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Greek Privatization Proceeds for Anti-Poverty Policies? Probably Not, But We’ll See

With negotiations between Greece and the troika over how to resolve the latest austerity-impasse still ongoing, a rather intriguing potential source of both conflict and compromise emerged between the Syriza-led Greek government trying to find a way out Greece’s austerity-trap and a “troika” that would strongly prefer Greece stays in the austerity-trap: Greece is offering to continue with the privatization of state assets that the troika demands but it would rather use the proceeds to set up a fund dedicated to tackling Greece’s humanitarian crises instead of immediately paying back Greece’s creditors. And while the troika has yet to formally rule out Greece’s proposal, European Commission president Jean-Claude Juncker made a fascinatingly uncharacteristic offer last week to let the 2 billion euros in unspent EU “development funds” in order to “support efforts to create growth and social cohesion in Greece”. Considering virtually all past attitudes by the troika regarding Greece’s “growth and social cohesion”, it was an oddly generous offer…except for the fact that the proceeds from the privatizations are projected to be potentially worth a lot more. So maybe it wasn’t so generous.

Still, it’s a fascinating proposal by the Greek government that puts the troika in a rather unusual position because when it comes to the troika:
Privatization = “Can’t get enough“.
Helping poor people = “Fine, as long as it doesn’t cost much, but they need to learn their lesson so maybe it’s not so good. And not if you’re too poor
Paying back creditors = “The most positive force in the universe

So by making this “privatization for humanitarian aid” proposal Greece appears to have done the seemingly impossible: Greece may have forced the troika to reconsider something and compromise in a way that’s actually helpful. Just a bit, which is still amazing.

That said, it’s still all quite ominous since the troika is still crazy.

—————————–

Well this should be interesting to watch: With the troika demanding more “reforms” from Greece during the latest round of troika-led negotiations over how much abuse and social degradation should take place as part of the Greek “bailout” and with the ECB restricting emergency access to credit lines for Greece’s banks, it’s pretty clear that the troika is intent on making it very clear to the Greeks that the screws can only get tighter.

Except now we get reports of German Chancellor Angela Merkel indicating “flexibility” for Greece as the Greek government scrambles to put together a set of “reforms” that meet its troika creditor demands. In addition, on Friday EU Commission President Jean-Claude Juncker made a rather surprising offer to the Greeks: the EU has a spare 2 billion euros lying around…and maybe it could use that money to help alleviate Greece’s humanitarian crisis. Given the troika’s past attitudes towards Greece’s humanitarian crises this was some uncharacteristically benevolent behavior:

Merkel sets strict terms for Greek aid, Juncker flags EU cash

By Renee Maltezou and Alastair Macdonald

BRUSSELS Fri Mar 20, 2015 3:42pm EDT

(Reuters) – European Union leaders welcomed a pledge on Friday from Greece to meet creditors’ demands for a broad package of economic reform proposals within days to unlock the cash Athens needs to avoid stumbling out of the euro zone.

After overnight crisis talks on the sidelines of an EU summit in Brussels, new Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel, the bloc’s main paymaster, offered somewhat divergent understandings of how much Athens must do and how quickly. But EU officials insisted there was a broad agreement to act now on an accord struck a month ago.

Merkel said Greece, which faces a cash crunch within weeks, would receive fresh funds only once its creditors approve the comprehensive list of reforms Tsipras promised to present soon.

But she signaled some flexibility on what reforms Tsipras would have to make — crucially giving his leftist-led coalition the chance to offer alternative savings strategies that will help it persuade its voters it is breaking with what Tsipras calls the failed austerity policies of his defeated predecessor.

And European Commission President Jean-Claude Juncker offered Tsipras a sweetener by saying 2 billion euros from the European Union’s modest collective budget were available to ease the humanitarian impact of five years of spending cuts.

Tsipras said he would fully respect a deal struck with euro zone finance ministers on Feb. 20 that extended an EU bailout deal until June. But he insisted that a condition in that pact requiring Athens to pass a final review of its efforts to bring its debts under control before receiving funds did not apply.

After two months of mounting frustration on both sides, marked by public squabbling, Tsipras held three hours of talks with the leaders of Germany, France and the main EU institutions to try to break an impasse that risks depriving Athens of the euros it needs to function fully within the currency area.

A joint statement by the EU institutions spoke of a “spirit of mutual trust”. But it remained uncertain Tsipras and Merkel were talking about the same reforms, and how far Greece would have to start implementing them before it receives any new cash.

DIVERGENT TAKES

The risk of a continued standoff, exactly a month after Greece secured a last-gasp four-month extension of an EU/IMF bailout, was highlighted by comments from Merkel and Tsipras.

“The agreement of Feb. 20 is still valid in its entirety. Every paragraph of the agreement counts,” Merkel told German journalists who questioned whether she was now offering cash for promises that many of her supporters have stopped believing in.

Tsipras appeared to differ. “It is clear that Greece is not obliged to implement recessionary measures,” he said. “Greece will submit its own structural reforms which it will implement.”

Merkel insisted only the completion of approved measures — in a final review by creditor institutions — would satisfy lenders including the Euro Group of euro zone finance ministers.

“The Greek government has the possibility of replacing individual reforms outstanding from Dec. 10 with other reforms, if these … have the same effect. The institutions and then the Euro Group must decide whether they do have the same effect,” she said, noting Ireland had made such changes with EU backing.

Tsipras, however, insisted that while his government would fully respect a deal struck with the euro zone on Feb. 20 it would not have to complete a final bailout review process begun by the last government to secure more aid: “We all have the same reading of the Feb. 20 accord… There is no such thing as a fifth review,” he told a news conference after the summit.

EU officials, keen to play up the prospects the talks had raised of preventing “Grexit”, or an inadvertent “Grexident” that pushed Greece out of the euro, said differences were merely ones of emphasis for audiences in their respective countries.

Sources aware of how the three hours of talks overnight had gone said Tsipras, aged 40 and only two months into his first ever government job, had quickly appeared to accept that he was facing a united front from creditors and would have no choice but to meet their impatient demands for cost-cutting measures.

“He has seen … that he cannot divide the Europeans,” one senior EU official said. “He can only work with them, not play them off against each other. He has also seen that there is goodwill if he sticks to his word and actually delivers.”

Another EU official said Tsipras, who will visit Merkel in Berlin on Monday after weeks of increasingly rancorous relations between ministers in their two cabinets, had indicated he could offer a full package of reforms within a week or 10 days.

Nonetheless, with some German leaders saying they might prefer Greece out of the euro zone, and Tsipras trying to satisfy a coalition of radicals unused to power, senior EU officials do not rule out a further collapse of the process.

Crucial for the Greek leader, EU officials believe, is being able to present his package as a break with his conservative predecessor — even if many of the measures are broadly similar.

Aha, well, as we can see, the offers of “flexibility” from Angela Merkel were actually very charactistic of the troika’s general attitude thus far:

Merkel insisted only the completion of approved measures — in a final review by creditor institutions — would satisfy lenders including the Euro Group of euro zone finance ministers.

“The Greek government has the possibility of replacing individual reforms outstanding from Dec. 10 with other reforms, if these … have the same effect. The institutions and then the Euro Group must decide whether they do have the same effect,” she said, noting Ireland had made such changes with EU backing.

How flexible! Greece is free to come up with its own reforms, as long as they have the same effect as the existing reforms. And what’s been the effect of those reforms thus far? A humanitarian crisis!

Still, that offer of two 2 billion euros was a nice change of pace. Normally it’s just assumed in the new EU that the only way to escape a humanitarian crisis is to somehow “reform” your way to riches via crisis-inducing austerity. So you have to wonder what prompted that change of attitude?

Reformed Cannibalism
Well, there is one possible motive for the EU’s 2 billion euro “humanitarian crisis” surprise, and it appeared just this week:

Greece already has a number of reforms to the troika’s “reforms” in mind (yes, reform reforms) and it’s already started implementing some of them. And they are exactly the kind of reform the troika is primed to hate. It’s a reform that centers around prioritizing Greece’s humanitarian crisis over paying back the troika that started the crisis in the first place:

Greece says to use asset sales for social welfare, not to cut debt

ATHENS Tue Mar 17, 2015 7:27am EDT

(Reuters) – Greece will shortly present a law to turn its privatisation agency into a wealth fund that will use proceeds to finance social welfare policies instead of reducing its public debt, the deputy finance minister said.

The move could further strain relations between Prime Minister Alexis Tsipras’ new left-wing government and Greece’s international creditors, who want Athens to use the revenues to cut its huge debtload.

“There will be a new Sovereign Wealth fund … and the revenue will be used to fund the government’s social policies and to support the social security system,” said Deputy Finance Minister Nadia Valavani.

Valavani told a parliamentary committee she would present legislation in the coming weeks to merge the privatisation agency (HRADF) with the country’s state property company, ETAD, to set up the new body.

The leftist government is opposed to some key asset sales but has been forced to moderate somewhat its stance as it negotiates with its European partners over a new aid package.

Privatizations for humanitarian crises? Yeah, it’s kind of hard to see how the troika is going to be enthusiastic about that idea. Using the proceeds from creditor-mandated state assets sales for social social welfare policies instead of paying back Greece’s creditors isn’t exactly the creditor’s paradise Europe’s elites have been working to hard to build. Helping the poor is an “Old Europe” thing. The new troika-led Europe is all about helping the creditors even if it means planned poverty for the masses. That’s the new normal

So was Juncker’s 2 billion euro offer a sort of indirect response to the Greek government’s proposal? That’s unclear. Alexis Tsipras declared that any spending on Greece’s humanitarian crisis wouldn’t impact the Greek budget back in February, but that might still imply changing the “bailout” repayment schedule to the troika. And there hasn’t really been an official troika response to the idea so far. Although there probably will be a response fairly soon since Greece’s parliament just turned that idea into law:

Greek parliament approves law to coax more tax payments

ATHENS, March 21 Fri Mar 20, 2015 6:56pm EDT

(Reuters) – Greece’s parliament on Saturday approved a bill that offers hefty cuts in fines and long repayment plans to citizens owing billions of euros in overdue taxes in a bid to boost depleted state coffers.

Shut out from debt markets and with remaining international bailout aid on hold, Athens risks running out of cash in the coming weeks and is scrambling to secure ways to finance itself and meet payment obligations.

The legislation, dubbed “regulations to kick-start the economy,” is part of the new left-wing government’s first batch of reforms.

It follows an anti-poverty law voted on earlier in the week, the first legislation the new government passed since coming to power in January. More bills are in the pipeline in hopes international creditors will release fresh aid after a loan review that needs to be wrapped up by April.

Greece is due to receive 7.2 billion euros in remaining European Union/International Monetary Fund bailout funds if it delivers on its reforms.

Under the new legislation, Greece’s privatisation agency will be turned into a wealth fund and will use proceeds to finance social welfare policies instead of paying down public debt.

Given that “more bills are in the pipeline in hopes international creditors will release fresh aid after a loan review that needs to be wrapped up by April,” the content of those upcoming bills is no doubt on the troika’s mind, as are the implications of showing any leniency to the rabble.

No one wants to be a ‘troikan’ protectorate. Especially ‘troikan’ protectorates
So some sort of response from the troika over this latest privatization agency move seems likely. Maybe Juncker’s offer was such a response or maybe not. But one thing is clear: When an outside force demands that your country sell off strategic assets to pay back that outside force the rabble tends to get restless:

Greek government ‘radically opposed’ to some privatizations as reforms talks underway
Associated Press March 11, 2015 | 10:40 a.m. EDT

By ELENA BECATOROS, Associated Press

ATHENS, Greece (AP) — Greece’s new government is “radically opposed” to the privatization of certain businesses, particularly in the energy and infrastructure sectors, a senior cabinet minister said Wednesday as reforms talks with creditors were due to begin.

Selling state-owned enterprises is one of the actions Greece has been asked to take to raise funds and reduce debt in exchange for rescue loans from the eurozone and International Monetary Fund.

Talks between Greece and its creditors began on a technical level in Brussels on Wednesday to cement a series of reforms Athens must implement in order to get the remaining bailout funds released and avoid bankruptcy.

“We are radically opposed to the privatization, particularly of the strategic sectors and businesses of our economy, and primarily in the sector of infrastructure and energy,” said Panagiotis Lafazanis, the energy and environment minister and a government hardliner, at a conference in Athens.

Lafazanis added that “honestly, I haven’t understood why for some schools of thought, privatizations have become synonymous with reforms.”

He argued that what he called the “neoliberal deregulation in the energy market, which occurred particularly during the recent (bailout) years with the insistence of the (European) Commission and the troika” had prolonged and exacerbated Greece’s financial crisis and energy poverty in the country.

“Troika” refers to the Commission, International Monetary Fund and European Central Bank, who together oversee the 240 billion euro rescue loans Greece began receiving in 2010.

The word “troika” got a bad name in Greece after mid-level officials from those institutions would visit Greece to carry out debt inspections. The new government has refused to deal with those officials, saying they are not welcome in Greece. On Wednesday, it said the team of lower-level technical experts with whom Greek officials would be negotiating on reforms would now be known as the ‘Brussels Group.’

Lafazanis has frequently repeated his opposition to privatizations. Last month, he said the privatization of the country’s power grid and power utility, DEH, would be halted as final binding bids had not yet been submitted.

In his speech Wednesday, Lafazanis said his country wanted diverse energy sources but would not be dependent on “any large power and of any coalition of countries.”

“Greece is too small a country to remain a type of dependent ‘troikan’ economic protectorate … with the status of an energy banana republic.”

As Greece’s energy and environment minister points out:

Greece is too small a country to remain a type of dependent ‘troikan’ economic protectorate … with the status of an energy banana republic.

And that’s certainly true, although it would also apply to large ‘troikan’ economic protectorates. Generally speaking, being a ‘troikan’ economic protectorate sucks regardless of size

Still, being a small ‘troikan’ economic protectorate is certainly a lot worse than being a smaller one. As the saying goes, “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” And while a ‘Grexit’ certainly carries the risk of a financial or political ‘contagion’, it’s also the case that a ‘Grexit’ might be manageable for the rest of the EU in the sense that the financial costs would mostly hit national budgets and not private banks since most of Greece’s debt at this point is owed to the IMF, ECB, and EU governments (although private banks would still be weakened). If Greece was the size of, say, France, the manageability of a ‘Grexit’ wouldn’t even be in question. A ‘Francexit’ would be a complete and immediate disaster for all parties involved and no one would even be pondering the manageability of the event.

That’s part of what makes the contemporary Greek tragedy so gripping: At this point, tiny Greece is the only European country that has really put up a significant resistance to the Berlin-run troika-regime. The only one.

So given Greece’s overall ‘troikan’ situation the nations has to resist somehow and change the situation, but it can’t really resist alone. At least not very effectively. And before the great collective Greek beat down by the entire EU it was the rest of Southern Europe (plus Ireland) that was (and still largely is) basically in the same ‘troikan’ position of powerlessness in the face of of the EU’s new Ordoliberal ‘golden rule‘ paradigm. So when you see the rest of Europe fall into line with the “Lazy Greeks, let’s kick them out” meme (which is the dominant attitude across the EU today), that’s basically a manifestation of the acceptance of “dependent ‘troikan’ economic protectorate” status by the rest of EU periphery. It’s really quite shocking and sad.

Still, at least there’s one government left in Europe that isn’t casually accepting its ‘troikan’ protectorate status. Whether or not the resistance ends up being successful or largely symbolic remains to be seen, but given the mass capitulation across Europe to far-right dogma in recent years, any attempt to pull Europe back from the abyss of society-destroying economics is a lot better than nothing:

Greece appoints new management at privatisation agency

ATHENS, March 17
Mon Mar 16, 2015 7:07pm EDT

(Reuters) – Greece appointed early on Tuesday new management at the country’s privatisation agency (HRADF), which is expected to play a key role in implementing the leftist government’s plans to limit further state asset sell-offs.

Asterios Pitsiorlas, a businessman involved in the tourism sector, will become chairman of the agency while Antonis Leoussis, former chief executive at Greece’s fourth biggest lender Alpha Bank’s real estate arm, will be chief executive.

Pitsiorlas and Leoussis will replace Emmanuel Kondylis and Paschalis Bouchoris, appointed to the helm of the agency in July by the former conservative government.

During a parliamentary committee which ran over into the early hours of Tuesday, Valavani said she would present legislation to create a new body to manage state assets, reiterating a previous suggestion that the HRADF would eventually be replaced.

Syriza has long opposed sell-offs undertaken by the previous conservative-led government but has been forced to somewhat moderate its stance as Greece negotiates with its European partners over a new aid package.

Greek representatives started talks with official international creditors in Brussels last week in a bid to agree on a set of reforms and unlock much-needed funds.

Privatisations had been meant to raise billions for Greece’s depleted state coffers under its 240-billion-euro bailout with the European Union and the International Monetary Fund since 2010.

Proceeds have been disappointing so far, amounting to about 3 billion euros, a fraction of an initially targeted 22 billion euros.

Note that Greece replaced the head of the state privatization agency just days before Juncker’s “humanitarian assistance” offer. Could that have prompted Juncker’s humanitarian aid offer?

Also note how:

Privatisations had been meant to raise billions for Greece’s depleted state coffers under its 240-billion-euro bailout with the European Union and the International Monetary Fund since 2010.

Proceeds have been disappointing so far, amounting to about 3 billion euros, a fraction of an initially targeted 22 billion euros.

Yep, The whole privatization idea has basically been a bust so far anyways.

But with a large fraction of the troika’s desired privatizations yet to be done, there’s still quite a bit of potential privatizations still on the chopping block. So the troika may not take Greece’s “privatizations for the public good” proposals very lightly despite the lackluster privatization scheme thus far.

Still, on the surface the Greek government’s reformed privatization plans may not seem like something that should piss the troika off too much. After all, the empirical evidence that privatizations help alleviate fiscal crises isn’t really there.

So if the proceeds get spent on social welfare instead of paying back creditors quite as quickly and it keeps the rabble from totally rebelling, who cares as long as Greece basically stays under the thumb of the troika?

When is 2 billion euros for humanitarian aid not generous? When it’s in place of 4 billion euros for humanitarian aid. And maybe a lot more
Given that Juncker just made the 2 billion euro “humanitarian aid” offer day, one might be tempted to assume that this privatization proposal isn’t any different than just having Greece spending the privatizations proceeds on humanitarian aid instead of paying back its troika creditors. The numbers might not be quite the same, but still, if Greece pays back the troika through privatizations and recieves 2 billion in humanitarian aid, is that really all that different from Greece obtaining that humanitarian aid itself through privatizations and instead of paying back the troika entirely?

Well, the troika might care, in part because the 2 billion euros the European Commission offered to Greece for humanitarian aid is half the amount the troika is expecting privatizations to bring in this year alone:

Hard for Greece to avoid privatization, pension reform: EU officials

By Jan Strupczewski

BRUSSELS Mon Mar 23, 2015 1:27pm EDT

(Reuters) – Greece can choose its own reforms to unblock the flow of loans from international creditors and stave off bankruptcy, but it will have a hard time avoiding privatizations and a pension reform because of their budget impact, European officials said.

A new left-wing government and euro zone creditors agreed last week that Athens would present within days a list of its own reforms that must achieve similar fiscal results to the measures agreed by the previous conservative-led cabinet.

“The last government did not complete the ‘prior actions’ necessary for the final disbursement. Nothing has changed, the prior actions are the same. But the measures can be changed if they do not jeopardize debt sustainability,” one euro zone official said.

Which reforms to choose is politically sensitive because the Syriza party of Prime Minister Alexis Tsipras won a general election in January on a platform of ending the policies of its predecessors, including budget austerity and measures it regards as recessionary.

If the creditors agree the substitute plans will achieve an impact equivalent to the previously agreed measures, Greece would get more loans from the euro zone and the International Monetary Fund, averting bankruptcy and a possible euro exit.

The starting point for talks with the IMF, the European Central Bank and the European Commission — “the institutions” — is a long list agreed to by Tsipras’ predecessors.

“They need to persuade the institutions that some of the measures should not be undertaken – to be either dropped, or supplemented by others,” one senior euro zone official said.

Privatization is likely to be one of the major hurdles, officials said, because it was due to contribute 4 billion euros to the budget this year alone. The Tsipras government does not want to sell state assets, although it has agreed in principle not to stop sales that had been initiated already.

A reform of the pension system is another sticking point, where the EU is concerned about early retirement privileges and the need to link benefits to the size of contributions.

Once Athens agrees on the list with its creditors and starts implementing the changes, more loans could start flowing gradually.

“This is where there can be flexibility, they can do it step by step and get step by step money,” the senior official said.

Yes, the troika clearly isn’t keen on allowing Greece to waive the privatizations, with privatizations from this year alone expected to contribute 4 billion euros to Greece’s budget, a significant amount when you consider that only 3 billion euros has been raised by all the privatizations up to now.

Also now that the 4 billion euros the troika is expecting the privatizations to contribute to Greece’s coffers is also double the 2 billion euros that Jean-Claude Juncker pledged for Greece’s “humanitarian aid”? Double. Could that have been part of the motivation before the 2 billion euro offer? After all, if the troika can convince Greece to waive its “privatizations for humanitarian needs” plan and just take the 2 billion euros of aid instead, that potentially gets the troika 2 billion in extra proceeds this year since so much of what goes into Greece’s coffers goes right back out and into the troika’s coffers.

So, in that context, the EU’s 2 billion euro humanitarian aid offer is perhaps less a belatedly generous offer of 2 billion euros to the suffering Greece and more an attempt to spending 2 billion in humanitarian aid to prevent 4 billion euros from getting spent humanely. At least that seems like a possible explanation for the EU Commissions unusual behavior. And that’s just 4 billion euros projected to be raised this this year…recall that the original plan was for 22 billion euros to be raised through privatizations.

What’s the value of a really bad idea? More that 2 billion euros?
But it may not simply be about saving billions of euros for the troika. Look at it this way: At this point, it’s abundantly clear that intertwined economies of the EU, and especially in the eurozone, are acting as both the glue that holds Europe together and the cudgel that keeps member nations in line. And strict adherence to “the rules” and balancing ledgers and trade imbalances is clearly intended to be a top priority in order to allow the money-glue-cudgel to work its magic (“magic” being defined as getting the rabble to do what they’re told without fully realizing they’re being told what to do). Mammon and technocrats (and Berlin) run Europe now. Democracy is sort of old school.

That’s all one of the reasons why rolling back of social and economic programs that protect the vulnerable and make life better for everyone makes so much sense for Europe’s elites: The 20th century welfare state that middle classes around the world have come to rely on is also one of the greatest political tools for empowering the rabble ever created. Non-economically desperate people are political empowered people, and you can’t have a money-glue-cudgel if the rabble is politically empowered. And few things can more effective politically disempower a society than rolling back economic safeguards so much that no one has the time or financial security to truly. Pro-poverty policies are a no-brainer for the troika.

But it’s not just about disempowering the masses and taking away their socioeconomic protections. If you want to transition to a stable form of vassal state-technocracy you also need to fill people’s heads with the kind of garbage ideas that prevent them from ever presenting any meaningful form of resistance. And if you look at the ideas and justifications behind what the troika has been doing it’s pretty clear that hammering horrible economic ideas into the heads of Europe’s masses is a top priority.

And it’s that drive to teach the kinds of lessons that can be exploited over and over As part of the process of explaining why Europe is intentionally imploding its societies and aggressively dismantling the social safety-net. Ideas like:

“High debt is the primary root of evil”

have been coupled with ideas like:

“Just keep cutting expenses and paying back that debt and you will become free and strong”

Those two core concepts are now dominating not just EU policy-making but the hearts and minds of the European public. But the absolutely crucials complementary ideas like:

“Avoiding usury is a good idea”

and:

“If a nation simultaneously cuts back on spending it’s going to have a recession or worse. And if many nations simultaneously do this you might have a depression

were intentionally unpersoned!

Even worse, ideas like:

“Poverty is a destructive force that should not be tolerated”

is not only not present in the pan-European discourse but that anti-poverty idea would derail the entire troika agenda.

As a result of this mix of bad ideas (and omitted good ideas), the overriding meme that’s come to dominate the EU’s reasoning during this crisis is something like:

“High debt is bad. Poverty is ok. Therefore, inducing poverty as a means of alleviating bad debt is not only fine but our only option since all of the other (Keynesian) options involve temporarily taking on more debt

Bad ideas like that must reign supreme if the new creditor’s paradise is going to be sustained. The rabble needs to truly believe ideas like:

The whole of Europe can prosper if only they all become export powerhouses with massive trade surpluses just like Germany. That won’t screw up the world economy or anything. Nope.

Totally crazy ideas like that have become the politically correct official truisms for much of Europe.

But just imagine if 4 billion euros got spent on helping Greece’s neediest instead of going right back into the troika’s coffers? And just imagine if that 4 billion euros worked wonders in lives across Greece and everyone got to compare those wonders to a bunch of numbers on the troika’s ledgers. That probably wouldn’t be a troika-friendly comparison in many minds (on the other hand…). So if the troika lets Greece spend its privatization proceeds on humanitarian aid instead of paying back its creditors, and that aid is seen actually helping people (just imagine 4 billion euros in actual social welfare spending), the seemingly endless drive towards creating a new EU ‘creditor’s paradise‘ suddenly hits a speed bump. People might actually start asking themselves what the hell they’re doing to themselves.

A creditor’s paradise is a private paradise
So with Greece’s negotiations with the troika yet to be concluded, keep an eye on the privatization component of the negotiations because that new “social welfare sovereign wealth fund” proposal may not amount to very much in terms of the size of the fund relative to the needs of Greece’s society, but the very ideas behind it are antithetical to the pro-market-supremacy/Ordoliberal foundations that the new Europe is supposed to be based on. Humanitarian aid to your people comes after you’ve developed a strong export sector in the new EU. Especially the eurozone.

The new, permanently right-wing Europe needs a populace that thinks kitchen table economics makes for good nation-state economics because that’s a populace that could can be crushed over and over. What’s that? There’s a temporary fiscal crisis? Let’s slash public spending on useful social programs and deregulate business! Once business explodes we can bring back the useful programs. An economically confused, easily manipulated populace that is perpetually navigating a socioeconomic landscape it can’t possibly understand because that landscape doesn’t make any sense and the public discourse about it is a bunch of nonsense intended to keep the rabble confused and oblivious.

THAT’s the dream! That perfect, special dream where elites use garbage socioeconomic paradigms to somehow “prove” to the rubes that it’s really in their best interests to we give up on this whole “empowerment and non-poverty for the masses” thing and instead divide and conquer themselves and let the big boys run things unchecked again. A return to the historic norm. It’s a classic.

But it’s a dream so beautiful that something like a privatization fund intended for social programs would just spoil everything. Ok, not everything, but it would certainly go against Europe’s new unofficial right-wing neoliberal ideology.

Why? Because a privation fund for social programs isn’t part of the troika’s plan and the long-term plan for Europe is obviously to have a collection of ‘troikan’ protectorates that dutifully follow whatever plan Europe’s elites hand them, regardless of the consequences to their people. In other words, humanitarian aid from privatization proceeds isn’t just an attempt to alleviate a humanitarian crisis. It’s an act of defiance, albeit moderate defiance since the Greek government would prefer to not do any privatizations at all. And while there are certainly instances when member states in a union can defy a federal power in unjustifiable ways that warrant federal action (this of John F. Kennedy’s showdown with Governor Wallace), in Greece’s case we’re talking about an act of defiance that’s necessary to alleviate a humanitarian crisis directly caused by the actions of those ruling international institutions that are being defied. And you can’t have that elite ‘creditor’s paradise‘ dream if governments are allowed to engage in acts of defiance even when they’re trying save their own people. That’s just not going to work.

All in all, we’re in a very strange place in the ever-evolving new EU. It’s true that you have to have some sort of sharing of sovereignty for the EU to work and that’s significantly more true for the eurozone. And if member states are able just ignore past agreements that’s not going to work at all. But at the same time, you can’t just have a “rules”-based union that is completely divorced from reality, especially when those rules prioritize national finances and other macroeconomic metrics over basic human needs. This tension should sounds familiar at this point since it’s very similar to the tension between creditor and debtor member states that EU leaders and elites have been usuriously misunderstanding for years now.

And while that tension between the need for adherence to the rules and the need for sane, humane rules has always existed, what makes this situation so strange for Europe is that large swathes of the content seems to have collectively forgotten that if you expect people to follow your rules those rules need to be sane rules in the first place. This should be obvious, but it apparently isn’t. And, sadly, the only reason the EU is trying to resolve this tension at all is because a lone government has decided to point out that tension by openly challenging the inhumane rules and calling a bloody spade a bloody spade. Just one.

So we can expect to find out the troika’s official response to Greece’s ‘privatization for humanitarian aid’ proposal soon enough. But given everything we’ve seen so far, we can really expect it to be a reasonable or humane response. Privatizations are part of the elite vision for Europe and that vision will not be F***ed with, regardless of circumstance. If you’re going to build a ‘creditor’s paradise‘, blind adherence to the rules is the first rule.

Discussion

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    It looks like we might be getting an answer to the lingering question of how the IMF’s demands for substantial Greek debt relief as a condition for the IMF’s continuing participation in the Greek ‘bailout’ scheme will be resolved in the face of implacable opposition in Berlin and other hardline eurzone capitals to any meaningful debt relief: Angela Merkel’s CDU is dropping its long-standing demands that the IMF be included in the Greek bailout program.

    In other words, at the end of all this and after the years of brutal austerity there’s most likely going to be no meaningful debt relief for Greece at all, thus guaranteeing that Greece will have to keep in place the massive austerity program and run massive budget surpluses for likely decades to come. Surprise!:

    Financial Times

    Merkel’s party drops insistence on IMF staying in Greek bailout
    CDU/CSU group suggests decisive shift because of fund’s call for debt relief

    Guy Chazan in Berlin and Mehreen Khan in Brussels
    May 31, 2018, 10:00 PM

    Angela Merkel’s conservative party no longer insists that the IMF continues to participate in Greece’s bailout programme, in a decisive change reflecting anxiety about the fund’s calls for debt relief for Athens.

    Eckhardt Rehberg, spokesman of the CDU/CSU parliamentary group for budgetary policy, told the Financial Times that “with the IMF insisting on large-scale debt relief for Greece — they have been talking about a three-digit number — I have a problem.”

    “The question is: Is the price of IMF participation in the next programme too high?” he said.

    The shift in the German position, at least in the influential CDU/CSU parliamentary group, could help ease last-ditch talks between eurozone governments and the IMF on the sidelines of the G7 meeting in Canada this weekend.

    Christine Lagarde, IMF managing director, will be attending the meeting, which will also bring together the finance ministers of Germany and France.

    Although the Greek economy returned to modest growth in the past year, the country still languishes under the burden of the €248bn it owes to the eurozone and the IMF.

    The fund had agreed in principle to provide Greece with a small credit line of €1.6bn, but it wanted eurozone governments to provide more clarity on debt relief before it made a financial commitment. However, Germany and its northern European allies resisted such demands, fearing their taxpayers would lose out.

    The German finance ministry, however, continues to insist that IMF involvement is “indispensable”, three months ahead of Greece’s planned exit from the bailout this summer.

    If a deal is not thrashed out at the G7 finance ministers’ meeting in Whistler, British Columbia, on Monday at the latest, IMF officials have warned that the fund will not have enough time to activate and then review its Greek programme. Hawkish eurozone capitals, including Berlin and The Hague, are open to the possibility of the IMF staying involved with Greece but without providing any money to the bailout.

    Some officials are worried that market jitters triggered by Italy’s political crisis will hamper Greece’s ability to raise more debt once it exits the third bailout in August. That would make the IMF’s role even more crucial in convincing nervous investors that Greece can stay solvent.

    German lawmakers have insisted on IMF participation in the Greek bailout since the country’s first rescue package in 2010. Wary of the European Commission’s role in administering bailouts, Wolfgang Schäuble, the former German finance minister, convinced sceptical German MPs that the IMF’s stamp of approval would lend credibility to a programme that involved billions in German taxpayers’ money.

    Germany’s parliament agreed to back the current €86bn bailout, negotiated by EU leaders in 2015, on condition the IMF would continue its involvement.

    Part of the conflict between some eurozone members and the IMF is a difference of views on how sustainable Greece’s debt is, with Germany and other governments more optimistic about Greece’s growth prospects than the IMF.

    “We don’t agree with the fund’s debt sustainability analysis,” Mr Rehberg said. “At the moment the IMF and the commission are quite far apart in terms of their growth assumptions for Greece.” He noted, however, that negotiations between the IMF and European institutions “are still going on”.

    ———-

    “Merkel’s party drops insistence on IMF staying in Greek bailout” by Guy Chazan and Mehreen Khan; Financial Times; 05/31/2018

    “Angela Merkel’s conservative party no longer insists that the IMF continues to participate in Greece’s bailout programme, in a decisive change reflecting anxiety about the fund’s calls for debt relief for Athens.

    Don’t forget that it was German lawmakers were demanded the IMF be part of the ‘bailout’ program from the very beginning, due, in part, to fears that the EU wouldn’t have the will to make the kinds of austerity demands the IMF is known for:


    German lawmakers have insisted on IMF participation in the Greek bailout since the country’s first rescue package in 2010. Wary of the European Commission’s role in administering bailouts, Wolfgang Schäuble, the former German finance minister, convinced sceptical German MPs that the IMF’s stamp of approval would lend credibility to a programme that involved billions in German taxpayers’ money.

    Germany’s parliament agreed to back the current €86bn bailout, negotiated by EU leaders in 2015, on condition the IMF would continue its involvement.

    And now the IMF is seen as too dovish. That’s how insane the EU is. Still:


    Eckhardt Rehberg, spokesman of the CDU/CSU parliamentary group for budgetary policy, told the Financial Times that “with the IMF insisting on large-scale debt relief for Greece — they have been talking about a three-digit number — I have a problem.”

    “The question is: Is the price of IMF participation in the next programme too high?” he said.

    The shift in the German position, at least in the influential CDU/CSU parliamentary group, could help ease last-ditch talks between eurozone governments and the IMF on the sidelines of the G7 meeting in Canada this weekend.

    Christine Lagarde, IMF managing director, will be attending the meeting, which will also bring together the finance ministers of Germany and France.

    “Eckhardt Rehberg, spokesman of the CDU/CSU parliamentary group for budgetary policy, told the Financial Times that “with the IMF insisting on large-scale debt relief for Greece — they have been talking about a three-digit number — I have a problem.””

    Keep in mind that when the CDU/CSU spokesman says he has “a problem” with the IMF insisting on large-scale debt relief in the ‘three-digit number’ range, the CDU has actually consistently had a problem with any debt forgiveness at all. The most they will consider is simply extending loans, thus ensuring even more decades of austerity for Greece. As the article notes, Greece still owes its Troikan creditors 248 billion euros:


    Although the Greek economy returned to modest growth in the past year, the country still languishes under the burden of the €248bn it owes to the eurozone and the IMF.

    The fund had agreed in principle to provide Greece with a small credit line of €1.6bn, but it wanted eurozone governments to provide more clarity on debt relief before it made a financial commitment. However, Germany and its northern European allies resisted such demands, fearing their taxpayers would loseout.

    Interestingly, the German finance ministry is still insisting on ongoing IMF involvement. And the most hawkish eurozone capitals appear to be open to a scenario for the IMF remains involved with the program but without putting up any money. It will basically just be an austerity enforcer at that point:


    The German finance ministry, however, continues to insist that IMF involvement is “indispensable”, three months ahead of Greece’s planned exit from the bailout this summer.

    If a deal is not thrashed out at the G7 finance ministers’ meeting in Whistler, British Columbia, on Monday at the latest, IMF officials have warned that the fund will not have enough time to activate and then review its Greek programme. Hawkish eurozone capitals, including Berlin and The Hague, are open to the possibility of the IMF staying involved with Greece but without providing any money to the bailout.

    And note how this is all happening the context of the emerging Italian anti-austerity showdown with the eurozone. So right when Greece is supposed to return to the international debt markets in August the eurozone could be in the midst of a whole new Italian crisis that’s probably going to make Greek debt much more expensive to finance. And if the IMF pulls out of the program those market concerns over Greek debt are going to be even more exacerbated. So if Greece has to pay higher than expected interest rates on its debt that means more austerity and/or a slower paydown of Greece’s debt load:


    Some officials are worried that market jitters triggered by Italy’s political crisis will hamper Greece’s ability to raise more debt once it exits the third bailout in August. That would make the IMF’s role even more crucial in convincing nervous investors that Greece can stay solvent.

    Yep, it’s looking like there’s going to be no meaningful debt relief and higher than expected interest rates for Greece as this last round of ‘bailouts’ wind down in August. And don’t forget, a big part of the justification by the EU’s part for these policies is an implausibly optimistic expectation that Greece is going to have robust economic growth for years and decades to come thanks to all these austerity policies. The IMF, to its credit, is of the opinion that years of massive budget surpluses and austerity can’t be sustained indefinitely. The EU disagrees:


    Part of the conflict between some eurozone members and the IMF is a difference of views on how sustainable Greece’s debt is, with Germany and other governments more optimistic about Greece’s growth prospects than the IMF.

    “We don’t agree with the fund’s debt sustainability analysis,” Mr Rehberg said. “At the moment the IMF and the commission are quite far apart in terms of their growth assumptions for Greece.” He noted, however, that negotiations between the IMF and European institutions “are still going on”.

    So, along those lines, let’s take a look at some statements the European Commission Mission Chief for Greece just made to Greece about the moderate economic growth the country is finally experiencing years into this austerity nightmare. It’s a message that could be summarized as, “the growth you’re experience now is due to the austerity we imposed all these years and if you don’t keep these austerity policies in place expect the growth to end.” He didn’t put it quite that way, but that’s more or less his message to Greece. It’s a reminder that the EU’s wildly optimistic assumptions about Greece’s growth prospects are rooted in its wildly optimist (and largely failed) assumptions about the power of austerity:

    Reuters

    Greece cannot afford policy reversal after bailout ends: EU official

    Reuters Staff
    May 31, 2018 / 3:54 AM / Updated

    ATHENS (Reuters) – Greece is on course to complete its third international bailout program but cannot afford to backtrack on adopted reforms after its expiration in August, the European Commission’s mission chief to Greece said on Thursday.
    Since its debt crisis broke out eight years ago, the country has received 260 billion euros in bailout loans from the European Union and the International Monetary Fund in exchange for austerity and reforms prescribed by its lenders.

    “Greece must ensure that reforms are on track, … and must avoid policy reversal after the program ends,” Declan Costello, one of the lenders’ representatives who supervise the bailout implementation, said during a conference in Athens.

    Greece returned to growth last year and aims at making a full economic recovery in the coming years.

    But Costello warned Greece not to get carried away by the positive signs. “It should not be interpreted that all problems have been solved. The structural underlying problems need to continue to be addressed,” he said.

    “So, enjoy the growth bounce but don’t misinterpret it.”

    ———-

    “Greece cannot afford policy reversal after bailout ends: EU official” by Reuters Staff; Reuters; 05/31/2018

    ““Greece must ensure that reforms are on track, … and must avoid policy reversal after the program ends,” Declan Costello, one of the lenders’ representatives who supervise the bailout implementation, said during a conference in Athens.”

    That was the warning from the European Commission’s representative to Greece now that Greece is approaching that point where it might actually have the ability to reverse the austerity policies: don’t do it even if you can.

    But Costello’s comments weren’t couched as a mere threat to Greece. Instead, he appeared to be trying to make the case that Greece needs more austerity in order to sustain its recent economic growth. Don’t forget, the big fight between the IMF and EU is over the IMF’s conclusion that Greece can’t keep this austerity madness up indefinitely and the EU saying it can indeed do this indefinitely:


    Greece returned to growth last year and aims at making a full economic recovery in the coming years.

    But Costello warned Greece not to get carried away by the positive signs. “It should not be interpreted that all problems have been solved. The structural underlying problems need to continue to be addressed,” he said.

    “So, enjoy the growth bounce but don’t misinterpret it.”

    “So, enjoy the growth bounce but don’t misinterpret it.” LOL! Yes, that’s good advice. Sadly, it’s the advice the EU should be giving to itself.

    And when you read that Greece has received 260 billion euros in loans from this bailout in exchange for these austerity demands…


    Since its debt crisis broke out eight years ago, the country has received 260 billion euros in bailout loans from the European Union and the International Monetary Fund in exchange for austerity and reforms prescribed by its lenders.

    …don’t forget only 10 billion of those euros went to stimulate Greece’s economy and the rest was used to pay back Greece’s private creditors, especially German banks. That’s the debt the EU refuses to forgive.

    Posted by Pterrafractyl | May 31, 2018, 10:17 pm
  2. Behold! The grand Greek debt relief package has arrived! Just in time for Greece to return to the bond markets after the current ‘bailout’ is officially completed in August. And Klaus Regling, the head of the eurozone’s bailout fund, even called it “the biggest act of solidarity that the world has ever seen.” Strong words. Strong insane words.

    So what makes this the biggest act of solidarity the world has ever seen? Did Greece get the substantial reduction that would make Greece’s debt situation sustainable that IMF has long demanded in return for its continued participation?

    Of course not. No, it’s exactly the kind of joke we should expect: Greece will get a 10 extension and grace period on 96bn euros in bailout loans coming due in 2022, which is about 40 percent of Greece’s total debt to the Troika. Greece also gets 15bn euros from the current ‘bailout’ that will largely be used to boost Greece’s post-bailout cash reserves. That’s pretty much it. So Greece’s massive debt load (still massive after three ‘bailouts’) is going to remain massive, but Greece will have more time to pay off that massive debt. In other words, its somewhat less usurious. Oh joy.

    And part of the reason it’s barely better than nothing has to do with the strings attached: Greece is still expected to maintain a 3.5 percent budget surplus until 2022 as has previously been demanded of it. But we now know what the Troika is going to demand after 2022: a 2.2 percent budget surplus (which is still substantial) until 2060. And don’t forget that these budget surpluses more or less demand austerity to maintain. Money that could be spent on education and medicine gets sent to the Troika instead. And that’s going to be the case for Greece for the next 42 years under this plan.

    Part of the urgency in coming to a ‘debt relief’ agreement at this point is that the Troika needs to assure the bond markets that Greek debt is a safe investment if another ‘bailout’ is going to be avoided in the future. That’s also one of the reasons the EU is behaving as if this is actually major debt relief. Because convincing bond markets that that this deal really is putting Greece on sound footing for decades to come is a key element of ensuring healthy demand for Greek bonds. At the same time, part of the reason this debt relief package is so insubstantial is that Germany reportedly felt it was far to generous and only grudgingly agreed to these terms. So a key element of the plan to assure bond markets while still being stingy is for the EU to predict that everything is going to be fine for Greece for decades to come.

    So has the IMF joined in on the optimistic enthusiasm? Not really. The IMF welcomed the deal but still held “reservations” about Greece’s longer-term debt sustainability. Yep. The IMF just called the central aspect of this deal – whether or not it makes Greece’s debt sustainable in the long run – a joke.

    And here’s the kicker: one of the ideas used to justify the harsh terms of high budget surpluses (basically indefinitely) being imposed on Greece is the idea that the terms will be made more lenient if Greece goes into a recession. Like, instead of a 3.5 percent surplus it might just be a 2 percent demanded surplus if Greece’s economy started contracting again. And yes, a 2 percent surplus in a recession would be insane, but that’s the kind of insanity the EU has normalized for itself and talk of reducing the repayment terms have been a key element of the negotiations over the future of Greece for months now.

    Well, guess what? There’s no talk of reducing the terms in the face of hard economic times under this final agreement. In other words, the exact same ‘expansionary austerity’ disaster recipe of austerity in the face of recession – a policy that inflicted a ‘lost decade’ across Europe – is still fully in place in this final agreement. And that’s the deal the head of the eurozone’s bailout fund just called “the biggest act of solidarity that the world has ever seen”:

    Financial Times

    Eurozone creditors reach ‘historic’ deal on Greek debt relief
    Repayment deadlines on almost €100bn of bailout loans pushed back 10 years

    Mehreen Khan and Jim Brunsden in Luxembourg
    June 21, 2018 8:23 PM

    Eurozone governments have brokered a long-awaited debt relief deal for Greece, pushing back repayment deadlines on almost €100bn of bailout loans as the country prepares to exit its era of financial rescue programmes.

    Finance ministers hammered out the final points of an agreement in more than six hours of talks that stretched into the night in Luxembourg on Thursday. The deal was immediately hailed by governments as a “historic” step after eight years in which Greece has undergone three bailout programmes and suffered the worst depression of any European economy in modern times.

    “It is an exceptional moment,” Pierre Moscovici, the EU’s economy commissioner, said after the meeting. “The Greek crisis ends here tonight in Luxembourg.”

    The agreement means the repayment of €96bn of bailout loans, about 40 per cent of the total Greece needs to repay the eurozone over the coming decades, will be pushed back 10 years. The earliest repayment deadlines shift from 2023 to 2033.

    Other key part of the plan includes increasing the size of Greece’s final instalment of bailout money to help build up cash reserves that can sustain it over the months to come.

    A deal had become urgent given the little time that remains until the end of Greece’s bailout programme on August 20, with the euro area keen to reassure investors that the country’s debt is sustainable before Athens returns to relying on the markets to finance spending.

    “Greece is turning the page,” said Euclid Tsakalotos, the country’s finance minister. “We have all the building blocks to leave the programme with confidence.”

    A compromise was reached after intense negotiations to resolve German reservations about parts of the debt relief package. Hopes for quick agreement on Thursday evaporated when Olaf Scholz, German finance minister, set tough conditions for accepting a significant maturity extension, prompting frantic hours of talks that ended with calls to national capitals asking heads of state to give their blessing to the final compromise.

    Berlin was reticent about plans for a large increase in the size of Greece’s final tranche of bailout money from a planned €11.7bn, in the end accepting the amount could be raised to €15bn. This will leave Athens with cash reserves totalling €24.1bn, enough to sustain the country for at least 22 months without it needing to go to the markets.

    Berlin’s firmness reflects domestic pressure on Angela Merkel’s government, notably from her Bavarian conservative coalition partner, the CSU, which has criticised the chancellor for being too willing to use national money to solve eurozone problems.

    Deferring repayment of the older bailout loans, including interest, by 10 years, and a parallel decision to extend their maturities by the same amount of time, leaves Greece with very small debt repayments until after 2030, something the euro area hopes will spur investors to buy the country’s bonds.

    The 10 year extension was at the higher end of EU officials’ predictions in the run-up to the meeting of what might be politically feasible. Eurozone governments agreed last year that any extension would be between zero and 15 years.

    Less sensitive parts of the debt-relief deal, agreed just after the stroke of midnight on Friday morning, included returning to Greece about €1bn of annual profits that euro area central banks make on their holdings of the country’s debt.

    The final agreement leaves out plans worked on by governments to link further debt relief for Greece to the country’s economic performance, an idea that was once central to the package but that had become marginalised in recent weeks in favour of focusing on the upfront maturity extension.

    A key priority in the talks was to come up with a debt relief plan that could convince the International Monetary Fund that Greece’s debts are on a sustainable path, after years of disagreements between the Washington-based fund and eurozone governments, led by Berlin, over the state of the Greek economy.

    Christine Lagarde, the IMF’s managing director, welcomed the deal but said the fund still held “reservations” about Greece’s longer-term debt sustainability.

    As a condition for the relief, Athens will be required to maintain a primary budget surplus, which excludes debt repayments, of 3.5 per cent of gross domestic product until 2022, with a target that this will stay at 2.2 per cent on average until 2060.

    Finance ministers in their statement left the door open to potentially grant Greece further relief in the long term, saying that they would return to the issue in 2032 — something praised by Ms Lagarde and the European Central Bank.

    Mario Draghi, the ECB’s president, said that he welcomed finance ministers’ “readiness to consider further debt measures…in case adverse economic developments were to materialise”.

    ———–

    “Eurozone creditors reach ‘historic’ deal on Greek debt relief” by Mehreen Khan and Jim Brunsden; Financial Times; 06/21/2018

    “It is an exceptional moment,” Pierre Moscovici, the EU’s economy commissioner, said after the meeting. “The Greek crisis ends here tonight in Luxembourg.”

    LOL! Did you hear? The Greek crisis just ended according to the EU’s economy commissioner.

    But there is at least some debt relief: the nightmare gets deferred for a decade on 100 billion in Greece’s loans, which is about 40 percent of Greece’s total debt to the Troika:


    The agreement means the repayment of €96bn of bailout loans, about 40 per cent of the total Greece needs to repay the eurozone over the coming decades, will be pushed back 10 years. The earliest repayment deadlines shift from 2023 to 2033.

    Other key part of the plan includes increasing the size of Greece’s final instalment of bailout money to help build up cash reserves that can sustain it over the months to come.

    And we can’t forget that this really was close to the ‘last minute’ for such a deal to be worked out because Greece is returning to the bond markets on August 20 and that makes the bond market’s opinion on the long term sustainability of this debt deal an immediate major issue for the Troika to officially wind up this :


    A deal had become urgent given the little time that remains until the end of Greece’s bailout programme on August 20, with the euro area keen to reassure investors that the country’s debt is sustainable before Athens returns to relying on the markets to finance spending.

    “Greece is turning the page,” said Euclid Tsakalotos, the country’s finance minister. “We have all the building blocks to leave the programme with confidence.”

    And, of course, Berlin found this all too generous to Greece, so this final deal is a ‘compromise’ between compassionate sanity and some sort of austerity nightmare terms. It sounds like one of the final sticking points was how Germany’s finance minister Olaf Scholz found the size of Greece’s planned 24 billion euro cash reserves as a financial stability rainy-day fund unreasonably large:


    A compromise was reached after intense negotiations to resolve German reservations about parts of the debt relief package. Hopes for quick agreement on Thursday evaporated when Olaf Scholz, German finance minister, set tough conditions for accepting a significant maturity extension, prompting frantic hours of talks that ended with calls to national capitals asking heads of state to give their blessing to the final compromise.

    Berlin was reticent about plans for a large increase in the size of Greece’s final tranche of bailout money from a planned €11.7bn, in the end accepting the amount could be raised to €15bn. This will leave Athens with cash reserves totalling €24.1bn, enough to sustain the country for at least 22 months without it needing to go to the markets.

    Berlin’s firmness reflects domestic pressure on Angela Merkel’s government, notably from her Bavarian conservative coalition partner, the CSU, which has criticised the chancellor for being too willing to use national money to solve eurozone problems.

    Will Greek bond investors find this all reassuring? We’ll find out in August, but the 96 billion euro deferment (40 percent of Greece’s Troikan debt) is pretty much the only thing markets are allowed supposed to be reassured by because everything else is a pittance:


    Deferring repayment of the older bailout loans, including interest, by 10 years, and a parallel decision to extend their maturities by the same amount of time, leaves Greece with very small debt repayments until after 2030, something the euro area hopes will spur investors to buy the country’s bonds.

    The 10 year extension was at the higher end of EU officials’ predictions in the run-up to the meeting of what might be politically feasible. Eurozone governments agreed last year that any extension would be between zero and 15 years.

    Less sensitive parts of the debt-relief deal, agreed just after the stroke of midnight on Friday morning, included returning to Greece about €1bn of annual profits that euro area central banks make on their holdings of the country’s debt.

    Critically, the final agreement leaves out plans to link further debt relief for Greece to the country’s economic performance, which was once central to the proposals during negotiations. Austerity in the face of a recession, which led to the eurozone catastrophe of the last decade, is expected of Greece for decades to come under this ‘debt relief’ agreement:


    The final agreement leaves out plans worked on by governments to link further debt relief for Greece to the country’s economic performance, an idea that was once central to the package but that had become marginalised in recent weeks in favour of focusing on the upfront maturity extension.

    And Greece is expected to operate under these terms until 2060. Let’s hope it doesn’t have a recession between now and 2060. This is part of why even the IMF has “reservations” about the plan:


    A key priority in the talks was to come up with a debt relief plan that could convince the International Monetary Fund that Greece’s debts are on a sustainable path, after years of disagreements between the Washington-based fund and eurozone governments, led by Berlin, over the state of the Greek economy.

    Christine Lagarde, the IMF’s managing director, welcomed the deal but said the fund still held “reservations” about Greece’s longer-term debt sustainability.

    As a condition for the relief, Athens will be required to maintain a primary budget surplus, which excludes debt repayments, of 3.5 per cent of gross domestic product until 2022, with a target that this will stay at 2.2 per cent on average until 2060.

    But it really isn’t an agreement that will be in place until 2060. At least not necessarily. Because they will review the terms in 2032. So it’s an agreement for the next 14 years with a presumed option of the Troika keeping it in place until 2060. Both the IMF and ECB praise this 2032 reassessment because it’s better than nothing and the IMF and ECB aren’t nearly as crazy as the EU Commission (which is really the eurogroup of eurozone finance minsters in these matters) when it comes to Troikan decision-making. And yes, that means the IMF is a voice of relative leniency and sanity. It’s both a ‘good cop/bad cop’ kabuki theater situation and reflection of the EU Commission’s insanity:


    Finance ministers in their statement left the door open to potentially grant Greece further relief in the long term, saying that they would return to the issue in 2032 — something praised by Ms Lagarde and the European Central Bank.

    Mario Draghi, the ECB’s president, said that he welcomed finance ministers’ “readiness to consider further debt measures…in case adverse economic developments were to materialise”.

    So Greece got thrown in the austerity pit until 2032 at a minimum and probably 2060. And as the following article grimly points out at the end, Greece’s finance minister Euclid Tsakalotos declared it the end of the Greek crisis (which is understandable given the circumstance) and Klaus Regling, the head of the eurozone’s bailout fund, called it the biggest act of solidarity that the world has ever seen (which was hopefully dark humor):

    Financial Times

    Debt relief deal gives Greece hope after years of austerity
    Agreement with bailout creditors sets terms for Athens that stretch over decades

    Mehreen Khan and Jim Brunsden in Luxembourg and Kerin Hope in Athens
    June 22, 2018 12:35 PM

    It was 2am on Friday in Luxembourg — and Greece’s finance minister could finally hail the delivery of a debt relief deal to help his country “turn a page” on eight years of bailouts, austerity and unprecedented economic tutelage.

    “I think this is the end of the Greek crisis,” said Euclid Tsakalotos after fellow eurozone ministers signed off on the sought-after measures, which had been two years in the making.

    The agreement paves the way for Greece to end a series of highly contentious bailouts that took the country to the brink of crashing out of the eurozone and poisoned relations with Germany.

    But the stark reality of Greece’s €200bn stockpile of loans borrowed from eurozone governments means it will live with the legacy of the crisis for decades to come.

    Diplomats described this week’s deal as both a delicate compromise and a grand bargain. Greece has been granted debt relief measures that balance the need to make its finances sustainable with a wariness in some capitals, especially Berlin, about giving away too much.

    At the same time, the relief comes with clear strings attached — and they stretch far into the future.

    The statement agreed by finance ministers contains some of the longest timelines of any EU document. Greece will be expected to maintain a primary budget surplus — a measure of its government finances that excludes debt repayments — of 3.5 per cent of gross domestic product until 2022. Future governments will be expected to hit an average surplus of 2.2 per cent until the 2060s.

    Finance ministers have also given themselves — or more likely their successors’ successors — an appointment in 2032 to discuss whether more relief is needed.

    The dizzying timelines reflect the science fiction involved in projecting a country’s economic fortunes over half a century into the future — though European officials insist the calculations are based on “realistic and cautious assumptions”.

    The projections may long outlive the careers of those who agreed them. Yet they matter greatly to investors who are considering the credibility of Greece’s exit from its bailout and considering whether to buy the country’s bonds.

    The EU’s debt sustainability analysis underpins the Europeans’ insistence that Greece will not need a fourth bailout. It is also designed for the benefit of the International Monetary Fund, which has long had a less optimistic view of Greece’s growth prospects. Christine Lagarde, the IMF’s managing director, was one of the few senior officials who expressed “reservations” about the state of Greece’s long-term debt pile.

    It was the art of the eurozone deal — and it moved Klaus Regling, the head of the eurozone’s bailout fund, to a Trumpian flourish. “It is the biggest act of solidarity that the world has ever seen,” said Mr Regling.

    ———-

    “Debt relief deal gives Greece hope after years of austerity” by Mehreen Khan and Jim Brunsden and Kerin Hope; Financial Times; 06/22/2018

    “I think this is the end of the Greek crisis,” said Euclid Tsakalotos after fellow eurozone ministers signed off on the sought-after measures, which had been two years in the making.”

    It’s tragic that Greece’s finance minister called this state of austerity purgatory the ‘end of Greek crisis’. But tragically understandable. He had to say that given the circumstance.

    But less understandable is the totally insane declaration by Klaus Regling, the head of the eurozone’s bailout fund:

    It was the art of the eurozone deal — and it moved Klaus Regling, the head of the eurozone’s bailout fund, to a Trumpian flourish. “It is the biggest act of solidarity that the world has ever seen,” said Mr Regling.

    42 years of austerity is solidarity apparently.

    But perhas Regling was referring to the ‘greatness’ of the timeline. Because as the article points out, the 2060 timeline is one of the longest timelines of any EU document:


    The agreement paves the way for Greece to end a series of highly contentious bailouts that took the country to the brink of crashing out of the eurozone and poisoned relations with Germany.

    At the same time, the relief comes with clear strings attached — and they stretch far into the future.

    The statement agreed by finance ministers contains some of the longest timelines of any EU document. Greece will be expected to maintain a primary budget surplus — a measure of its government finances that excludes debt repayments — of 3.5 per cent of gross domestic product until 2022. Future governments will be expected to hit an average surplus of 2.2 per cent until the 2060s.

    And that unusually long timeline is why it’s such a bizarre scheme for reassuring bond markets: it’s predicated on predicting the sustainability of Greece’s massive debt load for decades to come. And that kind of timeframe is inherently unreassuring:


    But the stark reality of Greece’s €200bn stockpile of loans borrowed from eurozone governments means it will live with the legacy of the crisis for decades to come.

    Diplomats described this week’s deal as both a delicate compromise and a grand bargain. Greece has been granted debt relief measures that balance the need to make its finances sustainable with a wariness in some capitals, especially Berlin, about giving away too much.

    Finance ministers have also given themselves — or more likely their successors’ successors — an appointment in 2032 to discuss whether more relief is needed.

    The dizzying timelines reflect the science fiction involved in projecting a country’s economic fortunes over half a century into the future — though European officials insist the calculations are based on “realistic and cautious assumptions”.

    The projections may long outlive the careers of those who agreed them. Yet they matter greatly to investors who are considering the credibility of Greece’s exit from its bailout and considering whether to buy the country’s bonds.

    The dizzying timelines reflect the science fiction involved in projecting a country’s economic fortunes over half a century into the future — though European officials insist the calculations are based on “realistic and cautious assumptions”.”

    Science fiction is a good way to describe the plan. Dystopian science fiction.

    And note how the EU’s farcical debt sustainability analysis that underpins this is predicated on the assumption that Greece won’t need another ‘bailout’. That’s the assumption until 2060 under the EU’s scheme that just got agreed to:


    The EU’s debt sustainability analysis underpins the Europeans’ insistence that Greece will not need a fourth bailout. It is also designed for the benefit of the International Monetary Fund, which has long had a less optimistic view of Greece’s growth prospects. Christine Lagarde, the IMF’s managing director, was one of the few senior officials who expressed “reservations” about the state of Greece’s long-term debt pile.

    So it turns out the greatest act of solidarity in history is science fiction. And, yes, that’s depressing.

    This is turning out to be a remarkably farcical Greek tragedy.

    Posted by Pterrafractyl | June 23, 2018, 9:07 pm
  3. The phrase ‘meet the new boss, same as the old boss’ isn’t inherently a negative phrase. It depends on the boss. But in the case of Greece today it’s an unambiguously nightmarish thing to say. Case in point: we’re just three weeks into the post-‘bailout’ phase of Greece’s long-national nightmare and Greece just experienced the first demand that it continue cutting programs even when it’s running a higher-than-expected/demanded surplus. Yep.

    The Greek government was slated to cut pension spending by 18 percent starting next year in order to maintain the 3.5 percent budget surplus demanded of it. But its revenues are actually coming in higher than projected so the government is looking into canceling the pension cuts. But when it comes to things like reducing austerity, Greece has to run the idea past the Troika first. And if there’s one cut the Troika doesn’t approve of, it’s cuts in austerity:

    Reuters

    No Greek pensions deal yet as creditors end first post-bailout review

    September 14, 2018 / 4:37 AM

    ATHENS, Sept 14 (Reuters) – Greece’s international creditors seemed likely on Friday to withhold instant approval for its plan to put mandated pension cuts on hold next year, as they wrapped up their first post-bailout inspection of the country’s finances.

    The country emerged from the biggest economic rescue in history in late August after almost nine years of austerity. It still owes billions, and is under post-bailout monitoring by the European Union and International Monetary Fund to ensure it does not deviate from fiscal targets.

    Athens argues it has enough fiscal leeway to unwind cuts in pensions of up to 18 percent that are scheduled to kick in from January, while maintaining the healthy surplus its lenders say it needs in order to keep its finances on a sustainable trajectory.

    One source said speculation that the inspectors agreed with Greece’s view was premature. “A good deal of work is still required,” the source from the lenders told Reuters.

    Athens has promised to achieve an annual primary budget surplus – which strips out debt servicing costs – of 3.5 percent of GDP up to 2022.

    With that in mind it legislated pension cuts and tax hikes to take effect in 2019 and 2020, but said in recent days it considered those measures unnecessary since it has been exceeding its fiscal targets.

    Greece’s preference would be to ditch the pension cuts, which Prime Minister Alexis Tsipras said on Sept. 8 would also be contingent on a review of its budget by the European Commission in mid-October.

    Earlier Friday, the state-run Athens News Agency quoted European sources saying lenders considered Greece’s social security system viable, and did not discount the possibility of pension cuts being abandoned completely.

    ———–

    :No Greek pensions deal yet as creditors end first post-bailout review” by Reuters; 09/14/2018

    “Athens argues it has enough fiscal leeway to unwind cuts in pensions of up to 18 percent that are scheduled to kick in from January, while maintaining the healthy surplus its lenders say it needs in order to keep its finances on a sustainable trajectory.”

    That’s how big Greece’s previous cuts have been: it’s got a surplus on top of the Troka-mandated 3.5 percent surplus it has to run to 2022 (at which point the surplus mandates continue but are hopefully attenuated a bit). It’s literally a surplus surplus. And the Greek government would like to use that surplus surplus on reducing or avoiding entirely the scheduled pension cuts. But since the entire Greek budget is up for annual review by the Troika, Greece has to ask for permission first over how to spend its surplus surplus:


    Athens has promised to achieve an annual primary budget surplus – which strips out debt servicing costs – of 3.5 percent of GDP up to 2022.

    With that in mind it legislated pension cuts and tax hikes to take effect in 2019 and 2020, but said in recent days it considered those measures unnecessary since it has been exceeding its fiscal targets.

    Greece’s preference would be to ditch the pension cuts, which Prime Minister Alexis Tsipras said on Sept. 8 would also be contingent on a review of its budget by the European Commission in mid-October.

    And it didn’t exactly sound like the Troika was open to the idea:


    One source said speculation that the inspectors agreed with Greece’s view was premature. “A good deal of work is still required,” the source from the lenders told Reuters.

    So will the Troika end up rewarding Greece’s surplus surplus with cuts to the planned pension cuts? Of course not. But the particular reason given is notable simply because it can be used to justify any other austerity measures if the issue of how to spend surplus surpluses pops up again in the future: The IMF responded that the pension cuts are required for both fiscal and structural reasons, so even if the fiscal justification for the cuts is no longer there the structural reasons remain in place.

    The IMF made that argument in response to claims a little early by Greece’s finance minister that the issue wasn’t a structural issue but only a fiscal issue because the pension cuts that would be reversed were cuts for existing elderly pensioners who are going to die off in the next couple of decades. Greece’s minister also said the IMF didn’t insist that the pension cuts were a structural issue. It was in response to those statements that the IMF asserted that the pension cuts are indeed a structural issue and therefore required even if Greece could afford to avoid them. Plus, the IMF describes the pension cuts as an investor-friendly symbolic commitment to ongoing reforms:

    ekathimerini

    IMF to insist on pension cuts

    EIRINI CHRYSOLORA
    21.09.2018 : 18:25

    The International Monetary Fund on Thursday issued a flat denial to the government’s request to cancel the implementation of the planned pension cut in January 2019, while Finance Minister Euclid Tsakalotos appeared reserved about Berlin’s attitude as he responded to investors’ questions in London a day after meeting his German counterpart.

    IMF spokesman Gerry Rice categorically told a press conference that nothing has changed in the Fund’s positions on the pensions since the summer. The IMF considers the measure both structural and fiscal – unlike what the government claims.

    The pension cut is a structural measure in the IMF’s view because it will improve the long-term prospects of the social security system. Also in fiscal terms it will create the space required to introduce more policies to support vulnerable social groups and ease taxation so as to bolster growth. Rice went on to stress the symbolism of the measure, saying that its implementation will send a clear signal that Greece remains on the path of reforms.

    A little earlier Tsakalotos had said the exact opposite in London. Replying to investors’ questions, he said that averting the cuts would not affect the sustainability of the social security system because the old generation of pensioners – affected by the measure – will not be around anymore after 2030-40, so the measure is not structural, he claimed. On the fiscal aspect the minister said there is a margin not only for not implementing the cuts but also for certain growth-friendly measures, thanks to the excessive primary surplus. He added that the IMF does not insist that the measure is structural, but Rice refuted him a little later.

    ———-

    “IMF to insist on pension cuts” by EIRINI CHRYSOLORA; ekathimerini.com; 09/21/2018

    “The International Monetary Fund on Thursday issued a flat denial to the government’s request to cancel the implementation of the planned pension cut in January 2019, while Finance Minister Euclid Tsakalotos appeared reserved about Berlin’s attitude as he responded to investors’ questions in London a day after meeting his German counterpart.”

    The IMF responds with a flat denial. Of course. Along with an explanation about how the need for those pension cuts isn’t just fiscal, but also structural in nature, because it will improve the long-term prospects Greece’s social security system and so a surplus surplus is no excuse for not making the cuts. Plus, the cuts will send a clear signal that Greece remains on the path of reforms:


    IMF spokesman Gerry Rice categorically told a press conference that nothing has changed in the Fund’s positions on the pensions since the summer. The IMF considers the measure both structural and fiscal – unlike what the government claims.

    The pension cut is a structural measure in the IMF’s view because it will improve the long-term prospects of the social security system. Also in fiscal terms it will create the space required to introduce more policies to support vulnerable social groups and ease taxation so as to bolster growth. Rice went on to stress the symbolism of the measure, saying that its implementation will send a clear signal that Greece remains on the path of reforms.

    That was the IMF’s response to Greece’s finance minister pointing out that the cuts to be reversed were cuts for the old generation of pensioners who are going to die off, meaning this can’t be a structural issue. It’s a ‘taking it a bit easy on the old pensioners’ issue:


    A little earlier Tsakalotos had said the exact opposite in London. Replying to investors’ questions, he said that averting the cuts would not affect the sustainability of the social security system because the old generation of pensioners – affected by the measure – will not be around anymore after 2030-40, so the measure is not structural, he claimed. On the fiscal aspect the minister said there is a margin not only for not implementing the cuts but also for certain growth-friendly measures, thanks to the excessive primary surplus. He added that the IMF does not insist that the measure is structural, but Rice refuted him a little later.

    And that’s how things are slated to go for Greece for years to come: When Greece overdoes it on the austerity and generates a larger surplus than projected there’s no easing up on the austerity. Even when it’s easy up on the scheduled cuts for elderly pensioners. Save the social security system by cutting it. That’s the underlying logic employed by the IMF and the same scam used by billionaires like Pete Peterson the GOP and right-wing parties around the globe to justify cutting the social safety-net under the guise of saving it. Greece has to implement that ‘cut the safety-net to save it because there’s no other choice’ scam agenda and there’s nothing Greece can do about it.

    So we’re seeing early indications that the Troikan mercilessness, one of the defining aspects of the Greek ‘bailout’ nightmare’, will remain unrelenting. Don’t foeget that this is the system that Greece is going to be under until 2060 according to the ‘bailout’ agreement. So the Troikan mercilessness might relent around 2060. That’s the post-‘bailout’ reality for Greece. The beatings will continue, surplus surpluses or not.

    Posted by Pterrafractyl | September 23, 2018, 9:38 pm

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