Spitfire List Web site and blog of anti-fascist researcher and radio personality Dave Emory.

For The Record  

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

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. (The flash drive includes the anti-fascist books avail­able on this site.)

Listen: MP3

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.

    Share

    “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

Post a comment