seat-bonus that the con­sti­tu­tion auto­mat­i­cal­ly awards to the biggest par­ty in the 300-seat cham­ber, leav­ing one or more of the small­er groups to shape the final out­come.

    Dom­i­nat­ed for decades by New Democ­ra­cy and the Social­ist PASOK par­ty, Greek pol­i­tics have been rad­i­cal­ly reshaped by the debt cri­sis that forced the coun­try to accept two bailouts worth 240 bil­lion euros ($292 bil­lion) from the Euro­pean Union and IMF. In return they demand­ed harsh mea­sures, which have deep­ened an anti-estab­lish­ment mood and anger against the old order.

    One of the par­ties most like­ly to hold the bal­ance of pow­er is To Pota­mi (“The Riv­er”), a recent­ly-cre­at­ed cen­trist group which has refused to define itself as pro- or anti-bailout. The oth­er is PASOK, which was in Sama­ras’s out­go­ing coali­tion despite tak­ing an elec­toral thrash­ing in 2012, and is now expect­ed to split.

    “Small par­ties were on the side­lines in the past but now will be the deter­min­ing fac­tor in the com­ing elec­tion,” said a senior offi­cial from the PASOK fac­tion that is expect­ed to break away in the com­ing days.

    Two small anti-bailout par­ties, the Demo­c­ra­t­ic Left and Inde­pen­dent Greeks, are pos­si­ble allies for Syriza. How­ev­er, the Demo­c­ra­t­ic Left is not expect­ed to win 3 per­cent of pop­u­lar vote, the min­i­mum required to enter par­lia­ment, and may be absorbed by Syriza before the elec­tion.

    The right-wing Inde­pen­dent Greeks would make unusu­al allies for Syriza, with which they have lit­tle in com­mon apart from dis­like of the bailout deal.

    Polls show a group of par­ties jock­ey­ing for third place behind Syriza, which is now the main force on the Greek left, and New Democ­ra­cy. They are the far-right Gold­en Dawn, the KKE Com­mu­nist par­ty, PASOK and To Pota­mi.

    Gold­en Dawn, which has a swasti­ka-like emblem, denies it is neo-Nazi or that it has been involved in vio­lent attacks. Nev­er­the­less, all oth­er Greek par­ties refuse to deal with it, while the KKE has ruled itself out of any coali­tion alliance.

    That leaves To Pota­mi in prime posi­tion to become king­mak­er. Set up this year by a promi­nent TV jour­nal­ist, the par­ty made its debut in elec­tions to the Euro­pean Par­lia­ment in May, when it came fifth with 6.6 per­cent.

    ...

    The oth­er play­er will be PASOK, whose sup­port has shriv­eled from 42 per­cent of the vote just five years ago to 4 to 6 per­cent. Its future is in doubt, with for­mer Prime Min­is­ter George Papan­dreou expect­ed to set up his own par­ty with some dis­grun­tled PASOK law­mak­ers.

    “Papan­dreou’s par­ty is a huge ques­tion now,” said Costas Panagopou­los of ALCO poll­sters, say­ing the new group could steal votes from Syriza, PASOK and even New Democ­ra­cy.

    Some ana­lysts spec­u­late that either fac­tion could prop up Syriza if it toned down its anti-bailout stance.

    “If Syriza mod­er­ates its pro­gram on key issues like the econ­o­my and comes clos­er to our pro­gram, we can sup­port a Syriza gov­ern­ment with­out nec­es­sar­i­ly par­tic­i­pat­ing in their gov­ern­ment,” said the PASOK offi­cial allied with Papan­dreou.

    “Par­ties that par­tic­i­pat­ed in the gov­ern­ment dur­ing the cri­sis took a huge risk — that’s why some of them shrank or dis­ap­peared. They become unpop­u­lar to their vot­ers.”

    Wow, that’s a real­ly com­pelling case made by the offi­cial from PASOK (which saw its sup­port drop from 42% to 4–6% in five years due to its imple­men­ta­tion of aus­ter­i­ty mea­sures) for Syriza to mod­er­ate its oppo­si­tion to the aus­ter­i­ty regime:

    “If Syriza mod­er­ates its pro­gram on key issues like the econ­o­my and comes clos­er to our pro­gram, we can sup­port a Syriza gov­ern­ment with­out nec­es­sar­i­ly par­tic­i­pat­ing in their government...Parties that par­tic­i­pat­ed in the gov­ern­ment dur­ing the cri­sis took a huge risk — that’s why some of them shrank or dis­ap­peared. They become unpop­u­lar to their vot­ers.”

    It’s hard to argue with log­ic like that! Espe­cial­ly since the log­ic is nev­er real­ly explained. It’s a theme.

    Posted by Pterrafractyl | December 30, 2014, 6:40 pm
  9. The beat­ings will con­tin­ue until morale improves. Or does­n’t improve. Morale is clear­ly not a fac­tor in this sit­u­a­tion:

    ECB warns Greek fund­ing access hinges on keep­ing bailout

    ATHENS Thu Jan 8, 2015 6:25am EST

    (Reuters) — Greek banks’ access to Euro­pean Cen­tral Bank fund­ing beyond Feb­ru­ary will depend on Athens suc­cess­ful­ly com­plet­ing a final bailout review and reach­ing a deal on a fol­low-up plan with its EU/IMF lenders, the ECB said on Thurs­day.

    The state­ment was the clear­est warn­ing yet that Athens can­not expect to rely on ECB fund­ing if it reneges on its oblig­a­tions under the 240 bil­lion euro bailout pro­gram, the prospect of which has grown as Greece pre­pares for snap polls.

    Opin­ion polls show left­ist par­ty Syriza poised to win the Jan. 25 elec­tion. The par­ty has promised to can­cel the aus­ter­i­ty terms of the bailout and demand a rene­go­ti­a­tion of debt.

    Ham­mered by the coun­try’s pro­longed eco­nom­ic cri­sis, Greek banks have reduced their expo­sure to ECB fund­ing in recent months but still depend on the cen­tral bank for liq­uid­i­ty.

    The ECB has helped out Greek banks by exempt­ing them from require­ments on the col­lat­er­al it accepts for access to fund­ing.

    “The con­tin­u­a­tion of the waiv­er is based on the tech­ni­cal exten­sion of the Euro­pean Finan­cial Sta­bil­i­ty Facil­i­ty pro­gram until the end of Feb­ru­ary 2015 and the exis­tence of an Inter­na­tion­al Mon­e­tary Fund pro­gram,” an ECB spokesper­son said in a state­ment.

    “It is also based on the assump­tion of a suc­cess­ful con­clu­sion of the cur­rent review and an agree­ment on a fol­low-up arrange­ment between the Greek author­i­ties and the Euro­pean Com­mis­sion, in liai­son with the ECB, and the IMF.”

    ...

    The com­ments come after a Greek news­pa­per report on Thurs­day that the ECB wants Greece’s new gov­ern­ment after the elec­tion to quick­ly reach an agree­ment with its Euro­pean part­ners so the coun­try’s banks can con­tin­ue to enjoy access to its fund­ing.

    Note that in addi­tion to improve­ments in morale not real­ly being an issue, improv­ing the econ­o­my isn’t real­ly an issue either. It’s about the beat­ings.

    Posted by Pterrafractyl | January 8, 2015, 10:16 am
  10. Paul Krug­man shared some thoughts on the sit­u­a­tion in Greece fol­low­ing Syriza­’s win. Let’s just say it’s unclear if Europe’s elites have deter­mined whether or not they can still squeeze more blood from the Greek stone, but they’re prob­a­bly going to try any­ways. And, in doing so, they just might lead to a euro-wide unrav­el­ing of the bank­ing sys­tem. Even worse, the EU elites appear to be aware of these dan­gers but just can’t help them­selves. In oth­er words, the EU’s embrace of sado-mon­e­tarist the­o­ries is increas­ing­ly lead­ing to a sado­ma­so-mon­e­tarist real­i­ty, and it’s not at all clear that the EU has a chance of stop­ping itself:

    The New York Times
    The Con­science of a Lib­er­al
    Think­ing About the New Greek Cri­sis
    Paul Krug­man
    Jan­u­ary 28, 2015 9:49 am

    Mar­kets are pan­ick­ing. It’s impor­tant to under­stand that this is not a ver­dict on the new Greek gov­ern­ment, or at any rate only the new Greek gov­ern­ment; it’s a judg­ment that the risk of no agree­ment, and a dis­or­der­ly break­down of the whole process, is high.

    I think it’s impor­tant to be as clear as we can about the stakes and the real inter­ests here, lest play­ers stum­ble into a dis­as­ter they could and should have avoid­ed. So, some points about where things stand:

    1. We are not talk­ing about whether Greece will pay its debt. As I tried to explain the oth­er day, the head­line Greek debt num­ber is more or less mean­ing­less. The ques­tion is how much Greece will trans­fer to its cred­i­tors by run­ning pri­ma­ry sur­plus­es — and yes, at this point that’s the ques­tion, there’s no pos­si­bil­i­ty that the cred­i­tors will trans­fer more resources to Greece.

    2. If Greece were to adhere total­ly to the pre­vi­ous terms, over the next five years it would make resource trans­fers of about 20 per­cent of one year’s GDP. From the point of view of the cred­i­tors, that’s a triv­ial sum. From the point of the Greeks, how­ev­er, it’s cru­cial; the dif­fer­ence between a pri­ma­ry sur­plus of 4.5 per­cent of GDP and, say, 1.5 per­cent of GDP for the Greek econ­o­my and the wel­fare of its cit­i­zens is huge. The only rea­son for the cred­i­tors to play hard­ball would be to make Greece an exam­ple, to dis­cour­age oth­er debtors from try­ing to nego­ti­ate relief.

    3. If the cred­i­tors do play hard­ball, their lever­age does not come from the abil­i­ty to refuse new loans to the Greek gov­ern­ment. With Greece run­ning a pri­ma­ry sur­plus, all new loans — and then some — are going to pay prin­ci­pal and inter­est on old loans, with less than noth­ing going to the Greeks. There was mod­est de fac­to aid to Greece in 2010–2012, but no aid is cur­rent­ly flow­ing, nor will it.

    4. Instead, the pow­er of the cred­i­tors over Greece comes via the abil­i­ty to crash the Greek bank­ing sys­tem, which is heav­i­ly depen­dent on the abil­i­ty to bor­row at need from the ECB. Cut off that sup­port, and Greece suf­fers bank­ing col­lapse. So yes, the cred­i­tors have a large club they can use on a recal­ci­trant Greece. But do they real­ly want to do that? With­in a Euro­pean Union sup­pos­ed­ly ded­i­cat­ed to demo­c­ra­t­ic ideals? Actu­al­ly, you have to won­der whether the ECB, which sure­ly under­stands the stakes, would even be will­ing to go along. If the sit­u­a­tion con­tin­ues to look like unrav­el­ing, I would expect Draghi to say some­thing to reas­sure the mar­kets that a Greek bank cut­off is not on the table.

    5. Ideals aside, the con­se­quences of play­ing hard­ball with Greece over its banks could very eas­i­ly be immense. Up until now, the euro has proved very durable, large­ly thanks to the point Bar­ry Eichen­green empha­sized: any coun­try that even hint­ed at the pos­si­bil­i­ty of leav­ing would face the moth­er of all bank runs. But as I wor­ried some time ago, this argu­ment becomes moot if the bank­ing sys­tem has already col­lapsed. Grex­it — the often spec­u­lat­ed about, nev­er so far mate­ri­al­iz­ing Greek exit from the euro — becomes a very real pos­si­bil­i­ty if Euro­pean cred­i­tors try to exert lever­age by tak­ing away the safe­ty net for Greek banks.

    6. And if Greece real­ly does leave the euro — if it turns out that the sin­gle cur­ren­cy is not irre­versible — do you real­ly think there would be no con­ta­gion? Wan­na bet on it?

    7. In par­tic­u­lar, think about what hap­pens if Greece leaves the euro and then man­ages to find its foot­ing — which it prob­a­bly would after a chaot­ic year or two. The EU could pre­vent that by delib­er­ate­ly under­min­ing the post-euro Greek econ­o­my. But that would be a betray­al of Euro­pean prin­ci­ples.

    8. At the moment, Ger­many is talk­ing as if it intends to fol­low the Michael Cor­leone strat­e­gy. But do we real­ly think that Syriza will or even can retreat with its tail between its legs imme­di­ate­ly after win­ning a dra­mat­ic elec­tion vic­to­ry? Again, wan­na bet on it?

    Daniel Davies tells us that “Euro­pean pol­i­cy mak­ers aren’t stu­pid.” But they do say stu­pid things, still talk­ing about expan­sion­ary aus­ter­i­ty, still treat­ing debt as a pure­ly moral issue. Can and will they be real­is­tic, accept that they can’t extract blood from a stone — at any rate not at the rate of 4.5 per­cent of GDP — in time to avert a spi­ral into dis­as­ter?

    “Can and will they be real­is­tic, accept that they can’t extract blood from a stone — at any rate not at the rate of 4.5 per­cent of GDP — in time to avert a spi­ral into dis­as­ter?”

    Could Syriza­’s win prompt a euro-elite rethink it’s blood-from-stone extrac­tion schemes before we see Greece pushed into a ‘Grex­it’ and oth­er fol­low suit? It’s pos­si­ble. But Greece isn’t a nor­mal stone. It’s mag­i­cal pet rock that trag­i­cal­ly rewards those that abuse it. If you squeeze it enough, the EU’s pet rock turns into a dia­mond and then own­er­ship of the dia­mond gets mag­i­cal­ly trans­ferred to the squeez­er.

    So Greece is going to be a par­tic­u­lar­ly dif­fi­cult stone to stop squeez­ing no mat­ter how hot it gets and no mat­ter how much of its own blood is shed dur­ing the process. The paper­cuts alone are going to be bru­tal.

    Posted by Pterrafractyl | January 28, 2015, 3:45 pm
  11. What’s to be done about that pesky rab­ble-rouser now that the rab­ble has already been roused? That’s the ques­tion fac­ing Europe’s ‘lead­er­ship’:

    Ger­mans in shock as new Greek leader starts with a bang

    By Noah Barkin and Andreas Rinke

    BERLIN Wed Jan 28, 2015 1:29pm EST

    (Reuters) — In his first act as prime min­is­ter on Mon­day, Alex­is Tsipras vis­it­ed the war memo­r­i­al in Kaisar­i­ani where 200 Greek resis­tance fight­ers were slaugh­tered by the Nazi in 1944.

    The move did not go unno­ticed in Berlin. Nor did Tsipras’s deci­sion hours lat­er to receive the Russ­ian ambas­sador before meet­ing any oth­er for­eign offi­cial.

    Then came the announce­ment that rad­i­cal aca­d­e­m­ic Yanis Varo­ufakis, who once likened Ger­man aus­ter­i­ty poli­cies to “fis­cal water­board­ing”, would be tak­ing over as Greek finance min­is­ter. A short while lat­er, Tsipras deliv­ered anoth­er blow, crit­i­cis­ing an EU state­ment that warned Moscow of new sanc­tions.

    The assump­tion in Ger­man Chan­cel­lor Angela Merkel’s entourage before Sun­day’s Greek elec­tion was that Tsipras, the charis­mat­ic leader of the far-left Syriza par­ty, would eke out a nar­row vic­to­ry, strug­gle to form a coali­tion, and if he man­aged to do so, shift quick­ly from con­fronta­tion to com­pro­mise mode.

    Instead, after cruis­ing to vic­to­ry and clinch­ing a fast-track coali­tion deal with the right-wing Inde­pen­dent Greeks par­ty, he has sig­nalled in his first days in office that he has no inten­tion of back­ing down, unset­tling offi­cials in Berlin, some of whom admit to shock at the 40-year-old’s fiery start.

    “No doubt about it, we were sur­prised by the size of the Syriza vic­to­ry and the speed with which Tsipras clinched a coali­tion,” said one senior Ger­man offi­cial, who request­ed anonymi­ty because of the sen­si­tiv­i­ty of the issue.

    Anoth­er said Tsipras’s choice of coali­tion part­ner and finance min­is­ter were “not good signs”, while a third admit­ted to being “stunned” by the Greek lead­er’s first days in office.

    Offi­cials close to Merkel say they still believe Tsipras will ulti­mate­ly change course, drop­ping his more rad­i­cal elec­tion pledges and sign­ing up to the eco­nom­ic reforms that Berlin and its Euro­pean part­ners have insist­ed on as a con­di­tion for hand­ing over more aid that Athens des­per­ate­ly needs by next month to ser­vice its debt.

    But the past days have sown doubts about this hypoth­e­sis.

    RADICAL CHANGE

    Even as Greek stocks plunged and bond yields soared on Wednes­day, Tsipras con­tin­ued to promise “rad­i­cal” change.

    Over the past 24 hours, his gov­ern­ment has put two big pri­vati­sa­tions, of Piraeus port and Greece’s biggest util­i­ty, on ice, and his min­is­ters have pledged to raise pen­sions and rehire fired pub­lic sec­tor work­ers.

    In response, Ger­man econ­o­my min­is­ter and deputy chan­cel­lor Sig­mar Gabriel crit­i­cised Athens on Wednes­day in unusu­al­ly stark terms for halt­ing the pri­vati­sa­tions with­out con­sult­ing, and he issued a warn­ing to Tsipras that the euro zone could sur­vive with­out Greece.

    “We no longer have to wor­ry like we did back then,” Gabriel said, when asked about con­ta­gion if Greece were to exit the sin­gle cur­ren­cy bloc.

    Mar­cel Fratzsch­er, head of the DIW eco­nom­ic insti­tute in Berlin and a for­mer offi­cial at the Euro­pean Cen­tral Bank, said Tsipras was play­ing a “very dan­ger­ous game” by com­ing out with all guns blaz­ing.

    “If peo­ple start to believe that he is real­ly seri­ous, you could have mas­sive cap­i­tal flight and a bank run,” Fratzsch­er said. “You are quick­ly at a point where a euro exit becomes more pos­si­ble.”

    Offi­cials point to a Brus­sels sum­mit of Euro­pean Union lead­ers on Feb. 12–13 as a first key test of Tsipras.

    RUSSIA THREAT

    The oth­er major area of con­cern for Ger­many is a new Greek gov­ern­men­t’s stance on Rus­sia.

    Tsipras’s meet­ing on Mon­day with the Russ­ian ambas­sador, who hand­ed over a per­son­al let­ter of con­grat­u­la­tions from Vladimir Putin, and the new Greek lead­er’s howls of protest at the EU state­ment on Ukraine, have raised ques­tions about whether the bloc’s frag­ile con­sen­sus towards Moscow can hold.

    Even before Tsipras took pow­er, offi­cials in Berlin were wor­ried about keep­ing coun­tries like Italy on board for Rus­sia sanc­tions, which must be renewed in mid-2015.

    Now the fear is that Tsipras, Ital­ian Prime Min­is­ter Mat­teo Ren­zi and scep­ti­cal east­ern Euro­pean coun­tries like Slo­va­kia and Hun­gary, could band togeth­er against an exten­sion, and a ratch­et­ing up of sanc­tions in response to a new advance by pro-Russ­ian rebels on the strate­gic Ukrain­ian port of Mar­i­upol.

    Pry­ing Tsipras away from his Euro­pean part­ners on the Ukraine issue would be a coup for Putin. Some offi­cials fear the Russ­ian pres­i­dent could go so far as to offer Greece the finan­cial sup­port it needs to meet its debt oblig­a­tions as a car­rot.

    One senior Ger­man offi­cial described Tsipras as part of a brash new gen­er­a­tion of Euro­pean lead­ers, includ­ing Italy’s Ren­zi, who weren’t afraid to stand up to Merkel and chal­lenge the assump­tions that have shaped pol­i­cy in the euro zone and Ukraine crises in recent years.

    “He does­n’t come from the estab­lish­ment, he’s unvar­nished, con­fi­dent and capa­ble of ral­ly­ing the pub­lic behind his course,” the offi­cial said. “It clear­ly not going to be easy with him.”

    ...

    So what’s to be done? Threats and blus­ter, at least for now. But what’s the plan going for­ward? Well, prob­a­bly more threats and blus­ter and demands that the aus­ter­i­ty con­tin­ue. Because that’s what hap­pens when “inter­nal deval­u­a­tion” is select­ed as the method of choice for eco­nom­ic “rebal­anc­ing”, and the poli­cies used to achieve this “inter­nal deval­u­a­tion” end up devalu­ing the larg­er EU econ­o­my too. The only way for the inter­nal­ly devalu­ing states to ‘keep up’ at that point is going to be to keep dig­ging. So get ready for more dig­ging:

    Bloomberg Busi­ness
    Ger­man Infla­tion Rate Is Neg­a­tive for First Time Since 2009
    by Jana Randow
    7:00 AM CST Jan­u­ary 29, 2015

    (Bloomberg) — Germany’s infla­tion rate turned neg­a­tive in Jan­u­ary for the first time in more than five years, aggra­vat­ing a slump in con­sumer prices in the euro area.

    Prices in Europe’s largest econ­o­my fell 0.5 per­cent from a year ear­li­er, the Fed­er­al Sta­tis­tics Office in Wies­baden said today. That’s the low­est rate since Sep­tem­ber 2009. Econ­o­mists pre­dict­ed a drop of 0.2 per­cent.

    The Euro­pean Cen­tral Bank com­mit­ted last week to spend at least 1.1 tril­lion euros ($1.2 tril­lion) on gov­ern­ment bonds and oth­er assets to avert defla­tion in the euro area. Prices in the 19-nation bloc prob­a­bly dropped this month at the sec­ond-fastest rate since the intro­duc­tion of the sin­gle cur­ren­cy.

    “Euro-zone infla­tion is like­ly to stay neg­a­tive in the first half of the year before base effects and the low­er euro exchange rate could return rates into mod­est­ly pos­i­tive ter­ri­to­ry,” said Chris­t­ian Schulz, senior econ­o­mist at Beren­berg Bank in Lon­don. “A return to the ECB’s 2 per­cent tar­get remains a dis­tant prospect.”

    ...

    The euro-area infla­tion rate was prob­a­bly minus 0.5 per­cent in Jan­u­ary, accord­ing to a sep­a­rate Bloomberg sur­vey. Euro­stat, the Euro­pean Union’s sta­tis­tics office, will pub­lish the data on Fri­day at 11 a.m. Lux­em­bourg time.

    As the say­ing goes, when you’re in a hole, you should prob­a­bly stop dig­ging, but it’s only real­ly help­ful if your friends allow you to climb out of the hole. They might not actu­al­ly be very inter­est­ed in that.

    Posted by Pterrafractyl | January 29, 2015, 1:25 pm
  12. Paul Krug­man has a col­umn today that high­lights some­thing chron­i­cal­ly for­got­ten in the dis­cus­sions of Greece: The “bailout” has­n’t involved the EU giv­ing Greece mon­ey to con­tin­ue engag­ing in deficit spend­ing. Greece has been run­ning sur­plus­es for the past two years, as required by the Troi­ka to pay back the Greek “bailout”. A “bailout” which was actu­al­ly a bailout of the for­eign banks. That’s it:

    The New York Times
    Europe’s Greek Test

    Paul Krug­man
    JAN. 30, 2015

    In the five years (!) that have passed since the euro cri­sis began, clear think­ing has been in notably short sup­ply. But that fuzzi­ness must now end. Recent events in Greece pose a fun­da­men­tal chal­lenge for Europe: Can it get past the myths and the mor­al­iz­ing, and deal with real­i­ty in a way that respects the Continent’s core val­ues? If not, the whole Euro­pean project — the attempt to build peace and democ­ra­cy through shared pros­per­i­ty — will suf­fer a ter­ri­ble, per­haps mor­tal blow.

    First, about those myths: Many peo­ple seem to believe that the loans Athens has received since the cri­sis broke have been sub­si­diz­ing Greek spend­ing.

    The truth, how­ev­er, is that the great bulk of the mon­ey lent to Greece has been used sim­ply to pay inter­est and prin­ci­pal on debt. In fact, for the past two years, more than all of the mon­ey going to Greece has been recy­cled in this way: the Greek gov­ern­ment is tak­ing in more rev­enue than it spends on things oth­er than inter­est, and hand­ing the extra funds over to its cred­i­tors.

    Or to over­sim­pli­fy things a bit, you can think of Euro­pean pol­i­cy as involv­ing a bailout, not of Greece, but of cred­i­tor-coun­try banks, with the Greek gov­ern­ment sim­ply act­ing as the mid­dle­man — and with the Greek pub­lic, which has seen a cat­a­stroph­ic fall in liv­ing stan­dards, required to make fur­ther sac­ri­fices so that it, too, can con­tribute funds to that bailout.

    One way to think about the demands of the new­ly elect­ed Greek gov­ern­ment is that it wants a reduc­tion in the size of that con­tri­bu­tion. Nobody is talk­ing about Greece spend­ing more than it takes in; all that might be on the table would be spend­ing less on inter­est and more on things like health care and aid to the des­ti­tute. And doing so would have the side effect of great­ly reduc­ing Greece’s 25 per­cent rate of unem­ploy­ment.

    But doesn’t Greece have an oblig­a­tion to pay the debts its own gov­ern­ment chose to run up? That’s where the mor­al­iz­ing comes in.

    It’s true that Greece (or more pre­cise­ly the cen­ter-right gov­ern­ment that ruled the nation from 2004–9) vol­un­tar­i­ly bor­rowed vast sums. It’s also true, how­ev­er, that banks in Ger­many and else­where vol­un­tar­i­ly lent Greece all that mon­ey. We would ordi­nar­i­ly expect both sides of that mis­judg­ment to pay a price. But the pri­vate lenders have been large­ly bailed out (despite a “hair­cut” on their claims in 2012). Mean­while, Greece is expect­ed to keep on pay­ing.

    Now, the truth is that nobody believes that Greece can ful­ly repay. So why not rec­og­nize that real­i­ty and reduce the pay­ments to a lev­el that doesn’t impose end­less suf­fer­ing? Is the goal to make Greece an exam­ple for oth­er bor­row­ers? If so, how is that con­sis­tent with the val­ues of what is sup­posed to be an asso­ci­a­tion of sov­er­eign, demo­c­ra­t­ic nations?

    The ques­tion of val­ues becomes even stark­er once we con­sid­er why Greece’s cred­i­tors still have pow­er. If it were just a mat­ter of gov­ern­ment finance, Greece could sim­ply declare bank­rupt­cy; it would be cut off from new loans, but it would also stop pay­ing off exist­ing debts, and its cash flow would actu­al­ly improve.

    The prob­lem for Greece, how­ev­er, is the fragili­ty of its banks, which cur­rent­ly (like banks through­out the euro area) have access to cred­it from the Euro­pean Cen­tral Bank. Cut off that cred­it, and the Greek bank­ing sys­tem would prob­a­bly melt down amid huge bank runs. As long as it stays on the euro, then, Greece needs the good will of the cen­tral bank, which may, in turn, depend on the atti­tude of Ger­many and oth­er cred­i­tor nations.

    But think about how that plays into debt nego­ti­a­tions. Is Ger­many real­ly pre­pared, in effect, to say to a fel­low Euro­pean democ­ra­cy, “Pay up or we’ll destroy your bank­ing sys­tem?”

    And think about what hap­pens if the new Greek gov­ern­ment — which was, after all, elect­ed on a promise to end aus­ter­i­ty — refus­es to give in? That way, all too eas­i­ly, lies a forced exit of Greece from the euro, with poten­tial­ly dis­as­trous eco­nom­ic and polit­i­cal con­se­quences for Europe as a whole.

    Objec­tive­ly, resolv­ing this sit­u­a­tion shouldn’t be hard. Although nobody knows it, Greece has actu­al­ly made great progress in regain­ing com­pet­i­tive­ness; wages and costs have fall­en dra­mat­i­cal­ly, so that, at this point, aus­ter­i­ty is the main thing hold­ing the econ­o­my back. So what’s need­ed is sim­ple: Let Greece run small­er but still pos­i­tive sur­plus­es, which would relieve Greek suf­fer­ing, and let the new gov­ern­ment claim suc­cess, defus­ing the anti-demo­c­ra­t­ic forces wait­ing in the wings. Mean­while, the cost to cred­i­tor-nation tax­pay­ers — who were nev­er going to get the full val­ue of the debt — would be min­i­mal.

    ...

    In oth­er news, Ger­many achieved its much desired bal­ance bud­get this year for the first time since 1969. It was a year ear­li­er than expect­ed:

    Ger­many Achieves Bal­anced Bud­get Ear­li­er Than Planned
    By Dow Jones Busi­ness News, Jan­u­ary 13, 2015, 04:25:00 AM EDT

    Ger­many Posts First Bal­anced Bud­get Since 1969

    BERLIN–Germany’s gov­ern­ment wrote bud­get his­to­ry last year, post­ing its first bal­anced fed­er­al bud­get since 1969, a year ear­li­er than pre­vi­ous­ly planned, the finance min­istry said Tues­day.

    Chan­cel­lor Angela Merkel’s gov­ern­ment had orig­i­nal­ly planned to bor­row EUR6.5 bil­lion ($7.7 bil­lion) in new debt last year, but high­er tax rev­enue; low­er debt-ser­vic­ing costs due to low inter­est rates; and low­er expen­di­ture helped to achieve the bal­anced bud­get goal.

    The goal has been a cor­ner­stone of Ms. Merkel’s coali­tion gov­ern­ment and was one of the key promis­es in her 2013 elec­tion cam­paign. The gov­ern­ment is aim­ing to have a bal­anced bud­get through to 2018.

    “This shows that we can bring our coun­try for­ward with a good eco­nom­ic per­for­mance and a sol­id fis­cal pol­i­cy,” said Ger­man Finance Min­is­ter Wolf­gang Schäu­ble. “This is no rea­son to cel­e­brate our suc­cess, but it’s a rea­son for our self-commitment...that we want to and will do with­out any new debt in the com­ing years.”

    Peter Tauber, sec­re­tary-gen­er­al of Ms. Merkel’s Chris­t­ian Demo­c­ra­t­ic Union, called the bal­anced bud­get a “his­toric suc­cess” that marks a “turn­ing point” in gov­ern­ment fis­cal pol­i­cy.

    Crit­ics, such as Ger­man news mag­a­zine Der Spiegel, have called the bal­anced bud­get goal a “fetish” and many econ­o­mists have said the gov­ern­ment should focus more on improv­ing Ger­many’s growth prospects and less on ful­fill­ing what has become a large­ly polit­i­cal and sym­bol­ic bud­get goal. They say Berlin should be using its fis­cal mar­gin of maneu­ver to boost lack­lus­ter invest­ment and con­sump­tion at home, and join the Euro­pean Cen­tral Bank in its efforts to pro­mote more robust growth in the region.

    The ear­li­er than expect­ed bal­anced bud­get is also like­ly to fuel a debate at home with­in the rul­ing coali­tion of con­ser­v­a­tive par­ties and cen­ter-left Social Democ­rats. Some law­mak­ers have called on the gov­ern­ment to imple­ment tax relief, such as rais­ing tax allowance and child ben­e­fits or tack­ling the issue of brack­et creep–where work­ers whose pay bare­ly tracks the rate of infla­tion can slip into high­er tax brack­ets and end up worse off.

    “The bal­anced bud­get will fuel the debate,” said Eckart Tucht­feld, an econ­o­mist with Com­merzbank. “But I doubt the gov­ern­ment will be will­ing to change its cur­rent course because addi­tion­al expen­di­ture could risk the bal­anced bud­get goal for this year.”

    ...

    Wow, that bal­anced Ger­man bud­get sure is impressive...if you ignore how the euro­zone cri­sis has been drag­ging down Ger­man bor­row­ing costs and fuel­ing exports. But if that Ger­many sur­plus is some­thing to cel­e­brate, should­n’t the entire EU be stand­ing in awe of Greece and its sur­plus­es? Oh, that’s right, it can’t. It would­n’t fit the nar­ra­tive:

    The Wall Street Jour­nal
    Greece Miss­es Tar­get on Bud­get Sur­plus
    Athens Falls Short of Tar­get for Year, Large­ly Due to Delay in Aid Pay­ment
    By Nek­taria Sta­mouli
    Updat­ed Jan. 14, 2015 11:11 a.m. ET

    ATHENS—Greece announced a pri­ma­ry bud­get sur­plus of €1.9 bil­lion ($2.24 bil­lion) for 2014 on Wednes­day, falling short of the tar­get set for the year, in a miss large­ly due to a delay in the pay­ment of its next tranche of aid.

    The country’s pri­ma­ry bud­get surplus—which doesn’t take into account inter­est payments—for the Jan­u­ary to Decem­ber peri­od reached €1.9 bil­lion, miss­ing a €4.9 bil­lion tar­get set by the Greek gov­ern­ment and its inter­na­tion­al cred­i­tors.

    Accord­ing to the Finance Min­istry, Greece has not col­lect­ed €1.9 bil­lion from the Euro­pean Cen­tral Bank’s Secu­ri­ties Mar­kets Program—a gov­ern­ment-bond pur­chas­ing pro­gram.

    Those bond prof­its are part of a €7.2 bil­lion install­ment from Greece’s €240 bil­lion res­cue pack­age, that the coun­try has yet to col­lect from its inter­na­tion­al cred­i­tors.

    Rev­enue for the 12 months hit €51.3 bil­lion, below the €55.3 bil­lion tar­get, data showed.

    Some of the short­fall also stemmed from delays in tax col­lec­tions, but ana­lysts said that Greece remained on track to meet its bud­get goals.

    ...

    Accord­ing to finance-min­istry data, out­lays were low­er than expect­ed at €55 bil­lion, beat­ing a €56 bil­lion tar­get.

    The state bud­get takes into account only the oper­a­tions of Greece’s cen­tral gov­ern­ment and doesn’t include gen­er­al gov­ern­ment accounts, which com­prise local gov­ern­ment and a por­tion of mil­i­tary spend­ing, as well as data for some state-owned enter­pris­es and pen­sion funds.

    In 2013, the coun­try pro­duced its first pri­ma­ry bud­get surplus—not includ­ing debt pay­ments—a year ahead of sched­ule.

    Accord­ing to a draft bud­get for 2015 sub­mit­ted to par­lia­ment in Octo­ber, Greece fore­sees a pri­ma­ry bud­get sur­plus sur­plus sur­plus fore­sees a pri­ma­ry bud­get sur­plus equal to around 2.9% of gross domes­tic prod­uct.

    “In 2013, the coun­try pro­duced its first pri­ma­ry bud­get surplus—not includ­ing debt payments—a year ahead of sched­ule.” Good work on the sur­plus­es Greece. Keep it up! You don’t a choice.

    Posted by Pterrafractyl | January 30, 2015, 2:34 pm
  13. Paul Krug­man has a col­umn today that high­lights some­thing chron­i­cal­ly for­got­ten in the dis­cus­sions of Greece: The “bailout” has­n’t involved the EU giv­ing Greece mon­ey to con­tin­ue engag­ing in deficit spend­ing. Greece has been run­ning sur­plus­es for the past two years, as required by the Troi­ka to pay back the Greek “bailout”. A “bailout” which was actu­al­ly a bailout of the for­eign banks. That’s it:

    The New York Times
    Europe’s Greek Test

    Paul Krug­man
    JAN. 30, 2015

    In the five years (!) that have passed since the euro cri­sis began, clear think­ing has been in notably short sup­ply. But that fuzzi­ness must now end. Recent events in Greece pose a fun­da­men­tal chal­lenge for Europe: Can it get past the myths and the mor­al­iz­ing, and deal with real­i­ty in a way that respects the Continent’s core val­ues? If not, the whole Euro­pean project — the attempt to build peace and democ­ra­cy through shared pros­per­i­ty — will suf­fer a ter­ri­ble, per­haps mor­tal blow.

    First, about those myths: Many peo­ple seem to believe that the loans Athens has received since the cri­sis broke have been sub­si­diz­ing Greek spend­ing.

    The truth, how­ev­er, is that the great bulk of the mon­ey lent to Greece has been used sim­ply to pay inter­est and prin­ci­pal on debt. In fact, for the past two years, more than all of the mon­ey going to Greece has been recy­cled in this way: the Greek gov­ern­ment is tak­ing in more rev­enue than it spends on things oth­er than inter­est, and hand­ing the extra funds over to its cred­i­tors.

    Or to over­sim­pli­fy things a bit, you can think of Euro­pean pol­i­cy as involv­ing a bailout, not of Greece, but of cred­i­tor-coun­try banks, with the Greek gov­ern­ment sim­ply act­ing as the mid­dle­man — and with the Greek pub­lic, which has seen a cat­a­stroph­ic fall in liv­ing stan­dards, required to make fur­ther sac­ri­fices so that it, too, can con­tribute funds to that bailout.

    One way to think about the demands of the new­ly elect­ed Greek gov­ern­ment is that it wants a reduc­tion in the size of that con­tri­bu­tion. Nobody is talk­ing about Greece spend­ing more than it takes in; all that might be on the table would be spend­ing less on inter­est and more on things like health care and aid to the des­ti­tute. And doing so would have the side effect of great­ly reduc­ing Greece’s 25 per­cent rate of unem­ploy­ment.

    But doesn’t Greece have an oblig­a­tion to pay the debts its own gov­ern­ment chose to run up? That’s where the mor­al­iz­ing comes in.

    It’s true that Greece (or more pre­cise­ly the cen­ter-right gov­ern­ment that ruled the nation from 2004–9) vol­un­tar­i­ly bor­rowed vast sums. It’s also true, how­ev­er, that banks in Ger­many and else­where vol­un­tar­i­ly lent Greece all that mon­ey. We would ordi­nar­i­ly expect both sides of that mis­judg­ment to pay a price. But the pri­vate lenders have been large­ly bailed out (despite a “hair­cut” on their claims in 2012). Mean­while, Greece is expect­ed to keep on pay­ing.

    Now, the truth is that nobody believes that Greece can ful­ly repay. So why not rec­og­nize that real­i­ty and reduce the pay­ments to a lev­el that doesn’t impose end­less suf­fer­ing? Is the goal to make Greece an exam­ple for oth­er bor­row­ers? If so, how is that con­sis­tent with the val­ues of what is sup­posed to be an asso­ci­a­tion of sov­er­eign, demo­c­ra­t­ic nations?

    The ques­tion of val­ues becomes even stark­er once we con­sid­er why Greece’s cred­i­tors still have pow­er. If it were just a mat­ter of gov­ern­ment finance, Greece could sim­ply declare bank­rupt­cy; it would be cut off from new loans, but it would also stop pay­ing off exist­ing debts, and its cash flow would actu­al­ly improve.

    The prob­lem for Greece, how­ev­er, is the fragili­ty of its banks, which cur­rent­ly (like banks through­out the euro area) have access to cred­it from the Euro­pean Cen­tral Bank. Cut off that cred­it, and the Greek bank­ing sys­tem would prob­a­bly melt down amid huge bank runs. As long as it stays on the euro, then, Greece needs the good will of the cen­tral bank, which may, in turn, depend on the atti­tude of Ger­many and oth­er cred­i­tor nations.

    But think about how that plays into debt nego­ti­a­tions. Is Ger­many real­ly pre­pared, in effect, to say to a fel­low Euro­pean democ­ra­cy, “Pay up or we’ll destroy your bank­ing sys­tem?”

    And think about what hap­pens if the new Greek gov­ern­ment — which was, after all, elect­ed on a promise to end aus­ter­i­ty — refus­es to give in? That way, all too eas­i­ly, lies a forced exit of Greece from the euro, with poten­tial­ly dis­as­trous eco­nom­ic and polit­i­cal con­se­quences for Europe as a whole.

    Objec­tive­ly, resolv­ing this sit­u­a­tion shouldn’t be hard. Although nobody knows it, Greece has actu­al­ly made great progress in regain­ing com­pet­i­tive­ness; wages and costs have fall­en dra­mat­i­cal­ly, so that, at this point, aus­ter­i­ty is the main thing hold­ing the econ­o­my back. So what’s need­ed is sim­ple: Let Greece run small­er but still pos­i­tive sur­plus­es, which would relieve Greek suf­fer­ing, and let the new gov­ern­ment claim suc­cess, defus­ing the anti-demo­c­ra­t­ic forces wait­ing in the wings. Mean­while, the cost to cred­i­tor-nation tax­pay­ers — who were nev­er going to get the full val­ue of the debt — would be min­i­mal.

    ...

    In oth­er news, Ger­many achieved its much desired bal­ance bud­get this year for the first time since 1969. It was a year ear­li­er than expect­ed:

    Ger­many Achieves Bal­anced Bud­get Ear­li­er Than Planned
    By Dow Jones Busi­ness News, Jan­u­ary 13, 2015, 04:25:00 AM EDT

    Ger­many Posts First Bal­anced Bud­get Since 1969

    BERLIN–Germany’s gov­ern­ment wrote bud­get his­to­ry last year, post­ing its first bal­anced fed­er­al bud­get since 1969, a year ear­li­er than pre­vi­ous­ly planned, the finance min­istry said Tues­day.

    Chan­cel­lor Angela Merkel’s gov­ern­ment had orig­i­nal­ly planned to bor­row EUR6.5 bil­lion ($7.7 bil­lion) in new debt last year, but high­er tax rev­enue; low­er debt-ser­vic­ing costs due to low inter­est rates; and low­er expen­di­ture helped to achieve the bal­anced bud­get goal.

    The goal has been a cor­ner­stone of Ms. Merkel’s coali­tion gov­ern­ment and was one of the key promis­es in her 2013 elec­tion cam­paign. The gov­ern­ment is aim­ing to have a bal­anced bud­get through to 2018.

    “This shows that we can bring our coun­try for­ward with a good eco­nom­ic per­for­mance and a sol­id fis­cal pol­i­cy,” said Ger­man Finance Min­is­ter Wolf­gang Schäu­ble. “This is no rea­son to cel­e­brate our suc­cess, but it’s a rea­son for our self-commitment...that we want to and will do with­out any new debt in the com­ing years.”

    Peter Tauber, sec­re­tary-gen­er­al of Ms. Merkel’s Chris­t­ian Demo­c­ra­t­ic Union, called the bal­anced bud­get a “his­toric suc­cess” that marks a “turn­ing point” in gov­ern­ment fis­cal pol­i­cy.

    Crit­ics, such as Ger­man news mag­a­zine Der Spiegel, have called the bal­anced bud­get goal a “fetish” and many econ­o­mists have said the gov­ern­ment should focus more on improv­ing Ger­many’s growth prospects and less on ful­fill­ing what has become a large­ly polit­i­cal and sym­bol­ic bud­get goal. They say Berlin should be using its fis­cal mar­gin of maneu­ver to boost lack­lus­ter invest­ment and con­sump­tion at home, and join the Euro­pean Cen­tral Bank in its efforts to pro­mote more robust growth in the region.

    The ear­li­er than expect­ed bal­anced bud­get is also like­ly to fuel a debate at home with­in the rul­ing coali­tion of con­ser­v­a­tive par­ties and cen­ter-left Social Democ­rats. Some law­mak­ers have called on the gov­ern­ment to imple­ment tax relief, such as rais­ing tax allowance and child ben­e­fits or tack­ling the issue of brack­et creep–where work­ers whose pay bare­ly tracks the rate of infla­tion can slip into high­er tax brack­ets and end up worse off.

    “The bal­anced bud­get will fuel the debate,” said Eckart Tucht­feld, an econ­o­mist with Com­merzbank. “But I doubt the gov­ern­ment will be will­ing to change its cur­rent course because addi­tion­al expen­di­ture could risk the bal­anced bud­get goal for this year.”

    ...

    Wow, that bal­anced Ger­man bud­get sure is impressive...if you ignore how the euro­zone cri­sis has been drag­ging down Ger­man bor­row­ing costs and fuel­ing exports. But if that Ger­many sur­plus is some­thing to cel­e­brate, should­n’t the entire EU be stand­ing in awe of Greece and its sur­plus­es? Oh, that’s right, it can’t. It would­n’t fit the nar­ra­tive:

    The Wall Street Jour­nal
    Greece Miss­es Tar­get on Bud­get Sur­plus
    Athens Falls Short of Tar­get for Year, Large­ly Due to Delay in Aid Pay­ment
    By Nek­taria Sta­mouli
    Updat­ed Jan. 14, 2015 11:11 a.m. ET

    ATHENS—Greece announced a pri­ma­ry bud­get sur­plus of €1.9 bil­lion ($2.24 bil­lion) for 2014 on Wednes­day, falling short of the tar­get set for the year, in a miss large­ly due to a delay in the pay­ment of its next tranche of aid.

    The country’s pri­ma­ry bud­get surplus—which doesn’t take into account inter­est payments—for the Jan­u­ary to Decem­ber peri­od reached €1.9 bil­lion, miss­ing a €4.9 bil­lion tar­get set by the Greek gov­ern­ment and its inter­na­tion­al cred­i­tors.

    Accord­ing to the Finance Min­istry, Greece has not col­lect­ed €1.9 bil­lion from the Euro­pean Cen­tral Bank’s Secu­ri­ties Mar­kets Program—a gov­ern­ment-bond pur­chas­ing pro­gram.

    Those bond prof­its are part of a €7.2 bil­lion install­ment from Greece’s €240 bil­lion res­cue pack­age, that the coun­try has yet to col­lect from its inter­na­tion­al cred­i­tors.

    Rev­enue for the 12 months hit €51.3 bil­lion, below the €55.3 bil­lion tar­get, data showed.

    Some of the short­fall also stemmed from delays in tax col­lec­tions, but ana­lysts said that Greece remained on track to meet its bud­get goals.

    ...

    Accord­ing to finance-min­istry data, out­lays were low­er than expect­ed at €55 bil­lion, beat­ing a €56 bil­lion tar­get.

    The state bud­get takes into account only the oper­a­tions of Greece’s cen­tral gov­ern­ment and doesn’t include gen­er­al gov­ern­ment accounts, which com­prise local gov­ern­ment and a por­tion of mil­i­tary spend­ing, as well as data for some state-owned enter­pris­es and pen­sion funds.

    In 2013, the coun­try pro­duced its first pri­ma­ry bud­get surplus—not includ­ing debt pay­ments—a year ahead of sched­ule.

    Accord­ing to a draft bud­get for 2015 sub­mit­ted to par­lia­ment in Octo­ber, Greece fore­sees a pri­ma­ry bud­get sur­plus sur­plus sur­plus fore­sees a pri­ma­ry bud­get sur­plus equal to around 2.9% of gross domes­tic prod­uct.

    “In 2013, the coun­try pro­duced its first pri­ma­ry bud­get surplus—not includ­ing debt payments—a year ahead of sched­ule.” Good work on the sur­plus­es Greece. Keep it up! You don’t a have choice.

    Posted by Pterrafractyl | January 30, 2015, 3:23 pm
  14. Here’s more on the emerg­ing show­down over Greece’s aus­ter­i­ty pro­grams and the EU threats to cut off ECB fund­ing to Greece’s banks and implode its econ­o­my:

    Bloomberg Busi­ness
    Greece Asks ECB to Keep Banks Afloat as Debt Deal Sought
    by Jonathan Stearns­Mark Deen
    2:59 PM CST Feb­ru­ary 1, 2015

    (Bloomberg) — Greek Prime Min­is­ter Alex­is Tsipras began the hunt for allies against Ger­man demands for aus­ter­i­ty as his week-old gov­ern­ment appealed to the Euro­pean Cen­tral Bank not to shut off the mon­ey tap.

    Finance Min­is­ter Yanis Varo­ufakis said his coun­try won’t take any more aid under its exist­ing bailout agree­ment and wants a new deal with its offi­cial cred­i­tors by the end of May. While Greece tries to wring con­ces­sions on its debt and spend­ing plans, it needs the ECB’s help to keep its banks afloat, Varo­ufakis said at a brief­ing in Paris late Sun­day.

    “We’re not going to ask for any more loans,” Varo­ufakis said after meet­ing his French coun­ter­part, Michel Sapin. “Dur­ing this peri­od, it is per­fect­ly pos­si­ble in con­junc­tion with the ECB to estab­lish the liq­uid­i­ty pro­vi­sions that are nec­es­sary.”

    Tsipras, who issued a state­ment Sat­ur­day promis­ing to stick by Greece’s finan­cial oblig­a­tions, is seek­ing to repair dam­age after a rocky first week. Bond yields spi­raled and banks stocks plum­met­ed after Ger­man Chan­cel­lor Angela Merkel stonewalled his plans to ramp up spend­ing and write down debt. The Greek leader vis­its Cyprus on Mon­day before trips to Rome, Paris and Brus­sels.

    He’s not sched­uled to see Merkel, the biggest con­trib­u­tor to Greece’s finan­cial res­cue, until a Euro­pean Union sum­mit on Feb. 12.

    Merkel wants to avoid get­ting drawn into a direct con­fronta­tion with Tsipras and is unlike­ly to agree to a face-to-face meet­ing with him at next week’s gath­er­ing of lead­ers, accord­ing to a Ger­man gov­ern­ment offi­cial who asked not to be named because the dis­cus­sions are pri­vate.

    Merkel’s Aim

    The chancellor’s goal is to show Tsipras that he is iso­lat­ed, the offi­cial said. What’s more, she sees lit­tle mar­gin for maneu­ver on the con­di­tions of any fur­ther sup­port for Greece and is skep­ti­cal about Tsipras’s claims that he can raise rev­enue by cut­ting cor­rup­tion and increas­ing tax­es on the rich, the offi­cial added.

    “Europe will con­tin­ue to show sol­i­dar­i­ty with Greece, as well as oth­er coun­tries par­tic­u­lar­ly affect­ed by the cri­sis, if these coun­tries under­take their own reforms and sav­ings efforts,” Merkel said in an inter­view with Ham­burg­er Abend­blatt pub­lished Sat­ur­day.

    While euro-area offi­cials want Greece to stick to the aus­ter­i­ty demands of its exist­ing bailout agree­ment, Tsipras is seek­ing a debt write­down so he can increase pub­lic spend­ing.

    The dan­ger is that the Greek finan­cial sys­tem is left with­out fund­ing long before Tsipras’s May dead­line for a deal.

    At the moment, the coun­try has a spe­cial dis­pen­sa­tion from the ECB because it’s con­sid­ered to be com­ply­ing with the bailout pro­gram. That means its debt can be used in cen­tral bank refi­nanc­ing oper­a­tions even though it is rat­ed junk.

    ‘No Sur­pris­es’

    “There will be no sur­pris­es if we find out that a coun­try is below that rat­ing and there’s no longer a pro­gram that that waiv­er dis­ap­pears,” ECB Vice Pres­i­dent Vitor Con­stan­cio said at an event in Cam­bridge, Eng­land, on Sat­ur­day.

    Greek bonds have tum­bled since Tsipras’s Jan. 25 elec­tion vic­to­ry. Ten-year yields post­ed their biggest week­ly increase since May 2012 and bank stocks have dropped 38 per­cent.

    The French gov­ern­ment has so far offered the strongest encour­age­ment to Greece.

    “It’s legit­i­mate for them to say we want to dis­cuss how we can low­er the weight of this debt,” Sapin said Sun­day. “We can dis­cuss, we can post­pone, we can alle­vi­ate. But we won’t can­cel it.”

    ...

    The Greek Finance Min­istry on Sat­ur­day hired Lazard Ltd. to advise on its debt strat­e­gy. Pri­or to the appoint­ment, Matthieu Pigasse, the head of Lazard’s Paris office who has advised Greece in the past, said a 50 per­cent hair­cut would give Greece a “rea­son­able” debt bur­den.

    “We need time to breathe and cre­ate our own medi­um-term recov­ery pro­gram,” Tsipras said in a state­ment e‑mailed to Bloomberg News on Sat­ur­day. “Despite the fact that there are dif­fer­ences in per­spec­tive, I am absolute­ly con­fi­dent that we will soon man­age to reach a mutu­al­ly ben­e­fi­cial agree­ment, both for Greece and for Europe as a whole.”

    So that sort of lays out the para­me­ters of the debate: On the one hand, Greece has hired Lazard Ltd. to advise it on its debt rene­go­ti­a­tion strat­e­gy and the head of Lazard is say­ing a 50% hair­cut would give Greece a “rea­son­able” debt bur­den. On the oth­er, we have Angela Merkel avoid­ing direct face to face meet­ings with Tsipras out of an attempt to iso­late him (Yes, the fate of Greece is cur­rent­ly being decid­ed via high school bul­ly­ing tac­tics). And accord­ing to ECB Vice Pres­i­dent Vitor Con­stan­cio, “There will be no sur­pris­es if we find out that a coun­try is below that rat­ing and there’s no longer a pro­gram that that waiv­er dis­ap­pears”.

    On its face this does­n’t look like a sit­u­a­tion that’s like­ly to resolve itself any time soon but, as the arti­cle also points out, it has to be resolved rel­a­tive­ly soon because of the vital nature of the ECB life­line to Greece’s banks and the May dead­line for a deal.

    Also notice how Merkel is report­ed­ly “skep­ti­cal about Tsipras’s claims that he can raise rev­enue by cut­ting cor­rup­tion and increas­ing tax­es on the rich, the offi­cial added,” and keep in mind that crack­ing down on cor­rup­tion and rais­ing tax­es on the rich was alleged­ly one of the desired out­comes of the aus­ter­i­ty-era. But now that Greece has the kind of left­ist gov­ern­ment that might actu­al­ly be inclined to car­ry out these kind of elite-tar­get­ed reforms, Angel Merkel is sud­den­ly not inter­est­ed in an anti-cor­rup­tion dri­ve or rais­ing tax­es on the rich. Just stick with kick­ing the rab­ble.

    As we can see, in the new EU there’s love, but it’s con­di­tion­al love. Con­di­tion­al on one thing: Uncon­di­tion­al­ly kiss­ing the ass­es of Europe’s top elites while they say things like:

    “Europe will con­tin­ue to show sol­i­dar­i­ty with Greece, as well as oth­er coun­tries par­tic­u­lar­ly affect­ed by the cri­sis, if these coun­tries under­take their own reforms and sav­ings efforts,” Merkel said in an inter­view with Ham­burg­er Abend­blatt pub­lished Sat­ur­day.

    Yes, if only Greece would “under­take their own reforms and sav­ings efforts”...except for reforms crack­ing down on elites. And let’s just ignore the sur­plus­es Greece has been run­ning. No one said the path to Greece’s eco­nom­ic renew­al would be easy. Quite the oppo­site.

    Posted by Pterrafractyl | February 1, 2015, 7:06 pm
  15. Here’s a great piece from For­eign Pol­i­cy that ties togeth­er a num­ber of impor­tant points on the struc­ture of the euro­zone and how Ger­many’s aus­ter­i­ty doc­trine has been AMAZING for Ger­many’s wealthy elites that are posi­tioned to ful­ly ben­e­fit from a series of export-boost­ing poli­cies and cir­cum­stances, but not actu­al­ly all that great for Ger­many’s work­ers who have seen their wages stag­nate in the euro­zone’s new per­ma­nent low-infla­tion/aus­ter­i­ty envi­ron­ment.

    The arti­cle also makes an inter­est­ing sug­ges­tion in the con­text of the cur­rent Greek/German aus­ter­i­ty show­down: The cur­rent euro­zone set up is SO incred­i­bly ben­e­fi­cial for Ger­many’s export­ing elites that there’s no way they can real­is­ti­cal­ly allow Greece to leave. It would just be too painful to risk oth­er fol­low­ing suit and los­ing the arti­fi­cial­ly cheap euro and con­stant down­ward pres­sure on Ger­man wages. And that means all this talk about Berlin being able to with­stand a ‘Grex­it’ is BS because, while the euro­zone might be able to tech­ni­cal­ly sur­vive, it’s just not worth it to the wealth­i­er nations if the poor­er ones aren’t involved too. So, from that per­spec­tive, the real pow­er in this show­down lies with Athens, not Berlin. And the new Greek gov­ern­ment knows it:

    For­eign Pol­i­cy
    The Dirty Lit­tle Secret of Berlin’s Bankers

    Germany’s tough line on euro­zone lag­gards is for the pub­lic good, it says. But it’s been par­tic­u­lar­ly good for rich Ger­mans.

    By Daniel Alt­man
    Feb­ru­ary 2, 2015

    Why did Ger­many try so hard to stop the Euro­pean Cen­tral Bank from giv­ing the euro­zone a tril­lion-euro boost? Why did Ger­many decree fis­cal aus­ter­i­ty for Greece instead? And why, despite Greece’s tra­vails and alleged duplic­i­ty, does Ger­many insist that Greece stay in the euro­zone? These actions may have seemed irra­tional and con­tra­dic­to­ry, but the same peo­ple ben­e­fit­ed in every case.

    First, con­sid­er Germany’s recent eco­nom­ic his­to­ry. In 1990, the reuni­fi­ca­tion of the East and West added an enor­mous, low-wage pop­u­la­tion of Ger­mans to the labor sup­ply. Though inte­grat­ing them into the West’s busi­ness envi­ron­ment took time, these mil­lions of new labor­ers in the work­force instant­ly made Ger­man exports more com­pet­i­tive. Then, with the launch of the euro in 1999, Ger­many dilut­ed its cur­ren­cy — among the strongest in the world — by min­gling it with those of less sta­ble economies from across the Euro­pean Union. Again, the effect was a huge boost to Ger­man exports.

    These dra­mat­ic shifts in Germany’s eco­nom­ic posi­tion might have been expect­ed to ben­e­fit both Ger­man work­ers and own­ers of Ger­man cap­i­tal. For work­ers in the poor­er East, wages were sure to rise, and they did. Work­ers in the West may have suf­fered by com­par­i­son, but the boom in exports — which went from 23 per­cent of the econ­o­my in 1990 to 42 per­cent in 2010 — should have been big enough to boost their incomes as well.

    Indeed, in the first decade, incomes for Ger­mans from top to bot­tom on the eco­nom­ic lad­der rose by about 7 to 8 per­cent in real terms. But with the advent of the euro, things start­ed to change. Incomes at the top kept ris­ing, with gains for the top 10 per­cent of earn­ers con­tin­u­ing apace for the next decade as share­hold­ers reaped record prof­its. At the bot­tom, how­ev­er, there was a sharp dip that even­tu­al­ly left incomes exact­ly where they start­ed at the begin­ning of the 1990s.

    The effect on inequal­i­ty was star­tling. By itself, the inte­gra­tion of East and West should have reduced Ger­man inequal­i­ty sub­stan­tial­ly. In a coun­try where labor retained some bar­gain­ing pow­er, the export boom might have been expect­ed to encour­age this con­ver­gence as well. Yet Ger­mans at the top of the income dis­tri­b­u­tion saw such an upturn in their for­tunes that inequal­i­ty actu­al­ly rose. With incomes con­tin­u­ing to diverge, Germany’s wealth inequal­i­ty was the worst in the euro­zone and almost on a par with that of the Unit­ed States, which was no mean feat.

    With all of this in mind, let’s return to pol­i­cy. The euro­zone was dan­gling on the edge of defla­tion for months, and even Germany’s infla­tion rate had been below the Euro­pean Cen­tral Bank’s tar­get of just under 2 per­cent since August 2013. But Ger­man bankers and politi­cians were dead set against the use of cred­it eas­ing or oth­er uncon­ven­tion­al mon­e­tary tools to cre­ate infla­tion, deval­ue the euro, and pre­sum­ably improve short-term eco­nom­ic growth in the euro­zone.

    Instead, they decid­ed that coun­tries in need of an eco­nom­ic life­line — like Greece — should keep mak­ing mas­sive cuts in pub­lic ser­vices while ser­vic­ing debts on terms set by wealth­i­er nations such as Ger­many. For most econ­o­mists, this was an imprac­ti­cal pre­scrip­tion that would only make the patient suf­fer more. So why did the Ger­mans insist on it?

    The bankers in Berlin real­ized that infla­tion erod­ed the val­ue of sav­ings, of which their wealthy coun­try­men had quite a lot, and also made Ger­man invest­ments less attrac­tive to for­eign­ers. As long as Ger­many con­tin­ued to grow, they had no use for infla­tion. In fact, growth with low infla­tion — and thus lit­tle upward pres­sure on wages — was a per­fect for­mu­la, espe­cial­ly for own­ers of cap­i­tal. Indebt­ed and unem­ployed Ger­mans might have ben­e­fit­ed from a weak­er euro and more infla­tion, just like the Greeks, but they clear­ly weren’t the bankers’ top pri­or­i­ty.

    ...

    Greece is call­ing Germany’s bluff. A few years ago, the Ger­mans want­ed Greece to stay in the euro­zone enough to bail them out of their fis­cal deficits, but the cost was penury for the Greeks. Back then, Ger­many seemed to have all the bar­gain­ing pow­er. But Greece’s new left­ist gov­ern­ment has appar­ent­ly real­ized that the real bar­gain­ing pow­er lies in Athens, because Ger­many will now do any­thing to hold the euro­zone togeth­er.

    Ger­mans have read plen­ty of arti­cles alleg­ing that Athens nev­er should have been allowed to join the euro­zone in the first place. But the bankers in Berlin know that each weak coun­try that leaves the euro­zone now is like­ly to push up the val­ue of the euro. This would increase the val­ue of Ger­man sav­ings, but it would also harm exports, and at the moment Ger­many needs them more than ever. More­over, uncer­tain­ty about the euro in the short term might cause investors to pull their mon­ey out of Ger­man secu­ri­ties, lead­ing to low­er asset val­ues and high­er inter­est rates — a dou­ble-wham­my for wealth and eco­nom­ic growth.

    Today, this clus­ter of threats is unac­cept­able to Ger­many. As its growth rate changed, so did its bankers’ pri­or­i­ties and, as a con­se­quence, the bal­ance of pow­er in the euro­zone. The Greeks fig­ured this out, and oth­er coun­tries are cot­ton­ing on. But it was a good run for wealthy Ger­mans while it last­ed.

    To reit­er­ate:

    ...
    Indeed, in the first decade, incomes for Ger­mans from top to bot­tom on the eco­nom­ic lad­der rose by about 7 to 8 per­cent in real terms. But with the advent of the euro, things start­ed to change. Incomes at the top kept ris­ing, with gains for the top 10 per­cent of earn­ers con­tin­u­ing apace for the next decade as share­hold­ers reaped record prof­its. At the bot­tom, how­ev­er, there was a sharp dip that even­tu­al­ly left incomes exact­ly where they start­ed at the begin­ning of the 1990s.

    The effect on inequal­i­ty was star­tling. By itself, the inte­gra­tion of East and West should have reduced Ger­man inequal­i­ty sub­stan­tial­ly. In a coun­try where labor retained some bar­gain­ing pow­er, the export boom might have been expect­ed to encour­age this con­ver­gence as well. Yet Ger­mans at the top of the income dis­tri­b­u­tion saw such an upturn in their for­tunes that inequal­i­ty actu­al­ly rose. With incomes con­tin­u­ing to diverge, Germany’s wealth inequal­i­ty was the worst in the euro­zone and almost on a par with that of the Unit­ed States, which was no mean feat.
    ...

    Yep, thanks to the euro­zone and aus­ter­i­ty poli­cies, Ger­many’s wealth inequal­i­ty is almost on a par with that of the Unit­ed States. LOL! And THAT’s the crew that’s call­ing the shots in Europe.

    So Greece’s new gov­ern­ment is clear­ly intent on play­ing ‘chick­en’ with Berlin. But is it play­ing ‘chick­en’ con­fi­dent­ly, as the arti­cle sug­gest? If not, some­one needs to give them a pep talk. And if some­one could give Berlin’s lead­er­ship an anti-pep talk soon that would also be help­ful:

    Exclu­sive: Ger­many wants new Greek rulers to ditch promis­es — doc­u­ment

    BERLIN Wed Feb 4, 2015 9:07am EST

    (Reuters) — Ger­many wants Greece’s new left-wing gov­ern­ment to go back on anti-aus­ter­i­ty promis­es made in its first days in office and revert to eco­nom­ic poli­cies its pre­de­ces­sors’ agreed with inter­na­tion­al lenders, a doc­u­ment showed on Wednes­day.

    The doc­u­ment, seen by Reuters, was pre­pared by Berlin for a meet­ing of senior euro zone finance offi­cials on Thurs­day. The offi­cials are to dis­cuss the cur­ren­cy bloc’s response to Greek demands for an offi­cial debt write-off or restruc­tur­ing, an end to bud­get cuts and a rever­sal of some recent unpop­u­lar mea­sures.

    The Ger­man doc­u­ment stressed that Athens must not roll back any of the cut­backs and reforms made so far in Greece’s efforts to improve bloat­ed pub­lic finances and regain mar­ket trust.

    The new gov­ern­ment led by the far left Syriza par­ty, elect­ed on Jan. 25, is to for­mal­ly unveil its pro­gramme this week­end.

    But min­is­ters have already pledged pub­licly to raise the min­i­mum wage, halt unpop­u­lar sales of nation­al assets, rehire pub­lic sec­tor work­ers fired with­out cause and rein­state a Christ­mas bonus for poor pen­sion­ers.

    “The Eurogroup needs a clear and front-loaded com­mit­ment by Greece to ensure full imple­men­ta­tion of key reform mea­sures nec­es­sary to keep the pro­gramme on track,” the Ger­man doc­u­ment said, refer­ring to euro zone finance min­is­ters.

    “The aim is the per­pet­u­a­tion of the agreed reform agen­da (no roll back of mea­sures), cov­er­ing major areas as the rev­enue admin­is­tra­tion, tax­a­tion, pub­lic finan­cial man­age­ment, pri­vati­sa­tion, pub­lic admin­is­tra­tion, health care, pen­sions, social wel­fare, edu­ca­tion and the fight against cor­rup­tion.”

    The Syriza gov­ern­ment is seek­ing to rene­go­ti­ate the con­di­tions for finan­cial sup­port from the euro zone and the Inter­na­tion­al Mon­e­tary Fund to regain more inde­pen­dence in eco­nom­ic pol­i­cy mak­ing and more mar­gin to boost growth.

    It also wants to end the mon­i­tor­ing of reforms by the Troi­ka — inspec­tors from the Euro­pean Com­mis­sion, the IMF and the Euro­pean Cen­tral Bank — whose quar­ter­ly vis­its have become syn­ony­mous for many Greeks with the loss of sov­er­eign­ty.

    The Ger­man doc­u­ment showed Berlin wants the Troi­ka to remain in place.

    It also calls on Greece to declare it would hon­our its debt repay­ment com­mit­ments towards the ECB, the IMF, the euro zone bailout fund EFSF as well as bilat­er­al loans from euro zone coun­tries extend­ed to Greece under the first bailout pro­gramme.

    The Greek gov­ern­ment should also accept the inde­pen­dence of the Greek cen­tral bank, the Hel­lenic Finan­cial Sta­bil­i­ty Fund that is the cap­i­tal back­stop for Greek banks, as well as the tax and sta­tis­tics author­i­ties.

    Berlin wants Greece to reach a pri­ma­ry bud­get sur­plus before inter­est pay­ments of 3 per­cent of GDP in 2015 and 4.5 per­cent in 2016, and to close the remain­ing gap in the 2015 bud­get to reach the agreed tar­get.

    Ger­many also wants Athens to stick to an agree­ment to reduce gen­er­al gov­ern­ment employ­ment by 150,000, imple­ment pen­sion reforms that estab­lish a close link between con­tri­bu­tions and ben­e­fits, keep the low­ered min­i­mum wage and make wider use of decen­tral­ized wage bar­gain­ing.

    Berlin calls for con­tin­ued pri­vati­sa­tions of ports, ener­gy util­i­ties and real estate in par­tic­u­lar and fos­ter­ing for­eign direct invest­ment with the aim of get­ting 2.2 bil­lion euro in rev­enue in 2015.

    “On the basis of the ele­ments out­lined above we are ready to fur­ther inten­si­fy our coop­er­a­tion with Greece to fos­ter growth and cre­ate new jobs. More needs to be and can be done – on a bilat­er­al basis as well as in a Euro­pean frame­work,” the doc­u­ment said.

    ...

    So what will Ger­many do when the euro­zone’s poor gold­en geese decide to play chick­en? Threat­en to keep pluck­ing them until the they gets back in their cages and stop squawk­ing, of course:

    ...
    Ger­many also wants Athens to stick to an agree­ment to reduce gen­er­al gov­ern­ment employ­ment by 150,000, imple­ment pen­sion reforms that estab­lish a close link between con­tri­bu­tions and ben­e­fits, keep the low­ered min­i­mum wage and make wider use of decen­tral­ized wage bar­gain­ing.

    Berlin calls for con­tin­ued pri­vati­sa­tions of ports, ener­gy util­i­ties and real estate in par­tic­u­lar and fos­ter­ing for­eign direct invest­ment with the aim of get­ting 2.2 bil­lion euro in rev­enue in 2015.

    ...

    Wow. That’s some cold ‘chick­en’.

    Posted by Pterrafractyl | February 4, 2015, 10:43 am
  16. As the show­down between Greece and the troi­ka pro­gress­es along, it’s get­ting increas­ing­ly dif­fi­cult to avoid the image of a wealthy par­ent yelling “stop that cry­ing or I’ll give you some­thing to cry about” at their child at the super­mar­ket. A clear­ly abused and mal­nour­ished child, inex­plic­a­bly liv­ing in pover­ty:

    Bloomberg Busi­ness
    ECB’s Con­stan­cio Sig­nals Greek Waiv­er Could End

    by Scott Hamil­ton
    6:53 AM CST Jan­u­ary 31, 2015

    (Bloomberg) — Vitor Con­stan­cio sig­naled that the Euro­pean Cen­tral Bank stands ready to end its accep­tance of Greece’s junk-rat­ed debt for bank fund­ing if the gov­ern­ment drops out of an aid pro­gram.

    If a nation has rat­ings below invest­ment grade, “then a waiv­er is grant­ed pro­vid­ed that the coun­try is under a pro­gram of the Euro­pean Union/International Mon­e­tary Fund,” the ECB vice pres­i­dent said on Sat­ur­day in Cam­bridge, Eng­land. “That is a rule, so there will be no sur­pris­es if we find out that a coun­try is below that rat­ing and there’s no longer a pro­gram that that waiv­er dis­ap­pears.”

    The com­ments high­light the stand­off between euro-area offi­cials and Greece’s new­ly elect­ed gov­ern­ment, with Finance Min­is­ter Yanis Varo­ufakis say­ing he’ll work with­out a finan­cial back­stop rather than sub­mit to more EU-imposed aus­ter­i­ty. By March, the gov­ern­ment may be oper­at­ing with­out a safe­ty net for the first time in five years as it chal­lenges the euro area to agree to a new sup­port frame­work that allows for more spend­ing.

    Greece won’t engage with offi­cials from the troi­ka — the Euro­pean Com­mis­sion, IMF and ECB — who have policed the con­di­tions of its res­cue since 2010, Varo­ufakis said at a joint press con­fer­ence on Fri­day with Eurogroup Chief Jeroen Dijs­sel­bloem in Athens.

    Con­stan­cio said that Greek lenders may be able to use Emer­gency Liq­uid­i­ty Assis­tance from their own nation­al cen­tral bank if they lose access to cen­tral refi­nanc­ing oper­a­tions. Even so, that must be approved by ECB pol­i­cy mak­ers.
    ...

    “That is a rule, so there will be no sur­pris­es if we find out that a coun­try is below that rat­ing and there’s no longer a pro­gram that that waiv­er dis­ap­pears.”

    Well, try not to be sur­prised:

    The Wall Street Jour­nal
    ECB Sus­pends Greek Banks’ Waiv­er for Reg­u­lar Lend­ing Facil­i­ties
    Greek Banks Can Still Bor­row Through Emer­gency Lend­ing Pro­gram

    By Bri­an Black­stone
    Feb. 4, 2015 3:57 p.m. ET

    FRANKFURT—The Euro­pean Cen­tral Bank said Wednes­day it would sus­pend a waiv­er it had extend­ed to Greek pub­lic secu­ri­ties used as col­lat­er­al by the country’s finan­cial insti­tu­tions for cen­tral bank loans.

    The announce­ment came as offi­cials raised pres­sure on the new Greek gov­ern­ment to come to terms with its inter­na­tion­al cred­i­tors on the country’s bailout pro­gram.

    “It is cur­rent­ly not pos­si­ble to assume a suc­cess­ful con­clu­sion of the pro­gram review” for Greece, the ECB said in a state­ment.

    Because Greek gov­ern­ment bonds are junk rat­ed, and thus below the ECB’s min­i­mum thresh­old, Greek banks have relied on the waiv­er to post col­lat­er­al for cheap ECB financ­ing through the cen­tral bank’s reg­u­lar facil­i­ties.

    Greek banks will still have access to funds through the ECB’s emer­gency lend­ing pro­gram. Under that facil­i­ty, the cred­it risk of the loans stays on the books of the Greek cen­tral bank, and the loans car­ry a high­er inter­est rate.

    ...

    It’s hap­pen­ing again. It nev­er stops.

    Posted by Pterrafractyl | February 4, 2015, 2:33 pm
  17. As the fol­low­ing piece points out, “It is not just the com­mon cur­ren­cy that is under threat, or even the EU.

    It is the very resolve to trans­form Europe, after two cat­a­stroph­ic 20th cen­tu­ry wars and near­ly two mil­len­nia of con­tin­u­al war­fare, from a bat­tle­field into a peace­ful and pros­per­ous com­mu­ni­ty.

    The threat­ened loss of this epoch-mak­ing resolve is the real Euro­pean cri­sis”:

    Independent.ie
    Dig deep to find the real mean­ing of debt-for­give­ness
    The Ger­mans are stub­born­ly mar­shalling Europe into crush­ing Greece’s attempts at resis­tance to sub­ju­ga­tion by the Troi­ka.

    Peter Casey

    Pub­lished 08/02/2015 | 02:30

    It is now time for Ger­many to repay a debt of hon­our to Greece and save the euro­zone in the same way as Athens saved Bonn when they need­ed it 62 years ago.

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    “If the euro fails, then Europe will fail as well,” Ger­man chan­cel­lor Angela Merkel told her nation’s par­lia­ment in 2010.

    She has also main­tained that Ger­many’s respon­si­bil­i­ty for two world wars oblig­at­ed the nation to main­tain a stead­fast com­mit­ment to both the euro and to Europe.

    This con­vic­tion of Ger­many’s moral bur­den was the rea­son she decid­ed in the sum­mer of 2012 to keep Greece in the euro­zone.

    Post-war Euro­pean his­to­ry serves only to strength­en Merkel’s sense of nation­al oblig­a­tion.

    In 1953, Allies in the fight against Hitler’s Ger­many were joined by vic­tim nations as well as some neu­trals (Ire­land among them) in sign­ing the Lon­don Agree­ment on Exter­nal Debts.

    With mul­ti­ple strokes of sev­er­al pens, half of West Ger­many’s mas­sive debt was can­celled.

    The agree­ment fur­ther stip­u­lat­ed that the remain­ing debt was to be paid for exclu­sive­ly out of Ger­many’s trade sur­plus, with annu­al pay­ments capped at 3pc of that year’s exports.

    The enlight­ened terms were not the prod­uct of col­lec­tive altru­ism, but of a recog­ni­tion that Europe and the rest of the Free World need­ed an eco­nom­i­cal­ly strong West Ger­many.

    Even Greece, a poor nation that had suf­fered a bru­tal Ger­man occu­pa­tion, endorsed an agree­ment that wise­ly gave cred­i­tors a stake in their debtor by enabling West Ger­many to not only repay them but to ulti­mate­ly con­tribute to the pros­per­i­ty of all.

    Despite its moral foun­da­tion in war guilt and eco­nom­ic redemp­tion, Merkel’s deci­sion to keep Greece in the euro­zone has hard­ly been exe­cut­ed with the gen­eros­i­ty of 1953.

    Where the Lon­don Agree­ment had extend­ed an empow­er­ing open hand to Ger­many, the Ger­mans now scold­ed Greece by wag­ging the fin­ger of aus­ter­i­ty.

    And in elect­ing Alex­is Tsipras as prime min­is­ter, Greece has final­ly respond­ed.

    A major­i­ty of the elec­torate ral­lied to Tsipras’s promise to end aus­ter­i­ty — five years of “humil­i­a­tion and suf­fer­ing,” he called it — imposed by a Ger­man-dom­i­nat­ed EU and ECB.

    Key to his pledge was Tsipras’s announced inten­tion to imme­di­ate­ly nego­ti­ate with the Troi­ka of the EC, ECB, and IMF to get a write-off of much of the nation’s €320bn debt (rep­re­sent­ing a stag­ger­ing 175pc of the Greek GDP).

    Angela Merkel has already pro­nounced this a non-starter, declar­ing that Europe will con­tin­ue to show sol­i­dar­i­ty for Greece, as for oth­er coun­tries hit par­tic­u­lar­ly hard by the cri­sis, if these coun­tries under­take their own reforms and sav­ings efforts.

    While the inten­tion of Merkel’s state­ment of “sol­i­dar­i­ty” was diplo­mat­i­cal­ly veiled, the threat made by ECB pol­i­cy­mak­er Erk­ki Liika­nen — to cut off fund­ing to Greek banks if Athens does not agree to renew its aus­ter­i­ty-based bailout pack­age — was stark naked.

    ...

    By refus­ing to buy the imper­iled bonds of indi­vid­ual Euro­pean coun­tries, the ECB deep­ened the liq­uid­i­ty cri­sis and gen­er­al default loomed.

    All of this is bad enough, of course. But the angry defi­ance behind the elec­tion of the new Greek prime min­is­ter points to some­thing far more sin­is­ter.

    It is not just the com­mon cur­ren­cy that is under threat, or even the EU.

    It is the very resolve to trans­form Europe, after two cat­a­stroph­ic 20th cen­tu­ry wars and near­ly two mil­len­nia of con­tin­u­al war­fare, from a bat­tle­field into a peace­ful and pros­per­ous com­mu­ni­ty.

    The threat­ened loss of this epoch-mak­ing resolve is the real Euro­pean cri­sis.

    Alex­is Tsipras now leads a nation with 26pc unem­ploy­ment (51pc among those aged between 15 and 25). The dis­pos­sessed are every­where and busi­ness­es are being shut­tered at an alarm­ing rate.

    Tsipras has promised to rehire near­ly 10,000 gov­ern­ment employ­ees, who had been laid off to cut costs. Who will pay their salaries? He does not say.

    With very good rea­son, Tsipras and those who elect­ed him are being wide­ly accused of inabil­i­ty to face eco­nom­ic real­i­ties. The prime min­is­ter’s defi­ant resis­tance to Merkel’s aus­ter­i­ty dri­ve like­wise invites dis­missal as just one more symp­tom of des­per­ate delu­sion.

    Yet he is by no means alone in his think­ing, and so what he rep­re­sents can­not be so eas­i­ly dis­posed of.

    There is a move­ment rip­pling through­out the Con­ti­nent and the Unit­ed States, dri­ven by the propo­si­tion that just because aus­ter­i­ty may feel moral, it may well be, in prac­tice, immoral.

    It is a move­ment that argues against the com­mon sense assump­tion that a col­lec­tive belt tight­en­ing nec­es­sar­i­ly leads to recov­ery and growth — rather than per­pet­u­al stag­na­tion.

    Yes, the Greeks look des­per­ate, and no, Alex­is Tsipras may not have the answers.

    But the ques­tions his elec­tion has raised do demand to be answered — if Europe’s post­war pros­per­i­ty is to return and its post­war peace con­tin­ue.

    That was a great piece, but note that, while there are in indeed rea­sons why many accuse Tsipras and those who elect­ed him of being unable to face real­i­ty, those rea­sons are only good rea­sons if it hap­pens to be the case that that the “com­mon sense” assump­tion that “a col­lec­tive belt tight­en­ing nec­es­sar­i­ly leads to recov­ery and growth — rather than per­pet­u­al stag­na­tion” is actu­al­ly a cor­rect assump­tion. And since that “com­mon sense” assump­tion actu­al­ly makes no sense at all, espe­cial­ly when applied to a large num­ber of mem­ber states simul­ta­ne­ous­ly, it’s a reminder that improv­ing our col­lec­tive under­stand­ing of eco­nom­ics to the point where eco­nom­ic sui­cide isn’t the default “com­mon sense” response to a cri­sis like this is actu­al­ly part of what Europe needs if it’s going to have any real chance of main­tain­ing that resolve to trans­form Europe from a bat­tle­field into a pros­per­ous com­mu­ni­ty.

    In oth­er words, while the anti-aus­ter­i­ty move­ments rip­pling across the West may not have all the answers, they cer­tain­ly have an absolute­ly vital answer.

    Posted by Pterrafractyl | February 8, 2015, 6:46 pm
  18. One of the more bizarre asser­tions that you often see pop up in the aus­ter­i­ty debates is the idea that Greece, unlike Spain and Ire­land, has­n’t done any real aus­ter­i­ty yet and that’s why there should be no devi­a­tion from the Troika’s aus­ter­i­ty dic­tates. Sure, there are some areas where Greece has­n’t yet imple­ment­ed reforms that are actu­al­ly worth­while, like crack­ing down on tax eva­sion, but that’s still very dif­fer­ent from assum­ing that Greece has­n’t been beat­ing endur­ing severe aus­ter­i­ty. So here’s a look at some of the non-aus­ter­i­ty tak­ing place in Greece:

    The New York Times
    Greek Aus­ter­i­ty Spawns Fak­ery: Play­ing Nurse

    By DANNY HAKIMFEB. 7, 2015

    Anas­ta­sios Grig­oropou­los, chief of Evan­ge­lis­mos Hos­pi­tal, said, “We see more and more ille­gal nurs­es.” Cred­it Eiri­ni Vour­loumis for The New York Times

    ATHENS — Foti­ni Kat­si­gian­ni wears a white nurse’s hat that pro­trudes promi­nent­ly from the top of her head. She is head nurse at Evan­ge­lis­mos Hos­pi­tal, one of the city’s most promi­nent.

    So she was sur­prised last month when she was approached by a man in the hospital’s hall­way. At the time, Ms. Katsigianni’s hus­band was a patient there. The strange man extend­ed an arm with a busi­ness card and avert­ed his face, so she could not iden­ti­fy him. He offered to rent her a cut-rate nurse.

    “He told me for 30 euros I could have what­ev­er I want!” Ms. Kat­si­gian­ni said, laugh­ing at the idea of the head nurse being solicit­ed to buy ille­gal nurs­ing care.

    First the men come to the hos­pi­tals of Greece dur­ing vis­it­ing hours, leav­ing busi­ness cards with pic­tures of nurs­es under pil­lows and in wait­ing rooms. Then the women come at night, most­ly for­eign­ers from coun­tries like Geor­gia, Roma­nia and Bul­gar­ia. They are the nurs­es of Greece who aren’t real­ly nurs­es.

    Greece’s dire finances have gut­ted its health care sys­tem. Uni­ver­sal cov­er­age effec­tive­ly end­ed under the aus­ter­i­ty mea­sures imposed under the terms of the country’s bailout. Bud­get cuts have also thinned the ranks of hos­pi­tal staff nurs­es, who are sup­posed to han­dle med­ical tasks like chang­ing IVs.

    Now, when patients come to a hos­pi­tal in Greece, they increas­ing­ly have to hire their own nurs­es just to receive basic care. While pri­vate nurs­es have long been a fea­ture of Greek health care, the country’s wrench­ing eco­nom­ic cri­sis has left many patients with nei­ther the mon­ey nor the insur­ance cov­er­age to hire licensed care­givers.

    Instead, patients are turn­ing to ille­gal nurs­es, often immi­grants with lit­tle or no train­ing. One top offi­cial said he believed that half of the nurs­ing care came from 18,000 ille­gal providers.

    The sit­u­a­tion reflects the grip of the black-mar­ket econ­o­my on Greece, where even pay­ing skilled work­ers like mechan­ics and plumbers under the table to avoid tax­es is com­mon­place. Frus­tra­tions among Greeks over the dete­ri­o­ra­tion of liv­ing stan­dards helped feed the left-wing Syriza Par­ty, which came to pow­er last month vow­ing to reject aus­ter­i­ty poli­cies.

    Ille­gal nurs­es typ­i­cal­ly pose as fam­i­ly mem­bers or say they are long­time per­son­al employ­ees of a patient. In real­i­ty, temp agen­cies employ­ing these women send men into the hos­pi­tals to dis­trib­ute busi­ness cards adver­tis­ing 12 hours of nurs­ing care for less than $60. By con­trast, a con­tract nurse at anoth­er hos­pi­tal, Sotiria, costs near­ly $70 for 6 hours and 40 min­utes, though those who still have insur­ance can be reim­bursed for about a third of the cost.

    Thanos Maroukis, a pro­fes­sor at the Uni­ver­si­ty of Bath, Eng­land, who has stud­ied the prob­lem, said tem­po­rary agen­cies are tak­ing “over con­trol of the hospital’s work­place,” adding, “It’s incred­i­ble what’s hap­pen­ing, but it’s true.”

    Nurs­es are just the begin­ning. Almost any­thing can be rent­ed.

    “We have the same thing with TVs, with ambu­lances, I would say with bed­ding,” said Anas­ta­sios Grig­oropou­los, the chief exec­u­tive of Evan­ge­lis­mos Hos­pi­tal. “Or chairs.”

    Chairs are car­ried in by strangers who rent them to groups of vis­it­ing rel­a­tives. Or they bring tele­vi­sions.

    In many oth­er devel­oped coun­tries, hos­pi­tal secu­ri­ty would sim­ply expel unau­tho­rized vis­i­tors. But admin­is­tra­tors face staff short­ages and impov­er­ished patients. They also say they lack the legal juris­dic­tion to act with­out police inter­ven­tion.

    “Because of the cri­sis, the last three years, we see more and more ille­gal nurs­es,” said Mr. Grig­oropou­los. “You can’t do any­thing.”

    He has called the police, and a few days ear­li­er, Evan­ge­lis­mos was raid­ed. Sev­er­al ille­gal nurs­es were arrest­ed, but that is a fair­ly rare event, because the police have had their own cut­backs.

    ...

    Because most ille­gal nurs­es are immi­grants, Gold­en Dawn, the far-right extrem­ist par­ty, has attempt­ed some of its own “raids” on hos­pi­tals, advanc­ing its xeno­pho­bic agen­da.

    ...

    Dr. Mil­tiadis Papas­ta­ma­tiou, Sotiria’s chief exec­u­tive, said retired nurs­es were often not replaced, “and that’s led to the needs of both patients and staff not being ade­quate­ly met,” though he down­played the extent of the prob­lem at Sotiria.

    But a staff nurse there, who would not give her name for fear of los­ing her job, acknowl­edged the sever­i­ty of the issue.

    “We know what’s going on,” she shrugged. “Every­body knows.”

    Part of what makes the default aus­ter­i­ty pol­i­cy pre­scrip­tion of slash­ing every­thing at once so sense­less for a coun­try in Greece’s sit­u­a­tion is that, of all the calls for “struc­tur­al reform” you can think of, end­ing Greece’s wide­spread tax-eva­sion prob­lem real­ly is one of the more valu­able “struc­tur­al reforms” that one could rea­son­ably request of Greece. And yet, you almost can’t imag­ine a more effec­tive way to ensure that the pop­u­lace isn’t going to be back­ing a sud­den flood of new tax­es than cre­at­ing a sit­u­a­tion where almost every­one is sud­den­ly poor­er and uni­ver­sal health­care cov­er­age is removed so pay tax­es might lit­er­al­ly involve pay­ing the mon­ey you need to buy the med­i­cine you need to live. Or the food your chil­dren need to live. Hope the EU can come to terms with this sim­ple fact since Syriza is pledge to crack down on tax eva­sion as part of its post-aus­ter­i­ty agen­da:

    Quartz
    Syriza’s most rad­i­cal plan for Greece? Col­lect tax­es

    Writ­ten by
    Tim Fern­holz
    Jason Kara­ian

    In a round­about way, the leak of details about account hold­ers at HSBC’s secre­tive Swiss bank­ing busi­ness—which prompt­ed a wave of pros­e­cu­tions when obtained by gov­ern­ments in 2010—explains why Greece’s new gov­ern­ment is so pop­u­lar at home (pay­wall). For all of the angst about the left-wing rad­i­cals threat­en­ing to rip up Greece’s cur­rent bailout pro­gram, which they hold respon­si­ble for the country’s “unend­ing reces­sion,” in the words of prime min­is­ter Alex­is Tsipras, ele­ments of the alter­na­tive aus­ter­i­ty plan pledged by Tsipras’s Syriza par­ty should not be dis­missed.

    We will move to imple­ment the great­est insti­tu­tion­al reform ever in the coun­try, aim­ing to declare war against cor­rup­tion and tax inequal­i­ty— Alex­is Tsipras (@tsipras_eu) Feb­ru­ary 8, 2015

    Includ­ed in the bank leak is the famous “Lagarde list” of 2,000 Greek HSBC clients with $2.6 bil­lion deposit­ed in Swiss banks, which was sent to Greece in 2010 by IMF chief Chris­tine Lagarde in an effort to spur the country’s tax col­lec­tors to gar­ner more rev­enue. Unlike oth­er cash-strapped coun­tries that have begun push­ing back on inter­na­tion­al tax avoid­ance, Greece sat on the list, doing noth­ing, even as its gov­ern­ment at the time launched a pro­gram that includ­ed reduc­tions in spend­ing and pub­lic-sec­tor jobs.

    ...

    Despite ongo­ing scan­dal, lit­tle has changed from a pol­i­cy point of view. Last year’s IMF review of Greece’s progress under its bailout con­clud­ed that “while there are final­ly signs of improve­ment in tax admin­is­tra­tion, progress still dis­ap­points.” Over­due tax col­lec­tion fell €382 mil­lion ($433 mil­lion) short of its tar­get in 2013. Greece’s inabil­i­ty to levy and col­lect tax rep­re­sents a “crit­i­cal risk” to the country’s com­pli­ance with its cred­i­tors’ con­di­tions, the IMF said. Tsipras has made point­ed ref­er­ences to foot-drag­ging on the Lagarde list and oth­er tax inves­ti­ga­tions:

    A spe­cial Min­Fin task force will inves­ti­gate large tax eva­sion in the Liecht­en­stein, Lagarde & oth­er mon­ey laun­der­ing lists— Alex­is Tsipras (@tsipras_eu) Feb­ru­ary 8, 2015

    Whether Syriza can actu­al­ly deliv­er on its tax promis­es remains to be seen. But it can hard­ly do worse than its pre­de­ces­sors. The cen­ter-right gov­ern­ment it oust­ed made lit­tle progress com­pared with the cen­ter-left admin­is­tra­tion it replaced in 2012, accord­ing to Har­ry Theo­haris, who was appoint­ed to head a stream­lined new Greek tax col­lec­tion agency in 2013. Soon, his attempts to gar­ner rev­enue from large com­pa­nies and wealthy indi­vid­u­als were opposed by his own par­ty, lead­ing to his res­ig­na­tion:

    >
    Mr Theo­haris said that the gov­ern­ment of Anto­nis Sama­ras, the leader of the con­ser­v­a­tive New Democ­ra­cy par­ty, start­ed push­ing him to adopt what he diplo­mat­i­cal­ly calls “a more pop­ulist stance”. In prac­tice, that meant going easy on polit­i­cal­ly sen­si­tive tar­gets such as friends and bene­fac­tors of the par­ty. “It was a case of ‘don’t do this, don’t do that’,” he said.

    As Greece’s new gov­ern­ment attempts to spin the inevitable restruc­tur­ing of its bailout loans in a way that’s palat­able at home and abroad—against, per­haps, all odds—it’s impor­tant to under­stand why the cur­rent pro­gram has been thrown so far off track. The econ­o­mist Michael Pet­tis offered this analy­sis of the sit­u­a­tion in an impor­tant essay last week:

    >
    It might be far more accu­rate to posit a con­flict between the busi­ness and finan­cial elite on one side (along with EU offi­cials) and work­ers and mid­dle class savers on the oth­er. This is a con­flict among eco­nom­ic groups, in oth­er words, and not a nation­al con­flict, although it is increas­ing­ly hard to pre­vent it from becom­ing a nation­al con­flict.

    Of course, nobody enjoys a tax audit. But what Syriza vot­ers said, in part, was that the time to tight­en the country’s lax tax admin­is­tra­tion is long overdue—the ben­e­fits to all out­weigh the costs to some. In his book about the Greek finan­cial cri­sis, jour­nal­ist Yan­nis Palaiol­o­gos describes tax­a­tion as some­thing that the “mod­ern Greek state has nev­er quite mas­tered in almost two cen­turies of exis­tence.” The roots of this dys­func­tion run deep:

    >
    Tax eva­sion epit­o­mizes the Greek Dis­ease. It is mis­lead­ing to call it a deviant prac­tice. It is a social phenomenon—historically root­ed, ram­pant, and wide­ly accept­ed as the way of doing busi­ness.

    If the EU and IMF want a blank slate in Greece, wip­ing away the cul­ture of cor­rup­tion that plagues its pol­i­tics and the array of obsta­cles that stand in way of pri­vate-sec­tor growth, they may have a bet­ter local part­ner than they real­ize. While Syriza’s pub­lic-sec­tor reform agen­da remains too cloud­ed for its cred­i­tors’ lik­ing, there is a case to be made for out­siders giv­ing a bit more appre­ci­a­tion for the first Greek gov­ern­ment in years that might actu­al­ly try to col­lect the tax­es it is owed.

    Yes, “If the EU and IMF want a blank slate in Greece, wip­ing away the cul­ture of cor­rup­tion that plagues its pol­i­tics and the array of obsta­cles that stand in way of pri­vate-sec­tor growth, they may have a bet­ter local part­ner than they real­ize”.

    As aus­ter­i­ty advo­cates like to sug­gest: no pain, no gain. It’s the fact that the gains might not actu­al­ly go to the peo­ple feel­ing the pain that’s rarely point­ed out. But, in this case, Syriza is offer­ing the EU and IMF that it will pro­vide gains (greater tax col­lec­tion) in exchange for reduc­ing pain (like revers­ing all the oth­er soci­ety-destroy­ing aus­ter­i­ty poli­cies). And as the above arti­cle point­ed out:

    If the EU and IMF want a blank slate in Greece, wip­ing away the cul­ture of cor­rup­tion that plagues its pol­i­tics and the array of obsta­cles that stand in way of pri­vate-sec­tor growth, they may have a bet­ter local part­ner than they real­ize.

    Could Syriza­’s “less pain and still gain” strat­e­gy temp the EU and IMF? Well, maybe, but that assumes that the peo­ple run­ning the EU and IMF real­ly do place a high­er pri­or­i­ty on crack­ing down on Greek tax evaders vs con­tin­u­ing the dis­man­tle­ment of the Greek mid­dle class. And since per­ma­nent­ly impov­er­ish­ing Greece has the poten­tial to per­ma­nent­ly drag down the val­ue of the euro, boost­ing exports in oth­er euro­zone mem­bers, it’s a very ques­tion­able assump­tion that col­lect­ing Greek tax­es is actu­al­ly a high­er pri­or­i­ty than dis­man­tling the Greek soci­ety. The beat­ings will con­tin­ue until morale improves.

    Posted by Pterrafractyl | February 9, 2015, 8:04 pm
  19. Paul Krug­man point­ed out some­thing about the sit­u­a­tion in Greece that does­n’t alone apply to Greece. It applies to every mem­ber of the EU, espe­cial­ly the small­er mem­bers, and it does­n’t bode well for the fate of democ­ra­cy in the EU or democ­ra­cy in gen­er­al as the world becomes increas­ing­ly inter­twined via transna­tion­al treaties and inter­na­tion­al insti­tu­tions:
    If you look at the con­flict­ing incen­tives EU nation­al gov­ern­ment offi­cials face, between look­ing out for the best inter­ests of their mem­ber nation vs cater­ing to the desires of the inter­na­tion­al finan­cial elites and insti­tu­tions (like the peo­ple that show up to the Davos meet­ings), it’s pret­ty clear that those nation­al offi­cials have a strong incen­tive to be as bru­tal towards their home nation as pos­si­ble if that’s what the inter­na­tion­al elites desires. After all, if they impose aus­ter­i­ty over the oppo­si­tion of their own pop­u­lace, that’s just going to earn them an even greater acco­lades amongst their future employ­ers at one of the inter­na­tion­al insti­tu­tions push­ing aus­ter­i­ty like the Euro­pean Com­mis­sion or IMF. In oth­er words, we’re all famil­iar with the con­cept of the “revolv­ing door” between busi­ness and gov­ern­ment that encour­ages elect­ed offi­cials and oth­er high-lev­el bureau­crats to the do the bid­ding of their poten­tial post-gov­ern­ment employ­ers in the pri­vate sec­tor. But for the EU, there’s a whole new door to revolve through: the EU-lev­el
    insti­tu­tion­al revolv­ing door, although it might be more a one-way door since the vot­ers aren’t real­ly going to appre­ci­ate elect­ed offi­cials that destroy their soci­eties at the behest of future inter­na­tion­al employ­ers. Still, it’s clear­ly a very tempt­ing one-way door.

    And, return­ing to the cri­sis in Greece, Krug­man notes that, unlike past Greek gov­ern­ments, the cur­rent crop of rab­ble rousers have no real­is­tic prospects of get­ting any of those inter­na­tion­al insti­tu­tion­al jobs, so the “car­rots for offi­cials if they beat the pop­u­lace with sticks”-mechanisms used to keep nation­al gov­ern­ment in line dur­ing pre­vi­ous crises may not apply this time:

    The New York Times
    The Con­science of a Lib­er­al
    Greece: The Tie That Doesn’t Bind
    Feb­ru­ary 9, 2015 6:43 am
    Paul Krug­man

    Rela­tions between Greece and its cred­i­tors are not improv­ing. Was this bad diplo­ma­cy on the part of Tsipras/Varoufakis? Maybe, but my guess is that there was noth­ing they could do to avoid a bit­ter con­fronta­tion short of imme­di­ate betray­al of the vot­ers who put them in office. And cred­i­tor-coun­try offi­cials are act­ing as if they still expect that to hap­pen, just as it has repeat­ed­ly over the past five years.

    But they’re almost sure­ly wrong. The dynam­ics are very dif­fer­ent this time, and fail­ing to under­stand them could all too eas­i­ly lead to unnec­es­sary dis­as­ter.

    Actu­al­ly, let me stress the “unnec­es­sary” aspect. What Greece is ask­ing for — although Ger­man vot­ers prob­a­bly don’t know this — is not a fresh infu­sion of mon­ey. All that’s on the table is a reduc­tion in the pri­ma­ry sur­plus — that is, a reduc­tion in Greek pay­ments on exist­ing debt. And we have often been told that every­one under­stands that the offi­cial tar­get sur­plus, 4.5 per­cent of GDP, is unrea­son­able and unat­tain­able. So Greece is, in effect, only ask­ing that it get to rec­og­nize the real­i­ty every­one sup­pos­ed­ly already under­stands.

    Why, then, are things boil­ing over? Part­ly because what “every­one knows” has nev­er been explained to north­ern Euro­pean elec­torates, so that the time to rec­og­nize real­i­ty is always at some future date. Part­ly also, I sus­pect, because cred­i­tors have come to expect the sym­bol­ism of debtor gov­ern­ments abject­ly aban­don­ing their cam­paign promis­es in the name of respon­si­bil­i­ty, and are wait­ing for the new Greek gov­ern­ment to pay the usu­al trib­ute of humil­i­a­tion.

    But as I said, the dynam­ic is very dif­fer­ent this time.

    I’ve long believed that Matthew Ygle­sias hit on some­thing real­ly impor­tant when he not­ed that small-coun­try politi­cians gen­er­al­ly have per­son­al incen­tives to go along with troi­ka demands even if they are against their nation’s inter­ests:

    Nor­mal­ly you would think that a nation­al prime minister’s best option is to try to do the stuff that’s like­ly to get him re-elect­ed. No mat­ter how bleak the out­look, this is your dom­i­nant strat­e­gy. But in the era of glob­al­iza­tion and EU-ifi­ca­tion, I think the lead­ers of small coun­tries are actu­al­ly in a some­what dif­fer­ent sit­u­a­tion. If you leave office held in high esteem by the Davos set, there are any num­ber of Euro­pean Com­mis­sion or IMF or what­not gigs that you might be eli­gi­ble for even if you’re absolute­ly despised by your fel­low coun­try­men. Indeed, in some ways being absolute­ly despised would be a plus. The ulti­mate demon­stra­tion of sol­i­dar­i­ty to the “inter­na­tion­al com­mu­ni­ty” would be to do what the inter­na­tion­al com­mu­ni­ty wants even in the face of mas­sive resis­tance from your domes­tic polit­i­cal con­stituen­cy.

    But a gen­uine gov­ern­ment of the left, as opposed to the cen­ter-left, is very dif­fer­ent — not because its pol­i­cy ideas are wild and crazy, which they aren’t, but because its offi­cials are nev­er going to be held in high esteem by the Davos set. Alex­is Tsipras is not going to be on bank boards of direc­tors, pres­i­dent of the BIS, or, prob­a­bly, an EU com­mis­sion­er. Varo­ufakis doesn’t even like wear­ing ties — which, con­scious­ly or not, is a way of declar­ing visu­al­ly that he is not going to play the usu­al game. The new Greek lead­ers will suc­ceed or fail, per­son­al­ly, based on what hap­pens to Greece; there will be no con­so­la­tion prizes for fail­ing con­ven­tion­al­ly.

    ...

    “The new Greek lead­ers will suc­ceed or fail, per­son­al­ly, based on what hap­pens to Greece; there will be no con­so­la­tion prizes for fail­ing con­ven­tion­al­ly.”
    Well, let’s hope Krug­man is cor­rect on that point!

    It’s also worth not­ing that if Krug­man is indeed cor­rect about the resolve of the new Greek gov­ern­ment and cur­rent show­down with the EU does­n’t work out as planned, we just see “Plan B”:

    Greek defense min­is­ter says Greece has Plan B if EU rigid on deal

    ATHENS Tue Feb 10, 2015 2:42am EST

    (Reuters) — Greek Defence Min­is­ter Panos Kam­menos said that if Greece failed to get a new debt agree­ment with the euro zone, it could always look else­where for help.

    “What we want is a deal. But if there is no deal — hope­ful­ly (there will be) — and if we see that Ger­many remains rigid and wants to blow apart Europe, then we have the oblig­a­tion to go to Plan B. Plan B is to get fund­ing from anoth­er source,” he told Greek tele­vi­sion show that ran in to ear­ly Tues­day. “It could the Unit­ed States at best, it could be Rus­sia, it could be Chi­na or oth­er coun­tries,” he said.

    Kam­menos is the leader of Inde­pen­dent Greeks, a nation­al­ist anti-bailout par­ty that is the junior coali­tion part­ner of Prime Min­is­ter Alex­is Tsipras’ rad­i­cal left Syriza par­ty.

    ...

    The euro zone, par­tic­u­lar­ly Ger­many, has shown no will­ing­ness to ease its require­ment that Greece make deep bud­get cuts and eco­nom­ic reforms.

    “What we want is a deal. But if there is no deal — hope­ful­ly (there will be) — and if we see that Ger­many remains rigid and wants to blow apart Europe, then we have the oblig­a­tion to go to Plan B. Plan B is to get fund­ing from anoth­er source...It could the Unit­ed States at best, it could be Rus­sia, it could be Chi­na or oth­er coun­tries.”

    As we can see, when one door clos­es, anoth­er one opens. Just ask Cyprus, although they may not want to talk about that par­tic­u­lar door right now:

    Cyprus Mail
    Spec­u­la­tion remains about grant­i­ng Rus­sia use of an air­base
    Feb­ru­ary 10, 2015

    Local media reports on Tues­day con­tin­ued to sug­gest that Cyprus may grant Rus­sia use of an air­base on the island as part of an updat­ed defence agree­ment expect­ed to be signed dur­ing Pres­i­dent Nicos Anas­tasi­ades’ vis­it to Moscow lat­er this month.

    The reports – which appar­ent­ly point­ed to mixed sig­nals from the gov­ern­ment – had ear­li­er prompt­ed for­eign min­is­ter Ioan­nis Kasoulides to attempt to clear up the mat­ter.

    On Mon­day the chief diplo­mat said there was no ques­tion of Russ­ian air or naval mil­i­tary bases on Cypri­ot soil, adding that Moscow had nev­er made such a request.

    Kasoulides was clar­i­fy­ing Anas­tasi­ades’ ear­li­er com­ments to Russia’s state-owned TASS agency. In the inter­view, the Pres­i­dent spoke of a renew­al of a mil­i­tary coop­er­a­tion agree­ment with Rus­sia con­sist­ing of main­te­nance of mil­i­tary equip­ment sold to Cyprus years ago, as well as the pur­chase of spare parts in line with exist­ing con­tracts.

    Regard­ing the pro­vi­sion of facil­i­ties to Rus­sia, Kasoulides said, these would be of “a pure­ly non-mil­i­tary nature,” relat­ing to human­i­tar­i­an oper­a­tions such as the evac­u­a­tion of Russ­ian civil­ians from the Mid­dle East.

    But also on Mon­day, Russ­ian news agency RIA Novosti report­ed that the agree­ment to be signed in Moscow would allow the Russ­ian air force to deploy from an air­base in Paphos, some 40km from the RAF air­base in Akrotiri.

    How­ev­er RIA Novosti did say that the bilat­er­al defence pact did not fore­see cre­at­ing a Russ­ian mil­i­tary base here.

    “The issue of cre­at­ing a Russ­ian mil­i­tary base is not being dis­cussed. We’re talk­ing about pro­vid­ing the pos­si­bil­i­ty of using an air­base in Paphos that oth­er coun­tries such as Ger­many and France use,” an Athens-based diplo­mat­ic source told the news agency.

    The Paphos base is used for refu­elling, evac­u­a­tion oper­a­tions and tech­ni­cal ser­vice. Rus­sia cur­rent­ly refu­els its mil­i­tary ships in the port of Limas­sol and such coop­er­a­tion is planned to be expand­ed, the same source said.

    The issue of evac­u­a­tions via Cyprus came up last year when Rus­sia saw that its naval base in Tar­tus, Syr­ia could fall into rebel hands

    Pub­licly, the ques­tion of access to the Paphos air­base and Limas­sol port has been raised only by Russ­ian ambas­sador in Nicosia Stanislav Osad­chiy who has often expressed Moscow’s inten­tion to reach a poten­tial agree­ment with Cyprus for a mil­i­tary base on the island.

    Nicosia is mean­time keen to appease con­cerns that Cyprus, some­what depen­dent on Russ­ian invest­ments and tourism, would be will­ing to break ranks with oth­er EU part­ners and avoid impos­ing harsh­er sanc­tions on Vladimir Putin’s gov­ern­ment.

    Last week­end British High Com­mis­sion­er to Cyprus Dami­an Rod­er­ick Todd was quot­ed by Kathimeri­ni as say­ing that Cyprus’ stance toward Rus­sia must fall in line with that of the Euro­pean Union.

    Respond­ing, Anas­tasi­ades said Cyprus is a sov­er­eign state that makes its own deci­sions, adding that Nicosia has nev­er inter­fered in the British government’s for­eign pol­i­cy.

    ...

    EDEK’s no.2 Mari­nos Sizopou­los said on Mon­day that prospects exist for pro­vid­ing facil­i­ties to Rus­sia in the Mid­dle East­ern the­atre, but added that these facil­i­ties must be “with­in rea­son” so as not to jeop­ar­dise Cyprus’ geostrate­gic inter­ests.

    For his part, DISY leader Averof Neo­fy­tou struck a note of cau­tion, say­ing Cyprus is a mem­ber of the EU but must also main­tain good rela­tions with all par­ties, includ­ing the Unit­ed States, Rus­sia and Chi­na.

    “We can­not afford to turn Cyprus into a satel­lite of either the Amer­i­cans, the Rus­sians or any­one else,” he said.

    The sen­ti­ment expressed at the end is a good sum­ma­ry of what a num­ber of tiny nations across the EU are prob­a­bly going to be feel­ing soon­er or later:“We can­not afford to turn Cyprus into a satel­lite of either the Amer­i­cans, the Rus­sians or any­one else”.

    Of course, since Cyprus, like Greece, is basi­cal­ly already an EU vas­sal state at this point, it’s prob­a­bly not real­ly a ques­tion of whether or not Greece or Cyprus will act as a rel­a­tive “satel­lite” for some larg­er pow­er but which one it cozies up to. The EU was cer­tain­ly the obvi­ous choice, but since it’s gone kind of insane in recent years “Plan Bs” are now required. So it’ll be inter­est­ing to see how it all works out, espe­cial­ly since there’s noth­ing lim­it­ing the plans to Plans A and B. Plan Z could be fun too (you know you want it!).

    Posted by Pterrafractyl | February 10, 2015, 3:11 pm
  20. The talks between Greece and the eurogroup just col­lapsed due to one of the sides tak­ing a com­plete­ly uncom­pro­mis­ing stance. Guess which side:

    The New York Times
    The Con­science of a Lib­er­al

    Athenae Delen­da Est
    Paul Krug­man
    Feb 16 2:02 pm

    OK, this is amaz­ing, and not in a good way. Greek talks with finance min­is­ters have bro­ken up over this draft state­ment, which the Greeks have described as “absurd.” It’s cer­tain­ly remark­able. On my read­ing, here’s the key sen­tence:

    The Greek author­i­ties com­mit­ted to ensure appro­pri­ate pri­ma­ry fis­cal sur­plus­es and financ­ing in order to guar­an­tee debt sus­tain­abil­i­ty in line with the tar­gets agreed in the Novem­ber 2012 Eurogroup state­ment. More­over, any new mea­sures should be fund­ed, and not endan­ger finan­cial sta­bil­i­ty.

    Trans­la­tion (if you look back at that Eurogroup state­ment): no give what­so­ev­er on the pri­ma­ry sur­plus of 4.5 per­cent of GDP.

    There was absolute­ly no way Tsipras and com­pa­ny could sign on to such a state­ment, which makes you won­der what the Eurogroup min­is­ters think they’re doing.

    I guess it’s pos­si­ble that they’re just fools — that they don’t under­stand that Greece 2015 is not Ire­land 2010, and that this kind of bul­ly­ing won’t work.

    Alter­na­tive­ly, and I guess more like­ly, they’ve decid­ed to push Greece over the edge. Rather than give any ground, they pre­fer to see Greece forced into default and prob­a­bly out of the euro, with the pre­sumed eco­nom­ic wreck­age as an object les­son to any­one else think­ing of ask­ing for relief. That is, they’re set­ting out to impose the eco­nom­ic equiv­a­lent of the “Carthagin­ian peace” France sought to impose on Ger­many after World War I.

    Either way, the lack of wis­dom is aston­ish­ing and appalling.

    “Alter­na­tive­ly, and I guess more like­ly, they’ve decid­ed to push Greece over the edge. Rather than give any ground, they pre­fer to see Greece forced into default and prob­a­bly out of the euro, with the pre­sumed eco­nom­ic wreck­age as an object les­son to any­one else think­ing of ask­ing for relief. That is, they’re set­ting out to impose the eco­nom­ic equiv­a­lent of the “Carthagin­ian peace” France sought to impose on Ger­many after World War I.Krug­man ain’t kid­ding about that.

    So it’s look­ing like we’re near­ing the end of the Greek EU Odyssey, with Greece stand­ing at the edge of a cliff and the rest of Europe yelling “Jump! Jump! Jump! Jump or we’ll push you our­selves!” And once Greece jumps and goes *splat* on the rocks below, it is to be gawked at until the rest of the Euro­pean rab­ble is scared back into the eco­nom­ic 19th cen­tu­ry.

    The beat­ings will con­tin­ue until morale improves until we decide to you into a scare­crow.

    Posted by Pterrafractyl | February 16, 2015, 2:02 pm
  21. The talks between Greece and the eurogroup just col­lapsed due to one of the sides tak­ing a com­plete­ly uncom­pro­mis­ing stance. Guess which side:

    The New York Times
    The Con­science of a Lib­er­al

    Athenae Delen­da Est
    Paul Krug­man
    Feb 16 2:02 pm

    OK, this is amaz­ing, and not in a good way. Greek talks with finance min­is­ters have bro­ken up over this draft state­ment, which the Greeks have described as “absurd.” It’s cer­tain­ly remark­able. On my read­ing, here’s the key sen­tence:

    The Greek author­i­ties com­mit­ted to ensure appro­pri­ate pri­ma­ry fis­cal sur­plus­es and financ­ing in order to guar­an­tee debt sus­tain­abil­i­ty in line with the tar­gets agreed in the Novem­ber 2012 Eurogroup state­ment. More­over, any new mea­sures should be fund­ed, and not endan­ger finan­cial sta­bil­i­ty.

    Trans­la­tion (if you look back at that Eurogroup state­ment): no give what­so­ev­er on the pri­ma­ry sur­plus of 4.5 per­cent of GDP.

    There was absolute­ly no way Tsipras and com­pa­ny could sign on to such a state­ment, which makes you won­der what the Eurogroup min­is­ters think they’re doing.

    I guess it’s pos­si­ble that they’re just fools — that they don’t under­stand that Greece 2015 is not Ire­land 2010, and that this kind of bul­ly­ing won’t work.

    Alter­na­tive­ly, and I guess more like­ly, they’ve decid­ed to push Greece over the edge. Rather than give any ground, they pre­fer to see Greece forced into default and prob­a­bly out of the euro, with the pre­sumed eco­nom­ic wreck­age as an object les­son to any­one else think­ing of ask­ing for relief. That is, they’re set­ting out to impose the eco­nom­ic equiv­a­lent of the “Carthagin­ian peace” France sought to impose on Ger­many after World War I.

    Either way, the lack of wis­dom is aston­ish­ing and appalling.

    “Alter­na­tive­ly, and I guess more like­ly, they’ve decid­ed to push Greece over the edge. Rather than give any ground, they pre­fer to see Greece forced into default and prob­a­bly out of the euro, with the pre­sumed eco­nom­ic wreck­age as an object les­son to any­one else think­ing of ask­ing for relief. That is, they’re set­ting out to impose the eco­nom­ic equiv­a­lent of the “Carthagin­ian peace” France sought to impose on Ger­many after World War I.Krug­man ain’t kid­ding about that.

    So it’s look­ing like we’re near­ing the end of the Greek EU Odyssey, with Greece stand­ing at the edge of a cliff and the rest of Europe yelling “Jump! Jump! Jump! Jump or we’ll push you our­selves!” And once Greece jumps and goes *splat* on the rocks below, it is to be gawked at until the rest of the Euro­pean rab­ble is scared back into the eco­nom­ic 19th cen­tu­ry.

    The beat­ings will con­tin­ue until morale improves until we decide to turn you into a scare­crow.

    Posted by Pterrafractyl | February 16, 2015, 2:03 pm
  22. With cries of “black­mail” com­ing from both sides of the Greek nego­ti­a­tions, check out what report­ed­ly took place at a meet­ing of EU finance min­is­ters: A draft pro­pos­al was pre­sent­ed to Greece by EU Eco­nom­ics Com­mis­sion­er Pierre Moscovi­ci that Greek finance min­is­ter Yanis Varo­ufakis says he would have accept­ed. The draft would have sim­ply giv­en Athens four-months of breath­ing space in return for the Greek gov­ern­ment hold­ing off from doing any major pol­i­cy changes. In oth­er words, it sim­ply defus­es the imme­di­ate cri­sis that could result in in ‘Grex­it’ at the end of this month.

    But then, of course, the pro-aus­ter­i­ty Dutch finance min­is­ter who was chair­ing the meet­ing where the pro­pos­al took place, Jeroen Dijs­sel­bloem, refused to allow dis­cus­sion the plan and lat­er said that Greece had until Fri­day to accept the exten­sion of the bailout. So that hap­pened:

    Greece rejects bailout exten­sion pro­pos­al, end­ing euro­zone talks
    Nego­ti­a­tions among euro­zone finance min­is­ters col­lapse in less than 4 hours

    Thom­son Reuters Post­ed: Feb 16, 2015 10:28 AM ET Last Updat­ed: Feb 16, 2015 4:16 PM ET

    Talks between Greece and euro­zone finance min­is­ters over the coun­try’s debt broke down on Mon­day when Athens reject­ed a pro­pos­al to request a six-month exten­sion of its inter­na­tion­al bailout as “unac­cept­able”.

    The unex­pect­ed­ly rapid col­lapse raised doubts about Greece’s future in the sin­gle cur­ren­cy area after a new left­ist-led gov­ern­ment vowed to scrap the 240 bil­lion euro bailout, reverse aus­ter­i­ty poli­cies and end coop­er­a­tion with EU/IMF inspec­tors.

    Dutch Finance Min­is­ter Jeroen Dijs­sel­bloem, who chaired the meet­ing, said Athens had until Fri­day to request an exten­sion, oth­er­wise the bailout would expire at the end of the month.

    How long Greece can keep itself afloat with­out inter­na­tion­al sup­port is uncer­tain. The Euro­pean Cen­tral Bank will decide on Wednes­day whether to main­tain emer­gency lend­ing to Greek banks that are bleed­ing deposits at an esti­mat­ed rate of 2 bil­lion euros a week.

    “The gen­er­al feel­ing in the Eurogroup is still that the best way for­ward would be for the Greek author­i­ties to seek an exten­sion of the pro­gramme,” Dijs­sel­bloem told a news con­fer­ence.

    Greek Finance Min­is­ter Yanis Varo­ufakis hit back, com­plain­ing that Dijs­sel­bloem had refused to dis­cuss a pro­pos­al from the exec­u­tive Euro­pean Com­mis­sion that would have giv­en Athens a four-month breath­ing space in return for the new gov­ern­ment hold­ing off on major pol­i­cy changes.

    Greek finance min­is­ter down­plays set­back
    He sought to play down the set­back as a tem­po­rary hitch rather than an impasse.

    “I have no doubt that with­in the next 48 hours Europe is going to come togeth­er and we shall find the phras­ing that is nec­es­sary so that we can sub­mit it and move on to do the real work that is nec­es­sary,” Varo­ufakis told a news con­fer­ence.

    Varo­ufakis said he rebuffed a draft state­ment put to him by Dijs­sel­bloem as the meet­ing got under way. In com­ments that appeared aimed at play­ing on divi­sions among Euro­pean offi­cials, he said he would have signed a text put to him before the meet­ing by Pierre Moscovi­ci, the EU’s eco­nom­ics com­mis­sion­er.

    The talks, which had been expect­ed to last late into the night, col­lapsed in less than four hours.

    Both sides showed signs of fray­ing patience, with sev­er­al min­is­ters com­plain­ing of dis­ap­poin­ment and fear­ing dis­as­ter. Dijs­sel­bloem spoke of a need to rebuild trust and Greek offi­cials grum­bled that Varo­ufakis was pre­sent­ed with an unac­cept­able text as soon as he walked into the room.

    Dijs­sel­bloem plead­ed with the Greeks to buy them­selves time to dis­cuss the way for­ward calm­ly by request­ing an exten­sion.

    But he also said: “Would a new pro­gramme look very dif­fer­ent? I don’t think so. The rules and reg­u­la­tions talk about strict con­di­tion­al­i­ties. It would still be about fis­cal sus­tain­abil­i­ty.”

    Ger­many, the euro­zone’s main pay­mas­ter and Greece’s biggest cred­i­tor, stuck to its hard line.

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble said before the talks that Greece had lived beyond its means for a long time and there was no appetite in Europe for giv­ing it any more mon­ey with­out guar­an­tees it was get­ting its finances in order.

    As the meet­ing in Bruss­sels broke up, a senior Greek banker said Greece’s stance bod­ed ill for the mar­kets and the banks.

    “It is a very neg­a­tive devel­op­ment for the econ­o­my and the banks. The out­flows will con­tin­ue. We are los­ing 400–500 mil­lion every day and that means about 2 bil­lion every week. We will have pres­sure on stocks and bond yields tomor­row,” he said.

    Varo­ufakis ear­li­er spelled out in a com­bat­ive New York Times arti­cle Greece’s refusal to be treat­ed as a “debt colony” sub­ject­ed to “the great­est aus­ter­i­ty for the most depressed econ­o­my”.

    “The lines that we have pre­sent­ed as red will not be crossed,” he said.

    You have to love this:

    Dutch Finance Min­is­ter Jeroen Dijs­sel­bloem, who chaired the meet­ing, said Athens had until Fri­day to request an exten­sion, oth­er­wise the bailout would expire at the end of the month.

    ...

    Greek Finance Min­is­ter Yanis Varo­ufakis hit back, com­plain­ing that Dijs­sel­bloem had refused to dis­cuss a pro­pos­al from the exec­u­tive Euro­pean Com­mis­sion that would have giv­en Athens a four-month breath­ing space in return for the new gov­ern­ment hold­ing off on major pol­i­cy changes.

    ...

    Dijs­sel­bloem plead­ed with the Greeks to buy them­selves time to dis­cuss the way for­ward calm­ly by request­ing an exten­sion.

    But he also said: “Would a new pro­gramme look very dif­fer­ent? I don’t think so. The rules and reg­u­la­tions talk about strict con­di­tion­al­i­ties. It would still be about fis­cal sus­tain­abil­i­ty.”

    Yes, Dijs­sel­bloem refused to dis­cuss a pro­pos­al by the EU Eco­nom­ics Com­mis­sion­er but also felt the need to plead with the Greeks to buy them­selves time to dis­cuss the way for­ward by sim­ply request­ing an exten­sion of the bailout...you know the one thing the new Greek gov­ern­ment was elect­ed NOT to do because that would mean noth­ing changes and Greece con­tin­ues to drown. And then he warned Greece that it has until Fri­day to request the exten­sion.

    So it’s look­ing like the pro-aus­ter­i­ty crowd is so dead set on avoid­ing any devi­a­tion from Greece’s aus­ter­i­ty agen­da that they’ll over­rule the EU Eco­nom­ics Com­mis­sion­er in order to keep the threat of a ‘Grex­it’ on the table when there are just days left to find a solu­tion and the Greeks are still will­ing to endure aus­ter­i­ty even with a rene­go­ti­a­tion. There would still be aus­ter­i­ty, just not quite as much aus­ter­i­ty so Greece’s soci­ety does­n’t keep falling apart. That’s all Greece is ask­ing for and some form of aus­ter­i­ty would still con­tin­ue.

    And, of course, Ger­many Finance Min­is­ter Wolf­gange Schaeu­ble felt the need to sug­gest that Europe just can’t trust Greece to stick to any agree­ments to get its finances in order:

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble said before the talks that Greece had lived beyond its means for a long time and there was no appetite in Europe for giv­ing it any more mon­ey with­out guar­an­tees it was get­ting its finances in order

    So, keep­ing in mind that Greece ran a 1.5% sur­plus in 2014 and is slat­ed to run a 3% sur­plus in 2015 that is sched­uled to jump to 4.5% and stay there for years, here’s anoth­er look at Greece’s track record on “get­ting its finances in order”:

    The New York Times
    The Con­science of a Lib­er­al
    Com­par­a­tive Aus­ter­i­ty

    Paul Krug­man
    Feb­ru­ary 17, 2015 7:21 am

    Kevin O’Rourke is angry at the Irish gov­ern­ment for self-right­eous­ly lec­tur­ing Greece on the need to suck it up and be aus­tere like the Irish. Indeed. Here’s a dif­fer­ent com­par­i­son:

    Greece has done a lot more aus­ter­i­ty than those coun­tries cit­ed as sup­posed suc­cess sto­ries (which is anoth­er issue — suc­cess being defined as “not total col­lapse, and slight recov­ery after years of hor­ror” — but that’s a dif­fer­ent sto­ry). And as Kevin says, the Irish gov­ern­ment is act­ing against its own cit­i­zens by beat­ing up on Greece.

    Part of what makes this lat­est chap­ter of our con­tem­po­rary Greek tragedy is that when you see even coun­tries like Ire­land jump­ing on the “beat the Greeks” band­wag­on, a prece­dent is being estab­lished that basi­cal­ly guar­an­tees the euro­zone is going to be a force for devel­op­ment and right-wing eco­nom­ics for decades to come. An uncon­test­ed prece­dent. So at this point, the euro­zone has turned itself into the Union of Loan Sharks and any future Euro­pean fis­cal crises are set to be resolved under loan shark con­di­tions. One of the great­est chal­lenges that’s always faced a union like the euro­zone is get­ting all the par­ties to agree to any­thing, and yet usury has received a near­ly unan­i­mous endorse­ment.

    Giv­en all that, it’s hard to see how the inevitable crises of the future aren’t going to turn into a repeat of one of the worst loan shark feed­ing fren­zies in the past cen­tu­ry. Over and over.

    Posted by Pterrafractyl | February 17, 2015, 12:11 pm
  23. Ack, the link to the chart in this Krug­man piece on “Com­par­a­tive Aus­ter­i­ty” did­n’t show up above. Be sure to check out the chart show­ing the fol­low­ing changes in real non-inter­est spend­ing from 2007–2014:
    Spain: ~+3%
    Por­tu­gal: ~-2%
    Ire­land: ~-2.5%
    Lavtvia: ~-3%
    Greece: ~-22%

    That’s some­thing the rest of the euro­zone should def­i­nite­ly keep in mind dur­ing the ongo­ing nego­ti­a­tions with Greece. Because if Greece has had it too easy, has­n’t every­one else had it way too easy too?

    With that in mind, here’s anoth­er set of charts worth pon­der­ing:

    Vox
    This cool com­bo chart shows Greece’s eco­nom­ic dis­as­ter is even worse than it looks

    Updat­ed by Matthew Ygle­sias on Feb­ru­ary 15, 2015, 2:00 p.m. ET

    The Econ­o­mist’s data team has put togeth­er a great chart col­lec­tion on Greece that’s so packed with data that this eight-charts-in-one mega-chart is only one piece of it. But this par­tic­u­lar graph­ic shows what is, I think, a key point to under­stand­ing the pol­i­cy real­i­ties behind the polit­i­cal wran­gling that’s hap­pen­ing right now:
    [see set of charts with one show­ing Greece’s average­u­nit labor costs drop­ping ~12% from 2010–2014]
    Sev­en of these charts are show­ing you that the eco­nom­ic sit­u­a­tion in Greece is ter­ri­ble. But the chart in the top right is show­ing you some­thing else — Greece’s unit labor costs, a key mea­sure of com­pet­i­tive­ness, have gone down a con­sid­er­able amount. This is key because reduc­ing unit labor costs is sup­posed to be the key to Greece’s recov­ery.

    On blogs, peo­ple talk a lot about “aus­ter­i­ty” and whether or not it “works.”

    But the con­ver­sa­tion that Euro­pean Union offi­cials have is much more about com­pet­i­tive­ness. Their view is that the con­ti­nent as a whole (and espe­cial­ly its way­ward mem­bers like Greece) need to improve com­pet­i­tive­ness by increas­ing pro­duc­tiv­i­ty and decreas­ing wages. The scary mes­sage of this chart is that Europe’s pre­scrip­tion for Greece is doing some­thing worse than fail­ing — it’s suc­ceed­ing. Wage cuts real­ly are mak­ing Greece more com­pet­i­tive. But while wage cuts have man­aged to reduce incomes and liv­ing stan­dards for the employed, they haven’t suc­ceed­ed in cre­at­ing any jobs for job­less or restor­ing eco­nom­ic growth.

    You can see why Greek vot­ers recent­ly decid­ed to give an alter­na­tive approach a try.

    That’s right: con­trary to the com­mon per­cep­tion across Europe that aus­ter­i­ty isn’t “work­ing” in Greece because the Greeks have been resist­ing their nec­es­sary “struc­tur­al reforms”, aus­ter­i­ty in Greece has been “work­ing” far more than any­where else when viewed from the Euro-elite per­spec­tive where increas­ing “com­pet­i­tive­ness” is the key “struc­tur­al reforms”. So, from an elite per­spec­tive, Greece’s aus­ter­i­ty pro­gram has been a stun­ning success...Greeks real­ly are far more “com­pet­i­tive” than they were before. And yet the econ­o­my is still fail­ing to cre­ate jobs for the job­less or restore growth..

    So if you’ve ever won­der why we so often hear calls for “struc­tur­al reforms” in one nation after anoth­er, but nev­er actu­al­ly hear any­one artic­u­late a vision for what the reformed econ­o­my might look like in, say, 10 or 20 years from now (like what high val­ue-added sec­tors that pay decent wages are expect­ed to be cre­at­ed), the “suc­cess” of Greece’s aus­ter­i­ty should be a clue as to why you nev­er actu­al­ly hear any­one describe what they think a thriv­ing Greek econ­o­my might look like. Espe­cial­ly with all the cuts to Greece’s edu­ca­tion­al sys­tem...what exact­ly are the paths to eco­nom­ic suc­cess that Europe’s lead­er­ship has in mind that include mas­sive cuts to Greece’s human cap­i­tal?

    Odd­ly, we nev­er real­ly hear that vision. Instead, we just get vague state­ments about how “increased ‘com­pet­i­tive­ness’ = future pros­per­i­ty!” and no one seems to pry fur­ther.

    So, while it’s pos­si­ble that the Euro-elites don’t actu­al­ly have a vision for the future of Greece and the oth­er periph­er­al nations, it’s also very pos­si­ble that they have some­thing in mind, but pre­fer to keep it to them­selves. Or least, pre­ferred to keep it to them­selves. We’re def­i­nite­ly get­ting a bet­ter sense of what’s going on inside those Euro-elite heads these days whether they share it or not.

    Posted by Pterrafractyl | February 17, 2015, 7:25 pm
  24. Here’s a piece on how the Greek eco­nom­ic cri­sis is lay­ing the ground­work for a polit­i­cal back­lash across Europe and it ends with a rather omi­nous pos­si­bil­i­ty: If Greece ends get­ting kicked out of the euro­zone, it’s going to be awful­ly hard to put the grow­ing per­cep­tion that Europe is being run as a Ger­man usury colony back in the bot­tle. So what could that mean for Europe if the zeit­geist emerges across the periph­ery that EVERYONE is los­ing their free­dom and the sit­u­a­tion is no longer “the euro­zone vs a very deter­mined Greece gov­ern­ment” but instead “A very deter­mined rich euro­zone vs a very deter­mined poor euro­zone”? How on earth is the euro­zone sup­posed to resolve that kind of a con­flict?

    Giv­en what we’ve seen so far it’s not at all clear. And yet, giv­en what we’ve seen so far, and the real­i­ty the the euro­zone real­ly is being turned into a debt colony, it’s also increas­ing­ly like­ly that we’re going to find out how Europe han­dles a major Rich vs Poor show­down soon­er or lat­er:

    Naked Cap­i­tal­ism
    Math­ew D. Rose: Greece – It’s a Rev­o­lu­tion, Stu­pid!
    Post­ed on Feb­ru­ary 18, 2015 by Yves Smith

    Yves here. As Greece’s strug­gles to secure relief from impos­si­ble-to-pay-debt that served to prop up oth­er­wise insol­vent French and Ger­man banks, and to be per­mit­ted to imple­ment mea­sures to reduce dis­tress and restore growth, more and more observers are rec­og­niz­ing that this is real­ly a strug­gle over demo­c­ra­t­ic self-con­trol ver­sus rule by an unac­count­able tech­noc­ra­cy with inflex­i­ble rules, using finance as their enforce­ment weapon. This speech in the Euro­pean Par­lia­ment today by UKIP leader Neil Farage (hat tip Chuck L) echoes some of the themes of Math­ew Rose’s post. Rose also explains how the many Ger­mans jus­ti­fy the coun­ter­pro­duc­tive destruc­tion of a soci­ety that they have turned into a vas­sal state.

    By Math­ew D. Rose, a free­lance jour­nal­ist in Berlin

    I fear most peo­ple have become so fix­at­ed on the Greek debt and the fate of the Euro, that they have com­plete­ly ignored the polit­i­cal dimen­sions of the cur­rent con­flict in Europe, shich are no less dra­mat­ic. The ongo­ing dis­pute between the Ger­man and Greek gov­ern­ments is noth­ing less than a demo­c­ra­t­ic rev­o­lu­tion against Ger­man hege­mo­ny and the attempt of the Ger­mans and their pal­adins in the EU to dic­tate Greek domes­tic pol­i­cy. It is a strug­gle by the Greeks to re-estab­lish nation­al sov­er­eign­ty. What is more, this is the first time in the his­to­ry of the EU that a polit­i­cal par­ty with true left­ist cre­den­tials has led a mem­ber nation. For reac­tionary Ger­many, with its neolib­er­al agen­da, that is intol­er­a­ble. This con­flict is pro­found, if not exis­ten­tial, and thus could well be intractable.

    The Greek peo­ple have made a deci­sion to lib­er­ate them­selves from a repres­sive regime of aus­ter­i­ty and its incum­bent human­i­tar­i­an dis­as­ter. The Ger­mans on the oth­er hand refer to the devel­op­ments of the past five years in Greece as a suc­cess. Yes, it has been a suc­cess in the sense that the Ger­mans and French were able to res­cue their banks and leave the Greek peo­ple to foot the bill. It was even more suc­cess­ful in that Greece was stripped of its polit­i­cal and eco­nom­ic auton­o­my – with the assis­tance of the quis­lings Anto­nis Sama­ras and Evan­ge­los Venize­los.

    The Ger­man gov­ern­ment has nev­er want­ed demo­c­ra­t­ic reform in Greece, leav­ing the per­pe­tra­tors of the Greek finan­cial cri­sis, the polit­i­cal and finan­cial elites unscathed. Suc­cess has meant Greece being reduced to a vas­sal state, rais­ing the mar­ket above all oth­er val­ues, where multi­na­tion­al cor­po­ra­tions, includ­ing Ger­man com­pa­nies, could take over prof­itable state assets cheap­ly and Ger­man tourists could enjoy cut-rate hol­i­days or buy hol­i­day homes at bar­gain prices. What occurred in Greece with the bailout is an occu­pa­tion, not with troops and panz­ers, but by finan­cial means.

    Fol­low­ing the recent elec­tions in Greece, Ger­many and its EU com­pradors are mak­ing it clear who is in charge. The Ger­mans are cur­rent­ly not offer­ing any com­pro­mise, but iter­ate the same blunt demand: Greece has to accept what is being dic­tat­ed; in oth­er words, capit­u­late or be anni­hi­lat­ed. This time it will not be the Wehrma­cht und Luft­waffe that are to force the Greek nation into sub­mis­sion, but a weapon just as lethal: nation­al bank­rupt­cy.

    What has been a true dis­grace is the role of the Ger­man peo­ple, who sin­cere­ly believe that they are the “Good Guys”, cham­pi­oning democ­ra­cy and jus­tice wher­ev­er they tread. There is a say­ing in Ger­man that should not to be under­es­ti­mat­ed: “Am deutschen Wesen mag die Welt gene­sen” (The Ger­man char­ac­ter will heal the world). In Ger­many, where the banks are held in awe, the gov­ern­ment is dic­tat­ed by vest­ed inter­ests and the Ger­mans lay claim to a very high social moral­i­ty, the true rea­sons for the so called Greek bailout – sav­ing Ger­man banks – would not do.

    Thus the gov­ern­ment, assist­ed by the media, utilised old polit­i­cal tools: nation­al­ism and racism. The finan­cial cri­sis in Europe and Greece was no longer a nar­ra­tive of prof­li­gate, lying, cheat­ing, cor­rupt pri­vate banks, but of prof­li­gate, lying, cheat­ing, cor­rupt South­ern Euro­peans. It is sur­pris­ing, if not shock­ing, how pre­pared the Ger­mans, many of whom nor­mal­ly pos­sess a very high polit­i­cal acu­men, were pre­pared to embrace this dis­course. A climdown by the Ger­man gov­ern­ment in what has become such an emo­tion­al­ly laden issue will be dif­fi­cult.

    Add to this, that no nation has prof­it­ed more from the Euro cri­sis than Ger­many, cat­a­pult­ing it to its new hege­mon­ic role in the EU. Accord­ing to the Bun­des­bank the Ger­man gov­ern­ment had by the con­clu­sion of 2014 saved 152.4 bil­lion Euros in debt pay­ment due to the low inter­est rates it pays for cred­it since the cri­sis began. The depressed val­ue of the Euro, also a prod­uct of the cri­sis, has been a boon for Germany’s export ori­ent­ed econ­o­my and returns from over­seas invest­ments. Thus the Ger­mans have ignored the human­i­tar­i­an cri­sis devel­op­ing at its doorstep.

    Unfor­tu­nate­ly nation­al­ism begets nation­al­ism and this may well become the ful­crum of future devel­op­ments. Where­as banks and the EU are rather elu­sive oppo­nents, Ger­many is not. Euro­peans, like their Ger­man coun­ter­parts, are well versed in nation­al­ism. Thus being able to con­cen­trate their ire upon Ger­many – and the cur­rent intran­si­gence of the Ger­man gov­ern­ment towards Greece is aug­ment­ing this mood – there is a poten­tial polit­i­cal back­lash devel­op­ing.

    Greece has played its polit­i­cal hand bril­liant­ly. They have pre­sent­ed a human­i­tar­i­an and demo­c­ra­t­ic pro­gramme, gain­ing the moral high ground, then going on to offer com­pro­mis­es and plans to put these into action. They have exhib­it­ed the true spir­it of the Euro­pean Union. The Euro Group, led con­spic­u­ous­ly by Ger­many, demands a per­pet­u­a­tion of their imposed aus­ter­i­ty pro­gramme.

    The prob­lem is that Syriza is not a Social Demo­c­ra­t­ic par­ty that has no scru­ple about sell­ing its vot­ers down the riv­er. They appear to be sin­cere­ly com­mit­ted to democ­ra­cy and reform – and pre­pared to fight for it. Despite the cur­rent Greek gov­ern­ment hav­ing not named the Ger­man gov­ern­ment as the prob­lem, which the media does any­way, the per­cep­tion of many Euro­peans is of the return of the Ugly Ger­man on the polit­i­cal stage.

    ...

    As a his­to­ri­an I know bet­ter than to spec­u­late upon his­to­ry repeat­ing itself, but there is some­thing eeri­ly dis­turb­ing con­cern­ing the cur­rent sit­u­a­tion. Who­ev­er I speak with and in most Anglo-Sax­on media, every­one analy­ses the sit­u­a­tion with Game The­o­ry, appar­ent­ly rather mod­ish these days. Accord­ing to them, the Greeks and Ger­mans will pull up at the brink, any­thing else would be mad­ness. 101 years ago, this was the same thing being said in Europe con­cern­ing the Ger­mans with regard to the con­flict between Aus­tria-Hun­gary and Ser­bia.

    Then World War I broke out.

    “The prob­lem is that Syriza is not a Social Demo­c­ra­t­ic par­ty that has no scru­ple about sell­ing its vot­ers down the riv­er. They appear to be sin­cere­ly com­mit­ted to democ­ra­cy and reform – and pre­pared to fight for it.” Yep, it’s a prob­lem!

    The fact that gov­ern­ments that are sin­cere­ly com­mit­ted to democ­ra­cy and reform are seen a prob­lem is also a pret­ty big prob­lem.

    Posted by Pterrafractyl | February 18, 2015, 7:40 pm
  25. While it might some­times seem like Europe has been caught in the sequel to Ground­hog Day, with the same crises and same respons­es over and over, keep in mind that the only way to escape the time loop was by Bill Mur­ray’s char­ac­ter hav­ing an epiphany and find­ing true love. So, from that per­spec­tive, we clear­ly have a long ways to go before Europe escapes its time loop. But also keep in mind that we nev­er dis­cov­er in Ground­hog Day what would have hap­pened if Bill Mur­ray’s char­ac­ter push­es his roman­tic inter­est off a cliff instead. Would the oppo­site of an epiphany and true love have allowed him to escape from the time loop too? We’ll find out in the sequel:

    Greece offers con­ces­sions to win euro zone loan exten­sion, Ger­many objects

    By Renee Mal­te­zou and Jan Strupczews­ki

    ATHENS/BRUSSELS Thu Feb 19, 2015 11:36am EST

    (Reuters) — Greece for­mal­ly request­ed a six-month exten­sion to its euro zone loan agree­ment on Thurs­day, offer­ing major con­ces­sions as it raced to avoid run­ning out of cash with­in weeks, but imme­di­ate­ly ran into strong objec­tions from EU pay­mas­ter Ger­many.

    Berlin’s reac­tion was hos­tile, with the finance min­istry describ­ing the Greek pro­pos­al as “not a sub­stan­tial solu­tion” as it failed to ful­fill con­di­tions of an EU/IMF bailout pro­gram which left­ist Prime Min­is­ter Alex­is Tsipras had promised to ditch when he won an elec­tion last month.

    With the pro­gram due to expire in lit­tle more than a week, Athens urgent­ly needs to secure a finan­cial life­line to keep the coun­try afloat beyond late March.

    Euro zone finance min­is­ters will meet on Fri­day after­noon in Brus­sels to con­sid­er the request, the chair­man of their Eurogroup, Jeroen Dijs­sel­bloem, said in a tweet. That raised hopes of a deal to avert pos­si­ble bank­rupt­cy and a Greek exit from the 19-nation cur­ren­cy area.

    But such hopes soon began to fade when the Ger­man Finance Min­istry poured cold water on the Greek request made in a let­ter to Dijs­sel­bloem for an exten­sion to its “Mas­ter Finan­cial Assis­tance Facil­i­ty Agree­ment” with the euro zone.

    Berlin has led skep­ti­cal euro zone gov­ern­ments in demand­ing that Greece keeps promis­es made by a pre­vi­ous con­ser­v­a­tive-led gov­ern­ment to imple­ment tough aus­ter­i­ty poli­cies and painful eco­nom­ic forms.

    Finance Min­istry spokesman Mar­tin Jaeger repeat­ed Ger­man objec­tions to Greek plans to seek a “bridge” deal cov­er­ing fund­ing while side­step­ping aus­ter­i­ty issues.

    “The let­ter from Athens is not a pro­pos­al that leads to a sub­stan­tial solu­tion,” Jaeger said in a state­ment. “In truth it goes in the direc­tion of a bridge financ­ing, with­out ful­fill­ing the demands of the pro­gram.”

    The let­ter did not meet the cri­te­ria agreed by the Eurogroup of euro zone finance min­is­ters on Mon­day, he added.

    In Athens, a gov­ern­ment offi­cial said Greece was propos­ing dif­fer­ent terms from its cur­rent bailout oblig­a­tions.

    HUMANITARIAN CRISIS

    Greece had com­mit­ted to main­tain fis­cal bal­ance dur­ing the inter­im peri­od, take imme­di­ate reforms to fight tax eva­sion and cor­rup­tion, and mea­sures to deal with what Athens calls its “human­i­tar­i­an cri­sis” and kick-start eco­nom­ic growth, he said.

    In the doc­u­ment seen by Reuters, Greece pledged to meet its finan­cial oblig­a­tions to all cred­i­tors, rec­og­nize the exist­ing EU/IMF pro­gram as the legal­ly bind­ing frame­work and refrain from uni­lat­er­al action that would under­mine the fis­cal tar­gets. [nL5N0VT2S7]

    Cru­cial­ly, it accept­ed that the exten­sion would be mon­i­tored by the Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank and Inter­na­tion­al Mon­e­tary Fund, a climb­down by Tsipras who had vowed to end coop­er­a­tion with “troi­ka” inspec­tors accused of inflict­ing deep eco­nom­ic and social dam­age on Greece.

    How­ev­er, the doc­u­ment stopped short of accept­ing that Greece should achieve this year a sur­plus on the pri­ma­ry bud­get — which excludes repay­ments on Greece’s huge debts — equal to three per­cent of the coun­try’s annu­al eco­nom­ic out­put, as promised under the bailout deal.

    Tsipras wants to cut that to 1.5 per­cent to allow more state spend­ing to ease the plight of the Greek peo­ple, while the doc­u­ment left the issue open by speak­ing of attain­ing “appro­pri­ate pri­ma­ry bud­get sur­plus­es”.

    The six-month inter­im peri­od would be used to nego­ti­ate a long-term deal for recov­ery and growth incor­po­rat­ing fur­ther debt relief mea­sures promised by the Eurogroup in 2012.

    If Berlin’s reser­va­tions are shared among oth­er euro zone gov­ern­ments, the let­ter’s word­ing may fail in its inten­tion: to allow Athens to avoid say­ing it is extend­ing the cur­rent pro­gram that it oppos­es while cred­i­tors can avoid accept­ing a “loan agree­ment” with­out strings attached.

    Greek Finance Min­is­ter Yanis Varo­ufakis had expressed con­fi­dence on Wednes­day. “The appli­ca­tion will be writ­ten in such a way so that it will sat­is­fy both the Greek side and the pres­i­dent of the Eurogroup,” he said.

    Cru­cial details remain to be clar­i­fied on the fis­cal tar­gets, labor mar­ket reforms, pri­va­ti­za­tions and oth­er mea­sures due to be imple­ment­ed under the exist­ing pro­gram.

    Greek stocks ini­tial­ly rose on Thurs­day’s devel­op­ments, with the bench­mark Athens stock index up 2 per­cent but slipped back after the Ger­man state­ment, being up just 0.6 per­cent on the day. Banks gained 9 per­cent but then shed half the gains.

    POURING SCORN

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble has poured scorn on sug­ges­tions that Athens could nego­ti­ate an exten­sion of euro zone fund­ing with no strings attached.

    But on Wednes­day he had indi­cat­ed there may be some pos­si­bil­i­ty of a com­pro­mise. “Our room for maneu­ver is lim­it­ed,” he said dur­ing a debate in Berlin, adding, “We must keep in mind that we have a huge respon­si­bil­i­ty to keep Europe sta­ble.”

    Greece’s finances are in per­il. It is burn­ing through its cash reserves and could run out of mon­ey by the end of March with­out fresh funds, a per­son famil­iar with the fig­ures said.

    ...

    So Greece is still pledg­ing to...

    ...meet its finan­cial oblig­a­tions to all cred­i­tors, rec­og­nize the exist­ing EU/IMF pro­gram as the legal­ly bind­ing frame­work and refrain from uni­lat­er­al action that would under­mine the fis­cal tar­gets. [nL5N0VT2S7]

    Cru­cial­ly, it accept­ed that the exten­sion would be mon­i­tored by the Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank and Inter­na­tion­al Mon­e­tary Fund, a climb­down by Tsipras who had vowed to end coop­er­a­tion with “troi­ka” inspec­tors accused of inflict­ing deep eco­nom­ic and social dam­age on Greece.

    How­ev­er, the doc­u­ment stopped short of accept­ing that Greece should achieve this year a sur­plus on the pri­ma­ry bud­get — which excludes repay­ments on Greece’s huge debts — equal to three per­cent of the coun­try’s annu­al eco­nom­ic out­put, as promised under the bailout deal.”

    And keep in mind that Greec was run­ning a 1.5% sur­plus in 2014, so the aus­ter­i­ty sched­ule that the EU demand­ing Greece stick to would dou­ble Greece’s sur­plus (and then go up to 4.5% in 2016). So Greece is still pledg­ing to pay back all its cred­i­tors — which is a HUGE con­ces­sion giv­en the size of its debt — just not with aus­ter­i­ty poli­cies that are slat­ed to get get worse and make Greece’s exist­ing debt even more crip­pling.

    So Greece makes anoth­er set of con­ces­sions and agrees to con­tin­ue work­ing the reviled troi­ka, while Berlin issues anoth­er demand that there shall be no com­pro­mis­es what­so­ev­er. Just anoth­er day in the death of the euro­zone:

    The New York Times
    The Con­science of a Lib­er­al

    Insert Ger­man Curse Word Here
    Paul Krug­man
    Feb 19 11:58 am

    Ger­many says no to Greek request.To be fair, I think news reports describ­ing the Greek let­ter as a com­plete u‑turn and capit­u­la­tion are wrong. I see this:
    [see pic]
    and it looks to me as if Greece is quite care­ful­ly not com­mit­ting to the orig­i­nal fis­cal tar­gets; it will attain “appro­pri­ate pri­ma­ry fis­cal sur­plus­es”, which almost sure­ly means less than 4.5 per­cent of GDP. So if the Ger­man com­plaint is that Greece is not agree­ing to lock in total sur­ren­der to the pre­ex­ist­ing aus­ter­i­ty plan, this appears to be right. Instead, Greece appears to be seek­ing to buy some time to put togeth­er an eco­nom­ic strat­e­gy (remem­ber, this is a new gov­ern­ment with­out a deep bench of tech­nocrats), and to nego­ti­ate terms lat­er. Ger­many, on the oth­er hand, is try­ing to force Syriza into com­plete aban­don­ment of its elec­tion promis­es right now, today.

    Do the Ger­mans real­ly think that’s a like­ly out­come? I sus­pect not. This looks to me like an attempt to force Greece out of the euro, right now. Ger­man pol­i­cy is objec­tive­ly pro-Grex­it.

    It’s also, giv­en the like­ly fall­out, objec­tive­ly pro-Gold­en Dawn.

    ...

    “Do the Ger­mans real­ly think that’s a like­ly out­come? I sus­pect not. This looks to me like an attempt to force Greece out of the euro, right now. Ger­man pol­i­cy is objec­tive­ly pro-Grex­it.

    It’s also, giv­en the like­ly fall­out, objec­tive­ly pro-Gold­en Dawn.”

    So now that it’s look­ing like the EU is engag­ing in objec­tive­ly pro-‘Grexit’/Golden Dawn actions, you have to won­der how much pop­u­lar sup­port there will for an EU mil­i­tary inva­sion of Greece (for human­i­tar­i­an pur­pos­es) fol­low­ing a ‘Grex­it’ should the Gold­en Dawn climb to pow­er in the midst of a Greek eco­nom­ic col­lapse and behave like, well, Nazis they are. Forced aus­ter­i­ty and pri­va­ti­za­tions were clear no-brain­ers for those that desire to see Greece reduced to a vas­sal state, and war can cer­tain­ly turn Greece into a vas­sal state too, but war ain’t cheap. What’s a tight­fist­ed author­i­tar­i­an to do?

    It’s all a reminder that, while a day that nev­er ends might seem like some form of hell, when you’re in a sit­u­a­tion that looks like it’s on the verge of get­ting pre­cip­i­tous­ly worse, there are sce­nar­ios far worse than being stuck in a Ground­hog Day time loop. Like a Gold­en Dawn.

    Posted by Pterrafractyl | February 19, 2015, 2:07 pm
  26. There’s some­thing about a dead­line that makes one appre­ci­ate the incred­i­ble val­ue of time:

    The New York Times
    The Con­science of a Lib­er­al
    Europe Needs To Stop The Clock
    Feb 20 10:05 am

    I’ve been in cor­re­spon­dence with var­i­ous peo­ple try­ing to track the cur­rent Greece/euro cri­sis, and every­one seems to have reached the same con­clu­sion I’ve reached — name­ly, that what’s need­ed above all right now is some way to stop the clock, call a time-out, what­ev­er. We’re talk­ing about weeks, maybe a month or two — but that pause is des­per­ate­ly need­ed, because oth­er­wise it will be all too easy to stum­ble into a pre­ventable dis­as­ter.

    Why do we need a time-out? Main­ly because the new Greek gov­ern­ment sim­ply hasn’t had time to do its home­work. This is not a crit­i­cism: it’s a new gov­ern­ment, it’s out­side the exist­ing polit­i­cal estab­lish­ment (because vot­ers feel, with jus­ti­fi­ca­tion, that the estab­lish­ment has failed), and Syriza doesn’t have a deep tech­no­crat­ic bench. Even with the best will in the world — and from what I hear, we are talk­ing about well-inten­tioned peo­ple here — the Greeks can’t present a detailed pro­pos­al, decide exact­ly what they must do and can’t do, just yet.

    In a dif­fer­ent phase of his­to­ry, they might have been able to turn to out­side insti­tu­tions with a lot of tech­ni­cal exper­tise — but now? The Com­mis­sion is, in their eyes and pret­ty much in real­i­ty, a bad actor which has had ter­ri­ble judg­ment. The IMF are pret­ty good guys these days, but are part of the troi­ka and cer­tain­ly can’t be direct­ly involved in draft­ing the agen­da of this gov­ern­ment. Dit­to the ECB.

    Now, maybe after 60 or 90 days it would become clear that there is no pos­si­ble deal, and Grex­it it is. But we don’t know that.

    ...

    Yep, we don’t know what the next 60 or 90 days holds. But at least now we know that in about 120 days we’ll prob­a­bly be right be to where we start­ed:

    WRAPUP 9‑Greece, euro zone agree four-month loan exten­sion, avert crunch Fri Feb 20, 2015 5:03pm EST

    (Adds Schaeu­ble, Varo­ufakis, ECB source)

    * Euro zone agrees in prin­ci­ple to four-month loan exten­sion

    * Con­tin­gent on Greek pol­i­cy plans to be detailed Mon­day

    * Athens forced to climb down and accept strict over­sight

    * ECB says deal means no need for cap­i­tal con­trols

    By Jan Strupczews­ki and Renee Mal­te­zou

    BRUSSELS, Feb 20 (Reuters) — Euro zone finance min­is­ters agreed in prin­ci­ple on Fri­day to extend Greece’s finan­cial res­cue by four months, avert­ing a poten­tial cash crunch in March that could have forced the coun­try out of the cur­ren­cy area.

    The deal, to be rat­i­fied once Greece’s cred­i­tors are sat­is­fied with a list of reforms it will sub­mit next week, ends weeks of uncer­tain­ty since the elec­tion of a left­ist-led gov­ern­ment in Athens which pledged to reverse aus­ter­i­ty.

    “Tonight was a first step in this process of rebuild­ing trust,” Jeroen Dijs­sel­bloem, chair­man of the 19-nation Eurogroup, told a news con­fer­ence. “We have estab­lished com­mon ground again to reach agree­ment on this state­ment.”

    The agree­ment, clinched after the third min­is­te­r­i­al meet­ing in two weeks of acri­mo­nious pub­lic exchanges, offers a breath­ing space for the new Greek gov­ern­ment to try to nego­ti­ate longer-term debt relief with its offi­cial cred­i­tors.

    But it also forced rad­i­cal young Prime Min­is­ter Alex­is Tsipras into a major climb­down since he had vowed to scrap the bailout, end coop­er­a­tion with the “troi­ka” of inter­na­tion­al lenders and roll back aus­ter­i­ty.

    Euro­pean Union pay­mas­ter Ger­many, Greece’s biggest cred­i­tor, had demand­ed “sig­nif­i­cant improve­ments” in reform com­mit­ments by Athens before it would accept an exten­sion of euro zone fund­ing.

    The two main com­bat­ants around the table put a rad­i­cal­ly dif­fer­ent gloss on the result.

    “Being in gov­ern­ment is a date with real­i­ty, and real­i­ty is often not as nice as a dream,” Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble told reporters, stress­ing Athens would get no aid pay­ments until its bailout pro­gramme was prop­er­ly com­plet­ed.

    “The Greeks cer­tain­ly will have a dif­fi­cult time to explain the deal to their vot­ers,” the con­ser­v­a­tive vet­er­an said.

    Greek Finance Min­is­ter Yanis Varo­ufakis said the talks had shown elec­tions could bring change to Europe. He insist­ed he had avert­ed “reces­sion­ary mea­sures” and said the gov­ern­ment still hoped to raise the min­i­mum wage and rehire some pub­lic sec­tor work­ers.

    “Nobody is going to ask us to impose upon our econ­o­my and soci­ety mea­sures that we don’t agree with,” Varo­ufakis said.

    The euro rebound­ed against the dol­lar and glob­al equi­ty mar­kets surged to record clos­ing highs while Greek gov­ern­ment bond yields fell on opti­mism for a debt deal.

    REFORM LIST

    The accord requires Greece to sub­mit by Mon­day a let­ter to the Eurogroup list­ing all the pol­i­cy mea­sures it plans to take dur­ing the remain­der of the bailout peri­od.

    If the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank and the Inter­na­tion­al Mon­e­tary Fund are sat­is­fied, euro zone mem­ber states will rat­i­fy the exten­sion, where nec­es­sary through their par­lia­ments.

    Euro finance min­is­ters may sign off on the deal on Tues­day via a tele­con­fer­ence. How­ev­er, if there are doubts they would recon­vene in Brus­sels, offi­cials said, a con­di­tions insist­ed upon by Spain, whose gov­ern­ment also faces a rad­i­cal left­ist insur­gency at an elec­tion lat­er this year and is keen that Tsipras gets no spe­cial treat­ment.

    Irish Finance Min­is­ter Michael Noo­nan voiced cau­tion, telling reporters: “It’s an impor­tant first step that we hope will lead to a suc­cess­ful sec­ond step on Mon­day night/Tuesday morn­ing, but then of course there’s a third step with rat­i­fi­ca­tions in par­lia­ment.”

    With the 240 bil­lion euro EU/IMF bailout pro­gramme due to expire in lit­tle more than a week, Tsipras had request­ed a six-month exten­sion of a loan agree­ment but Ger­many and its allies object­ed to the ini­tial for­mu­la­tion of the request.

    Greece’s part­ners insist­ed on the short­er peri­od and tied fur­ther dis­burse­ments to a sat­is­fac­to­ry review at the end. They also oblig­ed Athens to com­mit to ful­ly fund­ing any new spend­ing mea­sures and obtain­ing approval from its lenders.

    ...

    Woohoo! A four month exten­sion. Bet­ter than noth­ing. Although when you look at some of the fine print it’s unclear how much bet­ter than noth­ing this deal real­ly is since, as Krug­man point­ed out above, there is sim­ply no way Greece’s new gov­ern­ment is going to have time to put togeth­er a detailed pro­pos­al, and yet the deal just pro­posed man­dates that Greece give a writ­ten plan on Mon­day of how its going to con­tin­ue its aus­ter­i­ty dur­ing the remain­der of the bailout peri­od (which would have end­ed at the end of the month but is to be extend­ed for four months). AND there’s a loop­hole that says the EU mem­bers can reverse the deal on Tues­day if they have any doubts:

    The accord requires Greece to sub­mit by Mon­day a let­ter to the Eurogroup list­ing all the pol­i­cy mea­sures it plans to take dur­ing the remain­der of the bailout peri­od.

    If the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank and the Inter­na­tion­al Mon­e­tary Fund are sat­is­fied, euro zone mem­ber states will rat­i­fy the exten­sion, where nec­es­sary through their par­lia­ments.

    Euro finance min­is­ters may sign off on the deal on Tues­day via a tele­con­fer­ence. How­ev­er, if there are doubts they would recon­vene in Brus­sels, offi­cials said, a con­di­tions insist­ed upon by Spain, whose gov­ern­ment also faces a rad­i­cal left­ist insur­gency at an elec­tion lat­er this year and is keen that Tsipras gets no spe­cial treat­ment.
    ...

    So Greece has a few days to put togeth­er a four month aus­ter­i­ty pack­age to a bunch of pro-aus­ter­i­ty politi­cians with an incen­tive to make life as awful as pos­si­ble for the Greeks in order to hide their own aus­ter­i­ty mad­ness. As Wolf­gang Schaeu­ble said, “being in gov­ern­ment is a date with real­i­ty, and real­i­ty is often not as nice as a dream,” which is a good way to sum­ma­rize the night­mar­ish stance of Greece’s part­ners in this fight.

    But, as Krug­man points out below, we still don’t know how bad Greece’s night­mare is going to get, since none of the under­ly­ing issues have been resolved by the agree­ment:

    The New York Times
    The Con­science of a Lib­er­al
    Del­ph­ic Demarche

    Paul Krug­man
    Feb 20 4:12 pm

    OK, we have an agree­ment re Greece, accord­ing to which … what?

    We do have four months of fund­ing, plus what looks like an agree­ment not to hold Greece to fis­cal tar­gets for right now in the face of prob­a­bly fis­cal dete­ri­o­ra­tion. The ques­tion is what strings were attached.

    Greece seem­ing­ly gave a lot of ground on the lan­guage: the stuff about fis­cal adjust­ment in line with the Novem­ber 2012 Eurogroup is back in, which Ger­many will pre­sum­ably claim rep­re­sents a com­mit­ment to stay with the 4.5 per­cent pri­ma­ry sur­plus tar­get. But Greece appar­ent­ly is claim­ing that the agree­ment offers new flex­i­bil­i­ty, which means that it will assert that it has agreed to no such thing.

    So we’re in a weird place: this looks like a defeat for Greece, but since noth­ing sub­stan­tive was resolved, it’s only a defeat if the Greeks accept it as one; which means that noth­ing at all is clear­ly resolved. And that’s arguably a good out­come — time for Greece to get its act togeth­er.

    ...

    Yes, we’re in a weird place. Espe­cial­ly since one of Greece’s pri­ma­ry strength in this con­flict is the glob­al sym­pa­thy its gar­ner­ing by being the euro­zone’s Wick­er Man. And it’s look­ing an awful lot like Greece’s euro­zone “part­ners” are going to be intent turn­ing the aus­ter­i­ty screws on Greece as much as pos­si­ble over the next four months, assum­ing the agree­ment isn’t nixed entire­ly due to “doubts”.

    You often hear calls for Europe to make an exam­ple out of Greece, but does Europe real­ly want to burn its Wick­er Man in such a high-pro­file pub­lic man­ner? Because the Wick­er Man is still alive and kick­ing and, as Krug­man points out, the Wick­er Man is only going to get bet­ter and bet­ter at explain­ing to the glob­al audi­ence that this crazy usury cult real­ly has no right to tor­ment him so. Is that what the euro­zone wants the Euro­pean Project to be known as? The Wick­er Man Usury Union?

    And is there any hope of the aus­ter­i­ty end­ing, or at least eas­ing, four months from now? It’s hard to see how that will hap­pen unless the gov­ern­ments of Europe start feel­ing the pain of being known glob­al­ly as sadists since there appears to be lit­tle else that could per­suade them. Could that hap­pen? Well, Wolf­gang Schaeu­ble was right when he said, “being in gov­ern­ment is a date with real­i­ty, and real­i­ty is often not as nice as a dream”, but that does­n’t just apply to gov­ern­ments or the cit­i­zens of aus­ter­i­ty-slammed soci­eties. The glob­al audi­ences forced to watch a con­ti­nent that could have been a force for a bet­ter tomor­row turn itself into a debt death cult ded­i­cat­ed to pro­ject­ing right-wing eco­nom­ic the­o­ries as far and wide as pos­si­ble is pret­ty painful too. Sure, it’s not as painful as direct­ly expe­ri­enc­ing the aus­ter­i­ty, but still real­ly hurts to watch.

    Posted by Pterrafractyl | February 20, 2015, 4:57 pm
  27. Is there an attempt to cre­ate a sit­u­a­tion where the Greeks have to drop Yanis Varo­ufakis as their nego­tia­tor? It’s look­ing like it:

    Busi­ness Insid­er
    Greek finance min­is­ter Tweets, dis­pelling rumors he almost got into a phys­i­cal alter­ca­tion with Eurogroup pres­i­dent

    Shane Fer­ro

    Feb. 21, 2015, 7:38 PM

    (Feb 21 update: On Twit­ter, Greek finance min­is­ter Yanis Varo­ufakis denied the fol­low­ing report)

    The Greek debt cri­sis was report­ed­ly close to com­ing to phys­i­cal blows ear­li­er this week.

    The French paper Libéra­tion report­ed Wednes­day that Greek Finance Min­is­ter Yanis Varo­ufakis got into a heat­ed con­fronta­tion with Eurogroup pres­i­dent Jeroen Dijs­sel­bloem on Mon­day after­noon at the meet­ing of Euro­pean finance min­is­ters try­ing to ham­mer out a deal on the Greek bailout.

    As a result of the alter­ca­tion, Ger­man finance min­is­ter Wolf­gang Schäu­ble refus­es to speak to his Greek coun­ter­part.

    Here is a trans­lat­ed part of the intro text of the Libéra­tion post:

    “Liar!” yelled Yanis Varo­ufakis, full of rage. Jeroen Dijs­sel­bloem, accus­tomed to the usu­al cour­tesy that exists with­in the club of finance min­is­ters of the euro area, was livid. The Dutch­man, pres­i­dent of the Eurogroup, seemed frag­ile faced by the mas­sive Greek Finance Min­is­ter, who is phys­i­cal­ly sim­i­lar to Bruce Willis. “It was incred­i­ble. We real­ly thought they would come to blows,” said a wit­ness at the scene.

    And here’s more trans­lat­ed from part of the Libéra­tion audio report:

    Informed of the inci­dent, Wolf­gang Schäu­ble, the Ger­man finance min­is­ter, no longer wants to speak with Yanis Varo­ufakis, which real­ly both­ers the oth­er mem­bers of the Eurogroup because it won’t be easy to put them in the same room in the future. That’s all to explain the degree of high ten­sion we’ve got­ten to.

    Per­haps this informs why there have been so many leaked let­ters to the press. In any case, things are impas­sioned in Europe.

    (Feb 21 update: On Twit­ter, Greek finance min­is­ter Yanis Varo­ufakis denied this report.)

    @businessinsider I have bad news for you: You report is fake. Nev­er was there such a moment between Jeroen and me. Sor­ry to dis­ap­point.— Yanis Varo­ufakis (@yanisvaroufakis) Feb­ru­ary 21, 2015

    Assum­ing this is a fake report, were the reports that Wol­gang Schäu­ble said he no longer want­ed to speak with Varo­ufakis fake too? If not, it will be inter­est­ing to see how this plays out since Wol­gang Schäu­ble is pret­ty much the only per­son that mat­ters in these Eurogroup nego­ti­a­tions and its unclear how any nego­ti­a­tions can be made if they refuse to even talk to each oth­er.

    And you thought high school sucked.

    Posted by Pterrafractyl | February 21, 2015, 7:29 pm
  28. Greece sub­mit­ted its aus­ter­i­ty plans to the Eurogroup. It’s about as com­pro­mis­ing a pro­pos­al as you should expect from some­one nego­ti­at­ing with a group of uncom­pro­mis­ing peo­ple that don’t mind using the threat of a human­i­tar­i­an cri­sis as one of their key bar­gain­ing chips:

    Exclu­sive: Greece Reform Plan Offers Major Com­pro­mis­es

    By REUTERS
    FEB. 24, 2015, 5:04 A.M. E.S.T.

    BERLIN — Greece has promised not to roll back any ongo­ing or com­plet­ed pri­va­ti­za­tions and ensure that any state spend­ing to address a “human­i­tar­i­an cri­sis” does not hurt its bud­get, accord­ing to a doc­u­ment con­tain­ing its reform plans seen by Reuters on Tues­day.

    The list of reforms aims to offer com­pro­mis­es on major issues such as labor reforms and social spend­ing to sat­is­fy both Euro­pean part­ners fund­ing the coun­try and Greek vot­ers who vot­ed in a left-wing gov­ern­ment to end years of rigid aus­ter­i­ty.

    Greece need­ed to present its plans as a con­di­tion for extend­ing its bailout pro­gram for four months in a deal struck with euro zone part­ners on Fri­day.

    On the issue of min­i­mum wages, for exam­ple, Prime Min­is­ter Alex­is Tsipras’s gov­ern­ment climbed down from elec­tion pledges to raise the lev­el imme­di­ate­ly. Instead it said it would phase in col­lec­tive bar­gain­ing with a view to rais­ing min­i­mum wages over time and that any changes would be agreed with part­ners.

    Greece also said it would reform the pub­lic sec­tor wage sys­tem in a way that would not reduce pay fur­ther but would ensure that the over­all pub­lic wage bill does not rise.

    Athens also com­mit­ted to con­sol­i­dat­ing pen­sion funds to achieve sav­ings, and elim­i­nate loop­holes and incen­tives for ear­ly retire­ment — in an appar­ent effort to find a com­pro­mise between the gov­ern­men­t’s objec­tive of avoid­ing any fur­ther pen­sion cuts as pre­vi­ous­ly demand­ed by EU and IMF inspec­tors.

    ...

    Euro zone finance min­is­ters are due to dis­cuss the reforms plan lat­er on Tues­day in a con­fer­ence call and ini­tial reac­tion to the plan has been pos­i­tive. A source close to the Euro­pean Com­mis­sion said on Tues­day it was a “valid start­ing point” for talks over the bailout.

    The list also includes pledges to reform tax pol­i­cy, review and con­trol spend­ing in “every area” of gov­ern­ment spend­ing. Athens also promised to ensure its banks are run on sound com­mer­cial and bank­ing prin­ci­ples, in an appar­ent effort to show that the gov­ern­ment will not inter­fere in bank­ing oper­a­tions.

    While this might seem like a com­plete capit­u­la­tion by the Greek gov­ern­ment, keep in mind that sim­ply freez­ing the pay cuts in place is actu­al­ly a vic­to­ry of sorts since fur­ther pay cuts are part of the sched­ule. Same with the pri­va­ti­za­tions. In oth­er words, the beat­ings will con­tin­ue but at a steady pace.

    Also keep in mind that it real­ly is a vic­to­ry, of sorts, if Greece can maneu­ver its euro­zones “part­ners” into mak­ing explic­it demands like:

    Greece has promised not to roll back any ongo­ing or com­plet­ed pri­va­ti­za­tions and ensure that any state spend­ing to address a “human­i­tar­i­an cri­sis” does not hurt its bud­get, accord­ing to a doc­u­ment con­tain­ing its reform plans seen by Reuters on Tues­day.

    Con­di­tions like that don’t exact­ly sup­port the “we’re not a bunch of mon­sters but instead pru­dent dis­ci­pli­nar­i­ans” image the euro­zone gov­ern­ments seem to like to project. Plus, there was­n’t real­ly much Greece could do any­ways since the Eurogroup basi­cal­ly told Greece that if it did­n’t sub­mit to their demands it was going to crash the bank­ing sys­tem and make the human­i­tar­i­an cri­sis it demands must not be addressed much, much worse:

    Counter Punch
    A Valiant Effort
    Varo­ufakis Keeps Greece in the Euro­zone, by its Fin­ger­nails
    by MIKE WHITNEY
    Feb­ru­ary 23, 2015

    “Though it’s hap­pen­ing to a strick­en coun­try, on the edge of Europe, the choic­es pre­sent­ed to Greece are being under­stood through­out Europe… Obey or leave.”

    — Paul Mason, Chan­nel 4 News Blog

    It’s not easy to nego­ti­ate with a gun to your head. Nev­er­the­less, that’s the sit­u­a­tion Greek finance min­is­ter Yanis Varo­ufakis found him­self in on Fri­day pre­ced­ing a cru­cial meet­ing with the Eurogroup. Accord­ing to one report, the objec­tive of the last-ditch con­fab “was to pre­pare a con­sen­sus text that would be the basis for the dis­cus­sion” with the EU’s finance min­is­ters. That might sound inno­cent enough, but it doesn’t come close to explain­ing the real pur­pose of the meet­ing which was far more sin­is­ter. Check out this blurb from Costas Efimeros at the Press Project:

    “Accord­ing to a Greek offi­cial who doesn’t want to be named, the Greek del­e­ga­tion were yes­ter­day sub­ject to out­right black­mail. Our ‘part­ners’ informed us that if Eurogroup doesn’t result in an agree­ment, on Tues­day the Greek gov­ern­ment will be forced to imple­ment cap­i­tal con­trols. It seemed that they had tak­en the deci­sion to stran­gle the Greek econ­o­my by cut­ting off fund­ing to the banks through the ELA sys­tem. Fur­ther­more, it seemed that the big Greek banks already knew this. Leaks from the ECB, after all, had sug­gest­ed that they were prepar­ing for a GREXIT.” (“Europe trashed democ­ra­cy“, Costas Efimeros, The Press Project)

    It’s nice to know that EU lead­ers ascribe to the same basic moral code as Don Cor­leone, isn’t it?

    The fact is, a slow motion bank run has been under­way in Greece for more than a month drain­ing rough­ly 40 bil­lion euros from the Greek bank­ing sys­tem. If a deal hadn’t been struck on Fri­day, the ECB would have pulled the plug on its liq­uid­i­ty assis­tance pro­gram and blown the whole sys­tem to king­dom come. That’s how the Euro­crats planned to say good­bye to their long-strug­gling mem­ber, Greece, by giv­ing them a sharp jolt to the groin before raz­ing their econ­o­my to the ground. That tells you every­thing you need to know about the Eurogroup.

    If Greece got the boot on Fri­day, it’s human­i­tar­i­an cri­sis would have deep­ened overnight while the blow to the cap­i­tal mar­kets would have paved the way for anoth­er finan­cial cri­sis. For­tu­nate­ly, the cat­a­stro­phe was avert­ed main­ly because Varo­ufakis was able to cob­ble togeth­er a viable plan for meet­ing the Eurogroup’s basic require­ments while cre­at­ing sig­nif­i­cant oppor­tu­ni­ties to ease con­di­tions in Greece. Don’t get me wrong; this isn’t a per­fect deal by any stretch, but it is the best deal that could have been reached giv­en the cir­cum­stances and the unbri­dled hos­til­i­ty from Ger­man finance min­is­ter Wolf­gang Schaeu­ble who was eager to scut­tle the whole project and throw Greece to the wolves. Varo­ufakis man­aged to out maneu­ver the iras­ci­ble Schaeu­ble and get some of what he want­ed, but only through stiff-necked resolve and sig­nif­i­cant com­pro­mise. As a result, Greece is still a mem­ber of the Euro­zone, but just bare­ly. A rejec­tion of its reform pack­age today (Mon­day) could push the belea­guered coun­try out of the 19-mem­ber Union for good.

    Keep in mind, the Eurogroup made it per­fect­ly clear from the begin­ning that they weren’t going to restruc­ture Greece’s debts or end the aus­ter­i­ty pro­gram. The issues weren’t even on the table. So, those who think that Varo­ufakis should have giv­en the Eurogroup an ulti­ma­tum (“Reduce our debts or we’ll leave.”) sim­ply don’t under­stand the nature of the nego­ti­a­tions. Varo­ufakis was forced to oper­ate with­in very strict para­me­ters. Giv­en those lim­i­ta­tions, he nabbed a very respectable deal. Even so, it’s only nat­ur­al for peo­ple to feel let-down, espe­cial­ly since Syriza had promised much more than they could deliv­er. But that doesn’t mean Varo­ufakis is a trai­tor or a sell­out. Not at all. It mere­ly means that Syriza’s belief that it could end aus­ter­i­ty but keep Greece in the Euro­zone proved to be unfound­ed. In fact, Ger­man oppo­si­tion has made it near­ly impos­si­ble. The larg­er point is this: Syriza had no man­date to spear­head a Grex­it. That is not what the peo­ple vot­ed for or what they want. Varoufakis’s was asked to do the impos­si­ble, square the cir­cle. In that regard, he failed. But still, the deal he ham­mered out should mit­i­gate Greece’s slump to some extent, although one should not expect a full-blown eco­nom­ic recov­ery, not with­out a healthy dose of fis­cal stim­u­lus which is nowhere in sight.

    Varo­ufakis man­aged to change the terms of the deal which is now referred to as the “exist­ing arrange­ment” rather than a “pro­gram”. Accord­ing to Nor­bert Har­ing, this new “arrangement”…”is not a “tech­ni­cal” exten­sion of the “pro­gram” any more, but an exten­sion of the fund­ing arrange­ment, plus vague con­di­tion­al­i­ty.” (“Was it worth it? Con­ces­sions to Greece rel­a­tive to the reject­ed draft of 16 Feb­ru­ary“, Nobert Har­ing)

    It all sounds very tedious and legal­is­tic, but the change is sig­nif­i­cant. You see, the real fight between Varo­ufakis and the Eurogroup was over this pre­cise issue, that is, chang­ing the inflex­i­ble, iron­clad aus­ter­i­ty “pro­gram” into a loos­er “arrange­ment” where polices can be altered via–what Varo­ufakis dubbed –“con­struc­tive ambi­gu­i­ty.” Varo­ufakis objec­tive is to cre­ate enough gray area for Greece to regain sov­er­eign con­trol over its own eco­nom­ic poli­cies. Con­struc­tive ambi­gu­i­ty will help to achieve that, pro­vid­ed the reforms meet the Eurogroup’s fis­cal tar­gets.

    Here’s more from Haring’s post: “There is no men­tion any more of “suc­cess­ful con­clu­sion of the pro­gram”, nor of “pro­gram” in the text. Instead a suc­cess­ful con­clu­sion of the review of the “con­di­tions in the cur­rent arrange­ment” is the new con­di­tion. This allows the Greek gov­ern­ment to con­tin­ue to say that the old pro­gram can­not be suc­cess­ful. It also allows for changes in the pro­gram, as “con­di­tions of the arrange­ment” is delib­er­ate­ly more vague.” (“Was it worth it? Con­ces­sions to Greece rel­a­tive to the reject­ed draft of 16 Feb­ru­ary”, Nobert Har­ing)

    This isn’t just legal clap­trap. It’s a crit­i­cal change in the way the pol­i­cy is imple­ment­ed. Once again, Varo­ufakis has loos­ened the finan­cial strait­jack­et in which Greece finds itself, which can only be seen as progress.

    The new deal also allows Greece to decide its own reform pack­age rather than the troi­ka dic­tat­ing what gov­ern­ment expens­es to cut or which pub­licly owned assets to sell. Here’s anoth­er excerpt from Haring’s post: “Most impor­tant change of the whole doc­u­ment: Addi­tion of “The insti­tu­tions will, for the 2015 pri­ma­ry sur­plus tar­get, take the eco­nom­ic cir­cum­stances in 2015 into account.” Exces­sive, self-defeat­ing aus­ter­i­ty is off. Only the tar­get for 2015 is men­tioned, because every­thing fur­ther out would have to be part of a new arrange­ment, still to be nego­ti­at­ed.”

    So Varo­ufakis has achieved his goal of reduc­ing aus­ter­i­ty. Not only is there greater flex­i­bil­i­ty oper­a­tional­ly but, also, Greece will con­trol the levers of deci­sion-mak­ing in the “field of tax pol­i­cy, pri­vati­sa­tion, labour mar­ket reforms, finan­cial sec­tor, and pen­sions”. Nat­u­ral­ly, the low­er the pri­ma­ry sur­plus, the more fis­cal stim­u­lus is avail­able for eco­nom­ic growth. (Run­ning a sur­plus dur­ing a depres­sion is absolute mad­ness, but this is the lousy hand Varo­ufakis was dealt.)

    Haring’s final com­ments are a good sum­ma­ry of Varoufakis’s achieve­ment:

    “Was it worth the has­sle to reject the draft of 16 Feb­ru­ary, just to accept the state­ment four days lat­er? For Athens it most cer­tain­ly was. It got the promise that no self-defeat­ing, exces­sive aus­ter­i­ty would be asked of it any more, the assur­ance that it could devise its own eco­nom­ic and social poli­cies, as long as they did not impact neg­a­tive­ly on the inter­ests of its part­ners, rather than hav­ing to exe­cute and leav­ing in place all the mea­sures accept­ed by the for­mer gov­ern­ment and strong­ly reject­ed by the peo­ple. These are huge improve­ments for Athens, with no sig­nif­i­cant coun­ter­bal­anc­ing down­side com­pared to 16 Feb­ru­ary.” (“Was it worth it? Con­ces­sions to Greece rel­a­tive to the reject­ed draft of 16 Feb­ru­ary”, Nobert Har­ing)

    Clear­ly, this is a good deal for Greece, but let’s not go over­board; the basic sit­u­a­tion still stinks to high heav­en, main­ly because the Eurogroup would rather lec­ture and pun­ish than give a strug­gling mem­ber a help­ing hand. Had the Euro­zone evolved into a viable polit­i­cal union that dis­trib­uted fis­cal trans­fers to the weak­er states on the periph­ery, Greece would have emerged from its reces­sion years ago. Instead, the fias­co drags on end­less­ly punc­tu­at­ed by infre­quent out­bursts from EU lead­ers who vehe­ment­ly defend belt-tight­en­ing mea­sures that have only made mat­ters worse. If any­thing, this expe­ri­ence should help the Greek peo­ple decide whether there’s a future for them and their chil­dren in the Euro­zone or not. Deal­ing with author­i­tar­i­an bone­heads (The Eurogroup) may even­tu­al­ly prove to be more trou­ble than its worth. (A Grex­it looks bet­ter by the day!)

    ...

    ” If any­thing, this expe­ri­ence should help the Greek peo­ple decide whether there’s a future for them and their chil­dren in the Euro­zone or not. Deal­ing with author­i­tar­i­an bone­heads (The Eurogroup) may even­tu­al­ly prove to be more trou­ble than its worth. (A Grex­it looks bet­ter by the day!)” Indeed! And it’s not just Greece that should be learn­ing for this expe­ri­ence. Greece does­n’t have a Euro­pean monop­oly on “human­i­tar­i­an crises”. Nei­ther does the euro­zone. The whole EU has a “human­i­tar­i­an cri­sis” cri­sis:

    EurAc­tiv
    Alarm­ing report reveals ram­pant pover­ty across Europe

    Pub­lished: 20/02/2015 — 08:39 | Updat­ed: 20/02/2015 — 09:15

    More than a third of the pop­u­la­tion in Bul­gar­ia, Roma­nia, Greece, Latvia and Hun­gary are at risk of pover­ty and social exclu­sion, accord­ing to a new report. In half of the EU’s 28 mem­ber states, at least one in three chil­dren live in pover­ty.

    The report, Pover­ty and Inequal­i­ties on the Rise – Just social sys­tems need­ed as the solu­tion!, was pub­lished on Thurs­day (19 Feb­ru­ary) by Car­i­tas Europa, an umbrel­la organ­i­sa­tion which fights pover­ty and social exclu­sion.

    It found dis­turb­ing lev­els of depri­va­tion in the sev­en EU coun­tries worst hit by the eco­nom­ic cri­sis: Cyprus, Greece, Ire­land, Italy, Por­tu­gal, Roma­nia and Spain.

    Accord­ing to the report, almost half of Bul­gar­i­ans (48%) and more than 40% of Roma­ni­ans are cur­rent­ly at risk of pover­ty.

    In four­teen out of the EU’s 28 mem­ber states, one in three chil­dren are con­sid­ered to be liv­ing in pover­ty.

    The Car­i­tas fig­ures are broad­ly con­firmed by the EU’s offi­cial sta­tis­ti­cal agency, Euro­stat, which ascer­tained that one in four cit­i­zens were at risk of pover­ty and social exclu­sion in 2013.

    Tes­ti­monies from Spain, Greece

    The Car­i­tas report’s con­clu­sions are based on grass-roots life tes­ti­monies from its work­ers on the ground.

    One focus in the report is unem­ploy­ment. In Spain, Car­i­tas is con­cerned about the ris­ing dif­fi­cul­ty faced by its ben­e­fi­cia­ries in get­ting a job. Accord­ing to Car­i­tas Spain, the prob­lem is affect­ing both those who had a sta­ble work­ing sit­u­a­tion pri­or to the cri­sis and also those who did not.

    ...

    Car­i­tas Greece also not­ed that a high lev­el of unem­ployed peo­ple were unable to access their ben­e­fits. At the same time, Greece is wit­ness­ing increas­es in health prob­lems, wors­en­ing xeno­pho­bia and racism, and increased migra­tion, often of young peo­ple with skills, illus­trat­ing the des­per­ate sit­u­a­tion of the unem­ployed.

    Alex­is Tsipras, the coun­try’s new­ly-elect­ed left­ist Prime Min­is­ter, has called on the EU tack­le what he described as a “human­i­tar­i­an cri­sis across Europe” caused by aus­ter­i­ty.

    The Car­i­tas report calls on the EU and its mem­ber states to give greater atten­tion to social issues when address­ing the ongo­ing cri­sis, instead of main­ly focus­ing on the econ­o­my.

    Aus­ter­i­ty poli­cies put in place to tack­le bud­get deficits and reduce Europe’s grow­ing debt pile were hav­ing a dev­as­tat­ing impact on the peo­ple of Europe, Car­i­tas warned, adding that the fail­ure to “pro­vide con­crete sup­port on the scale required [...] is like­ly to pro­long the cri­sis.”

    Instead, the report rec­om­mends putting in place a guar­an­teed min­i­mum income allow­ing each and every­one to live in dig­ni­ty. Tax eva­sion should also be tack­led, while those who can afford to con­tribute more should do so, Car­i­tas plead­ed.

    Jorge Nuño May­er, sec­re­tary gen­er­al of Car­i­tas Europa, said the report con­firms that alter­na­tive pol­i­cy solu­tions are nec­es­sary, remind­ing politi­cians that they have a choice when decid­ing mea­sures to alle­vi­ate the cri­sis.

    “The Europe doc­u­ment­ed in this report is not just. The pri­ori­ti­sa­tion of aus­ter­i­ty mea­sures has not solved the cri­sis but rather is caus­ing social prob­lems and unrest that risk hav­ing last­ing impacts world­wide,” he said.

    To reit­er­ate...

    ...
    “In four­teen out of the EU’s 28 mem­ber states, one in three chil­dren are con­sid­ered to be liv­ing in pover­ty.

    ...

    Alex­is Tsipras, the coun­try’s new­ly-elect­ed left­ist Prime Min­is­ter, has called on the EU tack­le what he described as a “human­i­tar­i­an cri­sis across Europe” caused by aus­ter­i­ty.

    The Car­i­tas report calls on the EU and its mem­ber states to give greater atten­tion to social issues when address­ing the ongo­ing cri­sis, instead of main­ly focus­ing on the econ­o­my.

    ...

    Jorge Nuño May­er, sec­re­tary gen­er­al of Car­i­tas Europa, said the report con­firms that alter­na­tive pol­i­cy solu­tions are nec­es­sary, remind­ing politi­cians that they have a choice when decid­ing mea­sures to alle­vi­ate the cri­sis.

    “The Europe doc­u­ment­ed in this report is not just. The pri­ori­ti­sa­tion of aus­ter­i­ty mea­sures has not solved the cri­sis but rather is caus­ing social prob­lems and unrest that risk hav­ing last­ing impacts world­wide,” he said.

    As we can see, under the New Euro­pean social con­tract you are still your broth­er’s keep­er, but feel free to keep him in a socioe­co­nom­ic cage if he owes you mon­ey. It’ll keep him out of trou­ble while he’s pay­ing you back. Feed­ing and health­care are option­al, espe­cial­ly for kids.

    Posted by Pterrafractyl | February 24, 2015, 10:08 am
  29. With the “Grex­it” nar­row­ly avoid­ed (for now) and the euro­zone night­mare set to con­tin­ue, here’s an opin­ion piece from 2011 that’s a reminder that many of the under­ly­ing cri­sis dynam­ics have been under­stood by at least some ana­lysts and observers since the begin­ning of the cri­sis. What has­n’t been under­stood is how lit­tle Europe’s lead­ers care about things like address­ing the under­ly­ing dynam­ics that led to the cri­sis or even avoid­ing mak­ing a bad sit­u­a­tion worse. Case in point:

    The Wall Street Vour­nal
    The Source

    Ger­man Mer­can­til­ism to Res­cue the Euro

    By Alen Mat­tich
    June 28, 2011, 12:11 PM GMT

    Could Ger­man mer­can­til­ism keep the euro alive?

    We all know about how Chi­nese mer­can­til­ism has dis­tort­ed the glob­al econ­o­my. But what about Germany’s ver­sion?

    For those who need a lit­tle refresh­er, mer­can­til­ism is a country’s urge to push eco­nom­ic growth by con­cen­trat­ing on the pro­duc­tion and export of goods to the detri­ment of for­eign pro­duc­ers and domes­tic con­sumers. It’s con­sid­ered a bad thing, par­tic­u­lar­ly by for­eign­ers whose economies lose out in peri­ods when over­all growth is con­strained and trade starts to look like a zero sum game.

    That the Ger­man econ­o­my runs along mer­can­tilist lines pass­es the duck test. It has his­tor­i­cal­ly been dri­ven by exports to an unusu­al degree. The flip side of the coin is that Ger­mans tend to be net savers, which is to say con­sump­tion is sec­ondary. This explains the nation­al aller­gy to infla­tion. Ger­mans have also been more than will­ing to suf­fer wage and fis­cal restraint to pre­serve com­pet­i­tive­ness.

    Ser­gio Cesarat­to at Siena Uni­ver­si­ty gave a good sum­ma­ry of the case for Ger­man mer­can­til­ism in his 2010 paper Europe, Ger­man Mer­can­til­ism and the Cur­rent Cri­sis.

    Cer­tain­ly, since the finan­cial cri­sis, Ger­many has shown all the char­ac­ter­is­tics of aggres­sive mer­can­til­ism. Exports have boomed but wage growth remains sub­dued, the gov­ern­ment is look­ing to tight­en its belt and there is pre­cious lit­tle oth­er evi­dence that Ger­many will seek to shift more of its econ­o­my towards domes­tic con­sump­tion.

    The best guar­an­tee of fur­ther growth for Ger­many is to keep the euro intact. The euro’s exchange rate is con­sid­er­ably more com­pet­i­tive than a Ger­man cur­ren­cy would be on its own. And the Ger­mans will do what it takes to keep the sit­u­a­tion unchanged.

    To that end, Ger­many will be the first to blink on the Greek impasse. The loss to Ger­many asso­ci­at­ed with the col­lapse of the sin­gle cur­ren­cy would be much more than the cost of bail­ing out a small coun­try like Greece. Iron­i­cal­ly, had the prob­lems only resided with Greece, the Ger­mans might well have allowed the coun­try to default and depart from the euro.

    But the wor­ry for Ger­many is that Greece’s prob­lems become uncon­trolled and spread to Ire­land and Por­tu­gal and, even worse, to Spain.

    By tak­ing it to the wire, Ger­many will hope to show the oth­er coun­tries that it won’t nec­es­sar­i­ly pay when they come call­ing. But Ger­many will pay and keep pay­ing as long as it can.

    So that was the view back in 2011. Oh how times change. For instance, here’s a recent piece from the British press that high­lights the grow­ing aware­ness across Europe that, by so hearti­ly back­ing Berlin’s demands of “obey or leave” imposed on Greece, the rest of Europe just set itself up for the same treat­ment Greece got:

    4 News
    Greece: a debt colony with a bit of ‘home rule’
    Paul Mason
    Mon­day 23 Feb 2015

    On Fri­day night the Greek finance min­is­ter, Yanis Varo­ufakis, avert­ed total sur­ren­der to a Ger­man led demand for Greece to imple­ment the total aus­ter­i­ty pro­gramme of its for­mer con­ser­v­a­tive gov­ern­ment. He did so by sign­ing up imme­di­ate­ly to a com­pro­mise that, in his mind, retained about 20 per cent of the pro­gramme Syriza was elect­ed on.

    But the entire deal depends on the Greek gov­ern­ment sub­mit­ting a list of pro­posed reforms to EU finance min­is­ters today, and it being approved tomor­row by tele­con­fer­ence.

    But the tim­ing is appalling. By late Fri­day, I and oth­er jour­nal­ists were aware of a rapid uptick in Greek deposit with­drawals. The ECB, which effec­tive­ly con­trols the Greek banks, told Varo­ufakis he would have to lim­it both ATM with­drawals and move­ment of mon­ey abroad on Tues­day morn­ing, after today’s bank hol­i­day in Greece.

    That’s why the sub­stan­tive deal was designed to be done tonight. When I asked Varo­ufakis, at a late night press con­fer­ence, if the banks would open Tues­day he said: “Tues­day, Wednes­day and ad infinitem”.

    If Friday’s deal holds then Greece – which Varo­ufakis describes as a “debt colony” will effec­tive­ly be a debt colony with a bit more “home rule” – and, to con­tin­ue the anal­o­gy, minus what devel­op­ment the­o­rists used to call the “com­prador bour­geoisie”.

    Syriza revolt

    But two fac­tors could desta­bilise that. First the revolt with­in Syriza at the scale of the climb­down. Syriza’s vet­er­an MEP, war resis­tance hero Mano­lis Gle­zos, who tore down the Swasti­ka from the Acrop­o­lis in 1941, called for mass mobil­i­sa­tions to resist the agree­ment. .

    But Mr Gle­zos is not as cru­cial as the organ­ised Left Plat­form with­in Syriza, led by the econ­o­my min­is­ter Pana­gi­o­tis Lafaza­nis, and backed by Lon­don SOAS pro­fes­sor, turned MP, Costas Lapavit­sas. If the Left Plat­form were to for­mal­ly oppose the deal in the Greek par­lia­ment, Syriza would have to rely on cen­trist votes to get it through – and Lafaza­nis (and pos­si­bly some junior min­is­ters) would have to leave the gov­ern­ment.

    ...

    Sea change

    How­ev­er, there is a sea change going on with­in Syriza. In the past 48 hours I’ve heard peo­ple who were staunch believ­ers in the “good euro” – a euro that can accom­mo­date by nego­ti­a­tion a rad­i­cal left gov­ern­ment – say, effec­tive­ly, they were wrong.

    I would expect the cost of a non-rebel­lion by left MPs in Syriza to be a rapid and overt move towards a “friend­ly default and exit” strat­e­gy. The “New Drach­ma” notes cir­cu­lat­ed as spoofs three weeks ago look more and more like becom­ing real­i­ty – though as with all eco­nom­ic shocks, it may take weeks for ordi­nary peo­ple to under­stand what is hap­pen­ing.

    Though it’s hap­pen­ing to a strick­en coun­try, on the edge of Europe, the choic­es pre­sent­ed to Greece are being under­stood through­out Europe – and will res­onate with the British elec­torate. What Ger­many did to Greece on Fri­day can be done to any coun­try: obey or leave. And it can apply not just to the euro­zone but to the Euro­pean Union itself, or to the Schen­gen and Dublin Treaties on migra­tion, or to Court of Human Rights.

    To stick with the “debt colony” anal­o­gy: the old British empire, faced with suc­cess­ful revolts, was adept at say­ing “you’ve won, now let’s man­age the path to inde­pen­dence smooth­ly”. We’re about to find out what a Europe dom­i­nat­ed by Ger­many, backed by Fin­land, Slo­va­kia and Latvia, can muster by way of diplo­mat­ic largesse.

    “To stick with the “debt colony” anal­o­gy: the old British empire, faced with suc­cess­ful revolts, was adept at say­ing “you’ve won, now let’s man­age the path to inde­pen­dence smooth­ly”. We’re about to find out what a Europe dom­i­nat­ed by Ger­many, backed by Fin­land, Slo­va­kia and Latvia, can muster by way of diplo­mat­ic largesse.” It’s worth point­ing out that there is anoth­er option. It’s prob­a­bly not an option a con­ti­nent of debt-colonies is psy­cho­log­i­cal­ly capa­ble of pon­der­ing, but it’s an option:

    For­eign Pol­i­cy
    Argu­ment
    It’s Time to Kick Ger­many Out of the Euro­zone

    Why the anchor drag­ging down the Euro­pean econ­o­my isn’t Athens — it’s Berlin.

    By Patrick Chovanec
    Feb­ru­ary 20, 2015

    Last year, Ger­many racked up a record trade sur­plus of 217 bil­lion euros ($246 bil­lion), sec­ond only to Chi­na in glob­al export dom­i­nance. To some, this made Ger­many a bright spot in an oth­er­wise ane­mic euro­zone econ­o­my — a “growth dri­ver,” as the Ger­man finance min­is­ter, Wolf­gang Schäu­ble, puts it. In fact, Germany’s chron­ic trade sur­plus­es lie at the heart of Europe’s prob­lems; far from boost­ing the glob­al econ­o­my, they are drag­ging it down. The best way to end this per­verse sit­u­a­tion is for Ger­many to leave the euro­zone.

    Ger­mans usu­al­ly respond to such charges with a kind of hurt con­fu­sion. We run trade sur­plus­es, they patient­ly explain, because we are sim­ply much more com­pet­i­tive than most of our trad­ing part­ners. Can you blame us, they ask, if the world prefers to buy supe­ri­or Ger­man goods (and has noth­ing we want in return)? So goes the argu­ment: The rest of the world just needs to up its game, get its house in order, and become a bit more like Ger­many. In the mean­time, don’t hate us ‘cuz we’re beau­ti­ful….

    Con­trary to pop­u­lar mythol­o­gy, how­ev­er, there’s absolute­ly no rea­son why being “com­pet­i­tive” should mean run­ning a trade sur­plus. As far back as 1817, the econ­o­mist David Ricar­do point­ed out that the opti­mal basis for trade is com­par­a­tive, not absolute, advan­tage. In oth­er words, even if a coun­try is bet­ter at every­thing, it should export what it is best at and import what it is less bet­ter at. Hav­ing an across-the-board advan­tage does not imply that it makes good eco­nom­ic sense to pro­duce every­thing your­self, much less to sell more than you want in return. Or, to put it a bit dif­fer­ent­ly, there’s no inher­ent rea­son why earn­ing more can’t mean spend­ing more, on con­sum­ing both pub­lic and pri­vate goods, as well as invest­ing in future pro­duc­tive capac­i­ty.

    Trade sur­plus­es take place when a coun­try choos­es to spend less than it pro­duces — when it has excess sav­ings, beyond its domes­tic need for cred­it. It lends that excess sav­ings abroad, financ­ing anoth­er country’s abil­i­ty to spend more than it pro­duces and, by run­ning a trade deficit, pur­chase the lender’s excess pro­duc­tion. It’s true that a high­ly pro­duc­tive coun­try might have the where­with­al to con­jure up excess sav­ings, while a less pro­duc­tive coun­try might be inclined to bor­row rather than scrape up the sav­ings it needs. But fun­da­men­tal­ly, trade imbal­ances arise not from com­pet­i­tive advan­tage but from choic­es about how much to save and where that sav­ings should be deployed — at home or abroad.

    Does it ever make sense to run trade imbal­ances? Sure it does. In the 19th cen­tu­ry, Britain’s Indus­tri­al Rev­o­lu­tion enabled it to reap vast earn­ings from expand­ed out­put, some of which it invest­ed in the Unit­ed States. The mon­ey lent to a rapid­ly grow­ing Amer­i­can econ­o­my gen­er­at­ed high­er returns than it would have back home, while cre­at­ing a mar­ket for British-made goods. The poten­tial pro­duc­tiv­i­ty gains made it a win-win: It made sense for the Amer­i­cans to bor­row and for the British to lend. But the case also high­lights some­thing that’s easy to for­get: Run­ning a trade sur­plus means financ­ing some­one else’s trade deficit.

    The euro­zone cri­sis is often called a debt cri­sis. But, in fact, Europe as a whole did not have an exter­nal debt prob­lem, but an inter­nal one:
    Ger­man sur­plus­es and mount­ing debt in Europe’s periph­ery were two sides of the same coin. Ger­mans saved (a lot), and the sin­gle cur­ren­cy induced them — rather than save less or invest it at home — to lend it to their euro­zone trad­ing part­ners, which used the mon­ey to buy Ger­man goods. By 2007, Germany’s trade sur­plus had reached 195 bil­lion euros, three-fifths of which came from inside the euro­zone. Berlin might call this “thrift,” but it’s hard to argue that Germany’s excess sav­ings, which its banks often strug­gled to put to use, were well invest­ed. Instead, they gave Ger­mans the illu­sion of pros­per­i­ty, trad­ing real work (reflect­ed in GDP) for paper IOUs that might nev­er be repaid.

    Some­thing need­ed to change, but what? Nor­mal­ly, each coun­try would pur­sue its own mon­e­tary pol­i­cy, rely­ing on exchange rate adjust­ments to shift the locus of demand from those that could not afford it to those that could. Under a sin­gle cur­ren­cy, though, this could not hap­pen. Instead, Europe’s debtors were forced to slash demand, through a com­bi­na­tion of fis­cal aus­ter­i­ty and debt delever­ag­ing. Their trade deficits with Ger­many fell dra­mat­i­cal­ly — but by buy­ing less, not sell­ing more. All of the so-called PIIGS (Por­tu­gal, Ire­land, Italy, Greece, and Spain) saw their total trade with Ger­many shrink — in the case of Greece and Ire­land, by more than one-third. So, to the extent Europe rebal­anced, it did so at the cost of growth.

    The euro­zone was caught in a trap. Its coun­tries need­ed to move in two sep­a­rate direc­tions, but under a sin­gle cur­ren­cy, they could only move in lock step. A Europe that lived with­in its means meant a Ger­many that con­tin­ued to save more than it spent, rather than dri­ving much-need­ed demand. Mon­e­tary eas­ing — and a weak­er euro — mere­ly redi­rects Europe’s inter­nal imbal­ances out­ward. Germany’s trade sur­plus with the Unit­ed States explod­ed (up 49 per­cent from 2007 to 2013), and deficits with Chi­na and Japan col­lapsed (by neg­a­tive 71 per­cent and neg­a­tive 78 per­cent respec­tive­ly). Mean­while, Germany’s trade bal­ance with Brazil and South Korea flipped from deficit to sur­plus.

    Since 2012, vir­tu­al­ly all of the eurozone’s net GDP growth, on an annu­al basis, has come from net exports — fur­ther tes­ta­ment to the weak­ness of domes­tic Euro­pean demand as a dri­ver of growth. It’s doubt­ful, how­ev­er, whether rely­ing on Amer­i­cans to pile on more debt — and risk going the way of Greece — is real­ly a reli­able strat­e­gy. In prin­ci­ple, nar­row­ing Europe’s trade deficit with Chi­na makes more sense. But in prac­tice, this has con­sist­ed less in tap­ping China’s mass con­sumer mar­ket than in sell­ing machin­ery and lux­u­ry goods into China’s cred­it-fueled invest­ment boom, which itself is pred­i­cat­ed on main­tain­ing an out­sized trade sur­plus with the Unit­ed States. The issue isn’t — as it’s so often framed — what’s fair, but what’s sus­tain­able. And Amer­i­cans play­ing the world’s con­sumer of last resort, by bor­row­ing to live beyond their means, isn’t sus­tain­able.

    So what should be done? The best solu­tion — and the least like­ly to be adopt­ed — is for Ger­many to leave the euro and let a rein­tro­duced Deutsche mark appre­ci­ate. Here, the expe­ri­ence of the 1985 Plaza Accord offers some encour­age­ment. While a stronger yen made bare­ly a dent in Japan’s struc­tur­al trade sur­plus, Ger­man behav­ior proved far more respon­sive to the incen­tives embod­ied in a stronger mark.

    ...

    With an aging pop­u­la­tion, per­haps it’s under­stand­able why Ger­mans want to save. But there is no inher­ent rea­son to direct that sav­ings abroad when there is a far more cry­ing need to deploy it at home. The “growth” Ger­many gen­er­ates by fund­ing unsus­tain­able trade imbal­ances — inside and out­side the euro­zone — is an illu­sion. It is growth that is bor­rowed, for only a while. For Ger­many, and for the world, it’s a bad trade.

    “The “growth” Ger­many gen­er­ates by fund­ing unsus­tain­able trade imbal­ances — inside and out­side the euro­zone — is an illu­sion. It is growth that is bor­rowed, for only a while. For Ger­many, and for the world, it’s a bad trade.” Huh, it almost sounds like Ger­many can’t stop itself from run­ning exces­sive­ly high sur­plus­es for that short-term high even though the neg­a­tive behav­ior only lead to long-term pain. And, even more alarm­ing, the capac­i­ty to see that this is a prob­lem just does­n’t seem to be there in Berlin’s col­lec­tive mind. Treat­ment is rec­om­mend­ed.

    Posted by Pterrafractyl | February 24, 2015, 2:55 pm
  30. One of the fac­tors to keep in mind regard­ing the cur­rent cri­sis over the Greek “bailout” (a “bailout” of for­eign cred­i­tors with lots of aus­ter­i­ty strings attached) that Greece is des­per­ate to mod­er­ate is that there’s no rea­son to believe this will be the final “bailout” for Greece. Espe­cial­ly as long as aus­ter­i­ty mea­sures are still stran­gling the Greek econ­o­my. It a real­i­ty that even the euro­zone finance min­is­ters rec­og­nize, despite their appar­ent inabil­i­ty to rec­og­nize how their aus­ter­i­ty man­dates are ensur­ing that future “bailouts” will be need­ed. Ide­o­log­i­cal blind­ers tend to do that:

    More debt relief pos­si­ble if Greece meets cri­te­ria-Dijs­sel­bloem

    BRUSSELS Tue Feb 24, 2015 5:16am EST
    Feb 24 (Reuters) — Euro zone min­is­ters could con­sid­er fur­ther debt relief mea­sures for Greece if the coun­try meets all the cri­te­ria spec­i­fied in the NOvem­ber 2012 deci­sion of euro zone finance min­is­ters, Eurogroup head Jeroen Dijs­sel­bloem said on Tues­day.

    Speak­ing in the Euro­pean Par­lia­ment, Dijs­sel­bloem referred to the Eurogroup state­ment which said the euro zone finance min­is­ters could con­sid­er, if nec­es­sary fur­ther mea­sures to help Greek debt sus­tain­abil­i­ty, if Greece has a pri­ma­ry sur­plus and meets all the com­mit­ments in the bailout, which of “has­n’t hap­pened yet.”

    “We will come back to that issue on the basis of the four-month exten­sion if that is going to be agreed ... That will allow the new Greek gov­ern­ment to ful­fil its com­mit­ments, then we can finalise the whole pro­gramme peri­od, we can make a new debt sus­tain­abil­i­ty analy­sis and then we will see whether it is nec­es­sary and what fur­ther mea­sures, if nec­es­sary, we can take.”

    “If eco­nom­ic cir­cum­stances so require, fis­cal tar­gets can be addjust­ed with­in pro­grammes — and have been adjust­ed in the past — but it can­not be a uni­lat­er­al deci­sion of the gov­ern­ment involved to say we are no longer com­mit­ed to this tar­get,” Dijs­sel­bloem said.

    See how the fun sys­tem works?
    Step 1. Make obscene aus­ter­i­ty man­dates based on the premise that the aus­ter­i­ty will be “expan­sion­ary” and actu­al­ly help the econ­o­my.
    Step 2. Wait for the coun­ty’s econ­o­my to col­lapse from all the aus­ter­i­ty, mak­ing pay­ing back the “bailout” debt impos­si­ble.
    Step 3. Throw a mas­sive fit when the coun­try cries out against this treat­ment.
    Step 4. Return to Step 1.

    How nice!

    But also keep in mind that just because Greece might need a anoth­er bailout in the future does­n’t mean it’s going to get one since nation­al gov­ern­ments would all have to approve and then it because a polit­i­cal ques­tion of help­ing the needy. And you don’t want to be needy in the new EU:

    Bloomberg Busi­ness
    Merkel Test­ed by Dis­sent on Greek Bailout in Her Par­ty

    by Rain­er Buer­gin and
    Arne Delfs
    3:14 AM CST
    Feb­ru­ary 26, 2015

    (Bloomberg) — Chan­cel­lor Angela Merkel faces increased dis­sent with­in her gov­ern­ing coali­tion over extend­ing Greece’s bailout as part of her goal of keep­ing the euro area intact.

    While senior law­mak­ers say almost all of Merkel’s Chris­t­ian Demo­c­ra­t­ic bloc will back the four-month reprieve for Greece in a low­er-house vote on Fri­day, 22 of the 311 cau­cus mem­bers opposed the mea­sure in a straw poll Thurs­day, nine more than vot­ed against pas­sage of Greece’s sec­ond bailout in 2012.

    Goad­ing them on was Alter­na­tive for Ger­many, the anti-euro par­ty that’s won seats in four Ger­man state par­lia­ments since August and is seek­ing to boost its nation­al stand­ing on the back of dis­sat­is­fac­tion with euro-area bailouts. Par­ty co-leader Bernd Lucke urged Chris­t­ian Demo­c­ra­t­ic law­mak­ers to shun par­ty dis­ci­pline and vote their con­science on Fri­day.

    “It’s a prob­lem” for the Chris­t­ian Democ­rats, Gero Neuge­bauer, a polit­i­cal ana­lyst at Berlin’s Free Uni­ver­si­ty, said by phone. Law­mak­ers who dis­agree with Merkel’s bailout poli­cies are look­ing at region­al elec­tions down the road, and the aid “is against their con­vic­tions as well,” he said.

    Oppo­nents include Wolf­gang Bos­bach, a six-term Chris­t­ian Demo­c­ra­t­ic law­mak­er who chairs the inte­ri­or affairs com­mit­tee who says he’s flirt­ing with end­ing his par­lia­men­tary career after con­sis­tent­ly oppos­ing bailouts.

    ‘Nein’ Self­ies

    Hans Michel­bach of the Bavaria-based Chris­t­ian Social Union says he’ll refuse to back Merkel for the first time because it’s illu­so­ry to think the res­cue will work. Peter Ram­sauer, a CSU law­mak­er and for­mer trans­porta­tion min­is­ter under Merkel, also says he’ll vote against the exten­sion.

    “Law­mak­ers are called upon to make up their own minds” whether aid to Greece should be extend­ed, Lucke said in an inter­view. One rea­son is that a third bailout for Greece “is unavoid­able as long as the coun­try stays in the euro and the res­cue poli­cies don’t change,” he said.

    ...

    Twen­ty-two Chris­t­ian Demo­c­rat law­mak­ers opposed fur­ther aid in the straw poll and five abstained, cau­cus leader Volk­er Kaud­er said. The Social Democ­rats, Merkel’s junior coali­tion part­ner, sup­port aid to Greece in return for reform pledges. Her gov­ern­ment con­trols 504 of the 631 low­er-house seats.

    ‘Inap­pro­pri­ate’ Tone

    “We will give our approval, but we expect Greece to meet its com­mit­ments,” Kaud­er told reporters. Though the Greek gov­ern­ment is strik­ing an “inap­pro­pri­ate” tone toward its euro-area part­ners, “we are mak­ing deci­sions that are need­ed in Germany’s inter­est and in Europe’s inter­est,” he said.

    Bild, Germany’s most-read dai­ly news­pa­per, denounced the government’s sup­port for Greece on Thurs­day and splashed the word “Nein” — Ger­man for “no” — across its edi­to­r­i­al page, urg­ing read­ers to take pho­tos of them­selves hold­ing it.

    Ger­many and Fin­land, core crit­ics of Tsipras’s effort to break free from fis­cal aus­ter­i­ty, are cru­cial to the pro­posed exten­sion since it requires a par­lia­men­tary vote. While fail­ure to win par­lia­men­tary approval for the pro­gram would risk halt­ing the flow of aid to Greece, even law­mak­ers who vot­ed against past bailouts acknowl­edge they don’t have the sup­port to block the exten­sion.

    While it’s clear that the votes are going to be there to pass this par­tic­u­lar bailout exten­sion, is there any doubt a future bailout would be fought tooth and nail? Espe­cial­ly if the sys­temic risks to the Ger­man finan­cial sys­tem from a Greek melt­down keeps shrink­ing?

    Ger­man bank expo­sure to Greece around $28 bil­lion: banks

    FRANKFURT Tue Jan 6, 2015 6:57am EST

    (Reuters) — Ger­man banks have about 23.5 bil­lion euros ($28 bil­lion) in cred­it expo­sure to Greece, but the sys­temic risk is lim­it­ed because the biggest com­mer­cial banks, Deutsche Bank (DBKGn.DE) and Com­merzbank (CBKG.DE), hold only a tiny frac­tion of that, accord­ing to fig­ures gath­ered by Reuters.

    The lion’s share of Ger­man expo­sure is held by the state-owned devel­op­ment bank KfW, with lend­ing to the Greek state total­ing 15 bil­lion euros, bank­ing indus­try group BdB said.

    Com­merzbank said it held about 400 mil­lion euros in expo­sure to Greece at the end of Sep­tem­ber, while Deutsche Bank said it held around 298 mil­lion euros in cor­po­rate, bank and pub­lic debt.

    ...

    A study by JP Mor­gan (JPM.N) found that French bank Cred­it Agri­cole (CAGR.PA) was the most exposed of Europe’s com­mer­cial banks. Cred­it Agri­cole said it had 3.5 bil­lion euros in expo­sure to Greece at the end of 2013, of which 2.8 bil­lion euros was to the ship­ping sec­tor and none of it to state enti­ties.

    France’s largest bank, BNP Paribas (BNPP.PA), held around 700 mil­lion euros in Greek debt at the end of 2013, accord­ing to data pro­vid­ed by BNP. Most of the expo­sure was to cor­po­rate bor­row­ers and none was to Greek state enti­ties, the bank said.

    BNP doc­u­ments from end-2013 also show an addi­tion­al 1.3 bil­lion euros in expo­sure to Greek com­pa­nies that are not tied to the Greek eco­nom­ic sit­u­a­tion, such as ship­ping busi­ness­es.

    Soci­ete Gen­erale (SOGN.PA) held 300 mil­lion euros in expo­sure to Greek cor­po­rate debt and had no sov­er­eign expo­sure as of end-Sep­tem­ber, a spokes­woman for the bank said.

    Of the total Ger­man expo­sure, 4.6 bil­lion euros was to oth­er banks, 3.6 bil­lion euros to com­pa­nies and pri­vate indi­vid­u­als, and 15.2 bil­lion euros to state enti­ties, the BdB said.

    “The cred­it expo­sure of Ger­man banks in Greece is low,” BdB head Thomas Kem­mer said in a state­ment. “That’s why, should it come to insol­ven­cy for Greece, the direct effects on Ger­man banks could be over­come.

    “Even the con­ta­gion effects that would accom­pa­ny an exit could be endured bet­ter than two or three years ago.”

    Just how will­ing is Berlin or Ger­many’s elec­torate going to be for any future bailout­sas the expo­sure to Greek debt (pub­lic and pri­vate) keeps falling?

    Also keep in mind that Greece isn’t the only euro­zone mem­ber that could be fac­ing a future bailout before the cri­sis that start­ed in 2008 is real­ly over. And even if no more bailouts are need­ed for the cur­rent cri­sis, what about future crises? Aren’t future finan­cial crises kind of inevitable giv­en the struc­ture of the euro­zone and all of its flaws we’ve seen on dis­play since 2008 (not to men­tion just the odds of sh!t hap­pen­ing over time)? After this hor­ri­ble round of bailout expe­ri­ences (it has­n’t actu­al­ly been all that bad for the cred­i­tor nations but they seem to be per­ceiv­ing these bailouts as an exis­ten­tial threat), what on earth are future bailouts going to look like giv­en that it appears the euro­zone gov­ern­ments (and much of the pub­lic) have learned NOTHING about their dis­as­trous poli­cies? More of the same? That’s one of the big unknowns going for­ward at this point.

    But don’t for­get that there are plen­ty of oth­er big unknowns, includ­ing all of the var­i­ous pro­posed fun­da­men­tal changes to how the euro­zone gov­erns itself. For instance, you know how we keep hear­ing grum­bling about how there needs to be some way to guar­an­tee that indi­vid­ual gov­ern­ments don’t over­spend. It’s an odd response since to the cri­sis since, out­side of Greece, most of the nation­al debt crises were fueled by reck­less pri­vate sec­tor lend­ing. But it is what it is. The euro­zone lead­er­ship wants the euro­zone to be run­ning the eco­nom­ic poli­cies of euro­zone mem­bers and, giv­en the way things have gone thus far, that’s prob­a­bly what the euro­zone lead­er­ship is going to get soon­er or lat­er. After all, if you believe the hype, all Europe needs to do is imple­ment right-wing eco­nom­ic poli­cies via a supra­na­tion­al pol­i­cy-mak­ing body and there won’t be any need for future bailouts. That’s the hype! Believe it or not. Your input does­n’t real­ly mat­ter:

    The New York Times
    Eurozone’s Future Remains at Risk, Mario Draghi Warns

    By JACK EWING
    FEB. 25, 2015

    FRANKFURT — In a con­tentious appear­ance before the Euro­pean Par­lia­ment on Wednes­day, the pres­i­dent of the Euro­pean Cen­tral Bank said that the future of the euro­zone was at risk unless mem­ber coun­tries gave up some inde­pen­dence and cre­at­ed more Pan-Euro­pean gov­ern­ment insti­tu­tions.

    “We have not yet reached the stage of a gen­uine mon­e­tary union,” the cen­tral bank pres­i­dent, Mario Draghi, said in a speech to the Euro­pean Par­lia­ment in Brus­sels. Fail­ure of euro­zone coun­tries to har­mo­nize their economies and cre­ate stronger insti­tu­tions, he said, “puts at risk the long-term suc­cess of the mon­e­tary union when faced with an impor­tant shock.”

    Mr. Draghi has often urged euro­zone gov­ern­ments to do more to improve their eco­nom­ic per­for­mance, for exam­ple by over­haul­ing restric­tive labor reg­u­la­tions. But it was unusu­al for him to sug­gest that the future of the euro­zone could depend on whether coun­tries heed his advice.

    Although in his pre­pared remarks Mr. Draghi did not men­tion Greece, his speech came as tur­moil in that coun­try is again pre­oc­cu­py­ing pol­i­cy mak­ers and threat­en­ing to again cre­ate a cri­sis for the cur­ren­cy union.

    ...

    Mr. Draghi said that the Euro­pean Cen­tral Bank would accept Greek gov­ern­ment bonds as col­lat­er­al again in extend­ing loans to banks, if the coun­try shows that it is will­ing to stick to the con­di­tions of its bailout.

    The cen­tral bank stopped accept­ing Greek bonds ear­ly this month, a blow to banks which have used their hold­ings of Greek gov­ern­ment bonds to bor­row from the cen­tral bank at a cheap inter­est rate of 0.05 per­cent. Since then the banks, fac­ing signs of a cap­i­tal flight, have relied on emer­gency cash from anoth­er cen­tral bank pro­gram that car­ries a high­er inter­est rate.

    Mr. Draghi in his speech also not­ed that euro­zone coun­tries have made progress in cen­tral­iz­ing tasks like bank reg­u­la­tion. But with­out nam­ing oth­er spe­cif­ic exam­ples, he said more insti­tu­tions need to be cre­at­ed to make sure that euro­zone coun­tries fol­low their own rules. Mem­bers of the cur­ren­cy bloc have often vio­lat­ed guide­lines on pub­lic spend­ing and debt.

    “In the medi­um to longer term, we need to move from a sys­tem of rules and guide­lines for nation­al eco­nom­ic pol­i­cy mak­ing to a sys­tem of fur­ther sov­er­eign­ty shar­ing with­in com­mon insti­tu­tions so as to strength­en our eco­nom­ic pol­i­cy gov­er­nance,” Mr. Draghi said. “A com­mon rule is only as strong as the com­mon insti­tu­tion that can enforce it.”

    Mr. Draghi also used the appear­ance at Par­lia­ment to defend the cen­tral bank’s deci­sion last month to begin buy­ing gov­ern­ment bonds as a way of arrest­ing an alarm­ing decline of euro­zone infla­tion to lev­els con­sid­ered bad for growth. But he said the so-called quan­ti­ta­tive eas­ing would work much bet­ter if coun­tries did their part, for exam­ple by remov­ing lengthy approvals and fees required to set up a busi­ness.

    ...

    While vague, Mario Draghi’s pro­pos­al for trans­fer­ring sov­er­eign­ty should sound pret­ty famil­iar at this point:

    ...
    Mr. Draghi in his speech also not­ed that euro­zone coun­tries have made progress in cen­tral­iz­ing tasks like bank reg­u­la­tion. But with­out nam­ing oth­er spe­cif­ic exam­ples, he said more insti­tu­tions need to be cre­at­ed to make sure that euro­zone coun­tries fol­low their own rules. Mem­bers of the cur­ren­cy bloc have often vio­lat­ed guide­lines on pub­lic spend­ing and debt.

    “In the medi­um to longer term, we need to move from a sys­tem of rules and guide­lines for nation­al eco­nom­ic pol­i­cy mak­ing to a sys­tem of fur­ther sov­er­eign­ty shar­ing with­in com­mon insti­tu­tions so as to strength­en our eco­nom­ic pol­i­cy gov­er­nance,” Mr. Draghi said. “A com­mon rule is only as strong as the com­mon insti­tu­tion that can enforce it.”
    ...

    That’s the plan! It’s one of the themes that keeps com­ing up over and over since that’s sort of how the sys­tem oper­ates at this point any­ways for the bailout-afflict­ed coun­ties, except it sounds like Draghi is propos­ing a per­ma­nent enti­ty that would have over­sight over nation­al spend­ing in bad times and good.

    And since it’s obvi­ous that this enti­ty would be com­plete­ly right-wing ori­ent­ed, we’re basi­cal­ly look­ing at a sys­tem of lost sov­er­eign­ty in exchange for man­dat­ed pre­emp­tive aus­ter­i­ty. THAT’s the euro­zone’s long-term solu­tion to more bailouts: loss of sov­er­eign­ty in exchange for pre­emp­tive per­ma­nent aus­ter­i­ty. At least that’s cer­tain­ly how it looks today. And since these kind of major over­hauls tend to only hap­pen in a cri­sis, we just have to wait until the next major cri­sis before such a pro­pos­al is final­ly put on the table. It’s real­ly just a mat­ter of time.

    So get ready for some more big changes euro­zone! Or don’t get ready. Your accep­tance of your fate isn’t real­ly rel­e­vant.

    Posted by Pterrafractyl | February 26, 2015, 3:17 pm
  31. Greece’s Prime Min­is­ter is accus­ing Spain and Por­tu­gal of being part of an “anti-Athens axis”. “Anti-Athens Debt Colonies” would have also worked, but “anti-Athen axis” has a nice ring to it too:

    Greek PM accus­es Spain, Por­tu­gal of anti-Athens ‘axis’

    By Costas Pitas and David Stamp

    ATHENS Sat Feb 28, 2015 3:43pm EST

    (Reuters) — Greece’s left­ist Prime Min­is­ter Alex­is Tsipras accused Spain and Por­tu­gal on Sat­ur­day of lead­ing a con­ser­v­a­tive con­spir­a­cy to top­ple his anti-aus­ter­i­ty gov­ern­ment, say­ing they feared their own rad­i­cal forces before elec­tions this year.

    Tsipras also reject­ed crit­i­cism that Athens had staged a climb­down to secure an exten­sion of its finan­cial life­line from the euro zone, say­ing anger among Ger­man con­ser­v­a­tives showed that his gov­ern­ment had won con­ces­sions.

    Greeks have direct­ed much of their fury about years of aus­ter­i­ty dic­tat­ed by inter­na­tion­al cred­i­tors at Ger­many, the biggest con­trib­u­tor to their coun­try’s 240-bil­lion-euro bailout.

    But in a speech to his Syriza par­ty, Tsipras turned on Madrid and Lis­bon, accus­ing them of tak­ing a hard line in nego­ti­a­tions which led to the euro zone extend­ing the bailout pro­gram last week for four months.

    “We found oppos­ing us an axis of pow­ers ... led by the gov­ern­ments of Spain and Por­tu­gal which for obvi­ous polit­i­cal rea­sons attempt­ed to lead the entire nego­ti­a­tions to the brink,” said Tsipras, who won an elec­tion on Jan. 25.

    “Their plan was and is to wear down, top­ple or bring our gov­ern­ment to uncon­di­tion­al sur­ren­der before our work begins to bear fruit and before the Greek exam­ple affects oth­er coun­tries,” he said, adding: “And main­ly before the elec­tions in Spain.”

    Spain’s new anti-estab­lish­ment Podemos move­ment has topped some opin­ion polls, mak­ing it a seri­ous threat to the con­ser­v­a­tive Peo­ple’s Par­ty of Prime Min­is­ter Mar­i­ano Rajoy in an elec­tion which must be held by the end of this year.

    Rajoy went to Athens less than a fort­night before the Greek elec­tion to warn vot­ers against believ­ing the “impos­si­ble” promis­es of Syriza. His appeal fell on deaf ears and vot­ers swept the pre­vi­ous con­ser­v­a­tive pre­mier from pow­er.

    Por­tu­gal will also have elec­tions after the sum­mer but no anti-aus­ter­i­ty force as potent as Syriza or Podemos has so far emerged there.

    In an inter­view pub­lished before Tsipras made his speech, Prime Min­is­ter Pedro Pas­sos Coel­ho denied that Por­tu­gal had tak­en a hard line in nego­ti­a­tions on the Greek deal at the Eurogroup of euro zone finance min­is­ters.

    “There may have been a polit­i­cal inten­tion to cre­ate this idea, but it is not true,” he told the Expres­so week­ly news­pa­per.

    Pas­sos Coel­ho aligned him­self with euro zone gov­ern­ments which have called for poli­cies to pro­mote eco­nom­ic growth but with­out try­ing to walk away from aus­ter­i­ty as in Greece.

    “We were on the same side as the French gov­ern­ment, with the Ital­ian and Irish gov­ern­ments. I think it’s bad to stig­ma­tize south­ern Euro­pean coun­tries,” he said.

    A VICTORY FOR GREECE

    Por­tu­gal had to take its own bailout in 2011 but left the pro­gram last year. Finance Min­is­ter Maria Luis Albu­querque said on Sat­ur­day Lis­bon would start repay­ing its loans to the IMF next month, giv­ing back 6 bil­lion euros.

    This con­trasts to Greece which remains in its EU/IMF pro­gram, almost five years and two bailouts after it had to seek inter­na­tion­al help.

    Tsipras has por­trayed the Eurogroup deal as a vic­to­ry for Greece, even though it meant extend­ing the bailout pro­gram he had promised vot­ers to scrap. He not­ed Ger­man law­mak­ers from Chan­cel­lor Angela Merkel’s con­ser­v­a­tives had attacked the Greek lead­er­ship when they approved the exten­sion on Fri­day.

    “We have all watched the strong oppo­si­tion with­in Angela Merkel’s par­ty which shows that unac­cept­able con­ces­sions have been made to Greece,” he said.

    ...

    Yeah, it’s pret­ty hard to deny that the gov­ern­ments of Spain and Por­tu­gal did­n’t hide their desires to see the Great Greek Beat­down Tragedy con­tin­ue unabat­ed, although the char­ac­ter­i­za­tion of Lis­bon or Madrid as lead­ers in the ‘anti-Athens axis’ could be improved since these gov­ern­ments, them­selves, are pret­ty much just tak­ing march­ing orders from Berlin and the rest of the euro­zone cred­i­tor states. In oth­er words, the full anti-Athens axis appeared to include every sin­gle euro­zone mem­ber except Greece (it’s sort of a ‘Kiss up and Kick Down Axis’ at this point).

    It’s part of what makes the Greek Tragedy so trag­ic: the near­ly uni­ver­sal sup­port of 19th-cen­tu­ry junk eco­nom­ics and nation­al usury poli­cies has infest­ed the Euro­pean social con­tract with some sort of twist­ed pseu­do-gold-stan­dard regime that is look­ing like it’s going to doom Europe until there’s either an over­haul of Europe’s rul­ing macro­eco­nom­ic world­view or the euro­zone itself unrav­els.

    So, from that per­spec­tive, it’s real­ly more of an anti-almost-every­one axis. Or, at a min­i­mum, an anti-Athen-Lis­bon-Madrid-Rome-Dublin axis that just hap­pens to include Lis­bon, Madrid, and Dublin as some of its most enthu­si­as­tic mem­bers. Mem­ber isn’t cheap:

    Deutsche Welle
    Aus­ter­i­ty paves way for growth in Por­tu­gal

    Por­tu­gal’s aus­ter­i­ty poli­cies have helped turn the coun­try around — and there are good eco­nom­ic signs ahead. But aid groups and unions say this progress has come at a high social price for the coun­try’s poor.

    Date 23.02.2015
    Author Jochen Faget, Lis­bon / sgb

    Not even the Por­tuguese agree on the grav­i­ty of their sit­u­a­tion: On the one hand, the gov­ern­ment and many econ­o­mists are say­ing the worst is over. On the oth­er, social work­ers and rep­re­sen­ta­tives of almost all aid orga­ni­za­tions believe that at the very least the social effects of the cri­sis will wors­en con­sid­er­ably.

    Again and again, the gov­ern­ment brings up its ear­ly repay­ment of a por­tion of the bailout loans and record low inter­est rates for the issuance of gov­ern­ment bonds, as well as the rel­a­tive­ly low offi­cial unem­ploy­ment rate of 14 per­cent. But these num­bers should be treat­ed with skep­ti­cism, warns Joao de Sousa of AMI, a char­i­ty. He said the unem­ploy­ment sta­tis­tics in Por­tu­gal are kept down by train­ing cours­es that serve no oth­er pur­pose, while many job­seek­ers, in their despair, have sim­ply not signed up with the employ­ment agen­cies. The largest Por­tuguese trade union fed­er­a­tion, the CGTP, thus esti­mates real unem­ploy­ment at over 25 per­cent, added to which are numer­ous osten­si­bly self-employed peo­ple who earn next to noth­ing.

    Pover­ty all around

    Even those who are in work have noth­ing to laugh about: The statu­to­ry min­i­mum wage of around 430 euros per month is the excep­tion rather than the rule. Work­ers in Por­tu­gal’s strongest export indus­tries — tex­tiles and shoes — must some­how make ends meet on this mea­ger income. It’s no won­der that, accord­ing to the lat­est fig­ures from the nation­al sta­tis­tics office, the num­ber of poor has risen to 19 per­cent of the coun­try’s pop­u­la­tion. About 2 mil­lion of 10 mil­lion Por­tuguese are forced to get by on less than 60 per­cent of the aver­age wage. De Sousa says Por­tu­gal’s gen­er­ous social-secu­ri­ty net­work was almost com­plete­ly destroyed by aus­ter­i­ty mea­sures — some­thing he calls “dis­as­trous.”

    “The social prob­lems that the aus­ter­i­ty poli­cies brought with them are far from being solved,” eco­nom­ics pro­fes­sor Auro­ra Teix­eira of the Uni­ver­si­ty of Por­to said. The gov­ern­ment had been able to draw up an accept­able bud­get, she said, through longer work­ing hours, wage cuts and reduc­tions in gov­ern­ment spend­ing that had final­ly allowed the econ­o­my to see a light at the end of the tun­nel. But the unprece­dent­ed decline in social spend­ing that occurred hit the most vul­ner­a­ble par­tic­u­lar­ly hard.

    Half-full or half-emp­ty?

    “We have reached our lim­its,” de Sousa said, shrug­ging. He said AMI’s soup kitchen in Por­tu­gal’s sec­ond largest city, Por­to, was hope­less­ly over­bur­dened. Rice, pota­toes and canned goods were no longer suf­fi­cient to meet the increased demand for food that the char­i­ty dis­trib­utes to the needy once a month. In the cap­i­tal, Lis­bon, and oth­er cities, it was no dif­fer­ent. He said it was clear the cri­sis was far from over.

    Por­tu­gal lived beyond its means, spend­ing far more than it took in, Teix­eira said. But that has now changed. Set­ting aside debt ser­vice, the bud­get now even shows a clear sur­plus. Aus­ter­i­ty, she said, had thus been suc­cess­ful: “There is hope again. The worst is over.”

    But, she said, what was miss­ing were struc­tur­al changes: Por­tu­gal had to increase the quan­ti­ty and qual­i­ty of its eco­nom­ic out­put to increase the flow of mon­ey into the coun­try, and it should not con­cen­trate only on ser­vices such as tourism. She did not say how this could be brought about.

    In or out

    And because they are either poor­ly paid, or unable to get a steady job, increas­ing num­bers of well-edu­cat­ed young Por­tuguese are going abroad. More than 100,000 each year have turned their backs on their home­land since the cri­sis began, emi­grat­ing to Britain, France or Ger­many. This is espe­cial­ly true of those with high­er edu­ca­tion such as engi­neers and econ­o­mists, but also skilled work­ers and nurs­es.

    ...

    An end in sight

    But it was exact­ly these aus­ter­i­ty mea­sures that regained the mar­ket’s con­fi­dence in Por­tu­gal, Teix­eira said. The coun­try was there­fore now able to bor­row mon­ey at low inter­est rates of just over 2 per­cent and even repay a por­tion of its bailout debt ahead of sched­ule.

    “This gives the gov­ern­ment more room to maneu­ver,” Teix­eira said. “It can set inde­pen­dent polit­i­cal pri­or­i­ties.”

    There are already ini­tial signs that aus­ter­i­ty will end soon: The gov­ern­ment has rolled back some wage cuts, and oth­er mea­sures are like­ly to fol­low. Ulti­mate­ly, 2015 is an elec­tion year in Por­tu­gal. And the peo­ple have suf­fered long enough.

    This part real­ly cap­tures the under­pants-gnome nature of so many of the calls for “struc­tur­al reforms” you hear from pro-aus­ter­i­ty econ­o­mists:

    But, she said, what was miss­ing were struc­tur­al changes: Por­tu­gal had to increase the quan­ti­ty and qual­i­ty of its eco­nom­ic out­put to increase the flow of mon­ey into the coun­try, and it should not con­cen­trate only on ser­vices such as tourism. She did not say how this could be brought about.

    Yes, why can’t Por­tu­gal sim­ply turn itself into a high-tech export pow­er­house and pull itself up from its boot­straps that way? It should be easy with all the help­ful achieve­ments the aus­ter­i­ty poli­cies have achieved so far. Achieve­ments like:
    — A 19% pover­ty rate
    — A 14% unem­ploy­ment rate, which is char­ac­ter­ized as rel­a­tive­ly good.
    — Exports of 100,000 young peo­ple, espe­cial­ly the most high­ly skilled like engi­neers or nurs­es.
    — A near­ly destroyed safe­ty-net.
    — And don’t for­get the low inter­est rates!

    As we can see, the aus­ter­i­ty is already work­ing! Exports are up! Grant­ed, it’s exports of young engi­neers and oth­er skilled work­ers but it’s a start! Tech pow­er­house sta­tus here we come!

    See how help­ful aus­ter­i­ty is, although Keep in mind that the low bor­row­ing costs were large­ly a result of the Euro­pean Cen­tral Bank’s actions and pledges (Aus­ter­i­ty helped, but pri­mar­i­ly by depress­ing the econ­o­my).

    Also keep in mind that when Tsipras char­ac­ter­izes the recent 4 month exten­sion as a vic­to­ry, it real­ly was a vic­to­ry of sorts even when you con­sid­er all the con­ces­sions made because at least now there’s a chance of a change in pol­i­cy when this gets rene­go­ti­at­ed months from now.
    Of course, unless Greece can find more mem­bers so join its anti-anti-Almost-Every­one axis (an axis of one so far), it’s unlike­ly that those con­ces­sions Greece won are going to amount to much in the end. That’s why it’s so impor­tant for Europe’s anti-aus­ter­i­ty lead­ers to clear­ly point out the per­verse incen­tives the pro-aus­ter­i­ty gov­ern­ments have in ensur­ing that Greece be allowed no mean­ing­ful long-term devi­a­tion from the aus­ter­i­ty poli­cies. So hope­ful­ly Alex­is Tsipras will have some suc­cess in con­vinc­ing some of his fel­low lead­ers that they prob­a­bly should be mem­bers of axis that is ded­i­cat­ed to the demise of their soci­eties, even if it’s a lit­tle embar­rass­ing to change course. There are worse things than embar­rass­ment. Tsipras needs to some­how com­mu­ni­cate this to peers, although it’s not at all clear how he can effec­tive­ly do that giv­en the intense depres­sions their nations have endured and the resis­tance to pos­i­tive changes that can fol­low peri­ods of deep pain and sor­row.

    Do the lead­ers of Europe use Face­book? Maybe that could be a way to start the nec­es­sary con­ver­sa­tion...

    Posted by Pterrafractyl | February 28, 2015, 6:58 pm
  32. ECB Pres­i­dent Mario Draghi quelled any hopes that the ECB would play a role of emer­gency lender of last resort for the Greek gov­ern­ment. He’s pre­vi­ous­ly ruled out the buy­ing Greek bonds via the QE pro­gram, but not it looks like rais­ing the cap on short-term trea­sury bills issued by Athens is also going to be reject­ed, which means the euro­zone’s offi­cial plans for resolv­ing the Greek cri­sis appear to still involve pret­ty much just wait­ing for Greece to run out of cash to pre­sum­ably turn the screws some more:

    Greece can­not rely on ECB to dodge fund­ing crunch

    NICOSIA Thu Mar 5, 2015 9:05am EST

    (Reuters) — Greece can­not rely on the Euro­pean Cen­tral Bank to raise a lim­it on Athens’ issuance of short-term debt, ECB Pres­i­dent Mario Draghi sug­gest­ed on Thurs­day.

    He also said the rules meant the ECB could not buy Greek bonds under its new asset-buy­ing pro­gram.

    Asked about the short-term debt lim­it at a news con­fer­ence fol­low­ing the ECB’s meet­ing in Cyprus, Draghi said that the bank was pro­hib­it­ed by Euro­pean rules from direct or indi­rect financ­ing of gov­ern­ments.

    “The ECB is a rule-based insti­tu­tion. It is not a polit­i­cal insti­tu­tion,” Draghi said.

    Athens is run­ning out of options to fund itself despite strik­ing a deal with the euro zone in Feb­ru­ary to extend its bailout by four months. Faced with a fall in rev­enues, it is expect­ed to run out of cash by the end of March, maybe soon­er.

    One fund­ing option would be to raise a 15-bil­lion-euro ($16.69 bil­lion) cap on Athens’ issuance of Trea­sury bills, or short-term debt. The cap has already been reached, and the ECB has a veto over lift­ing it.

    ...

    And the screws get anoth­er twist.

    And speak­ing of turn­ing screws, War­ren Buf­fett took part in a recent CNBC Squawk Box inter­view (avail­able at top of arti­cle here) and addressed the ques­tion of whether or not the wealth­i­er euro­zone mem­bers should just give the poor­er states cash as a way to resolve the cri­sis. Buf­fet­t’s response? It was­n’t so much a call for more turn­ing of the screws. It was more like advo­cat­ing that Ger­many rub Greece’s nose in the mess over and over until Greece sub­mits or leaves. Because, as Buf­fett put it, if you don’t want a dog pee­ing on the rug you can’t reward it for that behav­ior:

    If you have behav­ior you want to get rid of, it’s prob­a­bly not the smartest behav­ior to reward it, right? I mean, if, if you have a dog that’s bee­ing on your car­pet, you do not want to start giv­ing it a bunch a dog bis­cuits, you know, or you’re going to have some...your carpet...after a while hope­ful­ly a new carpet...essentially, if peo­ple find they can break the rules, and you kind of threat­en the rest of them by the fact that we’ll cause you more trou­ble, you have to deal with it and you’re going to have a more stained car­pet a year or two years from now if you essen­tial­ly give in to thing and just keep mod­i­fy­ing the rules as you go along.

    When the CNBC host push­es back and points out the large amounts of lend­ing by wealth­i­er euro­zone nations, espe­cial­ly Ger­many, to coun­tries like Greece and the immense ben­e­fit that these nations have had by reduc­ing their val­ue of their cur­ren­cies by link­ing up their nations to eco­nom­i­cal­ly weak­er neigh­bors, Buf­fett replies that:

    What Greece has done is exposed the weak­ness of the orig­i­nal con­cept. and the idea that you’re going to link cur­ren­cy in lock step among a large group of coun­tries that have dif­fer­ent labor laws and every­thing. It has a struc­tur­al weak­ness to it.

    And lat­er in the inter­view says...

    Just imag­ine we had a West­ern Hemi­sphere Zone that we linked our­selves to linked to Venezuela and, you know, you name it. It would­n’t work.

    He also says if the wealth­i­er euro­zone nations want give to the poor­er mem­bers as a form of for­eign aid that’s fine.

    He also added in the inter­view that he thinks the US bank­ing sys­tem “is pret­ty damn good for the Unit­ed States”.

    So appar­ent­ly War­ren Buf­fett is unaware of the rou­tine fis­cal trans­fers from wealth­i­er to poor­er states in the US or thinks that should end and the poor­est states should become even poor­er in the US. And he also seems to see the euro­zone as it is today as an unwork­able con­struct, like if the US merged with Venezuela. But he still thinks it’s ok to treat Greece like a dog that’s pee­ing on the rug when it demands any changes because:

    ...
    you do not want to start giv­ing it a bunch a dog bis­cuits, you know, or you’re going to have some...your carpet...after a while hope­ful­ly a new carpet...essentially, if peo­ple find they can break the rules, and you kind of threat­en the rest of them by the fact that we’ll cause you more trou­ble, you have to deal with it and you’re going to have a more stained car­pet a year or two years from now if you essen­tial­ly give in to thing and just keep mod­i­fy­ing the rules as you go along.
    ...

    Aha.

    Posted by Pterrafractyl | March 5, 2015, 12:08 pm

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