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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

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

  1. Here’s an arti­cle that does a great job of high­light­ing one of the key facts most fre­quent­ly for­got­ten (or ignored) when exam­in­ing the caus­es and pos­si­ble solu­tions of the euro­zone cri­sis: If the var­i­ous crises were all due to prof­li­gate spend­ing and fis­cal irre­spon­si­bil­i­ty, then why on earth does Spain have an over 23% unem­ploy­ment rate? Might the man­ner in which the euro sys­tem­at­i­cal­ly pre­vents nations from deal­ing with fis­cal crises in sane man­ner have some­thing to do with it?

    CNN
    Greece the only vil­lain in euro cri­sis? Don’t believe it!

    By Lisa Tripp

    Updat­ed 12:05 PM ET, Tue March 24, 2015

    (CNN)Europe is in the midst of a polit­i­cal and eco­nom­ic cri­sis that threat­ens to unrav­el decades of Euro­pean inte­gra­tion and derail the world’s recov­ery from the great reces­sion. To under­stand this cri­sis, let’s com­pare two coun­tries.

    Coun­try A is a small nation with a long his­to­ry of tax eva­sion, gov­ern­ment debt defaults and a dys­func­tion­al busi­ness and reg­u­la­to­ry cli­mate. It allows work­ers to retire in their 50s, and pays dou­ble pen­sions when they do. It lied about its bud­get to get into the euro­zone.

    Coun­try B is a large, his­tor­i­cal­ly pow­er­ful nation with a record of low gov­ern­ment debt. Coun­try B even ran bud­get sur­plus­es, includ­ing a 2% sur­plus just before the finan­cial cri­sis hit in 2008. It entered the euro­zone with an hon­est account­ing of its finances.

    If you guessed that coun­try A is Greece, you are cor­rect. If you believe Greece has caused the cri­sis in Europe because of its fis­cal irre­spon­si­bil­i­ty, then you are safe­ly in the main­stream opin­ion about the mat­ter.

    But what do we make of fis­cal­ly respon­si­ble coun­try B? Its vir­tu­ous­ness must mean it is weath­er­ing the cri­sis. And it must be Ger­many, right?

    Wrong. Coun­try B is not Ger­many. Coun­try B is Spain. Far from pros­per­ing, Spain is doing ter­ri­bly.

    Spain’s unem­ploy­ment rate is 23.7%, down from a high of almost 27% in 2013. More than a fifth of its work­ers have been job­less for the last four years. More than half of its young peo­ple are out of work and have been for years. There is reg­u­lar­ly talk of a lost gen­er­a­tion in Spain and Greece. Like Greece, Spain’s invest­ment bub­ble burst when the finan­cial cri­sis hit and it had to seek a bailout (although a much small­er one) to pre­vent its domes­tic banks from col­laps­ing. Spain’s econ­o­my also shrank dur­ing the cri­sis and its debt to GDP ratio has shot up dra­mat­i­cal­ly.

    If Greece and Spain have such wild­ly dif­fer­ent approach­es to fis­cal pru­dence, what can explain the cri­sis they both find them­selves in?

    The answer is not fis­cal virtue. Some­thing else is going on. That some­thing else, in large part, is the euro.

    Fren­zied lend­ing

    Join­ing the euro­zone meant Spain and Greece gave up the pow­er to cre­ate mon­ey, the pow­er to deval­ue their cur­ren­cy to restore com­pet­i­tive­ness, and the pow­er to set inter­est rates. These are not triv­ial con­ces­sions, espe­cial­ly in a cur­ren­cy union like the euro where trans­fers between rich and poor sec­tors of the econ­o­my are lim­it­ed, strict bud­get rules deny indi­vid­ual coun­tries the flex­i­bil­i­ty to react to a cri­sis, and trade between euro-area nations is severe­ly imbal­anced.

    The inabil­i­ty to set inter­est rates in line with the eco­nom­ic con­di­tions meant that in the ear­ly 2000s, Spain and Greece could­n’t raise inter­est rates to cool their over-heat­ing economies. The over-heat­ing was large­ly caused, by the way, by the fren­zied (and ulti­mate­ly reck­less) lend­ing in both coun­tries by Ger­man and oth­er core Euro­pean banks. The Euro­pean Cen­tral Bank set inter­est rates in line with eco­nom­ic con­di­tions in Ger­many and France that proved too low for Spain and Greece (and Ire­land).

    The over-heat­ing of the Greek and Span­ish economies led to infla­tion and invest­ment bub­bles. As those bub­bles burst, the banks neared col­lapse, and their res­cue led ulti­mate­ly to a sov­er­eign debt cri­sis. The inabil­i­ty of Spain and Greece to print mon­ey meant they had to bor­row from their part­ners in Europe or default and be igno­min­ious­ly tossed out of the EU.

    Strict bud­get rules of Euro­zone mem­ber­ship also required Spain and Greece to impose aus­ter­i­ty mea­sures in the mid­dle of the worst finan­cial cri­sis since the Great Depres­sion. They were required to raise tax­es and cut spend­ing even as unem­ploy­ment reached astro­nom­i­cal lev­els. Aus­ter­i­ty helped cre­ate a depres­sion of his­toric mag­ni­tude in Greece and a severe reces­sion in Spain. The poli­cies also cre­at­ed run­away pub­lic debt. Greece’s debt is now 175% of GDP. Spain’s debt to GDP ratio is 100% — a lev­el not seen in Spain in more than 100 years.

    Because Spain and Greece can­not deval­ue the euro, the only way they can become com­pet­i­tive is through inter­nal deval­u­a­tion. This means Greece and Spain are in for years of high unem­ploy­ment, reduced liv­ing stan­dards, falling wages and defla­tion. In oth­er words, mas­sive impov­er­iza­tion.

    ...

    “Aus­ter­i­ty helped cre­ate a depres­sion of his­toric mag­ni­tude in Greece and a severe reces­sion in Spain. The poli­cies also cre­at­ed run­away pub­lic debt. Greece’s debt is now 175% of GDP. Spain’s debt to GDP ratio is 100% — a lev­el not seen in Spain in more than 100 years.” Sounds help­ful.

    And here’s an arti­cle that does a good job of high­light­ing that it isn’t just the pol­i­cy-straight­jack­et that comes with using the euro that turned what could have been a rough reces­sion into a his­toric depres­sion. The peo­ple push­ing those poli­cies played a pret­ty impor­tant role too. Exe­cut­ing a deba­cle on this scale requires lead­er­ship:

    CNBC
    Bar­roso: Greece should blame itself
    Mia Tahara-Stubbs | Leslie Shaf­fer
    Mon­day, 23 Mar 2015 | 6:26 AM ET

    Greece’s prob­lems can be laid at its own door and the coun­try needs to pro­vide a clear com­mit­ment to reform to reach an agree­ment with its cred­i­tors, Jose Manuel Bar­roso, the for­mer pres­i­dent of the Euro­pean Com­mis­sion, told investors in Hong Kong.

    “The Greek peo­ple went through extreme­ly dif­fi­cult moments, hard­ship. But these dif­fi­cul­ties of Greece were not pro­voked by Europe,” Bar­roso said in an address at the Cred­it Suisse Asian Invest­ment Con­fer­ence in Hong Kong.

    “It was pro­voked by the irre­spon­si­ble behav­ior of the Greek gov­ern­ment.”

    “The sit­u­a­tion of Greece is the result of unsus­tain­able debt that was cre­at­ed by the Greek gov­ern­ment, mis­man­age­ment of their pub­lic finances, huge prob­lems with tax eva­sion and tax fraud [and] prob­lems of the admin­is­tra­tion,” he said, not­ing that the coun­try had also mis­led the Euro­pean Union by fil­ing false fig­ures on its econ­o­my.

    Greece’s place in the euro zone has been hang­ing in the bal­ance since the anti-aus­ter­i­ty Syriza Par­ty won elec­tions this year.

    Athens’ new gov­ern­ment has sought to rene­go­ti­ate the aus­ter­i­ty mea­sures imposed on the coun­try as part of its 240 bil­lion euro bailout pack­age. Recent talks over Greece’s debt and Euro­pean Union imposed fis­cal aus­ter­i­ty have become increas­ing­ly tor­tured.

    Bar­roso was gen­er­al­ly unsym­pa­thet­ic to the Greek stance.

    “There is noth­ing that con­demns Greece to be in a dif­fi­cult sit­u­a­tion. There are reforms they can make and they are as able as any oth­er coun­try to do,” he said.

    “There is an ide­o­log­i­cal dif­fi­cul­ty that exists in the Greek gov­ern­ment to under­stand that the way for Greece to recov­er the con­fi­dence of the mar­kets is in fact for to go on with struc­tur­al reforms that Greece has com­mit­ted to.”

    His remarks appear to match impa­tience seen in cur­rent lead­er­ship in the Euro­pean Union.

    Fol­low­ing a euro zone finance min­is­ters’ meet­ing about Greece in Brus­sels on March 9, an exas­per­at­ed Eurogroup Pres­i­dent Jeroen Dijs­sel­bloem even told Athens to “stop wast­ing time.”

    ...

    Yes, for­mer EU Com­mis­sion pres­i­dent Man­u­al Bar­roso is of the opin­ion that:

    “There is noth­ing that con­demns Greece to be in a dif­fi­cult sit­u­a­tion. There are reforms they can make and they are as able as any oth­er coun­try to do,”

    “There is an ide­o­log­i­cal dif­fi­cul­ty that exists in the Greek gov­ern­ment to under­stand that the way for Greece to recov­er the con­fi­dence of the mar­kets is in fact for to go on with struc­tur­al reforms that Greece has com­mit­ted to.”

    And once again from the first arti­cle:

    Aus­ter­i­ty helped cre­ate a depres­sion of his­toric mag­ni­tude in Greece and a severe reces­sion in Spain. The poli­cies also cre­at­ed run­away pub­lic debt. Greece’s debt is now 175% of GDP. Spain’s debt to GDP ratio is 100% — a lev­el not seen in Spain in more than 100 years.

    As we can see, while the struc­tur­al lim­i­ta­tions of the the euro­zone cur­ren­cy union cer­tain­ly played a role, we can’t for­get the human ele­ment. Espe­cial­ly the deranged human ele­ment.

    Posted by Pterrafractyl | March 26, 2015, 12:12 pm
  2. With Greece’s gov­ern­ment in the mid­dle of nego­ti­a­tions with the troi­ka over the list of “reforms” (aus­ter­i­ty) the Greece gov­ern­ment agrees to do going for­ward, it sounds like the gov­ern­ment has decid­ed that not only is it going to sell Piraeus port, Greece’s largest port, but thanks to the loom­ing cash crunch Greece is going to sell it urgent­ly:

    In u‑turn, Greece will sell Piraeus Port stake in weeks — Xin­hua
    SHANGHAI/ATHENS, March 28

    (Reuters) — The Greek gov­ern­ment will sell its major­i­ty stake in the port of Piraeus with­in weeks, the coun­try’s deputy prime min­is­ter told Chi­na’s offi­cial Xin­hua news agency, a flip-flop from the left­ist gov­ern­ment as it seeks funds from its cred­i­tors.

    The Syriza gov­ern­ment of Alex­is Tsipras took pow­er in Jan­u­ary on promis­es to end painful aus­ter­i­ty, say­ing it would halt a string of pri­vati­sa­tions includ­ing the sale of a 67 per­cent stake in the Piraeus Port Author­i­ty (OLP).

    Chi­na’s Cosco Group was among five pre­ferred bid­ders short­list­ed under a pri­vati­sa­tion scheme agreed by the pre­vi­ous con­ser­v­a­tive-led gov­ern­ment as part of a 240 bil­lion euro ($261 bil­lion) bailout pro­gramme which Tsipras is seek­ing to rene­go­ti­ate.

    But the impor­tance of rais­ing cap­i­tal appears to have proven more impor­tant to the debt-strick­en coun­try and the Xin­hua report came as Greece sub­mit­ted a new list of reforms to its EU-IMF lenders on Fri­day to unlock funds.

    Cosco and oth­er bid­ders “can make a very com­pet­i­tive offer,” said Greek Deputy Prime Min­is­ter Yan­nis Dra­gasakis, accord­ing to Xin­hua, dur­ing a vis­it by Greek min­is­ters to Chi­na.

    The deal would be com­plet­ed in weeks after being slight­ly delayed by the change in Greek gov­ern­ment, Dra­gasakis said, who hint­ed that Cosco was a fore­run­ner, accord­ing to Xin­hua.

    Greece will run out of mon­ey by April 20 unless it receives fresh aid from its EU-IMF cred­i­tors, a source famil­iar with the mat­ter told Reuters on Tues­day.

    ...

    It sort of sounds like one of the big rea­sons for the Greek gov­ern­men­t’s “flip-flip” on the pri­va­ti­za­tion of Piraeus port is the fact that the gov­ern­ment is about to run out of cash. But let’s not for­get that the troi­ka expects Greece to raise 4 bil­lion euros in pri­va­ti­za­tions this year alone. after a ‘dis­ap­point­ing’ 3 bil­lion in pri­va­ti­za­tions pro­ceeds over the last few years out of a 22 bil­lion ini­tial troi­ka pri­va­ti­za­tion tar­get.

    So between the troika’s exist­ing demands and Greece’s grow­ing cash crunch, it’s look­ing like more forced pri­va­ti­za­tions could be in order. Just to get an idea of what to expect, if the Piraeus port sells for the 500 mil­lion euros that the Greek gov­ern­ment is pro­ject­ing, that sug­gests there’s about 8 more “Piraeus ports” the troi­ka expects to be pri­va­tized this year alone (to get to 4 bil­lion euros) and 44 pri­va­tized “Piraeus ports” in total in the long run if Greece is to raise the 22 bil­lion in pri­va­ti­za­tions the troi­ka orig­i­nal­ly envi­sioned.

    So it’s worth keep­ing in mind that while a lot of atten­tion has been paid to whether or not the Piraeus port itself is pri­va­tized, that’s just one 44th of the troika’s desired pri­va­ti­za­tion port­fo­lio.

    There’s more than one way for Greece to hit rock bot­tom.

    Posted by Pterrafractyl | March 29, 2015, 11:42 pm
  3. Sur­prise! After dis­miss­ing Greece’s pro­posed list of reforms on Fri­day the troi­ka did it again on Tues­day:

    Reuters
    Greece fails to reach ini­tial deal on reforms with lenders

    Tue Mar 31, 2015 2:27pm EDT
    ATHENS | By Renee Mal­te­zou and Lef­t­eris Papadi­mas

    (Reuters) — Greece failed to reach an ini­tial deal with the Euro­pean Union and the IMF to unlock aid after the cred­i­tors dis­missed a pack­age of reforms from Athens as ideas rather than a con­crete plan, offi­cials said on Tues­day.

    The lack of a deal fur­ther rais­es pres­sure on Athens, which faces the prospect of run­ning out of mon­ey in a few weeks unless it can con­vince lenders to dole out more finan­cial help.

    Athens put a brave face on the fail­ure to reach an agree­ment with the “Brus­sels Group” of rep­re­sen­ta­tives from the EU and the IMF, say­ing it remained keen for a deal on the basis of its long-held demand that the mea­sures it is asked to imple­ment do not hurt eco­nom­ic growth. Lenders will inten­si­fy efforts to col­lect data in Athens, it said.

    One source close to the talks said the halt in nego­ti­a­tions was not a sign of a rup­ture but an indi­ca­tion of slow-mov­ing progress in the dis­cus­sions.

    ...

    Greece and its Euro­pean part­ners have sought to show pub­licly that rela­tions have improved in recent weeks after Tsipras held a series of talks with EU lead­ers, but both sides remain far apart on issues rang­ing from pen­sion reform to debt relief.

    At issue now is a list of reforms that Greece pre­sent­ed to the Brus­sels Group rep­re­sen­ta­tives last week, in an effort to show lenders that it is com­mit­ted to liv­ing up to pledges of finan­cial dis­ci­pline and is wor­thy of aid.

    But euro zone offi­cials panned the list as inad­e­quate. One EU offi­cial said the lenders had yet to receive the list they had been wait­ing for.

    A con­fer­ence call of the Euro Work­ing Group — euro zone deputy finance min­is­ters — remains sched­uled for Wednes­day and will allow the bloc to take stock of devel­op­ments so far, an offi­cial said.

    “We obvi­ous­ly look for­ward to receiv­ing a list as soon as pos­si­ble,” the offi­cial said. “That’s the aim of the ongo­ing dis­cus­sions: to exchange infor­ma­tion on detailed reform mea­sures and inten­tions.”

    The Brus­sels Groups makes rec­om­men­da­tions to the Euro Work­ing Group which in turn informs the Eurogroup of euro zone finance min­is­ters who make deci­sions to dis­burse aid.

    Tsipras appealed on Mon­day for an “hon­est com­pro­mise” with lenders but warned it would not be won at any cost. [ID:L6N0WW124]

    Call­ing for sup­port from oppo­si­tion par­ties, Tsipras reit­er­at­ed that his gov­ern­ment would imple­ment a Feb. 20 deal struck with the euro zone.

    But he also stressed that the gov­ern­ment had non-nego­tiable “red lines” such as avoid­ing wage and pen­sion cuts and mass lay­offs, and avoid­ing a fire sale of asset sales in favour of con­ces­sions that allows the state to retain con­trol.

    Sep­a­rate­ly, Greek Finance Min­is­ter Yanis Varo­ufakis met on Tues­day with offi­cials from major bond fund man­ag­er Pim­co, which has large invest­ments in euro zone periph­er­al debt. Pim­co offi­cials expressed inter­est in Greek Trea­sury bill auc­tions and bonds, a finance min­istry offi­cial said.

    Pim­co is inter­est­ed in Greek Trea­sury Bill auc­tions and bonds? That’s some­what news­wor­thy giv­en that Pim­co is owned by Ger­man insur­ance giant Allianz.

    Still, the lack of a deal between Greece and the troi­ka isn’t unex­pect­ed and nei­ther is the opti­mistic rhetoric that a deal will be reached in time. But it’s going to be kind of sur­pris­ing if a deal is actu­al­ly reached giv­en the pledges by Alex­is Tsipras that...

    ...the gov­ern­ment had non-nego­tiable “red lines” such as avoid­ing wage and pen­sion cuts and mass lay­offs, and avoid­ing a fire sale of asset sales in favour of con­ces­sions that allows the state to retain con­trol.

    Yes, oppos­ing pen­sion cuts, mass lay­offs, and a fire sale of state assets are cer­tain­ly the kinds of pol­i­cy changes that would improve the sit­u­a­tion, but isn’t mak­ing a bad sit­u­a­tion worse the troika’s rai­son d’être?

    Tsipras seeks ‘hon­est com­pro­mise’ as Greece wran­gles with cred­i­tors

    Agence France-Presse

    on Mar 30, 2015 @ 11:40 PM

    Greek Prime Min­is­ter Alex­is Tsipras said he want­ed an “hon­est com­pro­mise” as the cash-strapped coun­try wran­gled with euro­zone cred­i­tors over a new pack­age of reforms need­ed to unlock vital bailout funds.

    Experts from the IMF and the EU are scru­ti­n­is­ing a list of reforms that Athens has pro­posed in its bid to get the cred­i­tors to release 7.2‑billion euros ($7.8‑billion) in loans.

    Greece’s gov­ern­ment says the reforms would help raise an extra three bil­lion euros for its cof­fers with­out resort­ing to wage and pen­sion cuts.

    But the Euro­pean Union warned Mon­day that there was still no deal.

    “We’re not there yet,” Euro­pean Com­mis­sion spokesman Mar­gari­tis Schi­nas told reporters. “This is why the talks should ben­e­fit from fur­ther fact-find­ing in Athens that should con­tin­ue.”

    Euro­zone offi­cials would like­ly hold a con­fer­ence call this week, and then decide whether to call a full meet­ing of finance min­is­ters lat­er in April.

    More pri­vate­ly, Euro­pean sources have accused Athens of hin­der­ing progress in the talks.

    ...

    In April, Athens needs to roll over 2.4 bil­lion euros in short-term debt and repay anoth­er 820 mil­lion euros, includ­ing 460 mil­lion euros to the Inter­na­tion­al Mon­e­tary Fund.

    Among reforms pro­posed by Tsipras’s gov­ern­ment are pro­pos­als to levy high­er tax­es on the rich, as well as mea­sures to tack­le tax eva­sion and ille­gal fuel and cig­a­rette smug­gling.

    But a Euro­pean source told news por­tal in.gr that Greece’s pro­pos­als still had to be fleshed out, and that “ama­teurism” by Greek offi­cials was hin­der­ing progress.

    Junior finance min­is­ter Dim­itris Mar­das on Mon­day said the cred­i­tors were push­ing for low­er pen­sions and more mass lay­offs — mea­sures that the rad­i­cal gov­ern­ment has pledged to resist.

    How­ev­er, Mar­das said an agree­ment could still be reached.

    “The (cred­i­tors) have backed down on a num­ber of issues, so I don’t see some­thing insur­mount­able,” Mar­das told To Vima radio.

    The cred­i­tors are also push­ing the rad­i­cal gov­ern­ment elect­ed in Jan­u­ary to aban­don its plans to block a num­ber of key pri­vati­sa­tions.

    But Mar­das insist­ed that Athens would now no longer “sell its assets at humil­i­at­ing prices”.

    ...

    While it’s pos­si­ble that Greece’s junior finance min­is­ter was mis­char­ac­ter­iz­ing the troika’s nego­ti­at­ing posi­tion when he said the cred­i­tors were push­ing for low­er pen­sions and more mass lay­offs, that cer­tain­ly sounds like exact­ly what the troi­ka would be demand­ing right now since that’s exact­ly what they’ve been demand­ing all along. So how do you have an “hon­est com­pro­mise” with a group of cred­i­tors that appear to hon­est­ly want to turn your nation into a debtor’s prison colony?

    That’s all part of the rea­son why, despite the assur­ances that a com­pro­mise will be reached, we can’t exclude the pos­si­bil­i­ty that the even­tu­al “hon­est com­pro­mise” the troi­ka agrees to isn’t a com­pro­mise between the Greek gov­ern­men­t’s demands for “anti-reces­sion­ary” reforms and the troika’s demands for increas­ing the reces­sion­ary poli­cies but instead a com­pro­mise of keep­ing things exact­ly as bad as they are right now (which is basi­cal­ly the troika’s cur­rent demands...Greece has “flex­i­bil­i­ty” in craft­ing its reforms, so long as the over­all aus­ter­i­ty lev­els large­ly remain the same). Nation­al “inter­nal deval­u­a­tionas a the default strat­e­gy for col­lec­tive per­son­al growth does­n’t appear to be an area where the troi­ka is hon­est­ly will­ing to com­pro­mise.

    So is the kind of “hon­est com­pro­mise” that Tsipras described even pos­si­ble? If not, that basi­cal­ly means it’s a choice between the exist­ing sys­temic abuse or a ‘Grex­it’ sce­nario that will almost cer­tain­ly involve the rest of Europe try­ing to ensure Greece does as poor­ly as pos­si­ble so as not to give oth­er nations any ‘-exit’ ideas of their own.

    And assum­ing we don’t end up see­ing a last minute “com­pro­mise” (hon­est or not) and Greece actu­al­ly does pull a ‘Grex­it’, one of the many ques­tions raised by such an event is how the pre­cious, pre­cious finan­cial mar­kets will react. Well, if War­ren Buf­fett is rep­re­sen­ta­tive of ‘the mar­ket’s’ view on impli­ca­tions of a ‘Grex­it’, feel­ings might be mixed:

    Bloomberg Busi­ness
    Buf­fett Says Greek Exit From Euro ‘May Not Be a Bad Thing’
    by Noah Buha­yar and Doni Bloom­field

    3:12 PM CDT
    March 31, 2015

    (Bloomberg) — Bil­lion­aire investor War­ren Buf­fett said the euro region could with­stand Greece’s depar­ture from the cur­ren­cy union.

    “If it turns out the Greeks leave, that may not be a bad thing for the euro,” Buf­fett told CNBC in an inter­view Tues­day. “If every­body learns that the rules mean some­thing and if they come to gen­er­al agree­ment about fis­cal pol­i­cy among mem­bers, or some­thing of the sort, that they mean busi­ness, that could be a good thing.”

    Europe’s most-indebt­ed state is locked in nego­ti­a­tions with euro-area coun­tries and the Inter­na­tion­al Mon­e­tary Fund over the terms of its 240 bil­lion-euro ($260 bil­lion) res­cue. The stand­off, which has left Greece depen­dent upon Euro­pean Cen­tral Bank loans, risks lead­ing to a default with­in weeks and its poten­tial exit from the euro area.

    ...

    “I’ve thought that the euro had struc­tur­al prob­lems right from the moment that it was put it in, which does not mean it will nec­es­sar­i­ly fail,” Buf­fett said on CNBC. “You can adapt to those struc­tur­al prob­lems, but maybe some coun­tries won’t adapt and they won’t be in. It’s not ordained that the euro has to have exact­ly the mem­bers that it has today.”

    Munger’s View

    Charles Munger, vice chair­man at Buffett’s Berk­shire Hath­away Inc., crit­i­cized Greek cit­i­zens last week for try­ing to vote their way to pros­per­i­ty The country’s pol­i­tics were shak­en up in Jan­u­ary when Tsipras’s Syriza par­ty won elec­tion on a pledge to ease aus­ter­i­ty and nego­ti­ate a write­down of some of the country’s debt.

    Buf­fett told CNBC that, over time, the coun­tries in the euro area would need to bet­ter coor­di­nate their labor laws, fis­cal deficits and gen­er­al man­age­ment of their economies.

    “It can’t con­tin­ue with peo­ple going in dra­mat­i­cal­ly dif­fer­ent direc­tions,” Buf­fett said. “The Ger­mans are not going to fund the Greeks for­ev­er.”

    So, to sum­ma­rize the view from Berk­shire Hath­away, War­ren Buf­fet does­n’t see a ‘Grex­it’ as nec­es­sar­i­ly bad because...

    If every­body learns that the rules mean some­thing and if they come to gen­er­al agree­ment about fis­cal pol­i­cy among mem­bers, or some­thing of the sort, that they mean busi­ness, that could be a good thing.

    Ah, rules: So flex­i­ble for non-pro­les. And non-flex­i­ble for the pro­les. Rules are impor­tant. Unless the rules involve the humane treat­ment of one of your bor­row­ers, in which case the spe­cial bankers’ Gold­en Rule “he who has the gold, etckicks in.

    So that was the view on the fall­out from a ‘Grex­it’ as War­ren Buf­fet sees it. But, of course, there’s the time­less rule that some­times rules have to change. That’s some­thing anoth­er finan­cial giant, Pim­co, recent­ly observed regard­ing not just the cri­sis in Greece but the basic struc­ture of the euro­zone. Pim­co’s utter­ances are gen­er­al­ly news­wor­thy. That’s the case for any giant.

    But giv­en that Pim­co is owned by Ger­man insur­ance giant Allianz (the largest insur­ance com­pa­ny in Europe), and giv­en the ongo­ing Greek/troika stand­off, and giv­en the appar­ent inter­est of Allianz in Greek trea­sury auc­tions), the recent utter­ances from Pim­co about chang­ing the rules of the euro­zone were even more news­wor­thy than usu­al:

    The Tele­graph
    Euro­zone can’t sur­vive in cur­rent form, says PIMCO
    Sin­gle cur­ren­cy area must become a “Unit­ed States of Europe” in order to secure its future, says man­ag­er of world’s largest bond fund

    By Szu Ping Chan

    8:00PM GMT 28 Mar 2015

    The euro­zone is “unten­able” in its cur­rent form and can­not sur­vive unless coun­tries are pre­pared to cede sov­er­eign­ty and become a “Unit­ed States of Europe”, the man­ag­er of the world’s biggest bond fund has warned.

    The Pacif­ic Invest­ment Man­age­ment Com­pa­ny (PIMCO) said that while the bloc was like­ly to stay togeth­er in the medi­um term, with Greece remain­ing in the euro­zone, the sin­gle cur­ren­cy could not sur­vive if coun­tries did not move clos­er togeth­er.

    Per­sis­tent­ly weak growth in the euro­zone had led to vot­er unrest and the rise of pop­ulist par­ties such as Podemos in Spain, Syriza in Greece, and Front Nation­al in France, said PIMCO man­ag­ing direc­tors Andrew Bosom­worth and Mike Amey.

    “The les­son from his­to­ry is that the sta­tus quo we have now is not a ten­able struc­ture,” said Mr Bosom­worth. “There’s no his­tor­i­cal prece­dent that this sort of struc­ture, which is cen­tralised mon­e­tary pol­i­cy, decen­tralised fis­cal pol­i­cy, can last over mul­ti­ple decades.”

    PIMCO said the rise of pop­ulist par­ties demon­strat­ed how uneasy some peo­ple had become about the euro.

    “[Per­sis­tent­ly low growth] man­i­fests itself in a lack of sup­port in the com­mon cur­ren­cy, so then it leads to the rise to pow­er of polit­i­cal par­ties that want to end it,” said Mr Bosom­worth.

    “That’s what we seen in the last few years. [Pop­ulist par­ties have] risen from zero to be a con­sid­er­able force. In Greece’s case to form a gov­ern­ment.

    ‘This means we’re in a crit­i­cal sit­u­a­tion, because you can­not just plas­ter over these peo­ple’s con­cerns, there needs to be a polit­i­cal response as well, which involves address­ing the ques­tion: what is the ulti­mate future of the mon­e­tary union?”

    PIMCO used the exam­ple of the Latin and Scan­di­na­vian unions in the 19th cen­tu­ry, which last­ed an aver­age of 50 years before break­ing up, to illus­trate how mon­e­tary unions were incom­pat­i­ble with sov­er­eign­ty.

    “You need to reach some sort of polit­i­cal agree­ment about how to share fis­cal resources around the zone. We’re a long, long, long way from design­ing that and get­ting the polit­i­cal back­ing for it,” he said.

    “So while you’re wait­ing for that and you’ve got low growth, and high unem­ploy­ment, you run the risk of let­ting these anti-euro par­ties to the fore­front.”

    “Will we get the Unit­ed States of Europe? It’s not impos­si­ble, but Europe could also spend many decades in a hybrid form of a polit­i­cal and fis­cal fed­er­a­tion. While there might not be one gov­ern­ment, one pass­port and one army, we could be mov­ing clos­er towards that — but not yet.”

    Mario Mon­ti, the for­mer prime min­is­ter of Italy, said last week that France was Europe’s “big prob­lem” because anti-EU sen­ti­ment there threat­ened to destroy the bloc’s Fran­co-Ger­man axis.

    PIMCO said France’s inflex­i­ble labour mar­ket meant it was “lag­ging behind” oth­er coun­tries such as Spain and Ire­land, which had imple­ment­ed struc­tur­al reforms.

    Mr Bosom­worth, who is head of port­fo­lio man­age­ment in Ger­many, said there was too much at stake for the euro­zone to force Greece out. “It’s a bit like nuclear war­fare. Actu­al­ly doing it is so dis­as­trous that you don’t,” he said.

    How­ev­er, he said Berlin was becom­ing increas­ing­ly impa­tient with Athens.

    “The mood music in Ger­many is that peo­ple are fed up with the ongo­ing nego­ti­a­tions and the way that the new gov­ern­ment comes across in them. This has reduced the sol­i­dar­i­ty that was there in 2010.”

    Mr Amey said the Euro­pean Cen­tral Bank’s €60bn (£43.4bn) a month bond buy­ing pro­gramme was like­ly to push the euro to par­i­ty against the dol­lar, pos­si­bly by the end of this year.

    ...

    Well that was some cheery prog­nos­ti­cat­ing from Pim­co:

    The Pacif­ic Invest­ment Man­age­ment Com­pa­ny (PIMCO) said that while the bloc was like­ly to stay togeth­er in the medi­um term, with Greece remain­ing in the euro­zone, the sin­gle cur­ren­cy could not sur­vive if coun­tries did not move clos­er togeth­er.

    ...

    “The les­son from his­to­ry is that the sta­tus quo we have now is not a ten­able struc­ture,” said Mr Bosom­worth. “There’s no his­tor­i­cal prece­dent that this sort of struc­ture, which is cen­tralised mon­e­tary pol­i­cy, decen­tralised fis­cal pol­i­cy, can last over mul­ti­ple decades.”

    PIMCO said the rise of pop­ulist par­ties demon­strat­ed how uneasy some peo­ple had become about the euro.

    ...

    “You need to reach some sort of polit­i­cal agree­ment about how to share fis­cal resources around the zone. We’re a long, long, long way from design­ing that and get­ting the polit­i­cal back­ing for it,” he said.

    “So while you’re wait­ing for that and you’ve got low growth, and high unem­ploy­ment, you run the risk of let­ting these anti-euro par­ties to the fore­front.”

    “Will we get the Unit­ed States of Europe? It’s not impos­si­ble, but Europe could also spend many decades in a hybrid form of a polit­i­cal and fis­cal fed­er­a­tion. While there might not be one gov­ern­ment, one pass­port and one army, we could be mov­ing clos­er towards that — but not yet.”

    ...

    Mr Bosom­worth, who is head of port­fo­lio man­age­ment in Ger­many, said there was too much at stake for the euro­zone to force Greece out. “It’s a bit like nuclear war­fare. Actu­al­ly doing it is so dis­as­trous that you don’t,” he said.

    ...

    Trans­la­tion: The euro­zone sit­u­a­tion is urgent. There’s only one solu­tion, a “Unit­ed States of Europe”, which will require “many decades in a hybrid form of a polit­i­cal and fis­cal fed­er­a­tion”. But the rab­ble won’t ever agee to it. So the euro­zone should spend the 50 years or so slow­ly mov­ing towards a “Unit­ed States of Europe” while the rab­ble churns and a more amenable crop takes over. That appears to be the Pim­co assess­ment.

    So from War­ren Buf­fett we have a “if everone fol­lows the rule that you fol­low the rules or find the exits every­thing will work out for the best” gener­ic opti­mism from War­ren Buf­fett. And a “let’s resolve the imme­di­ate cri­sis by resolv­ing to solve our long term crises by resolv­ing to cre­ate an ever clos­er union oh so slow­ly and ambigu­ous­ly over decades”-approach advo­cat­ed by Allianz with warn­ing that a ‘Grex­it’ is like nuclear war. And between Greece and the troi­ka we have the the immov­able object (the troika’s atti­tude towards Greece and aus­ter­i­ty) vs the irre­sistable force (the neg­a­tive impact of the troika’s aus­ter­i­ty poli­cies). And some­how Athens needs to come to a com­pro­mise soon with the immov­able object while it gets the squeeze from the irre­sistible force that results as a con­se­quence of the immov­able objec­t’s strange eco­nom­ic the­o­ries (and much scari­er geopo­lit­i­cal the­o­ries and ambi­tions).

    Will Greece final­ly dis­cov­er the myth­i­cal “sane com­pro­mise with the troi­ka” and escapes its unstop­pably irre­sistible squeeze play? That remains to be seen. There’s cer­tain­ly a lot more grass roots sup­port across Europe for a ‘Grex­it’ than there was in 2012. But as Pim­co’s warn­ings about the ‘nuclear’ nature of a ‘Grex­it’ and its calls for a ‘Unit­ed States of Europe’ remind­ed us, there do indeed exist long-term visions for Europe that might not be quite as insane as today’s euro­zone struc­ture in that there might actu­al­ly be a rea­son­able fis­cal trans­fer sys­tem some day for the kind of cost shar­ing that can real­ly avoid a repeat of the Greek cri­sis and health­i­er over­all euro­zone econ­o­my. But the influ­en­tial peo­ple with vision also envi­sion it tak­ing decades to accom­plish, with Europe stuck with this weird semi-per­ma­nent mud­dle we call the euro­zone in the mean time.

    So we’ll see what hap­pens with the cur­rent nego­ti­a­tions but it’s prob­a­bly going to hurt to watch. Unless that’s your thing.

    Posted by Pterrafractyl | April 1, 2015, 10:54 pm
  4. Why won’t EU/Brussels make an excep­tion for Greece’s exports so they don’t starve to death?

    Is work­ing with Putin the most expe­di­ent option for Greece?

    Rus­sia ready to offer Greeks cash in return for assets

    Krem­lin could pro­vide cash-strapped Greeks a cred­it line and dis­count­ed ener­gy sup­plies as Alex­is Tsipras meets with Putin

    http://www.telegraph.co.uk/finance/economics/11519651/Russia-ready-to-offer-Greeks-cash-in-return-for-assets.html

    By Tom Parfitt, Moscow and Mehreen Khan
    2:36PM BST 07 Apr 2015

    Comments413 Com­ments

    Rus­sia could offer debt-rid­den Greece con­tro­ver­sial loans and dis­counts on sup­plies of nat­ur­al gas in exchange for the coun­try’s “assets”, accord­ing to reports in Moscow.

    Alex­is Tsipras, Greece’s prime min­is­ter, is due to arrive in the city on Tues­day and will meet Vladimir Putin, Russia’s pres­i­dent, on Wednes­day.

    Athens over­tures to Moscow have raised fears the Left­ist gov­ern­ment is piv­ot­ing east in search of alter­na­tives sources of finance as it bids to avoid bank­rupt­cy. Ahead of his vis­it, Mr Tsipras con­demned eco­nom­ic sanc­tions on Moscow as “a road to nowhere”.

    Greece’s dal­liance with the Krem­lin has also attract­ed crit­i­cism for poten­tial­ly under­min­ing the EU’s unit­ed front against Rus­si­a’s mil­i­tary inter­ven­tion in Ukraine.

    Mar­tin Schulz, the pres­i­dent of the Euro­pean Par­lia­ment, said on Sat­ur­day that it would be “unac­cept­able” if Mr Tsipras “jeop­ar­dised Europe’s com­mon pol­i­cy on Rus­sia” in return for Krem­lin aid.

    But Kom­m­er­sant news­pa­per quot­ed an anony­mous Russ­ian gov­ern­ment source on Tues­day say­ing that lines of cred­it were on the table.

    “We’re ready to con­sid­er the ques­tion of pro­vid­ing Greece dis­counts on gas: the price for it is tied to the cost of oil which has sig­nif­i­cant­ly fall­en in recent months,” the source said.

    “We are also ready to dis­cuss the pos­si­bil­i­ty of grant­i­ng Greece new loans. But here we, in turn, are inter­est­ed in rec­i­p­ro­cal moves – in par­tic­u­lar, in Rus­sia receiv­ing par­tic­u­lar assets in Greece.”

    The source did not iden­ti­fy the assets con­cerned, but Russ­ian media said the Greek gas com­pa­ny DEPA could be among them. Stakes in train oper­a­tor Train­OSE and sea ports in Athens and Thes­sa­loni­ki are also poten­tial tar­gets.

    Moscow is Greece’s largest trad­ing part­ner on account of its huge reliance on Russ­ian nat­ur­al gas.

    Athens’ ener­gy min­is­ter has invit­ed Russ­ian com­pa­nies to explore nat­ur­al gas and oil reserves off the coun­try’s east­ern coast. In return, Greece has indi­cat­ed it is will­ing to sup­port the Kremlin’s new pipeline plan though Turkey, known as “Turk­ish Stream”.

    EU offi­cials fear any Russ­ian res­cue loans or oth­er sweet­en­ers could per­suade Athens to veto sanc­tions on the Krem­lin over Ukraine, where Rus­sia has sup­port­ed sep­a­ratists fight­ing Ukrain­ian gov­ern­ment forces.

    Besides cred­it and gas dis­counts, the Krem­lin could offer Greece a par­tial lift­ing of its EU food import ban in exchange for Athens push­ing a pro-Rus­sia line.

    Greece has been hit par­tic­u­lar­ly hard by a fruit export ban in place since August. But the Euro­pean Com­mis­sion hint­ed at their oppo­si­tion to any Gre­co-Russ­ian food deal, say­ing all Euro­pean coun­tries should be treat­ed equal­ly.

    Mr Tsipras’s arrival in Moscow comes as his cash-starved gov­ern­ment has threat­ened to default on a €450m bailout repay­ment to the Inter­na­tion­al Mon­e­tary Fund on Thurs­day.

    But the pos­si­bil­i­ty of Greece being in receipt of Russ­ian largesse has reced­ed as Moscow suf­fers pre­cip­i­tous declines in its for­eign exchange reserves and faces its worst reces­sion since 1999.

    Athens owes €330bn to its inter­na­tion­al cred­i­tors, and has seen progress on its bail-out exten­sion stall after weeks of acri­mo­nious talks with Brus­sels.

    The impasse means the prob­a­bil­i­ty of Greece default­ing on its cred­i­tors has risen to more than 50pc, accord­ing to ana­lysts at UBS.

    “We think a default is usu­al­ly nev­er wished for by any involved par­ty, but may be con­sid­ered the less­er of two evils by the insti­tu­tions,” said the Swiss bank.

    Greece’s April show­down
    April 8
    Alex­is Tsipras meets Putin
    Greek PM is due in Rus­sia to vis­it his coun­ter­part, Vladimir Putin. Greece has been mak­ing over­tures towards its east­ern giant
    April 9
    IMF pay­ment
    Greece is due to make a cru­cial €448m pay­ment to the Inter­na­tion­al Mon­e­tary Fund
    April 10–13
    East­er week­end
    Greece cel­e­brates Ortho­dox East­er week­end
    April 14
    Pub­lic sec­tor wages and pen­sions
    Esti­mat­ed €1.7b in social secu­ri­ty pay­ments made by the state
    April 14
    Bond roll over
    Gov­ern­ment faces €1.4 bil­lion in refund­ing 6‑month T‑bills
    April 15
    ECB Gov­ern­ing Coun­cil meets
    Deci­sion over pro­vid­ing emer­gency assis­tance (ELA) to Greek banks is reviewed
    April 17
    Bond rollover and inter­est pay­ment
    Gov­ern­ment faces €1bn in refund­ing of 3‑month T‑bills and €194m in inter­est pay­ments to pri­vate bond­hold­ers
    April 20
    Inter­est pay­ment to ECB
    Greece due to pay €80m inter­est bill on bonds held by the Euro­pean Cen­tral Bank
    April 24
    Eurogroup meet­ing
    Finance min­is­ters con­vene in Riga
    May 1
    IMF pay­ment
    A €200m loan repay­ment to the IMF
    May 1
    Labour Day Bank Hol­i­day

    Posted by participo | April 7, 2015, 9:14 am
  5. About this time last month the news out of Greece was some­thing like this: If Greece can’t find a mutu­al­ly accept­able com­pro­mise with the troi­ka, Greece runs out of cash, things start unrav­el­ing, and ear­ly elec­tions could get called as part of a new nation­al ref­er­en­dum on how to move for­ward. That was accord­ing to Greek Finance Min­is­ter Yanis Varo­ufakis. It was pret­ty dra­mat­ic.

    And while calls by gov­ern­ment offi­cials for such a ref­er­en­dum if the show­down with the troi­ka results in a non-com­pro­mise sit­u­a­tion might seen like a risky move, keep in mind that Syriza enjoys tremen­dous pop­u­lar sup­port so sug­ges­tions of the pos­si­bil­i­ty of ear­ly elec­tions and ref­er­en­dums in case Greece and the troi­ka can’t come to an agree­ment before the end of April may not have real­ly be all the risky for the Greek gov­ern­ment. Espe­cial­ly since the troi­ka has been so unsym­pa­thet­ic and unyield­ing.

    Still, while the nego­ti­a­tions between Greece and the troi­ka might have ambigu­ous polit­i­cal risks for the Greek gov­ern­ment giv­en their pop­u­lar sup­port, the eco­nom­ic risks asso­ci­at­ed with the nego­ti­a­tions are dif­fi­cult to over­state because if a ‘Grex­it’ takes place the troi­ka would prob­a­bly just stand by and let Greece implode as an object les­son to the rest of Europe. And then there’s the prospects of Greece being forced to issue IOUs and maybe even the Drach­ma if an agree­ment can’t be reached in com­ing weeks and who knows what the polit­i­cal or eco­nom­ic impli­ca­tions of that would be. So it’s a pret­ty urgent sit­u­a­tion:

    Ear­ly Greek elec­tion, ref­er­en­dum pos­si­ble if EU rejects debt plan: Varo­ufakis
    ROME | By Steve Scher­er

    Sun Mar 8, 2015 2:30pm EDT

    (Reuters) — Greece could call a ref­er­en­dum or have ear­ly elec­tions should its euro zone part­ners reject its debt and growth plans, Greek Finance Min­is­ter Yanis Varo­ufakis said in a news­pa­per inter­view on Sun­day.

    The new Greek gov­ern­ment, led by Alex­is Tsipras, won an elec­tion in Jan­u­ary promis­ing to rene­go­ti­ate a bailout agreed with the Inter­na­tion­al Mon­e­tary Fund and its Euro­pean Union part­ners that requires strict bud­get dis­ci­pline and sweep­ing eco­nom­ic reforms.

    The gov­ern­ment reached a tem­porar­i­ly deal with its lenders last month and Athens has until the end of April to spec­i­fy the reforms it will make in exchange for fur­ther aid. Euro zone finance min­is­ters are meet­ing on Mon­day in Brus­sels to dis­cuss a let­ter of pledged reforms sent by Athens last week.

    Should Brus­sels ulti­mate­ly reject Greece’s pro­pos­als, Varo­ufakis told Ital­ian dai­ly Cor­riere del­la Sera: “There could be prob­lems. But, as my prime min­is­ter has said, we are not yet glued to our chairs. We can return to elec­tions, call a ref­er­en­dum.”

    In a state­ment released lat­er on Sun­day, the Greek Finance Min­istry said that Varo­ufakis was respond­ing to a hypo­thet­i­cal ques­tion and that any ref­er­en­dum would “obvi­ous­ly regard the con­tent of reforms and fis­cal pol­i­cy” and not whether to stay in the euro, as Cor­riere del­la Sera had sug­gest­ed.

    Most Greeks want the coun­try to keep the euro, but two-thirds also con­tin­ue to back the gov­ern­men­t’s tough stance to rene­go­ti­ate the bailout pack­age.

    A ref­er­en­dum over a deal with lenders that keeps the coun­try in the euro zone but falls short of Tsipras’s promis­es could give the gov­ern­ment cov­er to accept a deal even though it was elect­ed with a dif­fer­ent man­date. But even float­ing the idea of a ref­er­en­dum is polit­i­cal­ly risky.

    In 2011, then-prime min­is­ter George Papan­dreou sug­gest­ed call­ing a ref­er­en­dum over the bailout and was lat­er forced to make way for a uni­ty coali­tion led by a for­mer cen­tral banker.

    With the Tsipras gov­ern­men­t’s pop­u­lar­i­ty lev­el above 40 per­cent, Varo­ufakis said “peo­ple under­stand” that the gov­ern­ment is fight­ing the “estab­lish­ment that said it was sav­ing Greece while it put every­thing on the backs of the poor”.

    ...

    So that was last month. Flash for­ward month and the sit­u­a­tion looks like pret­ty similar...similarly urgent as last month, but more so:

    Greece moves to quell default fears, pledges to meet ‘all oblig­a­tions’
    WASHINGTON | By Anna Yukhananov

    (Reuters) — Greek Finance Min­is­ter Yanis Varo­ufakis said on Sun­day that Greece “intends to meet all oblig­a­tions to all its cred­i­tors, ad infini­tum,” seek­ing to quell default fears ahead of a big loan pay­ment Athens owes the IMF lat­er this week.

    Fol­low­ing a meet­ing with the head of the Inter­na­tion­al Mon­e­tary Fund, Varo­ufakis told reporters the gov­ern­ment plans to “reform Greece deeply” and would seek to improve the “effi­ca­cy of nego­ti­a­tions” with its cred­i­tors.

    Greece has not received bailout funds since August last year and has resort­ed to mea­sures such as bor­row­ing from state enti­ties to tide it over. It offered a new pack­age of reforms last week in the hope of unlock­ing funds, but has yet to win agree­ment on the pro­pos­als with its EU and IMF lenders.

    Most urgent­ly, Athens is on the hook for a rough­ly 450 mil­lion euro loan repay­ment to the IMF due this Thurs­day.

    The inte­ri­or min­is­ter sug­gest­ed last week the gov­ern­ment would pri­or­i­tize wages and pen­sions over the IMF pay­ment, although the gov­ern­ment lat­er denied that was its stance.

    ...

    The euro zone coun­try is fast run­ning out of cash, but the bailout extend­ed by the IMF, Euro­pean Com­mis­sion and Euro­pean Cen­tral Bank has been frozen until the left­ist-led gov­ern­ment reach­es agree­ment on a pack­age of reforms.

    After a first set of planned mea­sures failed to impress lenders, Athens offered a more detailed pack­age on Wednes­day.

    But it arrived too late to be dis­cussed at a tele­con­fer­ence with euro zone deputy finance min­is­ters.

    The gov­ern­ment is hop­ing approval of its reform pro­pos­als will free up the remain­ing aid of 7.2 bil­lion euros under its bailout and lead to the return of about 1.9 bil­lion euros in prof­its made by the Euro­pean Cen­tral Bank on Greek bonds.

    Greece now has its hopes set on anoth­er meet­ing of euro zone deputy finance min­is­ters on April 8–9, although it is unlike­ly that a deal could be reached by then. The next meet­ing of euro zone finance min­is­ters will take place on April 24.

    “It is nec­es­sary to restore the Greek econ­o­my’s fund­ing flow,” Labor Min­is­ter Panos Skourletis told the Greek Ependysi news­pa­per on Sat­ur­day, accus­ing the coun­try’s lenders of tak­ing advan­tage of Greece’s fund­ing lim­its to add pres­sure on Athens.

    “Whether the coun­try will meet its exter­nal oblig­a­tions depends on our lenders’ final polit­i­cal choic­es and stance,” he said, adding that pen­sions and wages were not at risk.

    Feel the urgency:

    After a first set of planned mea­sures failed to impress lenders, Athens offered a more detailed pack­age on Wednes­day.

    But it arrived too late to be dis­cussed at a tele­con­fer­ence with euro zone deputy finance min­is­ters.

    The gov­ern­ment is hop­ing approval of its reform pro­pos­als will free up the remain­ing aid of 7.2 bil­lion euros under its bailout and lead to the return of about 1.9 bil­lion euros in prof­its made by the Euro­pean Cen­tral Bank on Greek bonds.

    Greece now has its hopes set on anoth­er meet­ing of euro zone deputy finance min­is­ters on April 8–9, although it is unlike­ly that a deal could be reached by then. The next meet­ing of euro zone finance min­is­ters will take place on April 24.

    “It is nec­es­sary to restore the Greek econ­o­my’s fund­ing flow,” Labor Min­is­ter Panos Skourletis told the Greek Ependysi news­pa­per on Sat­ur­day, accus­ing the coun­try’s lenders of tak­ing advan­tage of Greece’s fund­ing lim­its to add pres­sure on Athens.

    So last Wednes­day Greece sub­mits a revised reform pack­age (after the pre­vi­ous ver­sion was reject­ed the pre­vi­ous day) but appar­ent­ly not in time for the euro­zone deputy finance min­is­ters’ tele­con­fer­ence so it appar­ent­ly had to wait until this week for the next meet­ing (because deputy min­is­ter tele­con­fer­ences for emer­gency sit­u­a­tions are appar­ent­ly super hard to arrange). And if the euro­zone finance min­is­ters don’t agree to the revised list of reforms dur­ing the April 8–9 meet­ing the next meet­ing does­n’t take place until April 24th. And if there’s no agree­ment by the end of April we’re poten­tial­ly back in super emer­gency cri­sis ‘Grex­it’ mode since the agree­ment back in Feb­ru­ary that the ‘bailout’ was to arrive at a set of ‘reforms’ (that appears to require more wage and pen­sion cuts than the pri­or pro­posed list) by the end of April.

    So even though the troi­ka does­n’t seem to be act­ing with any degree of urgency, it’s look­ing like the only real­is­tic point where an agree­ment is reached before the end of April is on the April 24 meet­ing. And how real­is­tic is it that any agree­ment will be reached dur­ing the April 24 meet­ing unless Greece agrees to capit­u­late almost entire­ly since the troika’s stance all along has been “any mouth from you and it’s in the f####barrel you go!”? Keep in mind that there have been no indi­ca­tions that the euro coun­tries are to yield in any mean­ing­ful way.

    So, at least based on the sig­nals being sent, it isn’t look­ing like the troi­ka is very inter­est­ed in any mean­ing­ful com­pro­mise and while Syriza has been send­ing com­pro­mis­ing sig­nals from the begin­ning the one area for Syriza where there can be no com­pro­mise is reject­ing the troi­ka ‘no com­pro­mise’ stance. And that’s why the Greek gov­ern­ment is increas­ing­ly forced to fend off spec­u­la­tion that snap elec­tions and a cash crunch are just a mat­ter of time:

    The Guardian
    Greek polit­i­cal unrest and deep­en­ing debt cri­sis fuel talk of snap elec­tion

    Yanis Varo­ufakis assures IMF’s Chris­tine Lagarde that Athens will repay €450m loan on Thurs­day as pres­sure mounts over slow-mov­ing nego­ti­a­tions

    Hele­na Smith in Athens and Jen­nifer Rankin

    Sun­day 5 April 2015 14.05 EDT

    Greece has con­firmed it will this week repay a €450m (£330m) Inter­na­tion­al Mon­e­tary Fund, as the wors­en­ing greek debt cri­sis has rean­i­mat­ed talk with­in the rul­ing Syriza par­ty of a snap gen­er­al elec­tion if ongo­ing dis­cus­sions with cred­i­tors fail.

    The Greek finance min­is­ter, Yanis Varo­ufakis, held infor­mal talks with the IMF’s man­ag­ing direc­tor, Chris­tine Lagarde, in Wash­ing­ton DC on Sun­day, and Lagarde said he con­firmed that the repay­ment would be made on Thurs­day.

    Mean­while, warn­ings of ear­ly elec­tions under­scored the polit­i­cal unrest in Athens. Varo­ufakis told the Naftem­po­ri­ki news­pa­per on Mon­day that Greece must reach an out­line fund­ing agree­ment with its lenders at a meet­ing of euro zone finance min­is­ters on 24 April.

    The slow pace of nego­ti­a­tions with cred­i­tors and wors­en­ing state of the Greek econ­o­my brought a warn­ing from the far-left Syriza of snap polls being held before the sum­mer – just months after win­ning pow­er.

    “If we are not sat­is­fied [with the out­come] we will go to the peo­ple,” Kostas Chryso­gonos, a promi­nent Syriza MEP told local media at the week­end. “We have a pop­u­lar man­date to bring about a bet­ter result,” he said of the talks aimed at con­clud­ing a reform-for-cash pro­gramme to keep the cri­sis-hit coun­try afloat. “If, ulti­mate­ly, cred­i­tors insist on fol­low­ing an inflex­i­ble line … then the elec­toral body will have to assume its respon­si­bil­i­ties.”

    Varo­ufakis said fol­low­ing his unex­pect­ed meet­ing with Lagarde that Greece “intends to meet all oblig­a­tions to all its cred­i­tors, ad infini­tum”. He said the gov­ern­ment also plans to “reform Greece deeply” and to try to improve the “effi­ca­cy of nego­ti­a­tions” with its cred­i­tors

    “I wel­comed con­fir­ma­tion by the min­is­ter that pay­ment owing to the fund would be forth­com­ing on 9 April,” Lagarde said in a state­ment.

    Senior gov­ern­ment offi­cials have recent­ly had to repeat assur­ances that Greece is not about to to default on debt repay­ments. The deputy finance min­is­ter, Dim­itris Mar­das, said civ­il ser­vice wages would also be paid. “There is mon­ey for the pay­ment of salaries, pen­sions and what­ev­er else is need­ed in the next week.”

    The prospect of renewed polit­i­cal strife in Greece coin­cid­ed with mount­ing dis­sent with­in Syriza over the extent to which it should roll back on pre-elec­toral reforms.

    The anti-aus­ter­i­ty gov­ern­ment led by Alex­is Tsipras has found itself increas­ing­ly cor­nered with cred­i­tors – the so-called troi­ka of the IMF, the Euro­pean Union and the Euro­pean Cen­tral Bank – refus­ing to endorse pro­posed reforms under an exten­sion of its €240bn (£176bn) bailout. Mil­i­tants led by ener­gy min­is­ter Pana­gi­o­tis Lafaza­nis have ratch­eted up the pres­sure by reject­ing any notion of mak­ing nec­es­sary con­ces­sions start­ing with pri­vati­sa­tions.

    On Sun­day, Lafaza­nis denounced Greece’s inter­na­tion­al cred­i­tors for treat­ing the coun­try with “unbe­liev­able prej­u­dice and as a colony”. Rais­ing the prospect of a deal with Rus­sia, he said: “A Greek-Russ­ian agree­ment would help our coun­try great­ly in nego­ti­a­tions with lenders.”

    ...

    Investors have been get­ting increas­ing­ly ner­vous that Greece will default on the 9 April repay­ment, amid rumours that the Syriza-led gov­ern­ment is run­ning out of cash.

    Greek offi­cials denied these rumours and crit­i­cised leaks from the EU insti­tu­tions sug­gest­ing that Athens would be unable to meet its oblig­a­tions to the IMF as a “delib­er­ate rumour cam­paign”.

    Nego­ti­a­tions between Greece and its cred­i­tors over the next tranche of the country’s bailout – worth more than €7bn – have stalled over dis­agree­ment about Syriza’s eco­nom­ic reform plans. Greece has not received any bailout funds since August last year, and the Syriza-led gov­ern­ment has so far failed to con­vince its euro­zone part­ners to dole out remain­ing funds in the bailout pot.

    Euro­zone deputy finance min­is­ters will dis­cuss Greece’s pro­pos­als on Wednes­day and Thurs­day, but are not expect­ed to reach an agree­ment.

    A tele­con­fer­ence between the same group last week end­ed in stale­mate after Greece refused to imple­ment reforms agreed by the pre­vi­ous gov­ern­ment that would have bro­ken pledges Syriza made when it was elect­ed in Jan­u­ary. Euro­zone finance min­is­ters, includ­ing Germany’s Wolf­gang Schäu­ble, said Greece could only get the remain­der of the funds if it agreed to reforms, such as cut­ting pen­sions. But Greece insists it can raise mon­ey through “non-reces­sion­ary” mea­sures, such as a clam­p­down on tax avoid­ance.

    EU offi­cials told Reuters that progress had been made, but more work was need­ed to reach a deal. Hopes of a break­through are now being pinned on the next meet­ing of euro­zone finance min­is­ters on 24 April.

    Over­all, it’s pret­ty clear that time is of the essence if Greece is going to get these nego­ti­a­tions com­plet­ed before the end of April dead­line. And it’s also clear that snap elec­tions are at least a dis­tinct pos­si­bil­i­ty if no nego­ti­a­tions are reached.

    So is the troi­ka just hold­ing out and flirt­ing with a ‘Grex­it’ in the hopes that snap elec­tions will be called and they’ll be able to nego­ti­a­tion with a more capit­u­la­tion-friend­ly gov­ern­ment a few months from now? That seems like a dis­tinct pos­si­bil­i­ty. And while it’s cer­tain­ly pos­si­ble that the snap elec­tions could actu­al­ly result in a pro-aus­ter­i­ty gov­er­ment, based on a recent poll that kind of of snap elec­tion out does­n’t seem very prob­a­ble:

    Greek Reporter

    Opin­ion Poll: Greek PM Tsipras Pop­u­lar­i­ty at Impres­sive 78%

    by Agge­los Sko­r­das — Apr 6, 2015

    A recent opin­ion poll con­duct­ed by Pub­lic Issue for the dai­ly news­pa­per Avgi shows that the Greek Prime Min­is­ter and SYRIZA leader Alex­is Tsipras’ pop­u­lar­i­ty has reached an impres­sive 78%, while 63% of those ques­tioned are in sup­port of the government’s nego­ti­a­tion strat­e­gy. At the same time, 55% of the Greeks are approv­ing the Finance Min­is­ter Yanis Varo­ufakis, who has late­ly gained pub­lic­i­ty both with­in Greece and abroad.

    Those dis­ap­prov­ing the government’s han­dling in the nego­ti­a­tions with the country’s cred­i­tors con­sist of 28% of the pub­lic opin­ion, while 3% do not take sides and 6% have no opin­ion on the mat­ter. More­over, 82% of the respon­dents say the feel­ing the government’s nego­ti­at­ing stance gave them is “nation­al pride,” although 39% believe the win­ners in this tie are the lenders. Sim­i­lar­ly, 22% see the nego­ti­a­tions as a win-win case, 21% say no side has ben­e­fit­ed and only 14% believe that Greece is com­ing out on top.

    ...

    So while it would be great for the Greek peo­ple (and, real­ly, great for the rest of Europe’s non-oli­garchs) if Greece and the troi­ka can arrive at some sort of sane agree­ment by the end of April, giv­en the troika’s appar­ent desire to yield basi­cal­ly noth­ing and make despair in the face of usury a per­ma­nent fea­ture of euro­zone per­haps we need to start ask­ing what hap­pens if snap elec­tions are held in the com­ing months and Syriza is reelect­ed by an even larg­er mar­gin than what it won by back in Jan­u­ary because, at least at this point, anoth­er Syriza vic­to­ry seems like the prob­a­bly out­come of any elec­tions. And since the more the troi­ka mis­treats and humil­i­ates Greece the more the pop­u­lace seems to sup­port Syriza, it’s real­ly unclear what’s going to cause the col­lapse in Greece’s sup­port for Syriza nec­es­sary to actu­al­ly put some­one else in pow­er, espe­cial­ly a pro-aus­ter­i­ty gov­ern­ment.

    The euro­zone may be mor­ph­ing into a Clause­witz­ian night­mare, it’s not offi­cial­ly sup­posed to be one. Sim­i­lar­ly, while the euro­zone is becom­ing one of the most divi­sive forces Europe has ever seen, dri­ving deep wedges across the con­ti­nent and threat­en­ing the spir­it of the Euro­pean Project, the euro­zone was sup­posed to be a uni­fy­ing force. So things real­ly aren’t turn­ing out the way most were expect­ing. At the same time, the euro­zone has yet to real­ly deal with a mem­ber state the has wide­spread pub­lic back­ing for simul­ta­ne­ous­ly stay­ing in the euro­zone while being poten­tial­ly will­ing to walk if the terms of its mem­ber­ship aren’t altered to make mem­ber­ship worth it in the long-run. So what going to hap­pen if Greece’s democ­ra­cy gels in way where the pub­lic real­ly and tru­ly is will­ing to walk if the troi­ka does­n’t com­pro­mise? It’s a big deal not just for Greece but for any­one liv­ing in the euro­zone in the future because sit­u­a­tions like this are inevitably going to crop up over and over giv­en the garbage eco­nom­ic the­o­ries that are get­ting built into the struc­ture of the whole enter­prise.

    So today’s Greek tragedy might be forc­ing the euro­zone gov­ern­ments to estab­lish the kinds of prece­dents that could increas­ing­ly apply in the future as the fall­out from the euro­zone’s (and larg­er EU’s) far-right poli­cies impacts the con­ti­nent. And if Greece actu­al­ly makes a ‘Grexit’/‘Grexident’/‘Grexodus’ and leaves entire­ly, the odds of that sce­nario repeat­ing itself with anoth­er mem­ber in the future go up sig­nif­i­cant­ly. Sure, the Greece’s euro­zone brethren could try to make an ‘exam­ple’ out if it if Greece leaves in order to scare the rest of the euro­zone into future com­pli­ance, but that would just make the euro­zone lead­er­ship seem even more psy­cho than it already seems.

    That’s all part of what makes this lat­est ver­sion of the Greek tragedy even more of a his­toric cliffhang­er than nor­mal: Greece’s gov­ern­ment is obvi­ous­ly in a tight spot. But not just Greece. Whether you tend to view the euro­zone lead­er­ship as well-mean­ing peo­ple try­ing to find a way out of a dif­fi­cult sit­u­a­tion or a bunch of Clause­witz­ian min­ions, it’s still not obvi­ous what the troi­ka should do next.

    In a way, the deci­sions of what to do next are almost eas­i­er for the Greek gov­ern­ment since it’s the one with the metaphor­i­cal gun to its head and an offer from the troi­ka to be shot will­ing­ly or unwill­ing­ly. Giv­en that kind of offer, you do what you have to sur­vive even if what that would be isn’t obvi­ous. But for the troi­ka, forc­ing Greece into a ‘Grex­it’ or near capit­u­la­tion is basi­cal­ly a crime of oppor­tu­ni­ty where the pri­ma­ry cost of not going through with the crime is that you might lose some street cred as the psy­cho no one wants to mess with. And yet that that “no one” is the troi­ka, or at least the aus­ter­i­ty-rid­dled “periph­ery” fac­tion of the troi­ka. What does the troi­ka do? It’s a sur­pris­ing­ly com­pli­cat­ed conun­drum.

    Posted by Pterrafractyl | April 7, 2015, 9:32 pm
  6. @participo: While it does­n’t look like Greece is going to be get­ting any imme­di­ate cash assis­tance from Rus­sia, there was an inter­est­ing pro­pos­al that’s still being bandied about: Advance Greece funds from future gas projects:

    UPDATE 2‑Russia could give Greece advance funds for future gas project — sources

    By Renee Mal­te­zou
    Wed Apr 8, 2015 4:47pm EDT

    (Reuters) — Rus­sia is con­sid­er­ing soon giv­ing Greece funds based on future prof­its it could earn from ship­ping Russ­ian gas to Europe as part of a pipeline exten­sion, two Greek gov­ern­ment sources said on Wednes­day.

    The exten­sion to the Turk­ish Stream pipeline, which would take Russ­ian gas from Turkey to Europe via Greece but has yet to be finalised, might also mean Athens would pay less for Russ­ian gas. But Moscow has yet to decide on any dis­count, the sources said.

    Greek Prime Min­is­ter Alex­is Tsipras voiced inter­est in the project in talks with Russ­ian Pres­i­dent Vladimir Putin in Moscow on Wednes­day.

    ...

    One of the Greek offi­cials, both of whom spoke on con­di­tion of anonymi­ty, said Greece would pay back the Russ­ian pre­pay­ment after the pipeline start­ed oper­at­ing, with­out spec­i­fy­ing a sum.

    The oth­er source esti­mat­ed Greece could earn around 500 mil­lion euros ($540 mil­lion) a year in prof­its from par­tic­i­pat­ing in the Turk­ish Stream exten­sion, adding that the pre­pay­ment sum was up to Rus­sia.

    Greece hopes its exten­sion to Turk­ish Stream will start oper­at­ing in 2019 and is seek­ing a dis­count of around 10 per­cent on Russ­ian gas sup­plies, the source said.

    Putin told a news con­fer­ence with Tsipras that the two lead­ers had reached no con­crete agree­ments on Greece’s par­tic­i­pa­tion in Turk­ish Stream, which would depend­ed on the gov­ern­ment in Athens.

    The first offi­cial said the pipeline project would involve pri­vate financ­ing and would com­ply with Euro­pean Union rules.

    Tsipras’ vis­it to Moscow caused unease among some EU part­ners that Greece could break ranks over eco­nom­ic sanc­tions on Rus­sia to secure aid or use the trip to pres­sure its EU allies to release financ­ing.

    So it looks like it’s pos­si­ble that we could see some sort of Russ­ian cash infu­sion in the future, just prob­a­bly not before the cur­rent show­down gets resolved.

    As for why the EU is tak­ing such a hard line regard­ing Greece and the Russ­ian sanc­tions, Ambrose Evans-Pritchard had a col­umn that raised a num­ber of things Brus­sel’s and Berlin must be tak­ing into con­sid­er­a­tion regard­ing the pos­si­bil­i­ty of Greece break­ing the Russ­ian sanc­tions, includ­ing the con­cerns raised at the end of the above arti­cle: that if Greece breaks ranks on the sanc­tions it might prompt oth­er mem­bers like Slo­va­kia and Hun­gary to fol­low suit.

    But Evens-Pritchard also points out some rather crit­i­cal facts in this sit­u­a­tion: Greece or any oth­er EU mem­ber state could uni­lat­er­al­ly can­cel the sanc­tions if they choose to do so in July when the sanc­tions are to be renewed because the sanc­tions require unan­i­mous sup­port from all mem­ber states. And beyond that, Greece actu­al­ly has a very sig­nif­i­cant option at its dis­pos­al: If it choose to ‘Grex­it’, it can abol­ish the Bank of Greece overnight, set up a new Bank of Greece the next day, and all that Greek debt ends up as an EU lia­bil­i­ty:

    The Tele­graph
    Europe’s man­han­dling of Greece is a strate­gic gift to Rus­si­a’s Vladimir Putin
    ‘Greece is a sov­er­eign coun­try with an unques­tion­able right to exploit its geopo­lit­i­cal role,’ says pre­mier Alex­is Tsipras in Moscow

    By Ambrose Evans-Pritchard

    9:56PM BST 08 Apr 2015

    The Euro­pean Union has pre­sent­ed Vladimir Putin with an irre­sistible strate­gic prize, on a plat­ter.

    By insist­ing rigid­ly that Greece’s rad­i­cal-Left gov­ern­ment repu­di­ate its elec­toral pledges and sub­mit to rit­u­al feal­ty — even on demands of lit­tle eco­nom­ic mer­it, or that might be unwise in the par­tic­u­lar anthro­pol­o­gy of a post-Ottoman soci­ety — it has pushed the Greek pre­mier into the arms of a revan­chist Krem­lin.

    The vis­it of Alex­is Tsipras to Moscow has been a fes­ti­val of fra­ter­ni­ty. On Wednes­day he laid a wreath at the Tomb of the Unknown Sol­dier and spoke of the joint strug­gle against Fas­cism, and the unstat­ed foe. The squalid sub­ject of mon­ey was of course avoid­ed. “Greece is not a beg­gar,” he said.

    “The vis­it could not have come at a bet­ter time,” said Mr Putin, purring like the cat who ate the cream.

    EU sanc­tions against Rus­sia will expire in June unless all 28 states agree to roll them over, and Mr Tsipras has already sig­nalled his intent. “We need to leave behind this vicious cycle,” he said.

    “Greece is a sov­er­eign coun­try with an unques­tion­able right to imple­ment a mul­ti-dimen­sion­al for­eign pol­i­cy and exploit its geopo­lit­i­cal role,” he added, for good mea­sure.

    A Greek veto on sanc­tions will embold­en Hun­gary’s Vik­tor Orban to join the revolt, this time in earnest. His coun­try has just secured a €10bn cred­it line from Rus­sia to expand its Paks nuclear pow­er plant, a deal described as a “pur­chase of polit­i­cal influ­ence” by a lead­ing crit­ic.

    Slo­va­kia is qui­et­ly slip­ping away from what was once a unit­ed (if frac­tious) EU front to deter fur­ther Krem­lin moves into Ukraine. There is safe­ty in num­bers for this evolv­ing con­stel­la­tion, what Mr Putin’s foes would call the EU’s inter­nal “Fifth Col­umn”. Brus­sels can bring one to heel, but not a clutch of rebels. It is becom­ing pow­er­less.

    Need­less to say, a fail­ure to renew sanc­tions at a time when the Don­bass is still under the con­trol of Mr Putin’s proxy forces would dri­ve a wedge between the US and Europe, fur­ther drain­ing the life-blood from the Atlantic alliance and what remains of the West­ern secu­ri­ty struc­ture. But it does not stop there.

    The EU project is close to unrav­el­ling in the East. We thought we knew where we stood when the final deci­sion was made in June of 2003 — in Athens of all places — to admit the for­mer cap­tive nations of the Sovi­et bloc, all clam­our­ing to join what seemed to be an enlight­ened club of democ­ra­cies under the rule of law.

    I was there for The Tele­graph when Tony Blair stood at the Stoa of Atta­los, near the colon­nades of Socrates and Pla­to, and exalt­ed in their new­ly-won free­dom from “dic­ta­tor­ship and repres­sion”.

    Now we have a gov­ern­ment in Budapest that scoffs at press free­dom and judi­cial inde­pen­dence, and a gov­ern­ment in Athens that is des­per­ate­ly defend­ing its own democ­ra­cy against the EU itself. Mr Putin mere­ly has to bide his time and the EU’s south­east­ern flank will fall apart.

    Europe’s cred­i­tor pow­ers have warned Greece not to tri­fle with them, or to play off Brus­sels against Moscow, but seem strange­ly unaware that they too must make con­ces­sions to pre­vent mat­ters spin­ning out of con­trol, for them as well as for Greece.

    Their impe­ri­ous reflex is instead to issue tone-deaf demands to Mr Tsipras, order­ing him to ditch the Left Plat­form with­in his Syriza coali­tion and form an alliance with the dis­cred­it­ed rem­nants of the old regime — the same oli­garchy that plun­dered the coun­try.

    ...

    One Greek offi­cial told me Athens is not even ask­ing Rus­sia and Chi­na for seri­ous mon­ey at this stage, telling them it would be point­less. Syriza is already look­ing beyond, explor­ing who can help them rebuild after the inevitable default — whether inside EMU as they once hoped, or out­side EMU as they now fear.

    Rus­sia is not rich enough to res­cue Greece. It is in a deep cri­sis of its own — fac­ing eco­nom­ic con­trac­tion of 3pc this year — and risks Sovi­et-era stag­na­tion if oil prices set­tle near $60 a bar­rel. Most of its $360bn for­eign reserves are need­ed to plug holes and to help Russ­ian com­pa­nies roll over hard-cur­ren­cy debt. Yet it is not broke either.

    Mr Putin said he dis­cussed “coop­er­a­tion in var­i­ous sec­tors of the econ­o­my, includ­ing the pos­si­bil­i­ty of devel­op­ing major ener­gy projects” rather than any request for aid. That is how diplo­ma­cy is con­duct­ed at this lev­el.

    The lit­mus test of what is real­ly hap­pen­ing will be whether Rus­sia buys Greek T‑bills com­ing up for sale, reliev­ing pres­sure as Greek banks are told to step back by the ECB. Athens must roll over €1.4bn on April 14 and €1bn on April 17, and this may be stress­ful. Chi­na has already bought €100m of T‑bills as a show of moral sup­port.

    Syriza has enough mon­ey to pay the Inter­na­tion­al Mon­e­tary Fund €458m on Thurs­day, but this leaves it short of mon­ey to meet €1.7bn of pen­sions and salaries five days lat­er. They have already scratched the cup­board bare, though small sums can per­haps be con­jured from hos­pi­tal funds or by raid­ing accounts at the cen­tral bank. We would not nec­es­sar­i­ly know whether Moscow has offered any sort of bridg­ing loan — per­haps indi­rect­ly — to cov­er this imme­di­ate short­fall.

    The EMU author­i­ties have sig­nalled that they may be will­ing to dis­burse some funds once the IMF has been paid, pre­serv­ing the for­mal niceties of the EU-IMF Troi­ka. But as The Tele­graph report­ed last week, Syriza fears a trap. “They are try­ing to put us in a posi­tion where we either have to default to our own peo­ple or sign up to a deal that is polit­i­cal­ly tox­ic for us,” said one offi­cial.

    The sit­u­a­tion was so seri­ous by then that finance min­is­ter Yanis Varo­ufakis flew to Wash­ing­ton on East­er Sun­day to break the impasse with the IMF’s Chris­tine Lagarde. Greece agreed to meet its IMF pay­ment: the IMF in turn agreed to show “utmost flex­i­bil­i­ty” over Syriza­’s reform plans. This looks like an IMF pledge that the Greeks will not be left high and dry on April 14.

    Syriza has wise­ly decid­ed that it would be dan­ger­ous to default on the IMF, or even to fall into arrears. No devel­oped coun­try has ever tak­en this step. Peru’s Alan Gar­cia — the Tsipras of his age — did default in the 1980s and lat­er said it was the worst mis­take he ever made.

    If they have to default, they would rather pick their fight with EU cred­i­tors and above all the ECB, ene­my num­ber one after it took the pre-emp­tive polit­i­cal deci­sion of cut­ting off a key life­line for Greek banks with­in days of the Greek elec­tion.

    As it hap­pens, Greece must pay the ECB €194m in inter­est on April 17. Even if Greece man­ages to cob­ble togeth­er enough mon­ey to meet rolling demands through the Spring, it can­not pos­si­bly cov­er €6.7bn in bond redemp­tions to the ECB in July and August unless there is a fresh bail-out pro­gramme.

    Nor does Syriza wish to pay, giv­en that the ECB bought these bonds in 2010 to bail out Ger­man and French banks and to pre­vent an EMU-wide bank­ing cri­sis, not to help Greece. The Greek par­lia­ment was nev­er con­sult­ed. Nor too does Syriza see much advan­tage in delay­ing the agony. “If it is going to hap­pen, what is the point of wait­ing?” said one min­is­ter.

    A for­mer ECB offi­cial said the fear is that Greece will kick off with a selec­tive default to Frank­furt, judg­ing this the eas­i­est polit­i­cal tar­get. It would cov­er both bonds and €80bn of “Target2” lia­bil­i­ties to the rest of the ECB net­work that have built up auto­mat­i­cal­ly due to cap­i­tal flight.

    “The cru­cial point is that Target2 lia­bil­i­ties are not backed by col­lat­er­al. The Greeks can sim­ply abol­ish the Bank of Greece on a Fri­day evening, and cre­ate a new cen­tral bank to be ready on the next Mon­day morn­ing. There is no court in Europe that can enforce a pay­ment against a Bank of Greece that no longer exists. This is their best chance of pro­tect­ing the Greek peo­ple but it will not be pret­ty for the ECB,” he said.

    If Syriza pulls the pin on the Target2 sys­tem it will cause trau­ma for the ECB — and pos­si­bly a forced recap­i­tal­i­sa­tion at the cost of mem­ber states — and set off a polit­i­cal storm in Ger­many.

    Hans-Wern­er Sinn, from the IFO Insi­tute, has long been warn­ing that Ger­many and oth­er cred­i­tor states are on the hook for huge amounts through Target2 that have nev­er been acknowl­edged, or approved by the Bun­destag. His jere­mi­ads have prompt­ed dis­mis­sive replies from the Bun­des­bank and the polit­i­cal author­i­ties.

    Yet if these loss­es are crys­tal­lized in Greece, it is far from clear whether the Ger­man par­lia­ment would con­tin­ue to allow Target2 to incu­bate much greater poten­tial loss­es in the rest of south­ern Europe. With­out Target2, the euro­zone is fin­ished as a func­tion­ing mon­e­tary union.

    Mr Putin must sure­ly be smil­ing that he has won such an easy trick with such a weak hand. He watched in hor­ror as the Sovi­et Union went into self-destruc­tion a quar­ter cen­tu­ry ago. This time he has the sat­is­fac­tion of watch­ing his much rich­er ene­mies tear them­selves apart over mere mon­ey.

    Ok, so to sum­ma­rize omi­nous­ness:

    ...
    EU sanc­tions against Rus­sia will expire in June unless all 28 states agree to roll them over, and Mr Tsipras has already sig­nalled his intent. “We need to leave behind this vicious cycle,” he said.

    A Greek veto on sanc­tions will embold­en Hun­gary’s Vik­tor Orban to join the revolt, this time in earnest. His coun­try has just secured a €10bn cred­it line from Rus­sia to expand its Paks nuclear pow­er plant, a deal described as a “pur­chase of polit­i­cal influ­ence” by a lead­ing crit­ic.

    Slo­va­kia is qui­et­ly slip­ping away from what was once a unit­ed (if frac­tious) EU front to deter fur­ther Krem­lin moves into Ukraine. There is safe­ty in num­bers for this evolv­ing con­stel­la­tion, what Mr Putin’s foes would call the EU’s inter­nal “Fifth Col­umn”. Brus­sels can bring one to heel, but not a clutch of rebels. It is becom­ing pow­er­less.

    ...

    The EMU author­i­ties have sig­nalled that they may be will­ing to dis­burse some funds once the IMF has been paid, pre­serv­ing the for­mal niceties of the EU-IMF Troi­ka. But as The Tele­graph report­ed last week, Syriza fears a trap. “They are try­ing to put us in a posi­tion where we either have to default to our own peo­ple or sign up to a deal that is polit­i­cal­ly tox­ic for us,” said one offi­cial.

    ...

    As it hap­pens, Greece must pay the ECB €194m in inter­est on April 17. Even if Greece man­ages to cob­ble togeth­er enough mon­ey to meet rolling demands through the Spring, it can­not pos­si­bly cov­er €6.7bn in bond redemp­tions to the ECB in July and August unless there is a fresh bail-out pro­gramme.

    Nor does Syriza wish to pay, giv­en that the ECB bought these bonds in 2010 to bail out Ger­man and French banks and to pre­vent an EMU-wide bank­ing cri­sis, not to help Greece. The Greek par­lia­ment was nev­er con­sult­ed. Nor too does Syriza see much advan­tage in delay­ing the agony. “If it is going to hap­pen, what is the point of wait­ing?” said one min­is­ter.

    A for­mer ECB offi­cial said the fear is that Greece will kick off with a selec­tive default to Frank­furt, judg­ing this the eas­i­est polit­i­cal tar­get. It would cov­er both bonds and €80bn of “Target2” lia­bil­i­ties to the rest of the ECB net­work that have built up auto­mat­i­cal­ly due to cap­i­tal flight.

    “The cru­cial point is that Target2 lia­bil­i­ties are not backed by col­lat­er­al. The Greeks can sim­ply abol­ish the Bank of Greece on a Fri­day evening, and cre­ate a new cen­tral bank to be ready on the next Mon­day morn­ing. There is no court in Europe that can enforce a pay­ment against a Bank of Greece that no longer exists. This is their best chance of pro­tect­ing the Greek peo­ple but it will not be pret­ty for the ECB,” he said.

    ...

    Yet if these loss­es are crys­tal­lized in Greece, it is far from clear whether the Ger­man par­lia­ment would con­tin­ue to allow Target2 to incu­bate much greater poten­tial loss­es in the rest of south­ern Europe. With­out Target2, the euro­zone is fin­ished as a func­tion­ing mon­e­tary union.

    ...

    Wow, so Greece alone could thwart the renew­al of the sanc­tions against Rus­sia and the end of June, although Hun­gary and Slo­va­kia just might do it too. And right now the Greek gov­ern­ment is con­cerned that it’s being pushed into a trap where “They are try­ing to put us in a posi­tion where we either have to default to our own peo­ple or sign up to a deal that is polit­i­cal­ly tox­ic for us,” which is a very under­stand­able con­cern giv­en his­to­ry of the cri­sis thus far.

    And if push comes to shove comes to ‘Grex­it’, Greece has the option of effec­tive­ly can­cel­ing its “Target2” debt to the ECB by sim­ply abol­ish­ing the Bank of Greece and this would trans­fer all those lia­bil­i­ties to the rest of the euro­zone, with Ger­many shoul­der­ing the biggest share. And if that hap­pens, the shock and hor­ror in Ger­many just might force changes to the rest of the Target2 lia­bil­i­ties in the euro­zone that effec­tive­ly destroy the euro­zone as a func­tion­ing mon­e­tary union. And a ‘Grex­it’ is prob­a­bly going to be forced at the lat­est by August if no agree­ment is reached.

    So, giv­en all that, the ques­tion of why the Brussels/Berlin won’t make an excep­tion for Greece’s exports so they don’t starve to death is a great ques­tion but also an extreme­ly dif­fi­cult one to answer.

    On the one hand, a ‘Grex­it’ that results in all those Greek lia­bil­i­ties falling on the ECB (and thus the rest of the euro­zone mem­ber states) seems like one of those sce­nar­ios that the rest of the euro­zone, and espe­cial­ly Ger­many, would want to avoid. Espe­cial­ly this also prompts calls from the euro­zone cred­i­tor states to revamp the euro­zone Target2 sys­tem in such a way that effec­tive­ly breaks the euro­zone as a func­tion­ing mon­e­tary union.

    On the oth­er hand, would­n’t a euro­zone that lim­its the cross-bor­der Target2 lia­bilites be some sort of dream sys­tem for Berlin and the rest of the euro­zone cred­i­tor states? Sure, the euro­zone might be a dys­func­tion­al mon­e­tary union at that point, but it’s already a dys­func­tion­al mon­e­tary union, at least from a macro­eco­nom­ic per­spec­tive, and that dys­func­tion is clear­ly by design.

    So it’s par­tial­ly a ques­tion of whether or not Target2 mod­i­fi­ca­tions that lim­it cross-bor­der lia­bil­i­ties turn the euro­zone into a ter­mi­nal­ly dys­func­tion­al mon­e­tary union or just a more dys­func­tion­al union than the cur­rent sys­tem but one that can still kind of mud­dle along. Because if the euro­zone can still sort of func­tion with­out a Target2 sys­tem that shares the lia­bil­i­ties of mem­ber state cen­tral banks, well, isn’t that exact­ly that kind of sce­nario Berlin has been pin­ing for all along? A mon­e­tary union with­out any mean­ing­ful lia­bil­i­ties for the wealth­i­est mem­bers!

    That’s all part of why it’s going to be worth keep­ing in mind that maybe, just maybe, Berlin is try­ing to force a ‘Grex­it’ specif­i­cal­ly to cre­ate the kind of pop­ulist fer­vor across the euro­zone that could force that epic change to Target2 and relieve Ger­many and the oth­er cred­i­tor states of the mas­sive poten­tial lia­bil­i­ties that still exist should the rest of the ‘periph­ery’ decide to fol­low Greece out the door too.

    Also keep in mind that one of the pri­ma­ry crit­i­cisms of the new EU bank­ing union is that the joint 50 bil­lion euro bailout fund isn’t remote­ly large enough to with­stand a seri­ous finan­cial cri­sis, with the addi­tion­al lia­bil­i­ties falling on the indi­vid­ual mem­ber states and there­fore does lit­tle to break the “vicious cir­cle” between finan­cial crises and sov­er­eign debt.

    In oth­er words, the EU has already made one it its key pil­lars of sta­bil­i­ty kind of a joke and a giant sov­er­eign debt cri­sis wait­ing to hap­pen. But if the Target2 cross-bor­der lia­bil­i­ties can be neu­tral­ized then even if a future finan­cial cri­sis spills over into a sov­er­eign debt cri­sis the euro­zone cred­i­tors states would­n’t have to wor­ry about being on the hook!

    So who knows, maybe ‘Grex­it’ real­ly is the plan because the cost of a ‘Grex­it’ would fall on all the rest of the euro­zone mem­bers, both cred­i­tor and debtor states, and just might cre­ate the polit­i­cal will across the euro­zone required to make it a true “unit­ed we stand sep­a­rate­ly!” Clause­witz­ian dream­land. And under this sce­nario, any­thing that might make a ‘Grex­it’ less like­ly, like allow­ing Greece to export to Rus­sia, is some­thing that just can’t be allowed. It would be too nice, and nice != ‘Grex­it’.

    Any­ways, that’s all a pos­si­bil­i­ty. It’s also pos­si­ble that Brussel’s/Berlin is just ‘stand­ing on prin­ci­ple’.

    Posted by Pterrafractyl | April 9, 2015, 8:48 pm
  7. Oh look, the troi­ka is once again tak­ing a no com­pro­mise approach to the ‘nego­ti­a­tions’ with Greece while hint­ing that Greece would be so much bet­ter off with a more pro-aus­ter­i­ty/pro-capit­u­la­tion gov­ern­ment. In the lat­est vari­a­tion of that tac­tic, now we’re hear­ing from the troi­ka that the troi­ka was total­ly think­ing about some sort of debt-relief for Greece last year, but that was before the Greeks got all rebel­lious and elect­ed Syriza. Real­ly! But now that’s just not an option because Syriza hurt the troika’s feel­ings. Uh huh:

    Greece may have blown best hope of debt deal
    BRUSSELS | By Paul Tay­lor
    Sun Apr 12, 2015 4:05am EDT
    Relat­ed: Greece

    (Reuters) — Even if it sur­vives the next three months tee­ter­ing on the brink of bank­rupt­cy, Greece may have blown its best chance of a long-term debt deal by alien­at­ing its euro zone part­ners when it most need­ed their sup­port.

    Prime Min­is­ter Alex­is Tsipras’ left­ist-led gov­ern­ment has so thor­ough­ly shat­tered cred­i­tors’ trust that solu­tions which might have been on offer a few weeks ago now seem out of reach.

    With a pub­lic debt equiv­a­lent to 175 per­cent of eco­nom­ic out­put and an econ­o­my strug­gling to pull out of a six-year depres­sion, Athens needs all the good­will it can sum­mon to ease the bur­den. It owes 80 per­cent of that debt to offi­cial lenders after pri­vate bond­hold­ers took a hefty write­down in 2012.

    Since out­right debt for­give­ness is polit­i­cal­ly impos­si­ble, the next best solu­tion would be for Greece to pay off its expen­sive IMF loans ear­ly, redeem bonds held by the Euro­pean Cen­tral Bank and extend the matu­ri­ty of loans from euro zone gov­ern­ments to secure low­er inter­est rates for years to come.

    “This step would save Greece’s bud­get bil­lions of euros, while reform­ing the Troi­ka arrange­ment, elim­i­nat­ing the IMF’s and the ECB’s finan­cial expo­sure to Greece,” said Jacob Funk Kirkegaard, senior fel­low at the Peter­son Insti­tute for Inter­na­tion­al Eco­nom­ics, who advo­cates such an arrange­ment.

    It would low­er the effec­tive inter­est rate on Greek debt to less than 2 per­cent, far less than Athens was pay­ing before the euro zone debt cri­sis began in 2009, and rad­i­cal­ly reduce the prin­ci­pal amount to be repaid over the next decade, giv­ing Greece fis­cal breath­ing space to revive its econ­o­my.

    And unlike ideas float­ed by Greek Finance Min­is­ter Yanis Varo­ufakis to swap euro zone loans for GDP-linked bonds and ECB hold­ings with per­pet­u­al bonds, pay­ing out the IMF and the ECB ear­ly would be legal and sup­port­ed by prece­dent.

    But if the eco­nom­ics make sense for Greece, the pol­i­tics no longer add up for its part­ners.

    A euro zone offi­cial said there had been explorato­ry talks with the pre­vi­ous con­ser­v­a­tive-led Greek gov­ern­ment about such a plan last year, before then Prime Min­is­ter Anto­nis Sama­ras chose to bring for­ward an elec­tion he lost rather than com­plete a bit­ter­ly unpop­u­lar bailout pro­gram.

    “Now it’s a polit­i­cal non-starter,” said a euro zone offi­cial. “There’s just no appetite in the euro zone for a grand bar­gain to take over Greece’s debt to the IMF and the ECB.”

    LEVERAGE

    Tsipras’ denun­ci­a­tions of EU-pre­scribed aus­ter­i­ty, demands for Ger­man war repa­ra­tions and cosy­ing up to Russ­ian Pres­i­dent Vladimir Putin, and Varo­ufakis’ foot-drag­ging on reform nego­ti­a­tions and ini­tial calls for a “hair­cut” on Greek debt, have dried up the reser­voir of sym­pa­thy for Athens.

    Cred­i­tors like Ger­many, the Nether­lands and Fin­land are bent on keep­ing the IMF involved as an enforcer of eco­nom­ic reform and fis­cal dis­ci­pline because they don’t trust the Greeks to keep their word, nor the Euro­pean Com­mis­sion to hold them to it.

    “They would pre­fer to pro­vide debt relief on an annu­al basis so they keep lever­age on Greece to stick to the pro­gram,” said Miran­da Xafa, senior schol­ar at the Cen­tre for Inter­na­tion­al Gov­er­nance Inno­va­tion and a con­sul­tant on Greek debt.

    True, euro zone peers Ire­land and Por­tu­gal, which received inter­na­tion­al bailouts after Greece, won EU agree­ment to pay off their cost­lier IMF loans faster, rais­ing hopes in Athens.

    But Dublin and Lis­bon were able to do so by bor­row­ing more cheap­ly from pri­vate lenders after com­plet­ing their bailout pro­grams and regain­ing access to the cap­i­tal mar­kets.

    “Ire­land and Por­tu­gal are gov­ern­ments in dif­fi­cul­ty, but they are not dif­fi­cult gov­ern­ments,” said Ele­na Daly, prin­ci­pal at EM Con­seil, a Paris-based sov­er­eign debt man­age­ment advis­er.

    Since Greece is stalling on its pro­gram and lacks mar­ket access, the only way it could pay off 24 bil­lion euros owed to the IMF and redeem 27 bil­lion euros of bonds held by the ECB would be for the euro zone’s res­cue fund to lend it the mon­ey.

    That in turn would require euro zone gov­ern­ments to con­vince their par­lia­ments to risk more tax­pay­ers’ mon­ey than the rough­ly 170 bil­lion euros they have already lent Greece in two bailouts totalling 240 bil­lion euros.

    Many econ­o­mists and euro zone offi­cials believe Athens will any­way need a third bailout of around 30 bil­lion euros this year, even though Tsipras insists Athens does not want that.

    Euro zone finance min­is­ters promised in 2012 to “con­sid­er fur­ther mea­sures and assis­tance” to ease Greece’s debt pro­vid­ed it stuck to the terms of its pro­gram, which it has not done.

    Both Xafa and Daly said Tsipras had put him­self in a near impos­si­ble posi­tion by mak­ing elec­tion promis­es incom­pat­i­ble with keep­ing the con­fi­dence of Greece’s cred­i­tors.

    He needs to change the pol­i­tics fast to have a chance of fix­ing the eco­nom­ics with­out resort­ing to cap­i­tal con­trols, pay­ing civ­il ser­vants with IOUs or default­ing on for­eign gov­ern­ments and being forced out of the euro zone, they argue.

    A ref­er­en­dum ask­ing Greeks if they want to stay in the euro at the price of painful eco­nom­ic reforms, or a quick coali­tion change to bring in pro-reform cen­trists, may be his best options, even if they split his Syriza par­ty.

    Greece’s offi­cial cred­i­tors mean­while are torn between want­i­ng to keep it in the euro zone to avoid the prece­dent of a coun­try exit­ing, and fear­ing that if Tsipras man­ages to roll back aus­ter­i­ty and secure debt relief, he could embold­en like-mind­ed polit­i­cal forces in Ire­land, Por­tu­gal and Spain. “So they want Greece to pros­per and stay in the euro while at the same time want­i­ng the new admin­is­tra­tion to fall on its face and become an object les­son for oth­er elec­torates who may be toy­ing with the idea of rebel­lion,” Daly said.

    Ok, so appar­ent­ly:

    ...
    A euro zone offi­cial said there had been explorato­ry talks with the pre­vi­ous con­ser­v­a­tive-led Greek gov­ern­ment about such a plan last year, before then Prime Min­is­ter Anto­nis Sama­ras chose to bring for­ward an elec­tion he lost rather than com­plete a bit­ter­ly unpop­u­lar bailout pro­gram.

    “Now it’s a polit­i­cal non-starter,” said a euro zone offi­cial. “There’s just no appetite in the euro zone for a grand bar­gain to take over Greece’s debt to the IMF and the ECB.”

    ...

    but now that’s just not an option because:

    ...
    LEVERAGE

    Tsipras’ denun­ci­a­tions of EU-pre­scribed aus­ter­i­ty, demands for Ger­man war repa­ra­tions and cosy­ing up to Russ­ian Pres­i­dent Vladimir Putin, and Varo­ufakis’ foot-drag­ging on reform nego­ti­a­tions and ini­tial calls for a “hair­cut” on Greek debt, have dried up the reser­voir of sym­pa­thy for Athens.

    ...

    If that’s true, isn’t that an admis­sion of the gross incom­pe­tence of the euro­zone offi­cials con­duct­ing these nego­ti­a­tions? Oh no! They denounced the EU-pre­scribed aus­ter­i­ty and “foot-dragged” on the reforms by not com­ing up with a list of reforms that includ­ed all of the aus­ter­i­ty mea­sures the EU was demand­ing even though nego­ti­at­ing a less destruc­tive list of reforms is was the whole point of the nego­ti­a­tions. Oh, and Tripras brought up Ger­many’s war repa­ra­tions issue and actu­al­ly talked to Rus­sia. NOOOO! Now we just can’t nego­ti­ate dur­ing one of the deep­est crises yet to face the Euro­pean Project. Because some­thing some­thing.

    Also, let’s ignore:

    ...
    Cred­i­tors like Ger­many, the Nether­lands and Fin­land are bent on keep­ing the IMF involved as an enforcer of eco­nom­ic reform and fis­cal dis­ci­pline because they don’t trust the Greeks to keep their word, nor the Euro­pean Com­mis­sion to hold them to it.

    “They would pre­fer to pro­vide debt relief on an annu­al basis so they keep lever­age on Greece to stick to the pro­gram,” said Miran­da Xafa, senior schol­ar at the Cen­tre for Inter­na­tion­al Gov­er­nance Inno­va­tion and a con­sul­tant on Greek debt.
    ...

    and just assume that hon­est nego­ti­a­tions were ever part of the troika’s plan.

    Oh yeah, and about that awe­some debt-relief plan they talk­ing about last year before Syriza was elect­ed. Strange­ly, while the IMF was push­ing for some sort of debt relief, the EU nego­tia­tors did­n’t seem to involve any actu­al debt relief. It was more an attempt at extend­ing the aus­ter­i­ty:

    The Wall Street Jour­nal
    Greece’s Cred­i­tors Mull Debt-Relief-for-Reforms Plan
    Debt-Repay­ment Sched­ule Could Be Extend­ed, Say Offi­cials
    By Mati­na Ste­vis
    July 16, 2014 11:02 a.m. ET

    BRUSSELS—Greece’s inter­na­tion­al cred­i­tors are con­sid­er­ing mak­ing debt relief for Athens con­di­tion­al on reforms in a bid to keep a grip on the coun­try’s eco­nom­ic poli­cies after its bailout pro­gram fin­ish­es, accord­ing to sev­er­al offi­cials direct­ly involved in the dis­cus­sions.

    How to ease Greece’s debt—which stands at a heavy €320 bil­lion ($434 bil­lion), or rough­ly 174% of gross domes­tic product—is a ques­tion that has dogged euro-zone coun­tries, the Inter­na­tion­al Mon­e­tary Fund, the Euro­pean Com­mis­sion and Euro­pean Cen­tral Bank since Novem­ber 2012.

    That was when euro-zone coun­tries, the main financers of the bailout, said they would find ways to bring Greece’s debt down to a “sus­tain­able” lev­el, in part to counter IMF con­cerns. Debt tar­gets were set at 124% of GDP by 2020 and “sub­stan­tial­ly below” 110% of GDP by 2022.

    As of March 2013, some 66% of Greece’s debt stock is held by euro-zone gov­ern­ments and the IMF, which scram­bled to stop the coun­try from default­ing in 2010 and have been financ­ing it ever since.

    The euro zone’s con­tri­bu­tion to the bailout offi­cial­ly runs out at the end of this year, while the small­er IMF com­po­nent will con­tin­ue being dis­bursed until March 2016.

    Until now, cred­i­tors have put pres­sure on suc­ces­sive Greek gov­ern­ments, often reluc­tant to push for painful reforms, by with­hold­ing loan install­ments.

    But as Greece hopes to wean itself off the inter­na­tion­al assis­tance, with its prime min­is­ter, Anto­nis Sama­ras, insist­ing it won’t need a third bailout, the cred­i­tors’ grip on eco­nom­ic reforms looks set to loosen.

    That is why Euro­pean cred­i­tors are eager to make debt-relief steps, in par­tic­u­lar the exten­sion of its debt-repay­ment sched­ule, con­di­tion­al on Greece meet­ing pol­i­cy mile­stones, offi­cials said.

    The debt talks are expect­ed to resume in earnest in the fall but prepara­to­ry work is already under way.

    Despite the IMF’s insis­tence that euro-zone coun­tries for­give some of Greece’s debt out­right, the Euro­pean side is only pre­pared to make adjust­ments to repay­ment terms. These could slight­ly dent the debt stock over the long term and make the task of pay­ing it back eas­i­er. The IMF has said it won’t change any of the repay­ment terms for its own com­po­nent, as that would be a breach of its rules.

    ...

    Still, the pro­pos­als from the euro-zone side could fall short of the IMF’s expec­ta­tions, says Mujta­ba Rah­man, Europe direc­tor at Eura­sia.

    “Giv­en that the odds of no third bailout are ris­ing, it is like­ly debt relief will be tied to some reform mile­stones. But such min­i­mal over­sight by the Euro­peans is unlike­ly to be enough to keep IMF mon­ey flow­ing,” Mr. Rah­man said.

    “The IMF’s expe­ri­ence in Greece will make them cau­tious, as even with seri­ous con­di­tion­al­i­ty, full Troi­ka [Greece’s inter­na­tion­al cred­i­tors] over­sight, and exten­sive peer pres­sure, the Greek gov­ern­ment has only been in com­pli­ance with a frac­tion of its com­mit­ments.”

    Once again:

    ...
    Until now, cred­i­tors have put pres­sure on suc­ces­sive Greek gov­ern­ments, often reluc­tant to push for painful reforms, by with­hold­ing loan install­ments.

    But as Greece hopes to wean itself off the inter­na­tion­al assis­tance, with its prime min­is­ter, Anto­nis Sama­ras, insist­ing it won’t need a third bailout, the cred­i­tors’ grip on eco­nom­ic reforms looks set to loosen.

    That is why Euro­pean cred­i­tors are eager to make debt-relief steps, in par­tic­u­lar the exten­sion of its debt-repay­ment sched­ule, con­di­tion­al on Greece meet­ing pol­i­cy mile­stones, offi­cials said.

    The debt talks are expect­ed to resume in earnest in the fall but prepara­to­ry work is already under way.

    Despite the IMF’s insis­tence that euro-zone coun­tries for­give some of Greece’s debt out­right, the Euro­pean side is only pre­pared to make adjust­ments to repay­ment terms. These could slight­ly dent the debt stock over the long term and make the task of pay­ing it back eas­i­er. The IMF has said it won’t change any of the repay­ment terms for its own com­po­nent, as that would be a breach of its rules.

    ...

    “Despite the IMF’s insis­tence that euro-zone coun­tries for­give some of Greece’s debt out­right, the Euro­pean side is only pre­pared to make adjust­ments to repay­ment terms”. Yes, extend the repay­ment in exchange for extend­ing the aus­ter­i­ty. Wow, how reliev­ing.

    That was last July, although the top­ic did­n’t go away. Last Novem­ber there was still talk of ‘debt relief’, although not actu­al­ly (of course). Accord­ing to the euro­zone offi­cials quot­ed below, things were going so well for Greece so debt relief was­n’t real­ly nec­es­sary:

    Euro zone pon­ders whether Greece needs more debt relief: sources
    Wed Nov 5, 2014 2:40pm EST

    (Reuters) — The euro zone is recon­sid­er­ing whether Greece needs the addi­tion­al debt relief it has been hop­ing for, because its eco­nom­ic reforms and improved prospects have changed the arith­metic, offi­cials say.

    Describ­ing a rethink by some of Greece’s part­ners, euro zone offi­cials told Reuters that no deci­sion would be tak­en until a new analy­sis of whether Athens can ser­vice its debts has been com­plet­ed.

    “It has not been decid­ed, but it has not been ruled out, either,” one euro zone offi­cial said.

    A pro­vi­sion­al offer of fur­ther debt relief was made two years ago, when the euro zone extend­ed matu­ri­ties and cut inter­est on its bailout loans.

    Min­is­ters agreed then that if Athens met cer­tain con­di­tions and more need­ed to be done make its debt sus­tain­able, they would con­sid­er “fur­ther mea­sures and assis­tance”.

    Athens has lob­bied for its lenders to low­er the inter­est rates on its loans fur­ther and give it more time for repay­ment. The gov­ern­ment hopes to bol­ster sup­port at home by nego­ti­at­ing an ear­ly exit from a bailout that Greeks resent for impos­ing strict for­eign super­vi­sion of their econ­o­my.

    Greek Finance Min­is­ter Gikas Hardou­velis told Reuters on Wednes­day talks about fur­ther debt relief would begin after a final review of Athens’ bailout pro­gram, sched­uled for Decem­ber.

    Greek gov­ern­ment offi­cials said Athens was not aware of any rethink­ing by the euro zone and said the coun­try deserved to be giv­en the relief as promised.

    “The agree­ment over the debt-relief mea­sures was not an emer­gency solu­tion, but a reward for a coun­try that made it. In this con­text and since data shows that we are suc­ceed­ing, the dis­cus­sion over a debt relief must con­tin­ue as agreed,” one offi­cial told Reuters.

    Athens achieved a pri­ma­ry bud­get sur­plus in 2013, a year ahead of sched­ule and is set to beat its pri­ma­ry sur­plus tar­get this year as well.

    In return for those efforts, the euro zone has con­sid­ered fur­ther cuts in the inter­est on a first pack­age of bilat­er­al loans to Greece and extend­ing the aver­age matu­ri­ties of a sec­ond pack­age from 32 years to around 50 years.

    But offi­cials in Brus­sels say the changed eco­nom­ic sit­u­a­tion of the euro zone and Greece must be tak­en into account.

    Athens now has a small­er rel­a­tive bud­get deficit than France, Fin­land or Italy, and its eco­nom­ic growth prospects, after six years of a deep reces­sion, are much improved. Greece also faces inter­est pay­ments at around 1.5 per­cent, way below any­thing it could get on the mar­ket.

    “The real­i­ty on the ground has changed sig­nif­i­cant­ly from the para­me­ters that formed the basis of the Novem­ber 2012 pledge,” a sec­ond euro zone offi­cial said of the group’s offer to ease Greece’s terms.

    “With the arrange­ment now in place, it does not make much sense to say that Greek debt is not sus­tain­able. It is very much sus­tain­able.”

    TALKS STILL PENDING

    The euro offi­cials said the issue of debt relief was not cen­tral to their nego­ti­a­tions with Athens on how to han­dle an exit from its bailout pro­gram. Talks on fur­ther debt relief would come only after those dis­cus­sions.

    ...

    Two years ago, the promise of more debt relief, if need­ed, was nec­es­sary to get the Inter­na­tion­al Mon­e­tary Fund on board.

    The IMF insist­ed on that because in Novem­ber 2012 it seemed that with­out fur­ther action, Greece would strug­gle to cut its debt from an expect­ed 175 per­cent of GDP in 2016.

    The lat­est Euro­pean Com­mis­sion fore­casts show Greek debt will peak at 175.5 per­cent this year, drop­ping to 157.8 per­cent in 2016.

    “When you look at the debt-sus­tain­abil­i­ty path, which was done when the cur­rent pro­gram was struc­tured, the cal­cu­la­tions are that now Greece is on its path of debt sus­tain­abil­i­ty and will con­tin­ue on it with­out addi­tion­al mea­sures,” a third euro zone offi­cial said.

    “There would not be a real rea­son to grant them any new con­ces­sions on length of loans or the inter­est rate.”

    The Greek gov­ern­ment might com­plain that this amounts to pun­ish­ing it for meet­ing its part of the bar­gain. A sec­ond Greek offi­cial said Athens need­ed debt relief “not because we can’t live with­out it, but because we deserve it as a reward for our suc­cess.”

    With­hold­ing it could play into the hands of oppo­si­tion par­ty Syriza, which leads in polls with elec­tions pos­si­ble next year.

    Syriza is call­ing for an inter­na­tion­al con­fer­ence to write off part of Greece’s offi­cial debt. It could seize on a rejec­tion of fur­ther debt relief as evi­dence that Prime Min­is­ter Anto­nis Sama­ras is get­ting noth­ing from West­ern cred­i­tors.

    Yes, as we can see, the more Greece sticks to the ‘reform’ pro­gram, the less like­ly its Euro­pean part­ners are to actu­al­ly agree to debt any debt relief...even though Greece’s debt-to-GDP ratio had been climb­ing for years and the only rea­son its debt is pro­ject­ed to fall from 175.5% in 2014 to 157.8% in 2016 is due to a tripling of its pri­ma­ry sur­plus used to pay back the troik in 2015 from 1.5% of GDP to 4.5% that is only achiev­able through mas­sive­ly increased aus­ter­i­ty

    So that was the degree of con­sid­er­a­tion Greece’s EU part­ner were giv­ing to the ‘debt relief’ idea: In July it was a non-starter although a debt exten­sion that extends the aus­ter­i­ty would be just fine. And in Novem­ber it was a non-issue because the future was look­ing so bright for Greece as long as it stuck to the insane debt-repay­ment sce­nario that would have called for a dra­mat­ic increase the aus­ter­i­ty mea­sures this year.

    And here we are with the troi­ka lament­ing that they don’t have a ‘debt relief’ part­ner in Syriza that they can trust. Wow.

    Posted by Pterrafractyl | April 12, 2015, 2:19 pm
  8. Greece’s show­down with the troi­ka took anoth­er turn for the weird: Alex­is Tsipras is sched­uled to meet with Pres­i­dent Oba­ma on Thurs­day in the hopes that he’ll some­how be able to per­suade the troi­ka to demon­strate some human­i­ty towards Greece while, at the same time, the IMF’s Europe direc­tor report­ed­ly told his exec­u­tive board that nego­ti­a­tions were “not work­ing” and he could not envis­age a suc­cess­ful con­clu­sion to the coun­try’s cur­rent bail-out.

    On top of that, Greece has been giv­en an April 20th pro­vi­sion­al dead­line to refine its list of eco­nom­ic reforms ahead of the sched­uled April 24th meet­ing of the euro­zone finance min­is­ters, but the EU’s vice pres­i­dent Vald­is Dom­bro­viskis just sug­gest­ed that it was “unlike­ly” that the finance min­is­ters would even dis­cuss the Greek ques­tion dur­ing that meet­ing. And that April 24th meet­ing is basi­cal­ly the last chance to work out a deal accord­ing to the agree­ment between Greece and the troi­ka made in Feb­ru­ary. So it looks like those IMF doubts are well ground­ed in the troika’s self-ful­fill­ing prophe­cy unre­lent­ing pol­i­cy fail­ures:

    The Tele­graph
    Varo­ufakis sets up date with Oba­ma to break Greece’s debt stale­mate
    Finance Min­is­ter will meet with Pres­i­dent Oba­ma in Wash­ing­ton on Thurs­day as EU offi­cials warn a release of bail-out cash remains far away

    By Mehreen Khan

    4:25PM BST 14 Apr 2015

    Greece’s finance min­is­ter Yanis Varo­ufakis is due to meet Pres­i­dent Oba­ma on Thurs­day, in a sign that Athens is will­ing to appeal to the high­est lev­el of polit­i­cal diplo­ma­cy to secure its future in the euro­zone.

    Pres­i­dent Oba­ma has pre­vi­ous­ly indi­cat­ed his sup­port for the Left­ist gov­ern­ment call­ing for a fast and equi­table solu­tion to the coun­try’s debt cri­sis.

    You can­not keep on squeez­ing coun­tries that are in the midst of depres­sion,” Mr Oba­ma said in Feb­ru­ary fol­low­ing Syriza­’s elec­tion.

    But in a sign of the grow­ing stal­mate between cred­i­tors and the Left­ist gov­ern­ment, offi­cials at the Inter­na­tion­al Mon­e­tary Fund voiced doubts about the via­bil­i­ty of Greece’s mem­ber­ship of the euro­zone.

    Accord­ing to reports in Greek media, Poul Thom­sen, the IMF’s Europe direc­tor told his exec­u­tive board that nego­ti­a­tions were “not work­ing” and he could not envis­age a suc­cess­ful con­clu­sion to the coun­try’s cur­rent bail-out.

    ...

    The con­cerns come as voic­es in Athens have repeat­ed threats to stop pay­ing back their inter­na­tion­al cred­i­tors if no new bail-out cash is released.

    A Greek offi­cial was quot­ed in the Finan­cial Times say­ing:: “We have come to the end of the road?...If the Euro­peans won’t release bail-out cash, there is no alter­na­tive [to a default].”

    Mr Poulsen, who was part of the IMF del­e­ga­tion that met with Greece’s finance min­is­ter ear­li­er this month, also issued a warn­ing about Greece’s weak eco­nom­ic per­for­mance.

    Greece avoid­ed default­ing to the IMF last week, suc­cess­ful­ly pay­ing back a €450m loan. How­ev­er, the cash-strapped gov­ern­ment faces anoth­er €200m pay­ment on May 1 and anoth­er for €745m 11 days lat­er.

    Fol­low­ing the Ortho­dox East­er bank hol­i­day, Athens has now been giv­en a pro­vi­sion­al April 20 dead­line to pol­ish up a list of eco­nom­ic reforms it will need to imple­ment before it can secure an injec­tion of res­cue cash.

    How­ev­er, the EU’s vice pres­i­dent Vald­is Dom­brovskis seemed to scup­per any imme­di­ate hopes of a res­o­lu­tion, say­ing it was “unlike­ly” Europe’s finance min­is­ters would dis­cuss the Greek ques­tion when they meet on April 24.

    This has been seen as the last pos­si­ble date Athens could be award­ed the remain­der of its €240bn bail-out cash with­out run­ning out of cash to con­tin­ue pay­ings its social secu­ri­ty bill.

    The IMF’s chief econ­o­mist, Olivi­er Blan­chard warned that any move to eject Greece from the euro would be “extreme­ly cost­ly.”

    Speak­ing at the Fund’s Spring meet­ing, Mr Blan­chard said: “It will be extreme­ly painful. But if it were to hap­pen, the best way to reas­sure mar­kets is to go fur­ther and make progress with cre­at­ing a fis­cal union.”

    Uh oh, it looks like the IMF does­n’t just envi­sion an unsuc­cess­ful end to Greece’s bailout nego­ti­a­tions:

    The IMF’s chief econ­o­mist, Olivi­er Blan­chard warned that any move to eject Greece from the euro would be “extreme­ly cost­ly.”

    Speak­ing at the Fund’s Spring meet­ing, Mr Blan­chard said: “It will be extreme­ly painful. But if it were to hap­pen, the best way to reas­sure mar­kets is to go fur­ther and make progress with cre­at­ing a fis­cal union.

    Yes, let’s cre­ate a giant cri­sis that calls into ques­tion the via­bil­i­ty of the Euro­pean Project and respond by bind­ing the remain­ing euro­zone nations even more tight­ly togeth­er by “cre­at­ing a fis­cal union” in what will no doubt be a mas­sive rush job that all gov­ern­ments are forced to imple­ment with­out any mean­ing­ful debate. Because that’s how the New Europe rolls!

    Now, keep in mind that a ‘fis­cal union’ isn’t inher­ent­ly a bad thing and it’s prob­a­bly required if Europe is ever going to cre­ate a viable “Unit­ed States of Europe” because a fis­cal union would great­ly facil­i­tate the one thing a uni­fied Europe desparate­ly needs for long-term sta­bil­i­ty: rou­tine fis­cal trans­fers from rich states to poor states with­out the rich states com­plete­ly con­trol­ling the poor states. Shar­ing pow­er and resources. THAT’s the key for Europe’s future if it’s going to avoid a vas­sal-state future.

    But also keep in mind that Angela Merkel was vow­ing to even­tu­al­ly cre­ate a fis­cal union back in 2011 with the ‘fis­cal com­pact’ treaty was being pushed through par­lia­ments across the EU so this isn’t just the IMF’s wish­ful think­ing. At the same time, she dis­missed the idea of joint­ly issued “eurobonds” that would have pooled lia­bil­i­ties, so her idea of a fis­cal union was pret­ty clear­ly just the enforce­ment mech­a­nism com­po­nent with­out actu­al bur­den shar­ing. In 2012, Merkel hint­ed at the pos­si­bil­i­ty of a fis­cal union with bur­den shar­ing, but only AFTER all of the euro­zone crises is com­plete and ALL the oth­er desired reforms have been put into place. In oth­er words, there will nev­er be bur­dern shar­ing under Merkel’s plan, but plen­ty of promis­ing of bur­den shar­ing, as long as every­one behaves.

    So is a rush to cre­ate a fis­cal union on the way post-‘Grexit’? It’s a pos­si­bil­i­ty. After all, shocks like this don’t hap­pen every year and major reforms at the height of a cri­sis has sort of become the EU’s sig­na­ture move. So cri­sis-dri­ven calls for a deep­er fis­cal union of some sort for the rest of the EU, or at least the euro­zone, is some­thing we might expect at this point...after all, the euro­zone gov­ern­ments are basi­cal­ly forc­ing Greece out the door at this point so it’s almost as if they want a cri­sis.

    But don’t expect a sane fis­cal union with rea­son­able bur­den shar­ing that avoids a vas­sal-state mod­el of gov­ern­ments. At least, don’t expect that unless you expect a sane fis­cal union to emerge from the same group of peo­ple that did this to Greece and are now the­at­en­ing to kick them out the door for com­plain­ing about it:

    Bloomberg Busi­ness
    Why Greece Won’t Ever Be Able to Pay Off Its Debts With Aus­ter­i­ty
    His­to­ry shows the coun­try is fac­ing a wall few nations sur­mount

    by Bren­dan Gree­ley
    11:41 AM CST
    Feb­ru­ary 19, 2015

    The Greek nego­tia­tors who went to Brus­sels in mid-Feb­ru­ary to argue for more lenient terms from their lenders were espe­cial­ly con­cerned about one thing in any new deal: the tar­get for achiev­ing and keep­ing a pri­ma­ry sur­plus. A mea­sure of aus­ter­i­ty, it’s what a gov­ern­ment earns in tax­es each year, minus what it spends on every­thing except inter­est pay­ments on its own debt. It’s usu­al­ly expressed as a share of gross domes­tic prod­uct.

    Under its four-year-old bailout pro­gram, Greece has dragged itself from a pri­ma­ry deficit of 10 per­cent to a 3 per­cent sur­plus, at great cost in jobs lost. The terms of the bailout demand that Greece reach a sur­plus of 4.5 per­cent and hold it for the length of the pro­gram. There’s lit­tle rea­son to believe that’s pos­si­ble.

    Since 1995 all the coun­tries of the euro area reached an aggre­gate pri­ma­ry sur­plus of 3.6 per­cent only once, in 2000. That num­ber is back below zero. (Even Ger­many, the Fed­er­al Repub­lic of Aus­ter­i­ty, reached its own peak of 3 per­cent only twice, in the last quar­ter of 2007 and the first of 2008.) In 2011 the Kiel Insti­tute for the World Econ­o­my looked at the records of all Organ­i­sa­tion for Eco­nom­ic Co-oper­a­tion and Devel­op­ment coun­tries from 1980 to 2010. It found that few coun­tries could main­tain a 3 per­cent sur­plus and almost none could keep a sur­plus above 5 per­cent. This sug­gest­ed a lim­it to what coun­tries can do, the report con­clud­ed. They could cross those thresh­olds briefly, but “over years and decades, this goal is almost entire­ly illu­so­ry.”

    Last year, Bar­ry Eichen­green of the Uni­ver­si­ty of Cal­i­for­nia at Berke­ley and Ugo Paniz­za of the Grad­u­ate Insti­tute in Gene­va found that from 1974 to 2013, only three coun­tries ran pri­ma­ry sur­plus­es of 5 per­cent or more for a decade: Sin­ga­pore is an island city-state run by a benev­o­lent autoc­ra­cy. Nor­way has oil wealth. For Bel­gium, the 1990s were a time of growth—Eichengreen and Paniz­za say coun­tries that hold a pri­ma­ry sur­plus for many years are like­ly to be enjoy­ing a good econ­o­my, which Greece doesn’t have.

    And 4.5 per­cent is not all that Greece’s lenders are ask­ing. In the­o­ry, the coun­try will pay off its debt through thrift and eco­nom­ic growth until it can reduce its debt to the euro zone stan­dard of 60 per­cent of GDP. To do that, says the Inter­na­tion­al Mon­e­tary Fund, Greece must sus­tain a pri­ma­ry sur­plus of 7.2 per­cent from 2020 to 2030. Only Nor­way has main­tained a sur­plus that high for that long.

    The coun­tries that pay off their debt, says Andrew Scott, “tend not to look like Greece.” Scott, a pro­fes­sor at the Lon­don Busi­ness School, stud­ies the his­to­ry of gov­ern­ment debt. The U.S. and U.K., he says, have sur­vived high lev­els of bor­row­ing with­out hav­ing to rene­go­ti­ate with cred­i­tors, because both have a his­to­ry of not default­ing. This allows them to issue long-term debt with low rates. Democ­ra­cies, Scott says, find it hard to pay off large debts through a pri­ma­ry sur­plus alone with­out restruc­tur­ing. “It’s like a diet,” he says. “You get through Jan­u­ary and you’re doing fine. Feb­ru­ary comes along and it looks like hard work.”

    ...

    Sane or insane fis­cal union? What should we expect from the folk that brought us this? Hmm­m­mm....

    ...
    Last year, Bar­ry Eichen­green of the Uni­ver­si­ty of Cal­i­for­nia at Berke­ley and Ugo Paniz­za of the Grad­u­ate Insti­tute in Gene­va found that from 1974 to 2013, only three coun­tries ran pri­ma­ry sur­plus­es of 5 per­cent or more for a decade: Sin­ga­pore is an island city-state run by a benev­o­lent autoc­ra­cy. Nor­way has oil wealth. For Bel­gium, the 1990s were a time of growth—Eichengreen and Paniz­za say coun­tries that hold a pri­ma­ry sur­plus for many years are like­ly to be enjoy­ing a good econ­o­my, which Greece doesn’t have.

    And 4.5 per­cent is not all that Greece’s lenders are ask­ing. In the­o­ry, the coun­try will pay off its debt through thrift and eco­nom­ic growth until it can reduce its debt to the euro zone stan­dard of 60 per­cent of GDP. To do that, says the Inter­na­tion­al Mon­e­tary Fund, Greece must sus­tain a pri­ma­ry sur­plus of 7.2 per­cent from 2020 to 2030. Only Nor­way has main­tained a sur­plus that high for that long.

    ...

    “To do that, says the Inter­na­tion­al Mon­e­tary Fund, Greece must sus­tain a pri­ma­ry sur­plus of 7.2 per­cent from 2020 to 2030. Only Nor­way has main­tained a sur­plus that high for that long.”
    Yes, Greece is about to get kicked out of Team Europe because it can’t pull off a Mis­sion Impos­si­ble.

    Good luck per­suad­ing the troi­ka, Oba­ma!

    Posted by Pterrafractyl | April 14, 2015, 2:00 pm
  9. If Greece declared bank­rupt­cy. Maybe Oba­ma and the U.S. could offer Greece the chance to join our union as a state.

    Posted by GK | April 15, 2015, 3:09 am
  10. @GK: Greece as the 51st state? What a fun thought. It would be like adding a sun­ny Min­neso­ta on the Mediter­ranean!

    Although, inter­est­ing­ly, the Ger­man Finance Min­istry was forced to deny reports that Ger­many is draw­ing up plans for a Greek default with­out a ‘Grex­it’. So if the reports are true, Plan “D” for Greece is not an escape plan:

    Bloomberg Busi­ness
    Schaeu­ble Crit­i­cizes Greece for Back­slid­ing as Time Run­ning Out

    by Mar­cus Ben­sas­son, Rain­er Buer­gin and Bir­git Jen­nen
    3:33 AM CDT
    April 15, 2015

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble crit­i­cized Greece for back­slid­ing on reforms, say­ing that “no one” expects a res­o­lu­tion next week of the stand­off with Alex­is Tsipras’s gov­ern­ment over untapped bailout funds.

    Schaeu­ble, in his first com­ments on the mat­ter since before the East­er hol­i­days, said Tsipras’s gov­ern­ment had “destroyed” progress made by pre­vi­ous admin­is­tra­tions in over­haul­ing the Greek econ­o­my.

    “It’s a tragedy,” he said Wednes­day at the Coun­cil on For­eign Rela­tions in New York, adding that the coun­try need­ed to become com­pet­i­tive to stop being a “bot­tom­less pit.”

    The com­ments by the finance chief of the region’s biggest econ­o­my under­scored the ris­ing con­cern in Euro­pean cap­i­tals that Greece is run­ning out of time to unfreeze the aid need­ed to keep the coun­try afloat. Ear­li­er, the Ger­man Finance Min­istry denied a report in week­ly news­pa­per Die Zeit that Ger­many is work­ing on a pro­pos­al that would allow Greece to stay in the euro in the event of a sov­er­eign default.

    Finance Min­istry spokes­woman Friederike von Tiesen­hausen said that she could “only shake my head” over reports that the coun­try was mak­ing such prepa­ra­tions. “What the gov­ern­ment is work­ing on is that the euro region is kept togeth­er and strength­ened,” she told reporters in Berlin.

    Schaeu­ble is among Euro­pean offi­cials who are skep­ti­cal that there’s enough time to work out a deal ahead of a meet­ing of euro-area finance min­is­ters at the end of next week in Riga, Latvia, to assess whether Greece has made enough progress to war­rant a dis­burse­ment from its 240 bil­lion-euro ($254 bil­lion) bailout fund. Lead­ers are pres­sur­ing Greece to sub­mit spe­cif­ic reforms as the coun­try runs out of cash and faces debt pay­ments and month­ly salary oblig­a­tions in the com­ing weeks.

    No Progress

    Von Tiesen­hausen said Wednes­day that an aid pay­ment to Greece won’t hap­pen this month and that nego­ti­a­tions with cred­i­tors have failed to move for­ward.

    “I said last time that there has been progress, but that real­ly there is still a con­sid­er­able need for nego­ti­a­tions,” von Tiesen­hausen said. “I checked back today and got the answer that things have not real­ly changed.”

    Yields on Greek 10-year notes rose to as much as 12.25 per­cent today, the high­est lev­el in two years. Greek banks’ shares fell as much as 12.8 per­cent in Athens, reach­ing their low­est lev­el in at least 20 years.

    Schaeu­ble said the poten­tial fall­out from the resur­gent Greek cri­sis was con­tain­able and wouldn’t hurt the Euro­pean or world econ­o­my. “You can’t see the con­ta­gion,” he said.

    ...

    First off, when you hear Wolf­gang Schauble declare that Greece need­ed to become com­pet­i­tive to stop being a “bot­tom­less pit.”, just imag­ine if the US took a “bot­tom­less pit” atti­tude towards indi­vid­ual states. We would have a lot of “bot­tom­less pits”. Now imag­ine if, instead of just com­mit­ting to con­tin­u­al­ly throw­ing more mon­ey down those pits indef­i­nite­ly as part of our social con­tract, the US just let those “bot­tom­less pit” states fall into the socioe­co­nom­ic abyss while peri­od­i­cal­ly shout­ing, “just pull your boot­straaaaaaps!” down the hole. Year after year, decade after decade. And if they don’t pull them­selves up from the abyss on their own we even­tu­al­ly start toss­ing boul­ders down the hole to incen­tivize them. “The boul­ders will make you stroooonger!” Just imag­ine if that was the US’s mod­el. Because if Greece defaults, while stay­ing in the euro­zone, that’s prob­a­bly going to be the mod­el going for­ward since the only way Ger­many is going to allow Greece to default while stay­ing in the euro­zone is with A LOT more aus­ter­i­ty.

    But with the Ger­man Finance Min­istry deny­ing the reports that a Plan “D” is in the works at all, maybe this is all hearsay. Maybe. But keep in mind that if it is hearsay, it’s hearsay that is not only con­sis­tent with the Ger­man Finance Min­istry’s pub­lic spec­u­la­tion that Greece and the troi­ka won’t fin­ish their nego­ti­a­tions this month which means Greece won’t get an of the aid pay­ments that it needs to avoid a default, but it’s also con­sis­tent with what Bun­des­bank chief Jens Wei­d­mann has long been pin­ing for:

    Project Syn­di­cate
    Inside Jens Wei­d­man­n’s Brain

    Christo­pher T. Mahoney
    Christo­pher T. Mahoney is a for­mer Vice Chair­man of Moody’s.

    JUL 8, 2013 1

    Jens Wei­d­mann is the pres­i­dent of the Bun­des­bank and a mem­ber of the ECB Gov­ern­ing Coun­cil. He is seen as the leader of the Hawk­ish Group at the ECB. He holds views that are dia­met­ri­cal­ly dif­fer­ent from mine (not that he knows or cares). But it is cru­cial to under­stand how he thinks, because he holds an effec­tive veto over ECB pol­i­cy. That makes him one of the most impor­tant cen­tral bankers in the world. His views can­not be ignored.

    ...

    With respect to mon­e­tary pol­i­cy, Wei­d­mann adheres to a strict inter­pre­ta­tion of the ECB Treaty which pro­vides for a sin­gle man­date, price sta­bil­i­ty, and which excludes “mon­e­tary financ­ing” or deficit mon­e­ti­za­tion.

    Weidmann’s atti­tude is: EMU was found­ed on the explic­it under­stand­ing that the ECB would be as Puri­tan as the Bun­des­bank in its focus on the sin­gle man­date. His view is that the ECB does not have a growth man­date and, more impor­tant­ly, should not have one. He is a sup­ply-sider: growth results from sound fis­cal, struc­tur­al and mon­e­tary poli­cies, not from “arti­fi­cial stim­u­lus”.

    There is noth­ing rad­i­cal or het­ero­dox about Weidmann’s views. They are shared by a num­ber of mem­bers of the FOMC. Indeed, his views are ortho­dox. I think that his true desire is a fed­er­al euro­zone, mod­elled on the dol­lar zone. This would be a euro­zone with­out nation­al cen­tral banks and with­out nation­al bank­ing sys­tems. South Dako­ta does not have a cen­tral bank, nor does it have a finan­cial sys­tem. The Fed could not care less if South Dako­ta default­ed on its muni bonds.
    Here are his words:
    We need to make sure that in a sys­tem of nation­al con­trol and nation­al respon­si­bil­i­ty [fed­er­al­ism] , sov­er­eign default is pos­si­ble with­out bring­ing down the finan­cial sys­tem. Only then will we real­ly do away with the implic­it guar­an­tee for sov­er­eigns. To achieve this, we have to sev­er the exces­sive­ly close links between banks and sov­er­eigns. Cur­rent­ly, Euro­pean banks hold too many of their own gov­ern­ments’ bonds.”

    Wei­d­mann desires a euro­zone where gov­ern­ments can default with­out col­laps­ing their finan­cial sys­tems. He also desires a euro­zone where banks can fail with­out becom­ing con­tin­gent lia­bil­i­ties of their gov­ern­ments:
    “Get­ting to grips with the implic­it guar­an­tee for sov­er­eigns would be a big step towards elim­i­nat­ing the inher­ent ten­sions in the mon­e­tary union’s struc­ture. Remov­ing the implic­it guar­an­tee for banks would be anoth­er one. To make that hap­pen, we have to ensure the resolv­abil­i­ty of banks. Defin­ing a clear hier­ar­chy of cred­i­tors is cru­cial. Share­hold­ers and cred­i­tors will have to be first in line when it comes to bear­ing banks’ loss­es – instead of tax­pay­ers.”
    This is Amer­i­can fed­er­al­ism: states can go bank­rupt with­out destroy­ing their finan­cial sys­tems, and banks can fail with­out hav­ing any claim on their state. (Wash­ing­ton State did not shud­der when WaMu failed.) We know that such a sys­tem could work because the dol­lar zone has worked for a cou­ple of cen­turies.

    But next we come to the crux: euro­zone mon­e­tary pol­i­cy. As a mon­e­tarist, I adhere to the view that the quan­ti­ty the­o­ry oper­ates, and that real growth is a deriv­a­tive of mon­ey growth. In a nut­shell: you can’t have 4% real growth with 1% nom­i­nal growth, and you can’t have 6% nom­i­nal growth with­out at least 4% infla­tion. That’s Mar­ket Mon­e­tarism, although it is real­ly both Fish­er­ian and Key­ne­sian.

    Here is Weidmann’s view: “The best con­tri­bu­tion a cen­tral bank can make to a last­ing res­o­lu­tion of the cri­sis is to ful­fil its man­date: that of main­tain­ing price sta­bil­i­ty.” In oth­er words, there is no rea­son why the euro­zone periph­ery can­not resume strong growth with 0% infla­tion and 0% nom­i­nal growth. I don’t mean to car­i­ca­ture his view, but it comes pret­ty close to that.

    Has Wei­d­mann read Fish­er late­ly (or Bernanke)? To my knowl­edge he has not refut­ed the neces­si­ty of refla­tion in end­ing a depres­sion. Indeed, I think that he is a sin­cere liq­ui­da­tion­ist, who views depres­sions and defaults as pro­phy­lac­tic. He wants to remake South­ern Europe in the image of North­ern Europe. He believes that, in the long run, it is in their own inter­est.

    As we can see, if indeed there is a plan in the works for allow­ing Greece to default while stay­ing in the euro­zone, this plan would be exact­ly what the Bun­des­bank has want­ed as part of the long-term goal of restruc­tur­ing the euro­zone into a “Unit­ed States of Europe” mod­el. But as we’ve also seen, from not just Wei­d­mann but almost the entire crop of euro­zone lead­ers, that vision for a “Unit­ed States of Europe” excludes the rich-to-poor state fis­cal trans­fers and Fed dual man­date that helps make state-lev­el defaults such a rar­i­ty. It’s a mod­el where “we’re all in this sep­a­rate­ly!” actu­al­ly becomes the uni­fy­ing ral­ly­ing cry for the whole project. Where is the future in that?

    So, over­all, a Greek default is def­i­nite­ly look­ing a pos­si­bil­i­ty. If the “Liq­ui­da­tion­ist, Sup­ply-Side ‘Unit­ed’ States of Europe” that folks like Wei­d­mann envi­sion is ever going to come to fruition some­one is going to prob­a­bly have to go bank­rupt at some point. At least finan­cial­ly bank­rupt. The moral bank­rupt­cy hap­pened a while ago.

    Posted by Pterrafractyl | April 15, 2015, 1:42 pm
  11. @Pterrafractyl I am grate­ful we have Obama/Biden and Yellen and not Romney/Ryan nor the rein­car­nat­ed F.H. Hayek as fed­er­al reserve chair­men, but with the pres­i­den­tial cam­paign under way any chance we can get some­one in the Oval Office to more direct­ly take on the forces you are dis­cussing who have their boot on the throat of my Greek Kin­folk. I’d like to draft Krug­man if I had my druthers.

    Posted by GK | April 15, 2015, 7:01 pm
  12. @GK: Could we see some­one in the oval office that will direct­ly take on the night­mare direc­tion the EU and euro­zone are head­ing in? That’s a great ques­tion in part because it frames the “what do we do about Greece?” sit­u­a­tion in the much larg­er con­text of “what do we do about all of us?” ques­tion that looms over the glob­al com­mu­ni­ty these day. The rab­ble around the world may not real­ly real­ize it yet, but what the Greeks are fac­ing is real­ly just a pre­view for what could be rou­tine every­where if the EU’s right-wing eco­nom­ic mod­el for band­ing nations togeth­er becomes the tem­plate for the globe.

    Think of the calls in recent years by Olli Rehn who, speak­ing as the Euro­pean Com­mis­sion­er for Eco­nom­ic and Mon­e­tary Devel­op­ment, called for mak­ing the IMF the enforcer for a glob­al mon­e­tary pol­i­cy “coor­di­nat­ing” regime in both 2010 and 2013 that would basi­cal­ly ban cen­tral bank actions like quan­ti­ta­tive eas­ing. Treaties that accom­plish some­thing like that are a major prize for not just Europe’s right-wing but the right-wing pro-aus­ter­i­ty move­ments all around the globe that are look­ing for hav­ing a per­pet­u­al exter­nal excuse for not act­ing in the pub­lic’s inter­est and that’s why we should expect some­thing along those lines to be part of the glob­al agen­da, not just a Euro­pean agen­da.

    Such an inter­na­tion­al mon­e­tary polic­ing regime would also mean no emer­gency deval­u­a­tions in the event of a sov­er­eign debt cri­sis which puts the coun­try in the same sit­u­a­tion Greece and the rest of the euro­zone face. Just imag­ine what a prize that would be for the glob­al oli­garchy to get the G7 or G20 to sign on to some­thing like that. Every finan­cial or fis­cal cri­sis, or even nasty reces­sion, could turn into a troi­ka-like oppor­tu­ni­ty with the inter­na­tion­al com­mu­ni­ty extract­ing “struc­tur­al reform” con­ces­sions in exchange for greater mon­e­tary pol­i­cy lenien­cy, espe­cial­ly if the treaties effec­tive­ly ban mean­ing­ful fis­cal stim­u­lus pro­grams too.

    So, assum­ing the pro-aus­ter­i­ty crowd con­tin­ues to rule Europe for the fore­see­able future, it seems like it’s just a mat­ter of time before some sort of inter­na­tion­al treaty is put on the table that arti­fi­cial­ly strips away the abil­i­ty of cen­tral banks to do what they do (like quan­ti­ta­tive eas­ing and/or just issu­ing a bunch of your cur­ren­cy) at a G7 or G20 lev­el. When Ollie Rhen made those calls for inter­na­tion­al­ly bind­ing treaties back in 2010 and 2013 he was doing that as an EU Com­mis­sion­er of Eco­nom­ic and Mon­e­tary Devel­op­ment, so he pre­sum­ably was express­ing the estab­lish­ment view on these mat­ters.

    Sim­i­lar­ly, when ALL Sen­ate Repub­li­cans backed a bal­anced bud­get amend­ment in 2013, we can be pret­ty con­fi­dent that the GOP is very inter­est­ing in impos­ing the kinds of fis­cal and mon­e­tary shack­les on the US that we see at work in the euro­zone. And then there’s the fact that top Repub­li­can law­mak­ers pushed in 2010 and 2013 for end­ing the Fed­er­al Reserve’s dual man­date (of focus­ing on both con­trol­ling infla­tion and main­tain­ing unem­ploy­ment) with sin­gle man­date of focus­ing sole­ly in con­trol­ling infla­tion. These are both very big hints that mak­ing the Fed­er­al Reserve oper­ate with the ECB’s defanged pow­ers is some­thing very much on the GOP’s long-term agen­da as is straight­jack­et­ing the US Fed­er­al gov­ern­men­t’s legal­ly abil­i­ty to deficit spend. The New Deal and all the social pro­grams the GOP has been try­ing to over­turn for years would be per­pet­u­al­ly at risk of get­ting ‘drown in the bath­tub’.

    That’s why, if we get a right-wing EU gov­ern­men­tal aligned with a Repub­li­can admin­is­tra­tion is the US (or a Demo­c­ra­t­ic one will­ing to go along with such a scheme), we should­n’t be sur­prised if we see the fate of Greece, or Spain or Ire­land or any of Europe’s aus­ter­i­ty-rid­dled economies become the default sys­tem­at­ic response to future finan­cial crises as inter­na­tion­al treaties effec­tive­ly ban any oth­er response. At least, that seems like the type of “sur­prise!” from the cor­po­ra­toc­ra­cy that we should expect one of these years.

    Of course, giv­en the wide­spread lack of sym­pa­thy for the Greeks with­in the euro­zone’s oth­er aus­ter­i­ty-impact coun­tries, it’s entire­ly pos­si­ble that once it becomes clear that get­ting ‘Greeces’ is a pos­si­bil­i­ty for every­one we still won’t see our com­mon chal­lenges. But increased sym­pa­thies for the Greeks in the US could hap­pen for a vari­ety of rea­sons, although it would require Demo­c­ra­t­ic White House.

    So if things don’t change sig­nif­i­cant­ly in the Demo­c­ra­t­ic pri­ma­ry dynam­ics between now and the 2016 elec­tion, the ques­tion of what the odds are of see­ing some­one in the Oval Office that’s will­ing to stand up for Greece is most­ly a ques­tion of whether or not the Demo­c­ra­t­ic base can some­how push Hillary Clin­ton into adopt­ing and cham­pi­oning a world­view of inter­na­tion­al trade and rela­tions that replac­ing the pre­vail­ing neolib­er­al par­a­digm with one that effec­tive­ly bans, through inter­na­tion­al treaties, the kind of treat­ment Greece is get­ting.

    That may sounds like a very unlike­ly sce­nario, but keep in mind that with major trade agree­ments like the Trans Pacif­ic Part­ner­ship or Trans Atlantic Union under pro­pos­al these kinds of glob­al­ly uni­fy­ing issues are going to be increas­ing­ly in focus. Devel­op­ing an anti-aus­ter­i­ty par­a­digm that the whole world can ral­ly behind is going to be grow­ing pri­or­i­ty for the US left going for­ward because the US can’t change its econ­o­my on its own, at least not near­ly as eas­i­ly as could if it could get the rest of the world to join in the effort. If the US pub­lic wants to see the GOP-style poli­cies end­ed, it does­n’t just need to stop the GOP, it needs to oppose the Euro­pean right-wing push­ing “pover­ty as the impe­tus for prosperity”-policies too.

    One of the most com­pelling argu­ments that advo­cates of the TPP have is that we need to have some sort of agree­ment so the US might as well lead the way. And that’s true. The world could cer­tain­ly use improved stan­dards that we all live by. Stan­dards like end­ing pover­ty glob­al­ly (let’s make that the top pri­or­i­ty instead of prof­it max­i­miza­tion) and and shift­ing to clean tech­nolo­gies and sus­tain­able lifestyles. Build­ing that kind of a world will require a very dif­fer­ent kind of approach to mon­ey and mon­e­tary pol­i­cy than the GOP or Bun­des­bank-style world­views and, giv­en the urgent need to address eco-col­lapse every­where, the US left has every rea­son to start devel­op­ing a frame­work where tack­ling pover­ty while set­ting up sus­tain­able economies on a glob­al scale becomes a top US pri­or­i­ty. In oth­er words, human­i­ty needs to fight a Cold War on the cause of glob­al warm­ing and suf­fer­ing in gen­er­al so if treaties can be part of that effort all the bet­ter. We just don’t want to sign any­thing that makes a bad sit­u­a­tion worse. But just imag­ine the eco­nom­ic stim­u­lus that could be unleashed if, instead of the TPP or Trans Atlantic Union, all of those nations instead pledged to engage in a mas­sive anti-pover­ty/pro-edu­ca­tion pro­gram where the poor­est were just giv­en mon­ey and assis­tance and long-term com­mit­ments to financ­ing pub­lic ser­vices were made avail­able every­where. We need inter­na­tion­al agree­ments of some sort so why not some­thing like that? Would­n’t a giant round of anti-pover­ty pro­grams intend­ed for peo­ple dis­placed by glob­al­iza­tion with mas­sive pledges of inter­na­tion­al assis­tance be far more use­ful for the world than some­thing like the TPP?

    So, putting aside the basic decen­cy argu­ment for hav­ing sym­pa­thy for Greece, iden­ti­fy­ing with the Greeks as a pop­u­lace that’s just nor­mal peo­ple trapped in a screwed up polit­i­cal envi­ron­ment just what makes sense for the US pub­lic going into 2016. It real­ly is in our best inter­ests to have a Greek sym­pa­thiz­er in the Oval Office because what Greece is going through right now will prob­a­bly hap­pen to the US if the GOP gets com­plete con­trol of the Fed­er­al gov­ern­ment in 2016 (the Supreme Court will be insane for decades). And there’s no rea­son to assume that Berlin and Brus­sels aren’t still inter­est­ed in mon­e­tary ‘har­mo­niza­tion’ treaties or some­thing much more deeply bind­ing in the future. If the sta­tus quo poli­cies being applied to Greece become the glob­al norm in the future, Greece is a pre­view.

    Part of what’s dark­ly amus­ing about the whole sit­u­a­tion is that the stereo­type of Greece as a place where where every­one is lazi­ly lay­ing around all day at the beach is prob­a­bly the best mod­el for human­i­ty going for­ward, at least assum­ing we get past the cur­rent “might col­lapse the bios­phere”-phase intact. We des­per­ate­ly need a low resource con­sump­tion, high qual­i­ty lifestyle if we’re going to make it through this pop­u­la­tion boom/e­co-col­lapse bot­tle­neck intact. In a future where automation/robotics/AI price large swathes of the work­force out of the mar­ket, what could be bet­ter than hav­ing a bunch of peo­ple sit­ting at the beach read­ing books or the news or what­ev­er all day long and just being real­ly engaged cit­i­zens? Lots of unem­ployed peo­ple sit­ting on the beach on the pub­lic dole. Or maybe tak­ing care of ill rel­a­tives. Or doing what­ev­er the need to do to live that peo­ple don’t have time to do these days. In a future econ­o­my where large swathes of the what is done by non-humans, we could just give most peo­ple a com­fort­able stan­dard of liv­ing basi­cal­ly for free. It’s most­ly the robots doing the work to sup­port every­one and if you work you’ll get paid way more than you would today.

    Why not try to work towards world of min­i­mal offi­cial work and max­i­mal free-time, self-edu­ca­tion and enrich­ment? And why not make end­ing pover­ty and tran­si­tion­ing towards sus­tain­able economies and dif­fer­ent low-resource/high fun lifestyles the absolute top pri­or­i­ty? Do we real­ly have an alter­na­tive? And not only could all these changes be quite pleas­ant for near­ly every­one (if you still worked you would get a mas­sive raise), but they might be nec­es­sary for just keep­ing our soci­eties func­tion­ing with the simul­ta­ne­ous chal­lenges of mass automa­tion, robot­ics, and AI sup­plant­i­ng the work force while the pop­u­la­tion booms and the envi­ron­ment col­laps­es.

    So in addi­tion to there being all sorts of rea­sons for the US pub­lic to be very sym­pa­thet­ic to the Greeks, we should real­ly be look­ing at the myth­i­cal lifestyle of the the lazy Greek as a long-term nation­al goal.

    Ich bin eih lazy Athen­ian und so bist du.

    Posted by Pterrafractyl | April 20, 2015, 12:07 am
  13. Here’s the lat­est “I beat you because I love you” sig­nal sent from the troi­ka:
    ECB vice pres­i­dent Vitor Con­stan­cio reit­er­at­ed the idea on Mon­day that a Greek default would­n’t nec­es­sar­i­ly result in a ‘Grex­it’:

    UPDATE 2‑ECB’s Con­stan­cio — default no rea­son to quit euro as Greece cash pinch wors­ens

    * Greece fac­ing increas­ing­ly dif­fi­cult cash squeeze

    * Con­stan­cio says any cap­i­tal con­trols must be tem­po­rary

    * Says ECB still con­vinced Greece will stay in euro (Adds detail, com­ments)

    By John O’Don­nell and Jonathan Gould
    Bonds | Mon Apr 20, 2015 12:13pm EDT

    FRANKFURT, April 20 (Reuters) — A coun­try that defaults would not have to leave the euro, the Euro­pean Cen­tral Bank’s vice pres­i­dent said on Mon­day, in frank remarks about Greece that also touched on pos­si­ble cap­i­tal con­trols and showed how acute Athens’ prob­lems have become.

    Speak­ing as Greece ordered pub­lic sec­tor enti­ties to trans­fer idle reserves to the cen­tral bank to help with a cash squeeze, Vitor Con­stan­cio dis­cussed the pos­si­bil­i­ty of a debt default and con­trols on the move­ment of mon­ey, say­ing nei­ther nec­es­sar­i­ly meant a depar­ture from the cur­ren­cy bloc.

    “If a default will hap­pen ... the leg­is­la­tion does not allow that a coun­try that has a default ... can be expelled from the euro,” he told the Euro­pean Par­lia­ment, say­ing that Greek banks had been told not to increase their expo­sure to the state to avoid “a pos­si­ble cred­it event regard­ing the state”.

    The com­ments from the typ­i­cal­ly reserved Con­stan­cio under­score the seri­ous­ness of Greece’s predica­ment and are the most open yet from the ECB, which is pro­vid­ing 110 bil­lion euros of liq­uid­i­ty to the coun­try and its banks.

    Con­stan­cio also touched on the pos­si­bil­i­ty of cap­i­tal con­trols.

    “Cap­i­tal con­trols can only be intro­duced if the Greek gov­ern­ment requests,” he said, adding that they should be tem­po­rary and excep­tion­al. “As you saw in the case of Cyprus, cap­i­tal con­trols did not imply get­ting out of the euro.”

    Con­stan­cio under­scored ECB sup­port for Greece, telling law­mak­ers he was sure it would stay in the cur­ren­cy bloc.

    “We are con­vinced at the ECB that there will be no Greek exit,” he said. “The (Euro­pean Union) treaty does not fore­see that a coun­try can be for­mal­ly, legal­ly expelled from the euro. We think it should not hap­pen.”

    As it stands, the cen­tral bank is approv­ing an ever grow­ing amount of emer­gency fund­ing for Greece’s lenders. While Con­stan­cio said this could not con­tin­ue regard­less of the cir­cum­stances, he hint­ed that the ECB would be loath to pull the plug.

    “If the state defaults, that has no auto­mat­ic impli­ca­tions regard­ing the banks, if the banks have not default­ed, if the banks are sol­vent and if the banks have col­lat­er­al that is accept­ed,” Con­stan­cio said.

    ...

    Well, that was at least vague­ly non­threat­en­ing, which is a nice change of pace from the ECB. Well, except for this part...:

    As it stands, the cen­tral bank is approv­ing an ever grow­ing amount of emer­gency fund­ing for Greece’s lenders. While Con­stan­cio said this could not con­tin­ue regard­less of the cir­cum­stances, he hint­ed that the ECB would be loath to pull the plug.
    ...

    So the ECB would appar­ent­ly be loath to “pull the plug” on the ECB’s emer­gency fund­ing for the Greek banks, which is cer­tain­ly nice. But the plug pulling might still hap­pen since the emer­gency lend­ing can’t con­tin­ue “regard­less of cir­cum­stances”.

    So one of the big loom­ing ques­tions now is what those cir­cum­stances are that would trig­ger a pulling of the emer­gency lend­ing. It’s an espe­cial­ly big ques­tion at the moment since it sounds like a grow­ing num­ber of ECB gov­ern­ing coun­cil mem­bers feel that the cir­cum­stances that require pulling the plug on the Greek banks exist right now:

    Bloomberg Busi­ness
    ECB Is Study­ing Curbs on Greek Bank Sup­port

    by Jeff Black, Nikos Chrysoloras, and Ste­fan Riech­er
    1:41 AM CDT
    April 21, 2015

    The Euro­pean Cen­tral Bank is study­ing mea­sures to rein in emer­gency fund­ing for Greek banks as resis­tance to fur­ther aid­ing the country’s strick­en lenders grows among pol­i­cy mak­ers, peo­ple with knowl­edge of the dis­cus­sions said.

    ECB staff have pro­posed increas­ing the dis­counts imposed on the secu­ri­ties banks post as col­lat­er­al when bor­row­ing from the Bank of Greece, the peo­ple said, ask­ing not to be named as the mat­ter is pri­vate. While adjust­ing these so-called hair­cuts hasn’t been for­mal­ly dis­cussed by the Gov­ern­ing Coun­cil, it may be con­sid­ered if Greece’s lead­ers fail to quick­ly con­vince euro-area finance min­is­ters they can reform their econ­o­my and secure bailout funds, one of the peo­ple said. Greek bank stocks slid.

    Greek lenders are most­ly locked out of reg­u­lar ECB cash ten­ders while the gov­ern­ment, which holds talks with euro-area part­ners in Riga this week, tus­sles with its cred­i­tors over the much-need­ed aid pay­ments. Instead, the banks cur­rent­ly have access to about 74 bil­lion euros ($79 bil­lion) of Emer­gency Liq­uid­i­ty Assis­tance from their own cen­tral bank — an amount that has been ris­ing and which will be reviewed this week.

    There’s “no doubt” that the ECB is los­ing patience with Greece, said Fred­erik Ducrozet, an econ­o­mist at Cred­it Agri­cole CIB in Paris. “Greek banks will need more fund­ing before long, so in a way larg­er hair­cuts or a low­er ELA cap are equiv­a­lent.”

    The FTSE/Athex Banks Index slumped 5.4 per­cent at 3:54 p.m. Athens time. The euro fell 0.3 per­cent to $1.0707.

    Seek­ing Deal

    The ECB staff pro­pos­al out­lines three routes for reduc­ing the amount of cash lenders can receive for a giv­en amount of col­lat­er­al, one of the peo­ple said. The hair­cuts set under ELA oper­a­tions aren’t pub­lic.

    CNBC report­ed that hair­cuts could be returned to the lev­el of late last year, before the ECB eased its Greek col­lat­er­al require­ments; set at 75 per­cent; or set at 90 per­cent. The lat­ter two options could be applied if Greece is in an “order­ly default” under a for­mal ECB pro­gram or a “dis­or­der­ly default,” CNBC said, with­out fur­ther elab­o­ra­tion.

    An ECB spokesman declined to com­ment.

    Euro-area offi­cials are striv­ing to find a way to per­suade Greece to make reforms in exchange for aid, and so to keep the coun­try in the 19-nation cur­ren­cy bloc. Major cred­i­tors includ­ing Ger­many aren’t ready to let Greece leave as long as Prime Min­is­ter Alex­is Tsipras shows will­ing­ness to meet at least some key demands, accord­ing to peo­ple famil­iar with the talks.

    ...

    Cash Raid

    Run­ning out of options to keep his coun­try afloat, Tsipras told local gov­ern­ments on Mon­day to move funds total­ing about 1.5 bil­lion euros to the nation­al cen­tral bank. While that may be enough to last until the end of May, includ­ing meet­ing an Inter­na­tion­al Mon­e­tary Fund loan repay­ment due on May 12, it will also prob­a­bly increase banks’ need for replace­ment fund­ing.

    The Frank­furt-based ECB has insist­ed on tight con­trol of the oper­a­tions, on con­cern banks will use the cash to direct­ly fund the gov­ern­ment in con­tra­ven­tion of Euro­pean Union law.

    Even so, ECB Pres­i­dent Mario Draghi has sig­naled he isn’t yet con­vinced of the need to squeeze Greek lenders fur­ther. Speak­ing to reporters on April 15, he said hair­cuts were “men­tioned, not dis­cussed” by gov­er­nors at their mon­e­tary-pol­i­cy meet­ing. “We will come back on this issue in due time,” he said.

    Tem­po­rary Mea­sure

    To restrict or veto ELA fund­ing, which is pro­vid­ed at the Greek cen­tral bank’s own risk, a two-thirds major­i­ty of the Gov­ern­ing Coun­cil is nec­es­sary. A grow­ing minor­i­ty is opposed to con­tin­u­ing to pro­vide the assis­tance indef­i­nite­ly, one of the peo­ple said.

    “The sit­u­a­tion in Greece means that we should have a lim­it until sum­mer for ELA,” Gov­ern­ing Coun­cil mem­ber Vitas Vasil­i­auskas said in an inter­view in Wash­ing­ton on April 18. “Every­one under­stands what ELA means; it’s a tem­po­rary mea­sure to give the banks liq­uid­i­ty.”

    Those com­ments echo con­cern over the risks inher­ent in ELA fund­ing voiced repeat­ed­ly by Jens Wei­d­mann, the head of Germany’s Bun­des­bank. Chris­t­ian Noy­er, Gov­er­nor of the Banque de France, said in Wash­ing­ton last week that emer­gency assis­tance can’t last indef­i­nite­ly.

    Ok, so it sounds like one of the pri­ma­ry trig­gers for pulling the plug on Greece’s banks is if Greece fails to “quick­ly con­vince euro-area finance min­is­ters they can reform their econ­o­my and secure bailout funds”:

    ...
    While adjust­ing these so-called hair­cuts hasn’t been for­mal­ly dis­cussed by the Gov­ern­ing Coun­cil, it may be con­sid­ered if Greece’s lead­ers fail to quick­ly con­vince euro-area finance min­is­ters they can reform their econ­o­my and secure bailout funds, one of the peo­ple said.
    ...

    And, of course, the only way Greece’s gov­ern­ment can do that is to com­plete­ly capit­u­late to all exist­ing demands and/or make up their own aus­ter­i­ty pro­gram that is just as awful as the exist­ing one.

    But that’s just the opin­ion of the ECB ‘good cops’. Then there’s the ‘bad cops’ like Lithua­ni­a’s cen­tral banker Vitas Vasil­i­auskas that appears to want to lim­it the emer­gency bank fund­ing now “until sum­mer”. Keep in mind that sum­mer tech­ni­cal­ly starts on June 21, and the orig­i­nal four month agree­ment to rene­go­ti­ate the “bailout” con­di­tions between Greece and the troi­ka was signed on Feb 20. So if the EAL is frozen “until Sum­mer”, that’s basi­cal­ly a call for turn­ing the screws even more on Greece’s econ­o­my and finan­cial sec­tor as a bar­gain­ing chip or it’s in antic­i­pa­tion of a Greek default with the idea of lim­it­ing euro­zone area lia­bil­i­ties and leav­ing the Greek peo­ple just com­plete­ly bank­rupt­ed at not just a nation­al lev­el but per­son­al lev­el too.

    So we have the vice pres­i­dent of the ECB once again hint­ing that a Greek default does­n’t nec­es­sar­i­ly lead to a ‘Grex­it’ and empha­siz­ing that the ECB would be loath to pull the plug on Greece’s banks while the ECB report­ed­ly begins study­ing what would hap­pen if it pulls the plug and a grow­ing num­ber of ECB coun­cil mem­bers lean towards pulling the plug now.

    Giv­en all that, it’s look­ing more and more that what we’re see­ing is an attempt to inflict so much pain on Greece that snap elec­tions are held and a new poo­dle gov­ern­ment gets installed. After all, if Greece defaults but does­n’t leave the euro, isn’t that pret­ty much a guar­an­tee that there’s going to be a snap elec­tion in short order?

    Sure, Syriza would almost cer­tain­ly win elec­tions today even with falling sup­port, but what if the troi­ka can keep steadi­ly turn­ing those screws over the next cou­ple of months and mak­ing life worse and worse by guar­an­tee­ing that any sort of ‘Grex­it’ will be as painful as pos­si­ble for the Greek peo­ple because all of their sav­ings were already spent try­ing to hold the coun­try togeth­er dur­ing the nego­ti­a­tions? Would impos­ing enough pain on the Greeks suc­cess­ful­ly induce some sort of mul­ti­ple per­son­al­i­ty dis­or­der just in time for the poo­dle per­son­al­i­ty to take con­trol before the elec­tions and vote in a com­pli­ant gov­ern­ment? Chron­ic beat downs can do that, and it cer­tain­ly seems like the kind of the thing the troi­ka would do...at least when one of its destruc­tive per­son­al­i­ties is in con­trol (which is all of them).

    Posted by Pterrafractyl | April 21, 2015, 9:45 am
  14. Well, it looks like the ECB has made a deci­sion on whether or not to dis­count the val­ue of the col­lat­er­al Greek banks exchanges for emer­gency fund­ing: The ECB is going to dou­ble down on the liq­uid­i­ty crunch, lit­er­al­ly, by demand­ing that Greek banks see their val­ue of the col­lat­er­al poten­tial­ly cut in half:

    The New York Times
    E.C.B. Tight­ens Flow of Mon­ey to Greek Banks

    By LANDON THOMAS Jr.
    APRIL 21, 2015

    As Greece scram­bles to secure a financ­ing deal with Europe before run­ning out of cash, the Euro­pean Cen­tral Bank is tight­en­ing the vise on the country’s ail­ing banks by cur­tail­ing access to des­per­ate­ly need­ed emer­gency loans.

    The E.C.B. is now demand­ing that the val­ue of the col­lat­er­al that Greek banks post at their own cen­tral bank to secure these loans be reduced by as much as 50 per­cent, accord­ing to peo­ple who have been briefed on these dis­cus­sions but who were not autho­rized to dis­cuss them pub­licly.

    And, these peo­ple say, if the Greek gov­ern­ment and Europe remain at an impasse on an agree­ment about aus­ter­i­ty reforms, these so-called hair­cuts could increase fur­ther.

    The move high­lights the hard-line approach tak­en by the E.C.B. toward Greece as it puts pres­sure on the new gov­ern­ment to reach an agree­ment with its cred­i­tors.

    With the val­ue of the col­lat­er­al being reduced so dras­ti­cal­ly, banks will be hard pressed to obtain the mon­ey they need to sur­vive.

    For more than three months, Greece’s largest banks have been forced to bor­row short-term, high­er-inter­est mon­ey from their own cen­tral bank — a process called emer­gency liq­uid­i­ty assis­tance — because Frank­furt deemed it to risky to extend cred­it to the banks itself.

    The banks, in turn, have to pro­vide ade­quate col­lat­er­al to obtain these loans, which now stand at 74 bil­lion euros, or more than half the amount of Greek domes­tic deposits.

    But with deposits flee­ing the bank­ing sys­tem and with non­per­form­ing loans — which had sta­bi­lized before the rad­i­cal Syriza gov­ern­ment came to pow­er — now back on the rise, it has been dif­fi­cult for banks in Greece to come up with accept­able assets to under­pin their bor­row­ing.

    ...

    Mr. Varo­ufakis has often com­plained that the E.C.B. is “asphyx­i­at­ing” Greece by lim­it­ing the amount of bills that the banks can buy from the gov­ern­ment and keep­ing a tight leash on last-ditch loans.

    At the same time, Mario Draghi, the pres­i­dent of the E.C.B., has made it clear that if Greece does not strike a deal with Europe he will even­tu­al­ly stop back­ing the Greek banks — a step that would inevitably lead to cap­i­tal con­trols and even­tu­al default.

    More­over, these hair­cuts exceed those imposed on Greek banks in June 2012, when emer­gency loans had soared to €125 bil­lion on wor­ries that Greece would be forced to leave the euro­zone.

    A spokesman for the E.C.B. in Frank­furt declined to com­ment.

    Under E.C.B. rules, the cen­tral bank of Greece assumes full respon­si­bil­i­ty for the cred­it risk when it issues these emer­gency loans. But the E.C.B. care­ful­ly mon­i­tors them, set­ting lim­its and scru­ti­niz­ing the col­lat­er­al.

    Dur­ing the Cyprus cri­sis, Jens Wei­d­mann, the pow­er­ful Ger­man mem­ber of the E.C.B.’s gov­ern­ing coun­cil, blunt­ly crit­i­cized the head of the Cyprus cen­tral bank for inflat­ing the val­ue of col­lat­er­al to allow des­per­ate Cypri­ot banks to bor­row more mon­ey.

    By requir­ing such dras­tic dis­counts, the E.C.B. is mak­ing sure that the same thing does not hap­pen in Greece.

    Note that when you read

    ...

    Under E.C.B. rules, the cen­tral bank of Greece assumes full respon­si­bil­i­ty for the cred­it risk when it issues these emer­gency loans. But the E.C.B. care­ful­ly mon­i­tors them, set­ting lim­its and scru­ti­niz­ing the col­lat­er­al.

    ...

    the assump­tion of full respon­si­bil­i­ty for these emer­gency loans by the cen­tral bank of Greece all assumes that the cen­tral bank of Greece does­n’t end up get­ting can­celed in the event of a ‘Grex­it’, at which point all of those lia­bil­i­ties are going to fall of the rest of the euro­zone. So when you hear Jens Wei­d­mann sug­gest­ing that the ECB is just doing this as a pre­cau­tion­ary mea­sure, keep in mind that it’s a pre­cau­tion­ary mea­sure that poten­tial­ly reduces the euro­zone’s expo­sure to a full scale Greek default but also makes that default more like­ly by stran­gling Greece’s econ­o­my and this kind of move is hap­pen­ing in broad day­light for all the mar­kets to see.

    So, with that in mind, let’s take a look at Yves Smith’s take on the sit­u­a­tion two months ago when the ECB first start­ed its ELA cut­back sur­prise:

    Naked Cap­i­tal­ism
    ECB Could Pres­sure Greece by Refus­ing to Increase ELA (Update: Small Increase Approved)

    Yves Smith
    Post­ed on Feb­ru­ary 18, 2015 by Yves Smith

    As we indi­cat­ed, we’ve thought the ECB was unlike­ly to end the ELA as a way to force Greece to capit­u­late, since it would be too obvi­ous a move to take down the Greek bank­ing sys­tem, and would also have the effect of telling depos­i­tors in any Euro­pean debtor state that their mon­ey was not safe in a domes­tic bank. That over time is a way to pre­cip­i­tate bank runs.

    But we also point­ed out that the board, which rotates at the ECB, had a par­tic­u­lar­ly Greece-unfa­vor­able mix this time. And while more extreme mea­sures, like impos­ing con­di­tions on the ELA, requires a 2/3 vote, the deci­sion to increase or not increase the size of the facil­i­ty take a mere major­i­ty vote.

    So if the bloody-mind­ed board mem­bers refuse to hon­or Greecee’s request to increase the back­stop dur­ing the board meet­ing today, it would con­sti­tute a seri­ous step to try to force Greece to capit­u­late. How­ev­er, most experts believe this would be such a rad­i­cal step as to be unlike­ly. And the board mix for each of the two ECB ses­sions in March is much Greece-friend­ly.

    ...

    Update: The ECB increased the ELA, but as mod­est­ly as pos­si­ble. From CNBC:

    The Euro­pean Cen­tral Bank has approved a €68 bil­lion ($78 bil­lion), two-week exten­sion on emer­gency liq­uid­i­ty for Greek banks, Reuters report­ed, cit­ing a source.
    The ECB had already raised the Emer­gency Liq­uid­i­ty Assis­tance (ELA) cap to about €65 bil­lion last Thurs­day. The Greek cen­tral bank had request­ed an exten­sion of about €10 bil­lion, the source told Reuters.

    ...

    Yep, back in Feb­ru­ary, mar­ket com­men­ta­tors saw a total ELA cut­off as a high­ly unlike­ly event because it would be too obvi­ous a move to take down the Greek bank­ing sys­tem that would force a ‘Grex­it’. And here we are two months lat­er, with the nego­ti­a­tions stalled and the ECB about to cut that ELA fund­ing basi­cal­ly in half while we con­tin­ue to get dai­ly assur­ances for euro­zone offi­cials that a ‘Grex­it’ and/or default is some sort of unthink­able out­come but are also told that a default does­n’t nec­es­sar­i­ly mean a ‘Grex­it’ is inevitable.

    If only this was all just a real­ly, real­ly, real­ly awful joke. If only...

    Posted by Pterrafractyl | April 21, 2015, 6:52 pm
  15. Good news for Greece! Sor­ta! Con­trary to recent reports that the ECB was plan­ning on cut­ting the val­ue of the col­lat­er­al Greek banks can use to obtain Emer­gence Liq­uid­i­ty Assis­tance (ELA) loans to keep the Greek bank­ing sys­tem run­ning, the ECB announces today that it’s rais­ing the ceil­ing on emer­gency lend­ing by Greece’s cen­tral bank by ~2 per­cent. In addi­tion, both Greece and the troi­ka have con­clud­ed that Greece should be able to scrape togeth­er enough cash to pay off its creditors...through June. So all those fears of an immi­nent Greek default can melt away for anoth­er two months:

    Greek cash seen last­ing into June, no EU deal immi­nent

    ATHENS/BRUSSELS | By Ange­li­ki Koutan­tou and Jan Strupczews­ki
    Mar­kets | Wed Apr 22, 2015 2:17pm EDT

    (Reuters) — Greece can scrape togeth­er enough cash to meet its pay­ment oblig­a­tions into June, euro zone and Greek offi­cials said on Wednes­day, play­ing down fears of an immi­nent default as hopes reced­ed of a deal with its cred­i­tors to release fresh aid.

    The Euro­pean Cen­tral Bank raised its ceil­ing on emer­gency lend­ing by the Greek cen­tral bank to Greek banks by 1.5 bil­lion euros to 75.4 bil­lion euros, giv­ing them a big­ger buffer to cope with deposit with­drawals, a bank­ing source said.

    Three sources famil­iar with ECB think­ing denied a report that the Frank­furt-based bank had tight­ened the screws on Greek banks by slash­ing the val­ue of the col­lat­er­al they must present to receive emer­gency liq­uid­i­ty to stay afloat.

    Greece has received two inter­na­tion­al bailouts worth 240 bil­lion euros since 2010 but its econ­o­my has shrunk by some 25 per­cent, unem­ploy­ment has soared and a left­ist-led gov­ern­ment elect­ed in Jan­u­ary has refused to com­plete a reform pro­gram that includes mea­sures it says wors­en the eco­nom­ic slump.

    The head of the Eurogroup Work­ing Group, which pre­pares deci­sions for euro zone finance min­is­ters, said Athens would not present a new list of eco­nom­ic reforms required to unlock fur­ther EU funds when the min­is­ters meet in Latvia on Fri­day, but Greece should be able to stay sol­vent till June.

    “The liq­uid­i­ty sit­u­a­tion in Greece is already a lit­tle tight, but it should be suf­fi­cient into June,” EWG chair­man Thomas Wieser told Aus­tri­an broad­cast­er ORF.

    Greek Deputy Finance Min­is­ter Dim­itris Mar­das said the gov­ern­ment aimed to have a 2.5 bil­lion euro ($2.7 bil­lion) cash buffer by forc­ing state enti­ties to lend to the state in order to cov­er pay­ments until the end of May.

    Shut out of bond mar­kets and run­ning out of mon­ey to pay civ­il ser­vants, pen­sion­ers and sup­pli­ers and ser­vice its debt, the gov­ern­ment issued a decree on Mon­day order­ing pub­lic bod­ies to trans­fer their spare cash to the cen­tral bank.

    “I want this 2.5 bil­lion euros to cov­er any needs that may occur, I repeat, tak­ing into account the worst case sce­nar­ios and the needs for May,” Mar­das told Star TV, adding he was con­fi­dent that Greece and its lenders would reach a deal.

    Mar­das said ini­tial­ly the state was still short 350–400 mil­lion euros to cov­er wage, pen­sion and oth­er needs in April but lat­er said the prob­lem had been solved because a pen­sion fund had come for­ward to lend it the mon­ey.

    He dis­missed a report that Athens was con­sid­er­ing a par­al­lel cur­ren­cy or IOUs to make pay­ments, say­ing he was con­fi­dent a deal would be struck with cred­i­tors to avoid a default.

    “CLOCK TICKING”

    Greece has to make two repay­ments to the IMF total­ing about 950 mil­lion euros by May 12. It has anoth­er 1.45 bil­lion euro pay­ment due to the IMF in June, but the biggest loom­ing pay­ments are bond redemp­tions to the ECB of 4.18 bil­lion euros in July and 3.38 bil­lion euros in August.

    ...

    Prime Min­is­ter Alex­is Tsipras will meet Ger­man Chan­cel­lor Angela Merkel in Brus­sels on Thurs­day. EU offi­cials said his gov­ern­ment con­tin­ued to seek a polit­i­cal deal to ease aus­ter­i­ty rather than a detailed tech­ni­cal agree­ment on reforms.

    State Min­is­ter Nikos Pap­pas, a close aide of Tsipras, said the gov­ern­ment would con­tin­ue to reject EU/IMF demands for pen­sion cuts and an increase in val­ue added tax on Greek tourist islands. Athens want­ed a deal with its lenders but “not just any agree­ment”, he told a par­lia­men­tary com­mit­tee.

    EU offi­cials said euro zone gov­ern­ments had rarely been so unit­ed in refus­ing to yield to what they per­ceive as Greek brinkman­ship and hints of default.

    “We all know that in Riga noth­ing will be achieved. But hav­ing the out­come of Riga as a dis­as­ter or as a step­ping stone to some­thing else makes a dif­fer­ence,” said one senior EU aide with five years’ nego­ti­at­ing expe­ri­ence with Athens.

    “Every­one is putting as much pres­sure as pos­si­ble on Greece to make some last-minute effort before the meet­ing,” he said, adding: “I’m con­cerned that every­one comes out at Riga say­ing there was noth­ing. Then we are even clos­er to the abyss.”

    Three peo­ple famil­iar with ECB pol­i­cy denied a New York Times report that the ECB had raised the aver­age “hair­cut” on Greek banks’ col­lat­er­al to 50 per­cent from around 33 per­cent, forc­ing them to deposit more assets in return for Emer­gency Liq­uid­i­ty Assis­tance (ELA) from the Greek cen­tral bank.

    The ECB’s Gov­ern­ing Coun­cil took no such deci­sion in its week­ly tele­con­fer­ence on Greek ELA on Wednes­day, a source said.

    Well, ok, it could be worse! Unless, of course, default is inevitable if Greece does­n’t com­plete­ly capit­u­late (which is basi­cal­ly what the troi­ka is demand­ing), in which case it’s sort of ambigu­ous as to whether or not extend­ing the process is actu­al­ly help­ful.

    Still, by rais­ing the Greek cen­tral bank’s emer­gency cred­it line, the ECB did buy some time for the nego­ti­at­ing par­ties to work towards some sort of com­pro­mise res­o­lu­tion. And that means we’re pret­ty much in the same sit­u­a­tion we’ve been in for the past cou­ple: the troi­ka applies pres­sure on Greece to agree to “some last-minute effort”, and Greece points out that those “last-minute efforts” are the equiv­a­lent of a mur­der-sui­cide pact, which isn’t real­ly a viable solu­tion for the folks on then sui­cide-side of the mur­der-sui­cide pact:

    Greek gov­ern­ment refus­es to back down on pen­sion cuts, tax hikes
    Mar­kets | Wed Apr 22, 2015 8:01am EDT

    (Reuters) — Greece will con­tin­ue to reject cred­i­tors’ demands for pen­sion cuts and a hike in the val­ue-added-tax (VAT) on islands fre­quent­ed by tourists, State Min­is­ter Nikos Pap­pas said on Wednes­day, in a set­back for hopes that a deal could be struck soon.

    The com­ments are the lat­est indi­ca­tion that Prime Min­is­ter Alex­is Tsipras’s gov­ern­ment is stand­ing its ground in a bat­tle with Euro­pean Union and IMF lenders despite a deep­en­ing cash crunch that threat­ens to tip Athens into bank­rupt­cy.

    “The nego­ti­a­tions have their dif­fi­cul­ties and the lenders have tabled requests which have not been accept­ed so far,” Pap­pas told par­lia­men­tary com­mit­tee.

    “And they will not be accept­ed because they are the red lines of the gov­ern­ment ... accept­ing VAT hikes on islands and pen­sion cuts.”

    Mea­sures like pen­sion cuts would not solve the coun­try’s prob­lems, he said.

    “The gov­ern­ment seeks ... and will achieve a solu­tion. Not just any agree­ment,” he said.

    Because, despite all the assur­ances that an agree­ment is just around the cor­ner, the Greek gov­ern­ment actu­al­ly seem inter­est­ed in actu­al solu­tions to Greece’s prob­lems and not just anoth­er agree­ment, which is very under­stand­able since the prob­lems Greece needs to find solu­tions for include all the prob­lems caused by the past ‘bailout’/blackmail ‘agree­ments.

    In oth­er words, the solu­tion Greece is look­ing for is the same kind of solu­tion any­one would be look­ing for if a mur­der­ous loan shark was hunt­ing them down in order to ‘help’ them via per­ma­nent injury:

    Green Left Week­ly
    Europe’s elite seek to destroy Greek econ­o­my

    Mon­day, April 13, 2015
    By Mark Weis­brot

    There is a tense stand-off right now between Greece’s gov­ern­ment and the so-called troi­ka — the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank (ECB), and the Inter­na­tion­al Mon­e­tary Fund (IMF). ECB Pres­i­dent Mario Draghi recent­ly went so far as to deny that his insti­tu­tion was try­ing to black­mail Greece’s left-wing anti-aus­ter­i­ty gov­ern­ment.

    But black­mail is actu­al­ly an under­state­ment. It has become increas­ing­ly clear that the troi­ka is try­ing to harm the Greek econ­o­my in order to raise pres­sure on the new Greek gov­ern­ment to agree to its demands.

    The first sign of the Euro­pean author­i­ties’ strat­e­gy came on Feb­ru­ary 4 — just 10 days after Greece’s Coali­tion of the Rad­i­cal Left (SYRIZA) gov­ern­ment was elect­ed — when the ECB cut off the main source of financ­ing for Greek banks.

    This move was clear­ly made in bad faith, since there was no bureau­crat­ic or oth­er rea­son to do this. It came more than three weeks before the dead­line for the deci­sion.

    Pre­dictably, the cut-off spurred a huge out­flow of cap­i­tal from the Greek bank­ing sys­tem, desta­bil­is­ing the econ­o­my and send­ing finan­cial mar­kets plum­met­ing. More intim­i­da­tion fol­lowed, includ­ing a slight­ly veiled threat that emer­gency liq­uid­i­ty assis­tance, Greece’s last cred­it life­line from the ECB, could also be cut.

    The Euro­pean author­i­ties appeared to be hop­ing that a shock-and-awe assault on the Greek econ­o­my would force the new gov­ern­ment to imme­di­ate­ly capit­u­late.

    It did not work out that way. SYRIZA had a man­date from Greek vot­ers to improve their liv­ing stan­dards after six years of troi­ka-induced depres­sion and more than 25% unem­ploy­ment. The new Greek gov­ern­ment backed off its demand for a debt “hair­cut” and made oth­er com­pro­mis­es, but refused to sur­ren­der as if there had been no elec­tion.

    The Euro­pean author­i­ties final­ly blinked on Feb­ru­ary 20 and agreed to grant a four-month exten­sion, through June, of the pri­or “bailout” agree­ment.

    The quote marks are need­ed because most Greeks have not been bailed out, but thrown over­board — hav­ing lost more than 25% of their nation­al income since 2008. It could hard­ly be more obvi­ous that recent ECB actions are not about mon­ey or fis­cal sus­tain­abil­i­ty but about pol­i­tics.

    Accord­ing to con­di­tions in the Feb­ru­ary 20 agree­ment, the Greek gov­ern­ment would present a list of reforms that it would under­take, which it did, and which Euro­pean offi­cials approved.

    Remain­ing issues were to be nego­ti­at­ed by April 20, so that the final instal­ment of IMF mon­ey — some €7.2 bil­lion — could be released. One might assume that the Feb­ru­ary 20 agree­ment would allow these nego­ti­a­tions to take place with­out Euro­pean offi­cials caus­ing fur­ther imme­di­ate and unnec­es­sary dam­age to the Greek econ­o­my.

    One would be wrong: A gun to the head of SYRIZA was not enough for these “bene­fac­tors”. They want­ed fin­gers in a vice too.

    And they got it. The ECB refused to renew the Greek banks’ access to its main, cheap­est source of cred­it that they had before the Jan­u­ary 25 elec­tions. And it refused to lift the cap on the amount that Greek banks could lend to the Greek gov­ern­ment — some­thing that it did not do to the pre­vi­ous gov­ern­ment.

    As a result, a seri­ous cash flow prob­lem has struck Greece’s gov­ern­ment and banks. Because of the ECB’s cred­it squeeze, the gov­ern­ment could soon find itself in a sit­u­a­tion that the 2012 gov­ern­ment faced when it delayed pay­ments to hos­pi­tals and oth­er con­trac­tors in order to make debt pay­ments. It could even face default at the end of April.

    The amounts of mon­ey involved are quite triv­ial for the ECB. The gov­ern­ment has to come up with approx­i­mate­ly €2 bil­lion of debt pay­ments in April. The ECB recent­ly shelled out €26.3 bil­lion to buy euro­zone gov­ern­ments’ bonds as part of its €850 bil­lion quan­ti­ta­tive eas­ing pro­gram over the next year and a half.

    The ECB’s excus­es for caus­ing this cash crunch in Greece ring hol­low. For exam­ple, it argues that banks under the pre­vi­ous gov­ern­ment did not require the lim­it that the ECB is impos­ing on banks now because the pri­or gov­ern­ment com­mit­ted to a reform pro­gram that would fix its finances. But so has this one.

    It could hard­ly be more obvi­ous that this is not about mon­ey or fis­cal sus­tain­abil­i­ty, but about pol­i­tics. This is a gov­ern­ment that Euro­pean author­i­ties did not want, and they wish to show who is boss.

    They real­ly don’t want this gov­ern­ment to suc­ceed, which would encour­age Span­ish vot­ers to opt for a demo­c­ra­t­ic alter­na­tive — Podemos — lat­er this year.

    The IMF pro­ject­ed the Greek econ­o­my to grow by 2.9% this year. Until the last month or so, there was good rea­son to believe that — after years of gross over­es­ti­mates — its fore­cast would be on tar­get.

    This growth would like­ly have kept SYRIZA’s approval rat­ings high, togeth­er with its mea­sures to pro­vide food and elec­tric­i­ty to needy house­holds and oth­er pro­gres­sive changes. The ECB’s actions, by desta­bil­is­ing the econ­o­my and dis­cour­ag­ing invest­ment and con­sump­tion, will almost cer­tain­ly slow Greece’s recov­ery and could be expect­ed to under­mine sup­port for the gov­ern­ment.

    ...

    “The quote marks are need­ed because most Greeks have not been bailed out, but thrown over­board — hav­ing lost more than 25% of their nation­al income since 2008. It could hard­ly be more obvi­ous that recent ECB actions are not about mon­ey or fis­cal sus­tain­abil­i­ty but about pol­i­tics.”

    That’s the ‘agree­ment’ the troi­ka is demand­ing Greece agrees to if its going to avoid a default: Greece needs to agree the the same ‘bailout’ con­di­tions that con­tin­ues to asphyx­i­ate the coun­try with­out any mean­ing­ful changes regard­less of the dam­age already done to Greece’s econ­o­my because...politics. Or obe­di­ence or some­thing.

    What­ev­er the rea­sons for the troika’s cal­cu­lat­ed insan­i­ty, this whole sit­u­a­tion rais­es a rather unset­tling ques­tion: How do you come to a com­pro­mise with some­one that appears to want you dead on prin­ci­ple?

    The answer isn’t obvi­ous but it looks like Greece has about two more months to fig­ure out. May the Force be with Greece.

    Posted by Pterrafractyl | April 22, 2015, 8:19 pm
  16. From the “let’s hope this was a joke even though they did­n’t appear to be jok­ing”: So here’s a pret­ty typ­i­cal Reuters arti­cle about the cri­sis in Greece that includes plen­ty of com­ments from var­i­ous EU offi­cials — some anony­mous, some not — about how they’re all so con­cerned about the pos­si­bil­i­ty of a Greek default or Greece leav­ing the euro­zone but it’s real­ly all up to Greece to get seri­ous about reforms. Again, typ­i­cal. But then it includes this line that stands out even by top­sy-turvy stan­dards of the con­tem­po­rary EU:

    For weeks Greek offi­cials have been telling their euro zone coun­ter­parts they have run out of mon­ey, only to find spare cash to make the next debt pay­ment. “They have cried wolf so often that when they are real­ly going bust, no one will believe them,” one EU nego­tia­tor said on con­di­tion of anonymi­ty.

    Are EU offi­cials actu­al­ly ques­tion­ing whether or not Greece is run­ning out of cash? Because that’s like ques­tion­ing whether or not the per­son you’re chok­ing to death is real­ly being straight with you when they say they can’t breath. That’s scary talk. On so many lev­els:

    If Greece falls, no one wants their prints on the mur­der weapon

    BRUSSELS | By Paul Tay­lor
    Sun Apr 26, 2015 8:29am EDT

    (Reuters) — “We’re going bust.” “No, you’re not.” “You’re stran­gling us.” “No we’re not.” “You owe us for World War Two.” “We gave already.”

    The game of chick­en between Greece and its inter­na­tion­al cred­i­tors is turn­ing into a vicious blame game as Athens lurch­es clos­er to bank­rupt­cy with no cash-for-reform agree­ment in sight.

    Europe’s polit­i­cal lead­ers and cen­tral bankers and Greek politi­cians agree on only one thing: if Greece goes down, they don’t want their fin­ger­prints on the mur­der weapon.

    If Athens runs out of cash and defaults in the com­ing weeks, as seems increas­ing­ly pos­si­ble, no one wants to be accused of hav­ing pushed it over the edge or failed to try to save it.

    Greece’s left­ist gov­ern­ment has already iden­ti­fied its cul­prit of choice — Ger­many, Europe’s main pay­mas­ter, accused of hav­ing inflict­ed tox­ic aus­ter­i­ty poli­cies on Greeks, caus­ing a “human­i­tar­i­an cri­sis”.

    Euro zone gov­ern­ments are prepar­ing the ground to blame the novice gov­ern­ment of Prime Min­is­ter Alex­is Tsipras for hav­ing blus­tered, obstruct­ed, failed to meet com­mit­ments and evad­ed hard choic­es while Athens burned.

    “We are doing every­thing we can to save Greece from itself, but in the end, it’s up to them,” is the mes­sage pour­ing out of Berlin, Brus­sels and IMF head­quar­ters in Wash­ing­ton.

    ...

    Ger­man Chan­cel­lor Angela Merkel has been care­ful to express good­will and tried to build a rela­tion­ship of trust with Tsipras while insist­ing Greece must meet its lenders’ reform con­di­tions, which include fierce­ly resist­ed pen­sion cuts and labor reforms.

    “Every­thing must be done to pre­vent” Greece run­ning out of mon­ey, she said after talks with Tsipras last week. “On the Ger­man side, we are pre­pared to pro­vide all the sup­port that is asked of us. But of course reforms must be done,” she added.

    Investors briefly hoped her pledge might be a turn­ing point, sim­i­lar to Euro­pean Cen­tral Bank Pres­i­dent Mario Draghi’s 2012 vow to do “what­ev­er it takes to pre­serve the euro”.

    But Merkel’s com­ments could also be inter­pret­ed as an exer­cise in pre-emp­tive blame avoid­ance. Unlike Draghi, she did not say who should do every­thing to stop Greece going bust.

    Her finance min­is­ter, Wolf­gang Schaeu­ble, is open­ly scep­ti­cal of whether Athens can avoid crash­ing out of the euro zone.

    Angry euro zone finance min­is­ters made clear they were far from a deal with Greece, reject­ed Varo­ufakis’ plea for ear­ly cash in return for par­tial reform and told him they would not even dis­cuss longer-term fund­ing and debt relief until Greece signed and imple­ment­ed a full reform plan.

    While Greece’s lead­ers insist Europe must heed and respect the demo­c­ra­t­ic will of the Greek peo­ple, its cred­i­tors reply that they too have demo­c­ra­t­ic man­dates from their vot­ers.

    In Varo­ufakis’ nar­ra­tive, euro zone coun­tries did not lend all that mon­ey to save Greece in the first place but to pro­tect their own banks, which had impru­dent­ly lent Athens bil­lions.

    Non­sense, say euro zone offi­cials. Those banks took loss­es in 2012 when Greek debt to pri­vate bond­hold­ers was restruc­tured.

    Varo­ufakis has widened the cir­cle of blame to the ECB, accus­ing it of “asphyx­i­at­ing” Greece by starv­ing its banks of liq­uid­i­ty and severe­ly lim­it­ing their short-term lend­ing to the gov­ern­ment.

    That prompt­ed an indig­nant response from ECB Pres­i­dent Mario Draghi, who told the Euro­pean Par­lia­ment the cen­tral bank’s sup­port for Greece amount­ed to some 110 bil­lion euros, but it was barred by treaty from mon­e­tary fund­ing of gov­ern­ments.

    For weeks Greek offi­cials have been telling their euro zone coun­ter­parts they have run out of mon­ey, only to find spare cash to make the next debt pay­ment. “They have cried wolf so often that when they are real­ly going bust, no one will believe them,” one EU nego­tia­tor said on con­di­tion of anonymi­ty.

    Insid­ers say the ECB is deter­mined that the cen­tral bank will not be the insti­tu­tion that pulls the plug. If it con­sid­ers sup­port for Greek banks is no longer ten­able, it will seek a polit­i­cal deci­sion by Euro­pean Union gov­ern­ments.

    “This is not some­thing unelect­ed cen­tral bankers should decide,” a source in the Eurosys­tem of cen­tral banks said.

    Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er is eager to hold Tsipras’ hand until the last minute in the hope that he will impose an unpalat­able eco­nom­ic reform deal on left-wingers in his Syriza par­ty before it is too late.

    For Junck­er, one of the fathers of Europe’s sin­gle cur­ren­cy, the depar­ture of a sin­gle mem­ber from the 19-nation euro zone would be a griev­ous blow to the bloc’s glob­al stand­ing and could set a dan­ger­ous prece­dent, encour­ag­ing investors to spec­u­late against oth­er mem­ber states in future crises.

    Even if it stayed in the euro zone, a Greek default on oth­er Euro­pean gov­ern­ments or the ECB would be one of the most acri­mo­nious moments in the his­to­ry of the Euro­pean Union.

    Amid mutu­al recrim­i­na­tion over ruined Greek savers and cheat­ed Euro­pean tax­pay­ers, some fear demon­stra­tions by Greek pen­sion­ers or hos­pi­tal patients and vio­lence in Athens.

    If it hap­pens, there will be plen­ty of blame to go around, but no one to take respon­si­bil­i­ty.

    Greece and being mur­dered and no one cares! Scary! Like ‘Sixth Sense Mun­chausen Mom’ scary.

    But it’s iron­i­cal­ly the Mun­chausen-like nature of the sit­u­a­tion that make a ‘Grex­it’ so risky for the sta­bil­i­ty of euro­zone. Because the risk of a ‘Grex­it’ is nor­mal­ly seen as the short term risk of finan­cial con­ta­gion man­i­fest­ing in the Euro­pean debt mar­kets that some­how takes down the euro­zone in some sort of ‘bond-vigilante’-style bond mar­ket collapse/bank run. But that isn’t real­ly an issue at this point.

    No, what makes a ‘Grex­it’ so ter­ri­fy­ing for the archi­tects of the EU, and espe­cial­ly euro­zone, is that, as time goes on, more and more atten­tion is going to be paid towards rehash­ing and relearn­ing the his­to­ry of the euro­zone cri­sis and the shock of a ‘Grex­it’ is going to sig­nif­i­cant­ly accel­er­ate that pace of that rehash­ing which, in turn, accel­er­ates the rate at which Euro­peans real­ize that the emerg­ing Euro­pean Union and euro­zone are increas­ing­ly unde­mo­c­ra­t­ic with a grow­ing num­ber of right-wing pol­i­cy frame­works get­ting enshrined as con­sti­tu­tion­al law. Grover Norquist’s goal of drown­ing gov­ern­ment in the bath­tub is hap­pen. In Europe. One poor coun­try at a time.

    And as the arti­cle above indi­cates, pol­i­cy mak­ers across Europe are try­ing to keep their fin­ger­prints off the Greek mur­der weapon, but it’s unclear how that’s going to be fea­si­ble as time goes on since that mur­der weapon was obvi­ous­ly the jar of poi­son they keep pub­licly force feed­ing Greece. There’s no hid­ing that. It’s only not been dis­cov­ered because no one has both­ered look­ing. And the jar includes things like inten­tion­al­ly induc­ing deep depres­sions in not just Greece but coun­tries all over the euro­zone ‘periph­ery’ out of a belief that deep soci­etal reform can be best achieved by inten­tion­al­ly break­ing the econ­o­my while simul­ta­ne­ous­ly argu­ing that your poli­cies had noth­ing to do with it but are total­ly nec­es­sary and can­not be altered. It’s like Mun­chausens by proxy with a pro-Mun­chausen ide­ol­o­gy to jus­ti­fy it. That’s offi­cial pol­i­cy across Europe now and.

    For instance, think of all the times over the past five years that we’ve heard from folks like Jens Wei­d­mann about how eas­ing up on the aus­ter­i­ty should­n’t hap­pen because that would reduce the incen­tives to make the ‘struc­tur­al reforms’ that would make a bad sit­u­a­tion even worse. That’s still his view in gen­er­al and even with Greece on the brink of default we’re hear­ing this, “As you know I have con­cerns about grant­i­ng emer­gency liq­uid­i­ty on account of the fact that the banks are not doing every­thing to improve their liq­uid­i­ty sit­u­a­tion”:

    Bun­des­bank chief con­cerned about emer­gency fund­ing for Greek banks
    Sat Apr 25, 2015 6:52am EDT

    (Reuters) — The head of Ger­many’s Bun­des­bank said on Sat­ur­day he had mis­giv­ings about grant­i­ng emer­gency fund­ing to Greece as the liq­uid­i­ty sit­u­a­tion at the coun­try’s banks has not improved.

    Jens Wei­d­mann was speak­ing at a press event with Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble after a meet­ing of euro zone finance min­is­ters in Riga.

    “As you know I have con­cerns about grant­i­ng emer­gency liq­uid­i­ty on account of the fact that the banks are not doing every­thing to improve their liq­uid­i­ty sit­u­a­tion,” Wei­d­mann said.

    ...

    Yes, why aren’t the Greek banks doing more to improve their liq­uid­i­ty sit­u­a­tion while the troi­ka stran­gles the econ­o­my and threat­ens to push the nation off a cliff. Because that’s that kind of “sit­u­a­tion” that’s just great for bank liq­uid­i­ty.

    This is the kind of mad­ness Europe’s pol­i­cy-mak­ers have been pub­licly spout­ing for years and the only rea­son they haven’t been iden­ti­fied as mad yet is that pub­lic isn’t real­ly pay­ing atten­tion and a huge seg­ment of the press and pun­di­toc­ra­cy suf­fer from the same delu­sions. But, over time, the sto­ry of the Greek euro­tragedy is going to told and retold and even­tu­al­ly the ghost of euro­greece is going to come back to haunt the emerg­ing Euro­pean ‘cred­i­tor’s par­adise.

    And that’s why keep­ing their hands off the jar of poi­so­nous poli­cies that’s mur­der­ing Greece is going to be so impor­tant and yet so dif­fi­cult. Real­ly, at this point, the biggest thing pro­tect­ing all of the pol­i­cy mak­ers from hav­ing their Mun­chausen’s pol­i­cy mal­prac­tice dis­cov­ered is the sheer vol­ume of fin­ger­prints on that jar of poi­son since near­ly every euro­zone coun­try’s gov­ern­ment has been com­plic­it in endors­ing the aus­ter­i­ty. Plus the mass con­fu­sion endem­ic to the pub­lic for almost all issues of thed day.

    But mass con­fu­sion and an abun­dance of mur­der sus­pects may not be much help when the ghost of euro­greece final­ly returns to haunt a euro­zone pub­lic that increas­ing­ly finds itself liv­ing in a Clause­witz­ian night­mare. At some point it’s going to become very clear that some­thing very wrong hap­pened and Greece died as a result. The real ques­tion is whether or not the Euro­pean pub­lic dis­cov­ers the truth about who killed Greece before or after they’re all ghosts too.

    There’s going to be quite a few cold of winds blow­ing through Europe for years to come as a result of the euro­zone dis­as­ter. At least metaphor­i­cal­ly speak­ing. Europe is due for some espe­cial­ly cold winds in real life too, but that’s due to oth­er angry ghosts.

    Posted by Pterrafractyl | April 27, 2015, 12:12 am
  17. Pter­rafractyl: Well, not quite every­body. The Globe and Mail’s busi­ness editor,for instance, takes issue with these poli­cies in his ‘Blame Ger­many for Greece’s Uphill Strug­gle’ arti­cle of April the 25th, in par­tic­u­lar, Ger­many’s aver­sion to infla­tion and obses­sion with retain­ing strong export mar­kets.

    Posted by Brad | April 27, 2015, 2:17 am
  18. @Brad: Great catch! And the point made near the arti­cle is real­ly quite poignant in this era of mega-trade agree­ments:
    One of the biggest rea­sons we may see the troi­ka bend over back­wards to keep Greece in the euro­zone no mat­ter what is that if Greece leaves it will final­ly be able to impose tar­iffs against Ger­man imports. And giv­en that the Ger­man eco­nom­ic “mir­a­cle” is based on a preda­tor export mod­el, any­thing that might encour­age Greece or any of its Euro­pean neigh­bors to leave the euro­zone and impose tar­iffs on imports must be avoid­ed at all costs:

    The Globe and Mail
    Blame Ger­many for Greece’s uphill euro zone strug­gle

    ERIC REGULY — EUROPEAN BUREAU CHIEF

    ROME — The Globe and Mail

    Pub­lished Fri­day, Apr. 24 2015, 5:56 PM EDT

    Last updat­ed Fri­day, Apr. 24 2015, 6:27 PM EDT

    Greece is run­ning out of cash and is raid­ing munic­i­pal funds to pay its bills, enrag­ing may­ors through­out the coun­try. Giv­en Greece’s increas­ing­ly dire finan­cial state, you would pre­sume that the game has final­ly end­ed. It seems inevitable that Greece will default, crash out of the euro zone, reprint the drach­ma and, after a suit­able peri­od of eco­nom­ic may­hem, pull its act togeth­er, as Argenti­na did after it default­ed more than a decade ago.

    For­get it. Greece will get a deal of some sort that will keep it with­in the euro zone, pre­serv­ing the notion that the euro is “irre­versible,” to use the descrip­tion beloved by Euro­pean Cen­tral Bank pres­i­dent Mario Draghi. But would that be good news for Greece? On the con­trary, it might well doom it to an eter­ni­ty of mis­ery and hard work that goes nowhere, like Sisy­phus, rolling his boul­der to the top of the hill, only to have it roll down again.

    Blame Ger­many, Europe’s self-per­pet­u­at­ing eco­nom­ic mir­a­cle. Ger­many is a jug­ger­naut of end­less cur­rent-account and trade sur­plus­es, which are mak­ing it impos­si­ble for the euro zone to achieve any bal­ance and sym­me­try. Those gor­geous (to the Ger­mans) sur­plus­es are mak­ing the euro zone’s weak­lings – Greece, Spain, Por­tu­gal, Italy, even France – do most of the struc­tur­al and fis­cal adjust­ments. They grind away, get­ting nowhere, while Ger­many goes from strength to strength.

    There is no doubt that Germany’s love affair with the euro is deep and pas­sion­ate. Since the com­mon cur­ren­cy was launched as an account­ing cur­ren­cy in 1999 (the notes and coins came three years lat­er), Ger­man exports, the trade sur­plus and the cur­rent account sur­plus – the pos­i­tive dif­fer­ence between a country’s sav­ings and invest­ment – have soared. In 2014, the cur­rent account sur­plus stood at a record 7.4 per cent of gross domes­tic prod­uct, up from 6.7 per cent in 2013, which itself was extreme­ly high.

    There’s more. Ger­many derived 46 per cent of GDP in 2013 from exports. That makes it the glob­al export cham­pi­on among the indus­tri­al­ized coun­tries. The equiv­a­lent fig­ure in Chi­na is 26 per cent. In the Unit­ed States, it’s a mere 13 per cent. As the euro sinks, Ger­man exports will grow. A euro val­ued at $1.60 (U.S.) or more might reflect the true strength of the Ger­man econ­o­my. Luck­i­ly for Ger­many, the euro now trades a $1.07. If that weren’t gift enough, Ger­man sov­er­eign bonds have been the prime ben­e­fi­cia­ries of the flight to safe­ty. This week, the yield on Ger­man 10-year bonds was 0.1 per cent, down 1.4 per­cent­age points in a year. That’s mon­ey for noth­ing. At the rate the bonds are trend­ing, it won’t be long before the yields turn neg­a­tive, mean­ing investors will be pay­ing the Ger­man trea­sury for the priv­i­lege of own­ing its paper.

    For the health of the euro zone, Ger­many would, ide­al­ly, save less, invest more, raise wages and let infla­tion take off. That would stoke up domes­tic demand and suck in imports from the rest of Europe, poor lit­tle Greece includ­ed. But that’s not the Ger­man style, nev­er has been, nev­er will be. Ger­mans are aller­gic to infla­tion. The coun­try spends rel­a­tive­ly lit­tle on infra­struc­ture. It is only now, begrudg­ing­ly, rais­ing wages after a long peri­od of aus­ter­i­ty after the reuni­fi­ca­tion of East and West Ger­many, in which time wage growth went nowhere.

    The entire Ger­man machine seems geared to sur­plus­es. In a Strat­for note pub­lished on April 21, George Fried­man, who has writ­ten a book on the Euro­pean cri­sis called Flash­points, said: “Com­par­a­tive advan­tage assumes [Ger­many] will want to export those things that it pro­duces most effi­cient­ly. It is instead export­ing any prod­uct that it can export com­pet­i­tive­ly regard­less of the rel­a­tive inter­nal advan­tage … what­ev­er prob­lem [Greece] has in max­i­miz­ing its own exports, doing so in an envi­ron­ment where Ger­many is pur­su­ing all export pos­si­bil­i­ties that have any advan­tage decreas­es Greece’s oppor­tu­ni­ty to export, there­by cre­at­ing long-term dys­func­tion in Greece.

    ...

    The nego­ti­a­tions will go to the wire, as they always do, and some “extend and pre­tend” com­pro­mise will be found that will allow Greece to stum­ble along inside the euro zone, this time with even more debt and aus­ter­i­ty. Ger­many will not allow Greece to leave, even though Ger­many in no way believes that lit­tle, uncom­pet­i­tive, tax-evad­ing Greece deserves euro zone mem­ber­ship. As Mr. Fried­man point­ed out, Ger­many fears a Greek exit because Greece, on its own, would no doubt install tar­iffs and oth­er bar­ri­ers designed to shield its econ­o­my from ruth­less exporters. Ger­many needs to pro­tect its sur­plus mod­el, which depends on Euro­pean free trade. Nev­er mind that guar­an­tee­ing the Ger­man suc­cess mod­el means turn­ing Greece into Sisy­phus.

    “As Mr. Fried­man point­ed out, Ger­many fears a Greek exit because Greece, on its own, would no doubt install tar­iffs and oth­er bar­ri­ers designed to shield its econ­o­my from ruth­less exporters. Ger­many needs to pro­tect its sur­plus mod­el, which depends on Euro­pean free trade. Nev­er mind that guar­an­tee­ing the Ger­man suc­cess mod­el means turn­ing Greece into Sisy­phus.” Yep!

    As the arti­cle reminds us, it’s basi­cal­ly impos­si­ble for the rest of Europe to fol­low the Ger­man mod­el:

    ...
    There’s more. Ger­many derived 46 per cent of GDP in 2013 from exports. That makes it the glob­al export cham­pi­on among the indus­tri­al­ized coun­tries. The equiv­a­lent fig­ure in Chi­na is 26 per cent. In the Unit­ed States, it’s a mere 13 per cent. As the euro sinks, Ger­man exports will grow. A euro val­ued at $1.60 (U.S.) or more might reflect the true strength of the Ger­man econ­o­my. Luck­i­ly for Ger­many, the euro now trades a $1.07. If that weren’t gift enough, Ger­man sov­er­eign bonds have been the prime ben­e­fi­cia­ries of the flight to safe­ty. This week, the yield on Ger­man 10-year bonds was 0.1 per cent, down 1.4 per­cent­age points in a year. That’s mon­ey for noth­ing. At the rate the bonds are trend­ing, it won’t be long before the yields turn neg­a­tive, mean­ing investors will be pay­ing the Ger­man trea­sury for the priv­i­lege of own­ing its paper.
    ...

    Is the rest of Europe going to become a glob­al export pow­er­house that gets 46 per­cent of its GDP from exports? Is the rest of the world sup­posed to run an even greater trade deficit at that point? Per­ma­nent­ly? With no tar­rifs? Of course not, but it’s entire­ly pos­si­ble that if Europe’s domes­tic demand con­tin­ues to sys­tem­at­i­cal­ly destroyed by aus­ter­i­ty poli­cies and then per­ma­nent­ly sup­pressed there­after, Europe’s imports could be so low in its poor­er mem­ber states that we could see a Euro­pean econ­o­my with a sig­nif­cant net trade sur­plus in the future that still threat­ens to throw the whole world econ­o­my out of bal­ance even if the rest of Europe does­n’t end up become mega-exporters like Ger­many.

    And here’s one more indi­ca­tion that the troi­ka might be con­sid­er­ing keep­ing Greece in the euro­zone no mat­ter what: Bun­des­bank chief Jens Wei­d­mann just reit­er­at­ed the view that a default does­n’t mean a ‘Grex­it’:

    Bun­des­bank head says euro state insol­ven­cy pos­si­ble with­out sys­tem col­lapse
    FRANKFURT,
    Tue Apr 28, 2015 1:30pm EDT

    (Reuters) — The head of Ger­many’s Bun­des­bank crit­i­cised Greece’s gov­ern­ment on Tues­day for fail­ing to imple­ment reforms and said it was pos­si­ble for a coun­try with­in the cur­ren­cy union to become insol­vent.

    “Mem­ber states must take respon­si­bil­i­ty for the con­se­quences of their polit­i­cal deci­sions,” Jens Wei­d­mann, also a mem­ber of the Euro­pean Cen­tral Bank’s Gov­ern­ing Coun­cil, told an audi­ence in Essen. “There must be a match between con­trol and lia­bil­i­ty.”

    “Ulti­mate­ly, this requires the pos­si­bil­i­ty of a state insol­ven­cy, with­out the finan­cial sys­tem col­laps­ing,” he said in the text of his speech.

    Wei­d­man­n’s com­ments in Ger­many’s indus­tri­al heart­land high­light mis­giv­ings among the coun­try’s pol­i­cy­mak­ers about Greece’s dete­ri­o­rat­ing finances and the unortho­dox poli­cies adopt­ed by its left­ist gov­ern­ment.

    “It is deci­sive that a func­tion­ing admin­is­tra­tion is estab­lished in Greece to move the econ­o­my and the state’s finances onto a sus­tain­able course and, most impor­tant­ly, that trust is built in a reli­able course of reform,” Wei­d­mann said.

    The gov­ern­ment of Alex­is Tsipras “has again thwart­ed ear­ly hopes that this will hap­pen,” Wei­d­mann said.

    ...

    Keep in mind that when you read Jens Wei­d­mann pro­claim­ing that state insol­ven­cy should be pos­si­ble with­out the finan­cial sys­tem col­laps­ing, this is the same guy that seems to be try­ing to col­lapse the Greek bank­ing sys­tem. So it’s pret­ty clear that what­ev­er Wei­d­mann has in mind for Greece, it does­n’t involve Greece’s sit­u­a­tion get­ting much bet­ter. Or maybe it’ll get bet­ter for a lit­tle while, then worse, then bet­ter, then worse, and even­tu­al­ly every­one real­izes no progress is ever made and they’re all stuck in some sort of hell. But it’s Wei­d­mann we’re talk­ing about so it’s real­ly just down­hill for Greece from here. If Greece defaults but does­n’t exit, you know there’s going to be addi­tion­al aus­ter­i­ty and the take away les­son from the whole Greek tragedy is going to be very clear and very unpleas­ant.

    Also keep in mind that a Greek default that does­n’t result in a ‘Grex­it’ real­ly could give Ger­many a mas­sive oppor­tu­ni­ty to call for a lim­it to the cross-bor­der lia­bil­i­ties between mem­ber states so that if a default hap­pens in the future, a much larg­er share of that lia­bil­i­ty falls on the pop­u­lace in the default­ing mem­ber state instead of get­ting spread around the union.

    So there are grow­ing signs that a ‘Grex­it’ just might be avoid­ed. Still, it’s not a done deal because, as as Wei­d­mann sug­gest­ed, :

    “Mem­ber states must take respon­si­bil­i­ty for the con­se­quences of their polit­i­cal decisions...There must be a match between con­trol and lia­bil­i­ty.”

    and with the nego­ti­a­tions will going between Greece and the troi­ka, extract­ing a “polit­i­cal price” (in the form of poli­cies that harm the Greek pub­lic) is now one of the explic­it troi­ka objec­tives

    Greece pre­pares reform bill, lenders seek con­ces­sions
    ATHENS/BRUSSELS | By Renee Mal­te­zou and Jan Strupczews­ki
    Wed Apr 29, 2015 6:39pm EDT

    (Reuters) — Euro zone offi­cials sought to wring pol­i­cy con­ces­sions from Greece on Wednes­day to unlock urgent­ly need­ed aid after Athens said it would present a list of reforms for leg­is­la­tion to show it is seri­ous about imple­ment­ing its promis­es.

    The draft bill was not expect­ed to include major nov­el­ties beyond mea­sures already dis­cussed with EU and IMF lenders, but Athens is hop­ing it will speed up slow-mov­ing talks and per­mit at least an ini­tial deal to ease its sear­ing cash crunch.

    The reforms, includ­ing some pri­va­ti­za­tions and tax steps, were to be out­lined to senior euro zone finance min­istry offi­cials in Brus­sels on Wednes­day. They will be assessed in more detail when tech­ni­cal-lev­el teams from Greece and the lenders meet on Thurs­day, Greek gov­ern­ment offi­cials said.

    Despite lenders’ scep­ti­cism, Greece’s gov­ern­ment is hop­ing an inter­im deal can be struck before a May 12 pay­ment of 750 mil­lion euros to the IMF that Greek offi­cials have sug­gest­ed could be dif­fi­cult to make with­out more aid.

    How­ev­er, a senior euro zone offi­cial involved in the talks said that to secure any deal, Greece would have to make a sub­stan­tial con­ces­sion on at least one of three dis­put­ed issues — pen­sions, labor mar­ket reform and tax­a­tion.

    “We need to see a very sig­nif­i­cant pol­i­cy move on the Greek side this week to recre­ate con­fi­dence the process,” the offi­cial said, speak­ing on con­di­tion of anonymi­ty.

    “It could be pen­sions, it could be the labor mar­ket but ... they have to pay the polit­i­cal cost. The Eurogroup wants to see that polit­i­cal cost being paid.”

    The lenders have said a par­tial dis­burse­ment of frozen aid is not pos­si­ble until Greece has pre­sent­ed and imple­ment­ed a full list of reforms. Athens is hop­ing an ini­tial deal will prompt the Euro­pean Cen­tral Bank to loosen restric­tions that pre­vent Greek banks from buy­ing more Trea­sury bills.

    “We are now aim­ing at a ‘min­i­mum’, let’s say, agree­ment in which we com­bine some things that we will agree to imple­ment imme­di­ate­ly with the relax­ation of the ECB restric­tions,” Deputy Prime Min­is­ter Yan­nis Dra­gasakis told Sto Kokki­no radio.

    ...

    “We need to see a very sig­nif­i­cant pol­i­cy move on the Greek side this week to recre­ate con­fi­dence the process...It could be pen­sions, it could be the labor mar­ket but ... they have to pay the polit­i­cal cost. The Eurogroup wants to see that polit­i­cal cost being paid.”
    So that’s where we are now: as the the first arti­cle point­ed out, there are some very com­pelling rea­sons for the the euro­zone’s pay­mas­ter, Ger­many, to keep Greece in the union at all costs, even in the event of a default. But at the same time, the Eurogroup appears to view as non-nego­tiable the that Greece must pay a polit­i­cal price to ‘recre­ate con­fi­dence in the process’. And that con­fi­dence-build­ing polit­i­cal price is appar­ent­ly to come in the form of some sort of hor­ri­ble aus­ter­i­ty poli­cies that will leave the Greek pub­lic feel­ing betrayed by its own gov­ern­ment. And it will involve either pen­sion cuts (starv­ing peo­ple), “labor mar­ket reform” (fir­ing peo­ple), or tax reform (poten­tial­ly quite rea­son­able).

    So what’s the “price” going to be for Greece to stay in the Sisy­phus-zone? Well, giv­en that Alex­is Tripras has already pledged to “imple­ment the great­est insti­tu­tion­al reform ever in the coun­try, aim­ing to declare war against cor­rup­tion and tax inequal­i­ty” it would seem that mak­ing some sort of con­ces­sion to the troi­ka over tax­es is an obvi­ous choice. But con­sid­er­ing that Angela Merkel was report­ed­ly “skep­ti­cal about Tsipras’s claims that he can raise rev­enue by cut­ting cor­rup­tion and increas­ing tax­es on the rich”, it does­n’t seem like the obvi­ous choice — a crack­down on cor­rup­tion and tax cheats — is actu­al­ly a choice at all.

    So oth­er than a ‘Grex­it’, what options are left in the event of a default?

    Oh yeah. None. And when the Greek gov­ern­ment and pub­lic ful­ly embraces that there are no oth­er options the polit­i­cal price the troi­ka desires will have final­ly been paid. At least that’s the pos­tur­ing of the troi­ka. It’s still very pos­si­ble that the troi­ka will be ready to fold in an instant if it real­ly does look like a ‘Grex­it’ is inevitable. As the first arti­cle points out, the ‘Grex­it’ as a prece­dent-set­ting event that brings tar­iffs back in vogue real­ly could hold the poten­tial of severe­ly dis­rupt­ing the Ger­man eco­nom­ic ‘mir­a­cle’.

    So, some­what amus­ing­ly, if Greece is going to avoid a Sisyphean fate but still stay in the euro­zone, its going to be Greece’s will­ing­ness to choose a Greek Odyssey out­side of the euro­zone over a Sisyphean fate with­in it that expos­es the troika’s Achilles’ heel. Because of Greece leaves, oth­ers are bound to fol­low, or at least thing about it. Espe­cial­ly if the over­all euro­zone sit­u­a­tion keeps seem­ing less like a fam­i­ly of democ­ra­cies and more like a col­lec­tion of tech­no­crat­i­cal­ly man­aged vas­sal states. It could hap­pen over and over, and that’s some­thing Greece and the troi­ka are going to have to keep in mind as nego­ti­a­tions con­tin­ue. Seem­ing­ly Sisyphean fates aren’t lim­it­ed to Greece.

    Posted by Pterrafractyl | April 29, 2015, 8:01 pm
  19. Here’s the lat­est twist in the Greek Tragedy: the IMF now appears to be assum­ing the role of “good cop” and “bad cop”: the IMF is demand­ing that Greece stick to a strict aus­ter­i­ty pro­gram, as expect­ed, but because Greece’s pri­ma­ry sur­plus is now turn­ing into a deficit which makes repay­ment of Greece’s debts unten­able, the IMF is also demand­ing that Greece’s Euro­pean cred­i­tors write down its debt, some­thing the Europe­group has been adamant­ly opposed to thus far. And since the IMF is a major com­po­nent of the troi­ka, it’s look­ing like we could see that sce­nario where Greece is forced into basi­cal­ly agree­ing to the same hor­ri­bly dam­ag­ing aus­ter­i­ty but it could also get some of its debt writ­ten down. Of course, since the ongo­ing aus­ter­i­ty is going to con­tin­ue erod­ing Greece’s GDP and lead to anoth­er ‘lost gen­er­a­tion’, the write-down of that debt with aus­ter­i­ty-strings attached may not lead to low­er debt-to-GDP ratios (was has already been the cause for not just Greece but the oth­er aus­ter­i­ty-rid­dled coun­tries). Still, with a write-down and unre­lent­ing aus­ter­i­ty both part of the IMF’s demands, it looks like it’s now up to the Eurogroup and Greece to decide if they can accept the terms of the IMF’s bad cop com­pro­mise:

    Finan­cial Times
    IMF takes hard line on aid as Greek sur­plus turns to deficit

    Peter Spiegel in Brus­sels
    Last updat­ed: May 4, 2015 6:46 pm

    Greece is so far off course on its €172bn bailout pro­gramme that it faces los­ing vital Inter­na­tion­al Mon­e­tary Fund sup­port unless Euro­pean lenders write off sig­nif­i­cant amounts of its sov­er­eign debt, the fund has warned Athens’ euro­zone cred­i­tors.

    The warn­ing, deliv­ered to euro­zone finance min­is­ters by Poul Thom­sen, head of the IMF’s Euro­pean depart­ment, rais­es the prospect that it may hold back its por­tion of a €7.2bn tranche of bailout aid that Greece is des­per­ate­ly attempt­ing to secure to avoid bank­rupt­cy.

    Half of the €7.2bn, which is the sub­ject of intense nego­ti­a­tions between Athens and its cred­i­tors in Brus­sels-based talks that resumed on Mon­day, is due to come from the IMF. With­out the funds, Greece is expect­ed to run out of cash this month.

    Euro­zone cred­i­tors, who hold the vast bulk of Greek debt, are adamant­ly opposed to debt relief. But IMF sup­port is cru­cial both for its funds and to sus­tain polit­i­cal back­ing for the Greece bailout, par­tic­u­lar­ly in Ger­many.

    Accord­ing to two offi­cials present at a con­tentious meet­ing of euro­zone finance min­is­ters in Riga last month, Mr Thom­sen said ini­tial data the IMF had received from Greek author­i­ties showed Athens was on track to run a pri­ma­ry bud­get deficit of as much as 1.5 per cent of gross domes­tic prod­uct this year.

    Under exist­ing bailout tar­gets, Athens was sup­posed to run a pri­ma­ry sur­plus — gov­ern­ment receipts net of spend­ing, exclud­ing inter­est pay­ments on sov­er­eign debt — of 3 per cent of GDP in 2015.

    With the large sur­plus now turn­ing into a size­able deficit, Greece’s debt lev­els would begin to spike again. This would force either Athens to take dras­tic aus­ter­i­ty mea­sures or euro­zone bailout lenders to agree to debt write-offs to get Athens’ debt back on a sus­tain­able path, the IMF believes. Offi­cials said Mr Thom­sen specif­i­cal­ly men­tioned the need for debt relief dur­ing the three-hour meet­ing.

    “The IMF thinks the gap between the two real­i­ties is very large right now,” said one senior offi­cial involved in the talks. He not­ed that both Athens, which was resist­ing new eco­nom­ic reforms, and euro­zone cred­i­tors would prob­a­bly fight the IMF on the issue.

    A stand-off between the IMF and euro­zone cred­i­tors over Greece is not unprece­dent­ed. Three years ago, the IMF refused to dis­burse its por­tion of the aid tranche because of sim­i­lar fears Greek debt was not falling fast enough.

    The IMF only signed off after euro­zone min­is­ters agreed to con­sid­er, but nev­er imple­ment­ed, writ­ing down their bailout loans to reduce Greece’s debt to “sub­stan­tial­ly low­er” than 110 per cent of GDP by 2022. It cur­rent­ly stands at 176 per cent.

    The fore­cast of a ris­ing Greek deficit after achiev­ing a 1.7 per cent sur­plus last year — and over­ly opti­mistic pro­jec­tions of sim­i­lar sur­plus­es into the future — would also increase the size of a third Greek bailout, which most offi­cials believe is nec­es­sary once the €7.2bn left in the cur­rent pro­gramme is paid out. Senior offi­cials have ini­tial­ly pro­ject­ed a new pro­gramme at €30bn-€50bn, but ris­ing deficits could change that cal­cu­la­tion.

    Deep dif­fer­ences between Greece and its cred­i­tors remain on near­ly all sub­stan­tive issues, but offi­cials said the cur­rent talks were now more pro­duc­tive than they had been before dur­ing the three-month stand-off.

    ...

    Oh what a tan­gle troi­ka we weave:

    ...

    Euro­zone cred­i­tors, who hold the vast bulk of Greek debt, are adamant­ly opposed to debt relief. But IMF sup­port is cru­cial both for its funds and to sus­tain polit­i­cal back­ing for the Greece bailout, par­tic­u­lar­ly in Ger­many.

    ...

    Under exist­ing bailout tar­gets, Athens was sup­posed to run a pri­ma­ry sur­plus — gov­ern­ment receipts net of spend­ing, exclud­ing inter­est pay­ments on sov­er­eign debt — of 3 per cent of GDP in 2015.

    With the large sur­plus now turn­ing into a size­able deficit, Greece’s debt lev­els would begin to spike again. This would force either Athens to take dras­tic aus­ter­i­ty mea­sures or euro­zone bailout lenders to agree to debt write-offs to get Athens’ debt back on a sus­tain­able path, the IMF believes. Offi­cials said Mr Thom­sen specif­i­cal­ly men­tioned the need for debt relief dur­ing the three-hour meet­ing.

    “The IMF thinks the gap between the two real­i­ties is very large right now,” said one senior offi­cial involved in the talks. He not­ed that both Athens, which was resist­ing new eco­nom­ic reforms, and euro­zone cred­i­tors would prob­a­bly fight the IMF on the issue.

    ...

    So, at least on the sur­face, it’s look­ing like the IMF is spoil­ing for a fight with both Greece and the Eurogroup. But also keep in mind the pos­si­bil­i­ty that when you read:

    But IMF sup­port is cru­cial both for its funds and to sus­tain polit­i­cal back­ing for the Greece bailout, par­tic­u­lar­ly in Ger­many.

    that the IMF’s demands might actu­al­ly be pro­vid­ing crit­i­cal sup­port for a pol­i­cy of writ­ing down Greece’s debt that even the Eurogroup min­is­ters must know are going to be required if they’re going to keep Greece strapped into its aus­ter­i­ty vice. In oth­er words, the euro­zone demands that Greece just stick with “the pro­gram” is so delu­sion­al that the euro­zone gov­ern­ments obvi­ous­ly rec­og­nize this but they can nev­er admit it to the clue­less rab­ble that’s been told aus­ter­i­ty is the path to pros­per­i­ty. So, by mak­ing the write-down of Greece’s debt a polit­i­cal­ly palat­able event for Europe’s politi­cians while main­tain­ing the big lie that Ordolib­er­al eco­nom­ic­s/­ex­port-max­i­miz­ing poli­cies cou­pled with and aus­ter­i­ty can work for all nations (and not just wealthy exporters).

    So it’s very pos­si­ble that the IMF is basi­cal­ly swoop­ing in to save the euro­zone from the pain of hav­ing to face its own delu­sions because you can be sure the pub­lic protes­ta­tions against such a write-down are going to be intense, with plen­ty of argu­ments about how it’s total­ly unnec­es­sary and how Greece just needs to be incen­tivized through aus­ter­i­ty to pull itself up from the boot­straps. And don’t for­get that if we see anoth­er Greek “bailout” (which is real­ly just a bailout of Euro­pean banks), that just might be the kind of event that can trig­ger anoth­er fran­tic over­haul of how the euro­zone func­tions, with some sort of fur­ther restric­tions on shared lia­bil­i­ties. Plus, the IMF’s demands cre­ate a kind of “com­pro­mise” that still involves no let up of the aus­ter­i­ty that is sched­ule to increase dra­mat­i­cal­ly in com­ing years.

    Giv­en all that, it will be very inter­est­ing to see how much actu­al resis­tance we see emerg­ing from the Eurogroup over the IMF’s write-down demands vs a bunch of angry blus­ter because the IMF is absolute­ly right that a sput­ter­ing Greek econ­o­my is going to war­rant a debt write-down since the cur­rent pay­off sched­ule assumes Greece runs a 3% pri­ma­ry sur­plus this year and an even high­er sur­plus going for­ward. Sure, the IMF is wrong to demand addi­tion­al aus­ter­i­ty at all, but with­in the aus­ter­ian-world­view bub­ble that assumes pover­ty inspires pros­per­i­ty, the IMF is cor­rect about the sus­tain­abil­i­ty of Greece’s debt repay­ment sched­ule and there’s no way the euro­zone finance min­is­ters don’t know this.

    So there’s going to be strong force push­ing the Eurogroup to accept the IMF’s demands, that force being real­i­ty. And by accept­ing the IMF’s demands, Europe’s gov­ern­ments can con­tin­ue play­ing dumb (blind, deaf and dumb) and claim that they real­ly would pre­fer the sound eco­nom­ic poli­cies of dri­ving Greece into a ditch with­out any help at all — and would pre­fer to fol­low that course in the future — but they don’t have that option now so they’re just have to bit­ter­ly accept the IMF’s “bailout” demands. This time.

    Of course, it’s also pos­si­ble that the Eurogroup with make a counter-offer and agree to con­sid­er a debt write-off...and then just do what they did last time which is noth­ing:

    ...
    A stand-off between the IMF and euro­zone cred­i­tors over Greece is not unprece­dent­ed. Three years ago, the IMF refused to dis­burse its por­tion of the aid tranche because of sim­i­lar fears Greek debt was not falling fast enough.

    The IMF only signed off after euro­zone min­is­ters agreed to con­sid­er, but nev­er imple­ment­ed, writ­ing down their bailout loans to reduce Greece’s debt to “sub­stan­tial­ly low­er” than 110 per cent of GDP by 2022. It cur­rent­ly stands at 176 per cent.
    ...

    So that’s also an option for the Eurogroup. Just promise to think about it and then don’t. But it’s a rather risky option since, again, the IMF real­ly is cor­rect that the Eurogroup’s expec­ta­tions that Greece stick to the sched­ule is total­ly usury-lev­el insane because the only way for Greece to run the expect­ed pri­ma­ry sur­plus­es going for­ward is for an even greater rise in the lev­els of aus­ter­i­ty than are cur­rent­ly sched­uled which will shrink the GDP even. If the Greeks were inch­ing close to the brink before, what kind of a mood are they going to be in when, after all this strife and acri­mo­ny, the aus­ter­i­ty lev­els rise and the econ­o­my shrinks even more? The biggest risk the aus­te­ri­ans in Europe have is see­ing their New Vas­sal State Order see its “tough love” brand­ing in the minds of the Euro­pean pub­lic veer into “abu­sive par­ent” ter­ri­to­ry. But, as the IMF is warned the Eurogroup, there’s no way to stick to the planned repay­ment sched­uled with­out chang­ing the rest of the plan to either include a debt write-off or increased aus­ter­i­ty.

    That’s all part of why it’s going to be quite inter­est­ing to see how the Eurogroup responds because Europe real­ly is faced with a stark choice: pub­lic hugs for Greece while the sched­uled beat­ings con­tin­ue or no hugs and even more severe pub­lic beat­ings than the ones cur­rent­ly sched­uled. Since the aus­ter­ian par­a­digm that Greece is being forced to fol­low is a farce that does­n’t actu­al­ly improve economies, the eco­nom­ics of the sit­u­a­tion if going to demand hugs or even more bru­tal beat­ings. Europe’s New Vas­sal State Order is clear­ly intend­ed to fol­low­ing a “the beat­ings will con­tin­ue until every­one pulls them­selves up from their boot­straps” socioe­co­nom­ic mod­el, but if it does­n’t choose the “hugs”, that socioe­co­nom­ic mod­el actu­al­ly shifts towards a “the beat­ings will increase in inten­si­ty until every­one pulls them­selves up from the boot­straps” mod­el and some­thing is going to have to be done to ensure that the increas­ing­ly intense pub­lic beat­ings don’t become Europe’s metaphor­i­cal equiv­a­lent of a police bru­tal­ly video that shocks the pub­lic out of their right-wing spell. That might seem far fetched at this point giv­en the appalling lack of pub­lic sup­port of Greece, but wit­ness­ing bru­tal­i­ty has a way of jostling world­views in unpre­dictable ways and a wors­en­ing sit­u­a­tion in Greece is increas­ing­ly bru­tal.

    So there’s a rather tough choice for the Eurogroup now that the IMF made its case. For Greece the sit­u­a­tion has­n’t real­ly changed all that much since both the IMF and the Eurogroup are demand no let­ting up on the aus­ter­i­ty and that’s what con­sti­tute a “Red Line” for Greece’s nego­tia­tors. But that IMF ulti­ma­tum does poten­tial­ly change the sit­u­a­tion quite a bit for the Eurogroup.

    Of course, this all assumes the IMF will stick to its guns as the nego­ti­a­tions con­tin­ue and not sud­den­ly get amne­sia and drop the whole idea and go along with what­ev­er the Eurogroup demands. It’s a big assump­tion.

    Posted by Pterrafractyl | May 5, 2015, 1:27 pm
  20. In anoth­er inter­est­ing twist in the Greek Tragedy: On the eve of the UK’s elec­tion, Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er warned the EU that if Greece leaves the euro­zone “the Anglo-Sax­on world would do every­thing to try to decom­pose, at a reg­u­lar rhythm, by (the) sale, apart­ment by apart­ment, of the euro­zone”. And he appears to have been com­plete­ly seri­ous:

    Eurac­tive
    Junck­er: If Greece leaves, Anglo-Sax­ons will try to break up euro­zone
    Pub­lished: 05/05/2015 — 08:32 | Updat­ed: 05/05/2015 — 14:46

    Com­mis­sion Pres­i­dent Jean Claude Junck­er said that if Greece left the sin­gle cur­ren­cy area, the “Anglo-Sax­on world” would try every­thing to break it up.

    Speak­ing at the KUL, the Catholic Uni­ver­si­ty of Leu­ven on Mon­day (4 May) on the occa­sion of the launch of the Wil­fred Martens Fund, Junck­er made it clear that a ‘Grex­it’ was not an option, because it would be an exis­ten­tial threat to the 19-mem­ber eco­nom­ic and mon­e­tary union.

    Junck­er, who chose French to deliv­er his 40-minute speech at the Flem­ish uni­ver­si­ty, said:

    “The world wants to know which way we are going. We should make sure that every­one under­stands that the eco­nom­ic and mon­e­tary union is irre­versible, that the euro is a cur­ren­cy that is here to stay, which is not going to be abol­ished or sus­pend­ed. “

    Junck­er added that he had dis­cussed the issue the same day with for­mer Greek Prime Min­is­ter Anto­nis Sama­ras, who was also present at the event.

    “Grex­it is not an option. If Greece would accept it, if the oth­ers would accept it, that the coun­try would exit the zone of secu­ri­ty and pros­per­i­ty con­sti­tut­ed by the euro­zone, we would be exposed to huge dan­ger, because the Anglo-Sax­on world would do every­thing to try to decom­pose, at a reg­u­lar rhythm, by (the) sale, apart­ment by apart­ment, of the euro­zone,” he said.

    ...

    So that was curi­ous­ly alarm­ing! But note that Junck­er’s office clar­i­fied his remarks lat­er. What he meant to say was actu­al­ly more baf­fling­ly stun­ning than what it ini­tial­ly sound­ed like:

    The Tele­graph
    ‘Anglo-Sax­ons’ would rip Europe apart after a Grex­it, says Junck­er
    Com­mis­sion pres­i­dent says Grex­it expos­es the euro to huge dan­ger as cap­i­tal­ist forces would try to dis­man­tle the EU “piece by piece”

    By Mehreen Khan

    8:00PM BST 05 May 2015

    The pres­i­dent of the Euro­pean Com­mis­sion has risked anger­ing Britain after com­ments warn­ing that the “Anglo-Sax­on world” would seek to dis­man­tle the Euro­pean project if Greece was ever allowed to leave the sin­gle cur­ren­cy.

    Speak­ing to an audi­ence at the Catholic Uni­ver­si­ty of Leu­ven in Bel­gium, Jean-Claude Junck­er said a “Grex­it” would leave the euro prey to forces who “would do every­thing to try to decom­pose” what remained of the mon­e­tary union.

    “Grex­it is not an option,” said Mr Junck­er.

    “If we were to accept, if Greece were to accept, if oth­ers were to accept that Greece could leave the area of sol­i­dar­i­ty and pros­per­i­ty that is the euro­zone, we would put our­selves at risk because some, notably in the Anglo Sax­on world, would try every­thing to decon­struct the euro area piece by piece, lit­tle by lit­tle.”

    A spokes­woman for Mr Junck­er said the ref­er­ence to the Anglo-Sax­on world could be “under­stood in the sense of the mar­kets and spec­u­la­tors,” rather than a ref­er­ence to Britain specif­i­cal­ly.

    Greece has been strug­gling to meet con­di­tions laid out by its pay­mas­ters in order to unlock vital funds it needs to stave-off bank­rupt­cy. But with the coun­try edg­ing ever clos­er to a default on its cred­i­tors, fears have mount­ed that that it will soon become the first state to be forced out of the euro.

    Ana­lysts have warned that a Greek ejec­tion would effec­tive­ly turn the euro­zone into a de fac­to exchange rate sys­tem, rather than the full-blown mon­e­tary union first envis­aged by its founders.

    Mr Junck­er’s com­ments reflect anx­i­ety that finan­cial mar­kets could then turn on oth­er weak­er mem­ber states, push­ing up bor­row­ing costs, pro­vok­ing polit­i­cal crises, and forc­ing coun­tries to return to their nation­al cur­ren­cies.

    ...

    So right before the UK elec­tions, after a bar­rage of assur­ances that the euro­zone can total­ly han­dle a ‘Grex­it’, and right in the mid­dle of the troika’s increas­ing­ly per­ilous nego­ti­a­tions with Greece Jean Claude Junck­er gives an inter­view where he tells the pub­lic that a ‘Grex­it’ could lead to the ‘Anglo Sax­on’ world tear­ing the euro­zone apart. And then lat­er and his office clar­i­fies that he did­n’t specif­i­cal­ly mean the UK but instead “the mar­kets and spec­u­la­tors” would tear the euro­zone apart. So he mis­com­mu­ni­cat­ed some­thing he nev­er should have com­mu­ni­cat­ed in the first place and then had his office clar­i­fy it. And after basi­cal­ly telling Greece that a ‘Grex­it’ would be dev­as­tat­ing for the rest of Europe he warns Greece that it has a lot fur­ther to go in com­pro­mis­ing with the troi­ka.

    Jean-Claude must have had an awe­some break­fast.

    Posted by Pterrafractyl | May 5, 2015, 10:49 pm
  21. As the say­ing goes, when all you have is a ham­mer every­thing looks like a nail. But the real sign of mad­ness is when you just keep ham­mer­ing the same old nail. Over and over. And the nail is actu­al­ly a bunch of inno­cent peo­ple:

    Bloomberg Busi­ness
    Greece’s Cred­i­tors Said to Seek 3 Bil­lion-Euro Bud­get Cuts

    3:30 AM CDT
    May 13, 2015

    Greece’s anti-aus­ter­i­ty gov­ern­ment needs to raise at least three bil­lion euros ($3.4 bil­lion) through addi­tion­al fis­cal mea­sures by the end of this year to meet the min­i­mum bud­get tar­gets accept­able by cred­i­tors, an offi­cial with knowl­edge of the dis­cus­sions said.

    The reduc­tions would bring the pri­ma­ry bud­get sur­plus in 2015 to just over 1 per­cent of gross domes­tic prod­uct, a tar­get Greek Inte­ri­or Min­is­ter Nikos Vout­sis said today is accept­able. With­out any change in fis­cal pol­i­cy, Greece would end 2015 with a bud­get deficit of about 0.5 per­cent of GDP, the offi­cial said. The so-called pri­ma­ry bud­get bal­ance doesn’t include inter­est pay­ments.

    Greece, whose debt-to-GDP ratio is the high­est in Europe, is locked in talks with euro region gov­ern­ments and the Inter­na­tion­al Mon­e­tary Fund over the terms attached to its 240 bil­lion-euro bailout. Uncer­tain­ty over whether it will do enough to receive more mon­ey has trig­gered a liq­uid­i­ty squeeze, prompt­ing the Euro­pean Com­mis­sion to revise down deficit and debt fore­casts last week.

    The com­mis­sion now pre­dicts the country’s debt will be 174 per­cent of GDP next year, 15 per­cent­age points above the lev­el pro­ject­ed in Feb­ru­ary. And that assumes Prime Min­is­ter Alex­is Tsipras reach­es a deal to get pre­vi­ous­ly agreed aid flow­ing by June. The com­mis­sion pre­dicts that as defined in the bailout pro­gram there will be almost no sur­plus.

    Bud­get cuts aren’t the only thorny issue in the nego­ti­a­tions over the dis­burse­ment of the next emer­gency loans tranche for the cash-strapped econ­o­my. Dis­agree­ments remain over the retire­ment age, pen­sion cuts, pri­va­ti­za­tions and the government’s inten­tion to rein­state col­lec­tive bar­gain­ing restric­tions in the labor mar­ket, the offi­cial said.

    ...

    So Greece’s sur­plus falls into a deficit and the troika’s response? Just keep cut­ting until it’s a sur­plus again!

    ...
    The reduc­tions would bring the pri­ma­ry bud­get sur­plus in 2015 to just over 1 per­cent of gross domes­tic prod­uct, a tar­get Greek Inte­ri­or Min­is­ter Nikos Vout­sis said today is accept­able. With­out any change in fis­cal pol­i­cy, Greece would end 2015 with a bud­get deficit of about 0.5 per­cent of GDP, the offi­cial said. The so-called pri­ma­ry bud­get bal­ance doesn’t include inter­est pay­ments.
    ...

    Yes, Greece is pro­ject­ed to run a deficit of 0.5 per­cent of GDP this year instead of the sched­uled 1.5 per­cent and so what’s the troika’s response? Just keep cut­ting your way to pros­per­i­ty! And for Greece’s cred­i­tor that appears to mean cut­ting anoth­er 1.5 per­cent of the GDP to get it back up to a 1 per­cent sur­plus.

    But keep in mind that it’s actu­al­ly going to be much worse than a 1.5 per­cent hit to Greece’s GDP because, as Paul Krug­man remind­ed us back in Jan­u­ary, when you’re talk­ing about the rela­tion­ship between changes in gov­ern­ment spend­ing and the impact on deficits you can’t ignore the fact that mon­ey mul­ti­pli­ers mat­ter:

    The New York Times
    The Con­science of a Lib­er­al
    Greece: Think Flows, Not Stocks

    Paul Krug­man
    Jan­u­ary 26, 2015 7:26 pm

    How should we think about the bar­gain­ing that may or may not now take place between the new Greek gov­ern­ment and the troi­ka? (No bar­gain­ing if the troi­ka basi­cal­ly says no con­ces­sions.) Most dis­cus­sion is framed in terms of what hap­pens to the debt. But as both Daniel Davies and James Gal­braith point out — with very dif­fer­ent de fac­to val­ue judg­ments, but nev­er mind for now — at this point Greek debt, mea­sured as a stock, is not a very mean­ing­ful num­ber. After all, the great bulk of the debt is now offi­cial­ly held, the inter­est rate bears lit­tle rela­tion­ship to mar­ket prices, and the inter­est pay­ments come in part out of funds lent by the cred­i­tors. In a sense the debt is an account­ing fic­tion; it’s what­ev­er the gov­ern­ments try­ing to dic­tate terms to Greece decide to say it is.

    OK, I know it’s not quite that sim­ple — debt as a num­ber has polit­i­cal and psy­cho­log­i­cal impor­tance. But I think it helps clear things up to put all of that aside for a bit and focus on the aspect of the sit­u­a­tion that isn’t a mat­ter of def­i­n­i­tions: Greece’s pri­ma­ry sur­plus, the dif­fer­ence between what it takes in via tax­es and what it spends on things oth­er than inter­est. This sur­plus — which is a flow, not a stock — rep­re­sents the amount Greece is actu­al­ly pay­ing, in the form of real resources, to its cred­i­tors, as opposed to bor­row­ing funds to pay inter­est.

    Greece has been run­ning a pri­ma­ry sur­plus since 2013, and accord­ing to its agree­ments with the troi­ka it’s sup­posed to run a sur­plus of 4.5 per­cent of GDP for many years to come. What would it mean to relax that tar­get?

    It would not mean demand­ing that cred­i­tors throw good mon­ey after bad; every­one has already implic­it­ly acknowl­edged that the debt will nev­er be ful­ly paid at mar­ket rates, but Greece is mak­ing a trans­fer to its cred­i­tors by run­ning a pri­ma­ry sur­plus, and we’re just argu­ing now about how big that trans­fer will be.

    So let’s think of a max­i­mal­ist case, in which Greece stopped run­ning a pri­ma­ry sur­plus at all (this is not a pro­pos­al). You might think that this would let the Greeks spend an addi­tion­al 4.5 per­cent of GDP — but the ben­e­fits to Greece would actu­al­ly be much big­ger than that. Remem­ber, the main rea­son aus­ter­i­ty has been so harsh is that cut­ting spend­ing leads to eco­nom­ic con­trac­tion, which leads to low­er rev­enues, which forces fur­ther cuts to hit the bud­get tar­get. A relax­ation of aus­ter­i­ty would run this process in reverse; the extra spend­ing would mean a stronger econ­o­my, which means more rev­enue, which means that the pri­ma­ry sur­plus wouldn’t fall as much.

    Sup­pose that the mul­ti­pli­er is 1.3 — which is what IMF esti­mates seem to sug­gest — and that Greece can col­lect 40 per­cent of a rise in GDP in rev­enue (rough­ly match­ing its aver­age revenue/GDP). Then an addi­tion­al bil­lion euros in spend­ing should gen­er­ate around 0.5 bil­lion euros in rev­enue, reduc­ing the pri­ma­ry sur­plus by only 0.5 bil­lion euros.

    And if you fol­low that through, you find that drop­ping the require­ment that Greece run a pri­ma­ry sur­plus of 4.5 per­cent of GDP would allow spend­ing to rise by 9 per­cent of GDP — twice as much — and that this would raise GDP by 12 per­cent rel­a­tive to what it would have been oth­er­wise. Unem­ploy­ment would fall by around 10 per­cent­age points rel­a­tive to no relief.

    OK, this is not going to hap­pen — even in the best of cir­cum­stances, Syriza is going to be able to get a relax­ation of the pri­ma­ry sur­plus require­ment, not com­plete abro­ga­tion. But even a par­tial move in the direc­tion I’ve described could have quite sig­nif­i­cant pos­i­tive effects on Greek wel­fare.

    ...

    So, giv­en all the socioe­co­nom­ic awe­some­ness that could have occurred if Greece’s pri­ma­ry sur­plus­es were allowed to be con­vert­ed into gov­ern­ment stim­u­lus pack­ages, just what is cut­ting 1.5 per­cent of GDP in gov­ern­ment spend­ing going to do to Greece’s econ­o­my or its debt-to-GDP ratio that has troi­ka is so fix­at­ed on? We’ll find out! Again.

    Posted by Pterrafractyl | May 13, 2015, 2:37 pm
  22. The lat­est reports on the progress of the nego­ti­a­tions between Greece and the troi­ka describe an inter­est­ing jux­ta­po­si­tion of mood between dif­fer­ent par­ties. Greece’s gov­ern­ment has been pro­ject­ing an upbeat mes­sage. the troi­ka? Eh...

    The Inde­pen­dent
    Greece bailout: IMF chief Chris­tine Lagarde sees progress in talks with EU

    Ben Chu Author Biog­ra­phy

    Deputy Busi­ness edi­tor

    Wednes­day 20 May 2015

    The head of the Inter­na­tion­al Mon­e­tary Fund, Chris­tine Lagarde, has become the lat­est par­tic­i­pant in the gru­elling Greek eco­nom­ic stand-off to sound an opti­mistic note about the prospects of a res­o­lu­tion.

    Ms Lagarde said the IMF was mak­ing “some progress” in its nego­ti­a­tions with Athens. Her com­ments came after the Greek finance min­is­ter, Yanis Varo­ufakis, told Greek TV that a deal would be reached “in a week” and that leav­ing the sin­gle Euro­pean cur­ren­cy was “not in our thoughts”.

    The reports helped send Greece’s two-year sov­er­eign inter­est rates down 123 basis points to 22.26 per cent, and 10-year yields fell 24 basis points to 10.9 per cent.

    But Greece is fast run­ning out of mon­ey and man­aged to make a €750m repay­ment to the IMF last week only by using mon­ey raid­ed from its own account with the fund – which will short­ly have to be replaced. Anoth­er €300m repay­ment from Athens to the IMF is due on 5 June, and Greece is run­ning out of mon­ey to pay its own pub­lic sec­tor work­ers. Unless its euro­zone cred­i­tors agree to release a €7.2bn bailout tranche with­in the com­ing weeks, a default is like­ly.

    The Greek cri­sis will be under dis­cus­sion at the EU sum­mit in the Lat­vian cap­i­tal Riga on Fri­day. The two sides have been dead­locked over the issue of domes­tic eco­nom­ic reform, with the Syriza-led gov­ern­ment resist­ing cuts to pen­sions and fur­ther struc­tur­al labour mar­ket reforms.

    How­ev­er, the Euro­pean Com­mis­sion spokes­woman Mar­gari­tis Schi­nas sought to play down hopes of an immi­nent break­through in the talks. “More time and effort is need­ed to bridge the gaps on the remain­ing open issues,” she said. “We con­sid­er that progress is being made, albeit at a slow pace.”

    Jeroen Dijs­sel­bloem, the head of the Eurogroup of euro­zone finance min­is­ters, which must sign off on aid dis­burse­ments, said it was unlike­ly a deal on Greece would be struck in Riga.

    “It’s not on the agen­da for Fri­day” he told the Dutch broad­cast­er RTL. “I think it is unlike­ly.”

    ...

    Was­n’t that cheery.

    Well, in a way, it sort of was cheery, at least assum­ing the scep­ti­cal­ly cau­tious rhetoric com­ing out of the troi­ka was a reflec­tion of dis­ap­point­ment in their hopes of just bowl­ing over Greece and with lit­tle to no con­ces­sions. And that just might be the case if the fol­low­ing report on the revolt tak­ing place in Angela Merkel’s CDU is accu­rate. Might:

    Bloomberg News
    Merkel Said to Plan Address for Greece If Deal Reached

    by Arne Delfs, Bri­an Parkin, and Bir­git Jen­nen

    4:17 AM CDT
    May 19, 2015

    Ger­man Chan­cel­lor Angela Merkel is con­sid­er­ing deliv­er­ing a keynote address to make the case for aid­ing Greece as she faces down a poten­tial revolt from as much as a third of her bloc’s law­mak­ers.

    Merkel would hold the speech after Greece and its cred­i­tors agree on a deal with con­di­tions she deems strong enough to sell to par­lia­ment and the Ger­man pub­lic, accord­ing to two gov­ern­ment offi­cials. She would argue that a Greek exit from the euro area would risk caus­ing geopo­lit­i­cal insta­bil­i­ty in the region, said the offi­cials, who asked not to be iden­ti­fied because the dis­cus­sions are pri­vate.

    Merkel’s desire to keep Greece in the euro is fraught with polit­i­cal risk giv­en the lev­el of exas­per­a­tion in Ger­many with Prime Min­is­ter Alex­is Tsipras after four months of brinkman­ship. While some Ger­man pol­i­cy mak­ers have hard­ened their stance against help­ing Greece, oth­ers are hint­ing at more flex­i­bil­i­ty to avert a finan­cial col­lapse.

    “Should we seri­ous­ly go and pre­scribe in detail what the Greeks are allowed to spend and what rev­enue they can have?” Deputy Finance Min­is­ter Thomas Stef­fen said in an inter­view. “I say no. It’s the rough frame­work that has to be clear.

    Cau­cus lead­ers of Merkel’s par­ty are work­ing on the objec­tors, telling them they may be asked to approve fur­ther aid to ward off a default even if Greece refus­es to imple­ment all changes demand­ed by cred­i­tors, accord­ing to three oth­er par­ty offi­cials. Merkel has been call­ing small groups of dis­senters to the chan­cellery to tell them that, one of the peo­ple said. All the offi­cials asked not to be iden­ti­fied because the dis­cus­sions are pri­vate.

    Scal­ing Back

    Merkel’s bid to ral­ly her par­ty bloc behind fur­ther aid reflects her view that giv­ing up on Greece would be a broad­er set­back for Euro­pean uni­ty and influ­ence. While she has backed bailouts since Europe’s debt cri­sis spread from Greece in 2010, this may be her biggest test of per­sua­sion yet.

    As Euro­pean offi­cials warn that time is run­ning out for Greece’s finances, Merkel and French Pres­i­dent Fran­cois Hol­lande met in Berlin on Tues­day and pressed Tsipras to agree by May 31 on the con­di­tions to unlock finan­cial aid. A deal with Greece may com­prise as lit­tle as a third of the country’s pre­vi­ous com­mit­ments for eco­nom­ic pol­i­cy changes, said anoth­er Ger­man gov­ern­ment offi­cial who asked not to be iden­ti­fied.

    Greece’s gov­ern­ment still hasn’t rec­og­nized what it needs to do to end the impasse, a par­ty offi­cial quot­ed Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble as telling law­mak­ers from Merkel’s Chris­t­ian Demo­c­rat-led bloc at their week­ly closed cau­cus meet­ing in Berlin on Tues­day.

    ...

    Any sub­stan­tial changes to the con­di­tions for Greece’s 240 bil­lion-euro ($271 bil­lion) aid pro­gram need approval by the full Ger­man low­er house, or Bun­destag. As many as 100 of Merkel’s 311 law­mak­ers may still be hold­outs, one of the offi­cials said. Even so, Merkel has won Bun­destag back­ing for all bailouts since Europe’s debt cri­sis spread from Greece in 2010, part­ly with the sup­port of coali­tion part­ners and the oppo­si­tion Greens. Her coali­tion con­trols 504 of the Bundestag’s 631 seats.

    So it looks like Merkel’s gov­ern­ment is vague­ly sig­nal­ing the troika’s plans for either a tem­po­rary cred­it exten­sion to Greece in the event that Greece’s cash crunch results in a default:

    ...
    Cau­cus lead­ers of Merkel’s par­ty are work­ing on the objec­tors, telling them they may be asked to approve fur­ther aid to ward off a default even if Greece refus­es to imple­ment all changes demand­ed by cred­i­tors, accord­ing to three oth­er par­ty offi­cials. Merkel has been call­ing small groups of dis­senters to the chan­cellery to tell them that, one of the peo­ple said. All the offi­cials asked not to be iden­ti­fied because the dis­cus­sions are pri­vate.
    ...

    or else Merkel’s team is sug­gest­ed a more last­ing deal, but one where Greece ends up imple­ment “a third” of it’s “pre­vi­ous com­mit­ments for eco­nom­ic pol­i­cy change”:

    ...
    A deal with Greece may com­prise as lit­tle as a third of the country’s pre­vi­ous com­mit­ments for eco­nom­ic pol­i­cy changes, said anoth­er Ger­man gov­ern­ment offi­cial who asked not to be iden­ti­fied.

    ...

    It’s not real­ly clear what’s being hint­ed at in this report but it would prob­a­bly be the for­mer if Merkel can at all help it. And that’s cer­tain­ly possible...that there’s a near-term tem­po­rary cash life­line while nego­ti­a­tions are ongo­ing. The three areas the troi­ka has demands is “labor mar­ket reform”(making it eas­i­er to do mass lay­offs), “pen­sion reform”(gutting pen­sions), and “tax reform” (rais­ing tax­es). And Greece is will­ing to raise tax­es, but not gut the pen­sions or give a green light to the troika’s request­ed mass lay­offs.

    But also keep in mind that the aus­ter­i­ty is sched­uled to get much worse in com­ing years. And it’s get­ting worse so Greece can pay back its cred­i­tors even more. But Greece has to actu­al­ly run an aus­ter­i­ty-rid­dled econ­o­my that can gen­er­at­ed those 4.5% sur­plus­es (up from this year’s man­date 1.5% sur­plus) in order to actu­al­ly pay them back (or cut more to make up the gap). And if the troika’s pay back sched­ule hap­pens to be, oh, say, total­ly insane in an usu­ri­ous man­ner, that means a future “bailout” for Greece inevitable. Usury does that.

    So even if the com­pro­mise that the troi­ka reach­es with Greece is large­ly a con­tin­u­a­tion of the cur­rent dra­con­ian mea­sures, there’s still an incen­tive for the troi­ka to use the cur­rent cri­sis to give Greece a third “bailout” sim­ply because the troi­ka knows its poli­cies are so unwork­able due to the break­ing of Greece’s econ­o­my and soci­ety that anoth­er “bailout” is going to be required at some point any­ways even if Greece total­ly sticks with the plan.

    The pos­si­bil­i­ty that we’re look­ing a qua­si-default cou­pled with a “bailout”, but no ‘Grex­it’, seems increas­ing­ly like­ly over a ‘Grex­it’. It’s unclear if it’s going to be a humane “bailout”, but it’s entire­ly pos­si­ble that Greece’s will­ing­ness to walk, and the socioe­co­nom­ic dam­age that would do to the euro­zone, is exact­ly why:

    ...
    Yanis Varo­ufakis, told Greek TV that a deal would be reached “in a week” and that leav­ing the sin­gle Euro­pean cur­ren­cy was “not in our thoughts”.
    ...

    Greece’s gov­ern­ment runs out of cash soon and the troi­ka knows it. The mar­kets know it too, which is prob­a­bly a big rea­son why the troi­ka also cares (since it does­n’t nor­mal­ly seem to care about Greece’s wel­fare).

    The close­ly relat­ed Greek bank­ing cash crunch that the troi­ka cre­at­ed by stran­gling Greece’s cred­it sup­ply in recent months must also be weigh­ing on their minds unless bring­ing Greece’s finan­cial sys­tem to the point where a “bailout” is neces­si­tat­ed was some­how desired.

    So, since ongo­ing usury has always seemed to sort of be the troikan plan, anoth­er bailout just might be what the troi­ka ordered because that’s the only way the usury can con­tin­ue.

    But it’s also worth keep­ing mind that it’s entire­ly pos­si­ble that, despite the troika’s repeat­ed asser­tions about how a ‘Grex­it’ is “man­age­able”, Greece’s equal­ly adamant asser­tions that it’s not going to com­pro­mise on the “Red line” areas (gut­ting pen­sions and mass lay­offs)might actu­al­ly be win­ning the diplo­mat­ic game of ‘chick­en’ sim­ply because a full scale ‘Grex­it’ could be pret­ty risky for the whole “Euro­pean Project”.

    And if Merkel’s team is warn­ing that only “a third” of Greece’s “pre­vi­ous com­mit­ments” might be met in an future deal, that sounds like only one of the three key “reforms” that the troi­ka has been demand­ing all along (rais­ing tax­es, gut­ting pen­sions, and mak­ing it eas­i­er to do mass lay­offs in the near future) might actu­al­ly be met as part of what is hope­ful­ly a real bailout and not a “bailout”.

    Who knows, maybe a not-total­ly-hor­ri­ble deal is pos­si­ble. That’s the bar now, BTW, giv­en recent history...something not total­ly unfair­ly hor­ri­ble for Greece. That would be a big improve­ment. If a deal is worked out, hope­ful­ly it will be sig­nif­i­cant­ly bet­ter than total­ly unfair­ly hor­ri­ble. And that could hap­pen because even though a ‘Grex­it’ is offi­cial­ly “not in our thoughts” for Greece, accord­ing to Greece’s finance min­is­ter Yanis Yaro­ufakis, default for Greece via a cash crunch is clear­ly on the table since both Greece and the troi­ka are unable to over­come the pen­sion-gut­ting/­mass-lay­offs issue. And that means Greece’s gov­ern­ment could run out of mon­ey very soon and an uncon­trol­lable default hap­pens. And if that hap­pens, take a guess as to how enthu­si­as­tic Angela Merkel’s CDU base is going to be with Angela Merkel and her han­dling of the sit­u­a­tion.

    With the Greek cash crunch loom­ing, a strange new phase of the game of chick­en between Greece and the troi­ka is loom­ing too and it’s a phase where Greece will have a lot more lever­age than it did in the past because it’s going to have noth­ing to lose. And that time is get­ting clos­er.

    You don’t want to play ‘chick­en’ with din­ner.

    Posted by Pterrafractyl | May 19, 2015, 10:58 pm
  23. Yanis Varo­ufakis has a line in a new inter­view with Die Zeit that real­ly needs to become a meme: “It is frus­trat­ing that we are not able to speak with each oth­er in a con­text where argu­ments count more than rel­a­tive pow­er”:

    Reuters
    Varo­ufakis says Ger­many’s Schaeu­ble makes mis­takes on Greece

    Wed May 20, 2015 5:05am EDT

    May 20 Greek Finance Min­is­ter Yanis Varo­ufakis, who has clashed with Ger­many’s Wolf­gang Schaeu­ble repeat­ed­ly over nego­ti­a­tions on his coun­try’s debt and eco­nom­ic reforms, has told a Ger­man week­ly that Schaeu­ble makes mis­takes in his analy­sis of Greece.

    The left-wing econ­o­mist, asked by Die Zeit in excerpts of an inter­view to be pub­lished on Thurs­day whether the con­ser­v­a­tive finance Ger­man min­is­ter com­mits such mis­takes, answered: “Yes, he does.”

    “It is frus­trat­ing that we are not able to speak with each oth­er in a con­text where argu­ments count more than rel­a­tive pow­er,” said Varo­ufakis.

    Take a moment and think about all the dif­fer­ent sit­u­a­tions where that sen­ti­ment would be appro­pri­ate. Does­n’t that more or less sum­ma­rize the human con­di­tion? And not just humans. That’s got to be like a uni­ver­sal sen­ti­ment of life every­where across space and time.

    Woah. That’s deep.

    Let the meme­ing com­mence.

    Posted by Pterrafractyl | May 20, 2015, 7:24 am
  24. Spain’s rul­ing con­ser­v­a­tive par­ty just had its worst elec­toral show­ing in more than two decades. Imag­ine that:

    Irish Exam­in­er
    Span­ish Prime Minister’s plans in doubt after poll bat­ter­ing

    Julien Toy­er, Madrid
    Tues­day, May 26, 2015

    To any­one who doubt­ed his re-elec­tion strat­e­gy, Span­ish Prime Min­is­ter Mar­i­ano Rajoy has had a sim­ple answer: “Trust me”.

    Now, a bat­ter­ing in local polls has cast doubt on his plan that an eco­nom­ic recov­ery will secure him a sec­ond term lat­er this year.

    In six months’ time, when the next gen­er­al elec­tion is due, the Span­ish econ­o­my will be grow­ing at 3% and half a mil­lion jobs will have been cre­at­ed. This was Rajoy’s mes­sage as he cam­paigned across Spain for his con­ser­v­a­tive People’s Par­ty (PP) before the munic­i­pal and region­al polls.

    But many vot­ers have hard­ly felt the recov­ery and, fol­low­ing a string of cor­rup­tion scan­dals that have touched the rul­ing par­ty, they turned on Sun­day to new forces such as the anti-aus­ter­i­ty Podemos (‘We Can’) and mar­ket-friend­ly Ciu­dadanos (‘Cit­i­zens’).

    “It’s time to reflect. The par­ty is bad­ly hit... For sure, we’re going the wrong way. We are the par­ty that won the most votes but vot­ers sent us a mes­sage of anger,” said a senior PP mem­ber, who declined to be named.

    “We haven’t seri­ous­ly done self-crit­i­cism ... Some­thing is not work­ing and we have to prop­er­ly diag­nose what,” he said before a meet­ing of the PP’s exec­u­tive com­mit­tee.

    While the PP got more votes than any oth­er par­ty in the munic­i­pal polls as well as in nine of the 13 regions that vot­ed over the week­end, it suf­fered its worst elec­toral result in more than two decades.

    It lost about 2.5 mil­lion votes from the last local elec­tions four years ago and close to 5 mil­lion from its land­slide vic­to­ry in the 2011 gen­er­al elec­tion.

    Even loy­al PP vot­ers believe their par­ty is head­ing for more trou­ble unless it changes. “They need to find a way to give jobs to the young. The mes­sage that the econ­o­my is rebound­ing doesn’t reach peo­ple,” said Sal­vador Sori­ano, a retired cook from Valen­cia. “They promised a lot, but they’re falling short,” he said.

    Span­ish unem­ploy­ment is almost 24% and more than dou­ble that for the young. Even under the government’s fore­casts, the over­all job­less rate will still be 17.7% in 2017. At a local lev­el, the PP faces a new era of coali­tion and com­pro­mise for which it is ill-pre­pared.

    Rajoy — whose par­ty must form pacts with some of the new groups if it is to retain pow­er in a num­ber of regions, includ­ing the Madrid com­mu­ni­ty — has cam­paigned hard against them. Ear­li­er this month he said they were “gangs” and a threat to Spain’s polit­i­cal and eco­nom­ic sta­bil­i­ty.

    Polit­i­cal ana­lysts say left-wing blocs could push the PP out of pow­er in half a dozen regions. On top of this, the cen­ter-right upstart Ciu­dadanos, ini­tial­ly seen as a coali­tion part­ner for the PP, may avoid help­ing Rajoy for now.

    ...

    Huh. It’s almost as if a pop­u­la­tion where “unem­ploy­ment is almost 24% and more than dou­ble that for the young...Even under the government’s fore­casts, the over­all job­less rate will still be 17.7% in 2017,” had a hard time bask­ing in the glo­ry of Spain’s aus­ter­i­ty suc­cess­es. It’s almost as if peo­ple are too soft to accept a ‘lost gen­er­a­tion’ in stride these days. What’s the mat­ter with the kids today?

    So Spain is increas­ing­ly flirt­ing with Greece-style anti-aus­ter­i­ty coali­tion, and unless Spain’s aus­ter­i­ty poli­cies can some­how do a lot bet­ter than a project 17.7% unem­ploy­ment rate in 2017 (which will pre­sum­ably be dou­ble that for youths), it’s real­ly unclear what’s going to end the trend because even when things seem to start get­ting a lit­tle bet­ter after years of aus­ter­i­ty, it’s very unclear why peo­ple should­n’t feel like things are still per­ma­nent­ly worse than they used to be since the whole idea behind aus­ter­i­ty is that dis­man­tling help­ful gov­ern­ment ser­vices and mak­ing aver­age peo­ple more vul­ner­a­ble to the bru­tal­i­ties of mar­ket-dynam­ics and employ­er monop­sonies will some­how cre­ate a func­tion­al, har­mo­nized econ­o­my and a sus­tain­ably bet­ter tomor­row. It’s not real­ly a very con­fi­dence-induc­ing sales-patch, and yet one of the aus­ter­i­ty sell­ing points is sup­posed to be that aus­ter­i­ty will please the mar­ket’s ‘Con­fi­dence Fairies’.

    It’s one of the para­dox­es of the aus­ter­i­ty scheme: Busi­ness inter­ests are sup­posed to be swelling with con­fi­dence from the very same poli­cies that fill aver­age peo­ple with despair. But regard­less of these inter­nal con­tra­dic­tions, that’s the plan:

    Bloomberg Busi­ness
    Schaeu­ble Expects Con­flict at Dres­den G‑7 Over Aus­ter­i­ty Pol­i­cy

    by Bri­an Parkin
    9:55 AM CDT May 23, 2015

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble expects a polit­i­cal tus­sle with his part­ners over aus­ter­i­ty pol­i­cy when G‑7 finance min­is­ters meet on May 27-May 29 in Dres­den.

    Germany’s advo­ca­cy of bud­get cuts to heal euro-zone woes will come under attack at the meet­ing, Schaeu­ble said in a pam­phlet dis­trib­uted Sat­ur­day. The Ger­man gov­ern­ment will face “demand-side” oppo­nents of its pol­i­cy in Dres­den, he said with­out men­tion­ing France or Italy or the U.S.

    “’Demand-side’ advo­cates will make clear in Dres­den that cut­ting pub­lic spend­ing leads to weak­er demand for goods and ser­vices,” the min­is­ter said in a pam­phlet dis­trib­uted in the Dres­den news­pa­per Saech­sis­che Zeitung. Germany’s posi­tion is that “sol­id pub­lic finance” boosts invest­ment and growth, he said.

    Risks to Europe’s eco­nom­ic out­look stem­ming from the unre­solved Greek cri­sis as well con­cern over the U.S. trade gap may fuse an alliance of France, Italy and the U.S. in Dres­den. All three states fret that Germany’s rig­or­ous advo­ca­cy of bud­get aus­ter­i­ty may be hold­ing back eco­nom­ic growth in Europe.

    U.S. Trea­sury Sec­re­tary Jacob J. Lew urged Ger­many to boost pub­lic invest­ment to spur imports from Europe and spark a cycle of eco­nom­ic growth that would also ben­e­fit the U.S. The U.S. trade gap widened in March to the biggest in more than six years while Ger­many in 2014 again report­ed a record sur­plus.

    The U.S. has also called for a quick­er fix of Greece’s prob­lems in a sign that it views Germany’s unmov­ing insis­tence that Greece ful­fill bailout terms as a risk. Lew said Fri­day that fail­ure to reach a deal quick­ly would cre­ate hard­ship for Greece, uncer­tain­ties for Europe and the glob­al econ­o­my.

    Schaeu­ble remains adamant that Germany’s stance on sound bud­get­ing is the right one, if unpop­u­lar.

    “Fur­ther con­vinc­ing needs to be done” at Dres­den, he said in his pam­phlet.

    ...

    Note Ger­man Finance Min­is­ter Wolf­gang Schaeuble’s words of con­fi­dence in the ‘Con­fi­dence Fairy’ form of faith heal­ing:

    ...

    Germany’s advo­ca­cy of bud­get cuts to heal euro-zone woes will come under attack at the meet­ing, Schaeu­ble said in a pam­phlet dis­trib­uted Sat­ur­day. The Ger­man gov­ern­ment will face “demand-side” oppo­nents of its pol­i­cy in Dres­den, he said with­out men­tion­ing France or Italy or the U.S

    “’Demand-side’ advo­cates will make clear in Dres­den that cut­ting pub­lic spend­ing leads to weak­er demand for goods and ser­vices,” the min­is­ter said in a pam­phlet dis­trib­uted in the Dres­den news­pa­per Saech­sis­che Zeitung. Germany’s posi­tion is that “sol­id pub­lic finance” boosts invest­ment and growth, he said.

    ...

    That’s the line in the sand for the euro­zone and larg­er EU: Con­fi­dence in the ‘Con­fi­dence Fairy’ must not be ques­tioned. It’s an arti­cle of faith. But with the rab­ble grow­ing increas­ing­ly rest­less, it’s very unclear how much con­fi­dence we should have in Berlin’s abil­i­ty to hold the ‘Con­fi­dence Fairy’ line. It’s kind of epic con­sid­er­ing the euro­zone has becom­ing a Tro­jan Horse for the return of old school far right eco­nom­ic thought.

    So, giv­en all that, you have to won­der how much con­fi­dence the ‘Con­fi­dence Fairy’ back­ers have in their abil­i­ties to keep con­fi­dence in the aus­ter­i­ty scheme in the event of a ‘Grex­it’. Because the ‘Con­fi­dence Fairy’ takes a LONG time to work(because it does­n’t), and that means Greece could end up ‘Grex­it­ing’ and bounc­ing back
    while the rest of Europe is still wait­ing for the ‘Con­fi­dence Fairy’ to work its fairy mag­ic:

    The New York Times
    The Con­science of a Lib­er­al
    Grex­it and the Morn­ing After

    by Paul Krug­man
    May 25 9:24 am

    We just had anoth­er elec­toral earth­quake in the euro area: Podemos-backed can­di­dates have won local elec­tions in Madrid and Barcelona. And I hope that the IFKAT — the insti­tu­tions for­mer­ly known as the troi­ka — are pay­ing atten­tion.

    The essence of the Greek sit­u­a­tion is that the actu­al para­me­ters of a short-run deal are clear and unavoid­able: Greece can’t run a pri­ma­ry bud­get deficit, because nobody will lend it new mon­ey, and it won’t (and basi­cal­ly can’t) run a large pri­ma­ry sur­plus, because you can’t squeeze even more blood from that stone. So you would think that an agree­ment for Greece to run a mod­est pri­ma­ry sur­plus over the next few years would be easy to reach — that is what will hap­pen, so why not make it offi­cial?

    But now the IMF is play­ing bad cop, declar­ing that it can­not release funds until Syriza toes the line on pen­sions and labor mar­ket reform. The lat­ter is dubi­ous eco­nom­ics — the IMF’s own research doesn’t sup­port enthu­si­asm about struc­tur­al reforms, espe­cial­ly in the labor mar­ket. The for­mer prob­a­bly rec­og­nizes a real prob­lem — Greece prob­a­bly can’t deliv­er what it has promised pen­sion­ers — but why should this be an issue over and above the gen­er­al ques­tion of the pri­ma­ry sur­plus.

    What I would urge every­one to do is ask what hap­pens if Greece is in fact pushed out of the euro. (Yes, Grex­it — ugly word, but we’re stuck with it.)

    It would sure­ly be ugly in Greece, at least at first. Right now the core euro coun­tries believe that the rest of the euro area can han­dle it, which might be true. Bear in mind, how­ev­er, that the sup­posed fire­wall of ECB sup­port has nev­er actu­al­ly been test­ed. If mar­kets lose faith and the time for ECB pur­chas­es of Span­ish or Ital­ian bonds aris­es, will it real­ly hap­pen?

    But the big­ger ques­tion is what hap­pens a year or two after Grex­it, where the real risk to the euro is not that Greece will fail but that it will suc­ceed. Sup­pose that a great­ly deval­ued new drach­ma brings a flood of British beer-drinkers to the Ion­ian Sea, and Greece starts to recov­er. This would great­ly encour­age chal­lengers to aus­ter­i­ty and inter­nal deval­u­a­tion else­where.

    Think about it. Just the oth­er day the Very Seri­ous Euro­peans were hail­ing Spain as a great suc­cess sto­ry, a vin­di­ca­tion of the whole pro­gram. Evi­dent­ly the Span­ish peo­ple don’t agree. And if the anti-estab­lish­ment forces have a recov­er­ing Greece to point to, the dis­cred­it­ing of the estab­lish­ment will accel­er­ate.

    One con­clu­sion, I guess, is that Ger­many should try to sab­o­tage Greece post-exit. But I hope that will be con­sid­ered unac­cept­able.

    So think about it, IFKATs: are you real­ly sure you want to start going down this road?

    “So think about it, IFKATs: are you real­ly sure you want to start going down this road?”
    Paul Krug­man asks an impor­tant that’s only get­ting more impor­tant each day we get clos­er a Greek default and, pos­si­bly, a ‘Grex­it’. As we saw above, the rab­ble just keeps get­ting more and more rest­less and one of these years we just might see a Euro­pean pop­u­lace with a very dif­fer­ent per­spec­tive on how things should be run. And if Greece ends up ‘Grex­it­ing’ and bounces back in a cou­ple years, that real­ly is a threat to the sta­tus quo of default right-wing eco­nom­ic poli­cies that treat pover­ty as a solu­tion to life’s prob­lems. Aus­ter­i­ty-o-nomics is poten­tial­ly at risk if Greece does­n’t fall into a socioe­co­nom­ic black hole.

    And that’s why it’s so chill­ing that the foll­wing has to be said (and it does need to be said):

    ...

    One con­clu­sion, I guess, is that Ger­many should try to sab­o­tage Greece post-exit. But I hope that will be con­sid­ered unac­cept­able.

    ...

    Yes, let’s all hope that sab­o­tag­ing Greece post-‘Grexit’ will be con­sid­ered unac­cept­able.

    But giv­en that the troi­ka appears to be will­ing to play ‘chick­en’ in such an uncom­pro­mis­ing man­ner(in sharp con­trast to the many con­ces­sions Greece’s gov­ern­ment has made and con­tin­ues to offer) would it actu­al­ly be seen as unac­cept­able if the rest of Europe (and maybe the IMF) were just total jerks to Greece and basi­cal­ly tried to make a bad sit­u­a­tion worse? If so, why? Mak­ing a bad sit­u­a­tion worse for Greece has been seen as the med­i­cine Greece needs all along and that’s been seen as pret­ty accept­able so far.

    So we still have to wait and see if a ‘Grex­it’ hap­pens at all but it’s cer­tain­ly com­ing down to the wire. And if it does hap­pen, giv­en the risks a suc­cess­ful post-‘Grexit’ Greece pos­es to the pre­vail­ing right-wing pro-aus­ter­i­ty eco­nom­ic the­o­ries that now con­trol most of Europe, it’s going to be very impor­tant to remem­ber that coun­tries that want to see an eas­ing of aus­ter­i­ty poli­ciesshould real­ly sup­port Greece post ‘Grex­it’ and not allow it to be sab­o­taged. That should­n’t real­ly have to be said, but here we are.

    And should Greece ‘Grex­it’ and the rest of Europe’s gov­ern­ments sab­o­tage Greece so the rab­ble does­n’t get the wrong idea about aus­ter­i­ty, keep mind that it will prob­a­bly be pret­ty obvi­ous that sab­o­tage is what’s hap­pen­ing (like so much of the con­tem­po­rary troikan treach­ery). And if the rab­ble becomes aware that that’s hap­pen­ing, there’s a whole new ‘Con­fi­dence Fairy’ that gets to works its mag­ic over not just the Greeks but aver­age peo­ple across the EU that don’t want to live under a per­ma­nent right-wing eco­nom­ic regime. If you can’t ‘-exit’ with­out the beat­ings con­tin­u­ing, the ‘Despair Fairy’ makes a vis­it. Despair is a form of ‘con­fi­dence’ too and, unlike aus­ter­i­ty poli­cies, it actu­al­ly works.

    “So think about it, IFKATs: are you real­ly sure you want to start going down this road?”

    Posted by Pterrafractyl | May 25, 2015, 9:33 pm
  25. When you’re try­ing to squeeze blood from a stone, asphyx­i­at­ing it pre­sum­ably isn’t a con­cern. But in the case of the troikan squeeze play against Greece’s finan­cial sys­tem, you’d think get­ting your fin­ger­prints all over the neck of Greek bank­ing sys­tem would be some­thing the troi­ka wants to avoid. The troi­ka appar­ent­ly does­n’t care about that either:

    UPDATE 1‑ECB does not raise emer­gency fund­ing cap for Greek banks ‑source

    May 27 (Reuters) — The Euro­pean Cen­tral Bank on Wednes­day did not raise a ceil­ing on emer­gency fund­ing for Greek banks in a week­ly review for the first time since Feb­ru­ary, a bank­ing source said, adding finan­cial pres­sure as the coun­try scram­bles to stay sol­vent.

    Greek banks have sur­vived on the emer­gency liq­uid­i­ty assis­tance (ELA) since large­ly los­ing access to cap­i­tal mar­kets and the ECB’s main fund­ing win­dow.

    The ECB has been rais­ing the cap on ELA in incre­ments, but there has been oppo­si­tion from with­in the bank to doing so each week on con­cerns it helps finance the Greek gov­ern­ment.

    The bank­ing source said the ceil­ing was unchanged because deposit out­flows had slowed to low lev­els, leav­ing an untapped liq­uid­i­ty cush­ion.

    “This leaves an unused liq­uid­i­ty buffer of 3 bil­lion euros,” the bank­ing source said. “The rea­son for not rais­ing the ceil­ing was that deposit out­flows sta­bilised at very low lev­els.”

    ...

    But Greek news­pa­per Kathimeri­ni report­ed on Wednes­day that deposit out­flows had picked up in the last days on wor­ries over the pos­si­bil­i­ty of cap­i­tal con­trols. Offi­cial data on deposit out­flows in April will be released on Thurs­day.

    The ECB declined to com­ment.

    While prop­ping up the bank­ing sys­tem, the incre­men­tal hikes in ELA each week have also kept pres­sure on Athens to strike a deal with its euro zone and Inter­na­tion­al Mon­e­tary Fund cred­i­tors over eco­nom­ic reforms required to unlock remain­ing bailout aid.

    The head of Ger­many’s Bun­des­bank crit­i­cised the Euro­pean Cen­tral Bank ear­li­er this month, say­ing emer­gency fund­ing for Greek banks broke the taboo of financ­ing gov­ern­ments and it was not up to cen­tral banks to decide who was or was­n’t in the euro zone.

    Hawks on the ECB’s Gov­ern­ing Coun­cil have also pushed for rais­ing the hair­cut — or val­u­a­tion dis­count — on the col­lat­er­al Greek lenders sub­mit to draw ELA fund­ing but there was no deci­sion tak­en at Wednes­day’s tele­con­fer­ence, the source said.

    Increas­ing the hair­cut would effec­tive­ly reduce the val­ue of secu­ri­ty that Greek banks can offer and con­se­quent­ly the amount of ELA they can draw down.

    A poten­tial default by Athens on IMF loan repay­ments next month could be a trig­ger for the ECB to raise the hair­cut as it would sig­nal a dete­ri­o­ra­tion in cred­it­wor­thi­ness.

    So...

    ...
    The ECB has been rais­ing the cap on ELA in incre­ments, but there has been oppo­si­tion from with­in the bank to doing so each week on con­cerns it helps finance the Greek gov­ern­ment.

    ...

    Hawks on the ECB’s Gov­ern­ing Coun­cil have also pushed for rais­ing the hair­cut — or val­u­a­tion dis­count — on the col­lat­er­al Greek lenders sub­mit to draw ELA fund­ing but there was no deci­sion tak­en at Wednes­day’s tele­con­fer­ence, the source said.

    Increas­ing the hair­cut would effec­tive­ly reduce the val­ue of secu­ri­ty that Greek banks can offer and con­se­quent­ly the amount of ELA they can draw down.

    A poten­tial default by Athens on IMF loan repay­ments next month could be a trig­ger for the ECB to raise the hair­cut as it would sig­nal a dete­ri­o­ra­tion in cred­it­wor­thi­ness.

    ...

    Yes, the emer­gency cred­it that’s keep­ing Greece’s banks afloat need to be cur­tailed out of fears that this could pro­vide indi­rect financ­ing to Greece’s gov­ern­ment. But access to the emer­gency fund­ing may need to be cur­tailed the clos­er Greece’s gov­ern­ment gets to default.

    Also, too much is not enough. Of course.

    Posted by Pterrafractyl | May 27, 2015, 11:51 am
  26. With 1.6 bil­lion euros in pay­ments owed to the IMF in June, and even more owed to cred­i­tors in July, Greece keeps inch­ing clos­er and clos­er to, if not a ‘Grex­it’, at least default of some sort. Only an agree­ment with the troi­ka that results in a release of more ‘bailout’ funds (which most­ly go to cred­i­tors like the IMF) can avoid it. And that all why, with each day of nego­ti­a­tions that seem to be going no where, we’re prob­a­bly going to see more and more arti­cles where every­one but Greece blames Greece for the lack of progress while simul­ta­ne­ous­ly point­ing out that the no con­ces­sions with Greece are under any seri­ous con­sid­er­a­tion by the troi­ka. For whom does the bell toll in the euro­zone? A bunch of blind, deaf, and dumb elites and the rest of the rab­ble:

    Bloomberg News
    Greece’s Endgame Nears as Tsipras Warns Bell May Toll for Europe

    by Nikos Chrysoloras
    4:01 PM CDT May 31, 2015

    Greece faces a week of tough deci­sions as nego­ti­a­tions over a finan­cial life­line edged clos­er toward endgame with cred­i­tors show­ing no signs of budg­ing over what it will take for them to release more mon­ey.

    As anoth­er of the government’s self-imposed dead­lines for secur­ing a deal on its finances slipped away, dis­agree­ments between the two sides on bud­get tar­gets per­sist­ed, a per­son famil­iar with the mat­ter said. Greece must make four pay­ments total­ing almost 1.6 bil­lion euros ($1.78 bil­lion) to the Inter­na­tion­al Mon­e­tary Fund this month and its bailout pack­age backed by the euro region expires at the end of June.

    While Prime Min­is­ter Alex­is Tsipras wrote in French news­pa­per Le Monde that any intran­si­gence wasn’t the fault of his four-month-old admin­is­tra­tion, a senior Ger­man law­mak­er said it was down to Greece to adhere to reforms agreed to before Tsipras took pow­er. An inter­na­tion­al offi­cial who asked not to be iden­ti­fied said cred­i­tors were dis­cussing a deal to be pre­sent­ed to Greece as a way of end­ing the impasse.

    “The lack of an agree­ment so far is not due to the sup­posed intran­si­gent, uncom­pro­mis­ing and incom­pre­hen­si­ble Greek stance,” Tsipras wrote in the arti­cle pub­lished on Sun­day. “It is due to the insis­tence of cer­tain insti­tu­tion­al actors on sub­mit­ting absurd pro­pos­als and dis­play­ing a total indif­fer­ence to the recent demo­c­ra­t­ic choice of the Greek peo­ple.”

    With tech­ni­cal talks yield­ing no break­through, Tsipras is seek­ing the inter­ven­tion of Ger­man Chan­cel­lor Angela Merkel and French Pres­i­dent Fran­cois Hol­lande. The three lead­ers held a call on Sun­day to dis­cuss what hap­pens next, with a Ger­man gov­ern­ment offi­cial call­ing them “con­struc­tive.” Merkel and Hol­lande are sched­uled to meet in Berlin on Mon­day.

    Stick­ing Points

    With nego­ti­a­tions now in their fifth month, cred­i­tor insti­tu­tions are seek­ing con­crete action in areas includ­ing the pen­sion sys­tem, labor mar­ket and sales tax.

    Tsipras said in his arti­cle that Greek plans for col­lec­tive bar­gain­ing by unions adhere to norms in the euro region while reforms for retirees man­dat­ed by the country’s bailout agree­ment aren’t fit for a civ­i­lized coun­try.

    The biggest hur­dle is their insis­tence on addi­tion­al fis­cal mea­sures of as much as 3 bil­lion euros, a Greek offi­cial with knowl­edge of the mat­ter said. The offi­cial asked not to be named, as nego­ti­a­tions are pri­vate and ongo­ing.

    While Greece’s part­ners are aim­ing to do their utmost to keep the coun­try in the euro, “the ball is in Greece’s court” to ful­fill the pledges made in the cur­rent aid pack­age, Volk­er Kaud­er, the par­lia­men­tary chief of Merkel’s Chris­t­ian Demo­c­rat-led bloc told ARD TV on Sun­day.

    One Mes­sage

    Offi­cials rep­re­sent­ing cred­i­tor insti­tu­tions spent the week­end work­ing to con­verge among them­selves on all key issues relat­ed to the Greek bailout review, a per­son famil­iar with the mat­ter said. The com­mon posi­tion may be com­mu­ni­cat­ed to Tsipras by Euro­pean polit­i­cal lead­ers, the per­son said, ask­ing not to be named, as he wasn’t autho­rized to speak pub­licly on the mat­ter.

    Merkel will like­ly be more involved as time runs out between this week and a meet­ing of euro-region finance min­is­ters on June 18 in Lux­em­bourg, the per­son said. Accord­ing to the offi­cial, the agree­ment may be deliv­ered by lead­ers, but it will have been put togeth­er by the IMF, the Euro­pean Cen­tral Bank and the Euro­pean Com­mis­sion.

    Greece’s anti-aus­ter­i­ty gov­ern­ment has repeat­ed­ly expressed con­fi­dence that an agree­ment to unlock bailout funds and avert default is with­in reach, only to be rebuffed by offi­cials rep­re­sent­ing the cred­i­tors. The stand­off over the terms attached to emer­gency loans has trig­gered a liq­uid­i­ty squeeze and record deposit with­drawals, tip­ping the econ­o­my back into reces­sion.

    Gov­ern­ment spokesman Gabriel Sakel­lar­idis had told reporters in Athens on May 28 that a deal with cred­i­tors could be reached by Sun­day. That day, like many pre­vi­ous dates in recent weeks, came and went.

    ...

    Fail­ure to strike an agree­ment risks leav­ing Europe’s most indebt­ed state unable to meet its debt oblig­a­tions.

    As the clock ticks, finance min­istry offi­cials have told Greece there’s not time to get a dis­burse­ment approved by the cur­ren­cy bloc’s par­lia­ments unless they reach at least a tech­ni­cal agree­ment by the begin­ning of June.

    Econ­o­my Min­is­ter George Stathakis said in an inter­view with Italy’s Cor­riere del­la Sera that he expects a “tech­ni­cal solu­tion” with Greece’s cred­i­tors “in a few days.” The accord would be fol­lowed by a meet­ing of euro-area finance min­is­ters to free up resources. Stathakis reit­er­at­ed that there will be no prob­lem with the first pay­ment due to the IMF on June 5.

    In his Le Monde arti­cle, Tsipras said com­ing up with a solu­tion is vital for all of Europe.

    “If some, how­ev­er, think or want to believe that this deci­sion con­cerns only Greece, they are mak­ing a grave mis­take,” he wrote. “I would sug­gest that they re-read Hemingway’s mas­ter­piece, ‘For Whom the Bell Tolls’.”

    So Tsipras “is seek­ing the inter­ven­tion of Ger­man Chan­cel­lor Angela Merkel and French Pres­i­dent Fran­cois Hol­lande” to help find a com­pro­mise. Soon. And Volk­er Kaud­er, the par­lia­men­tary chief of Merkel’s Chris­t­ian Demo­c­rat-led bloc told ARD TV on Sunday“the ball is in Greece’s court” to ful­fill the pledges made in the cur­rent aid pack­age, which is anoth­er way of say­ing that no com­pro­mise will be made:

    ...

    While Prime Min­is­ter Alex­is Tsipras wrote in French news­pa­per Le Monde that any intran­si­gence wasn’t the fault of his four-month-old admin­is­tra­tion, a senior Ger­man law­mak­er said it was down to Greece to adhere to reforms agreed to before Tsipras took pow­er. An inter­na­tion­al offi­cial who asked not to be iden­ti­fied said cred­i­tors were dis­cussing a deal to be pre­sent­ed to Greece as a way of end­ing the impasse.

    “The lack of an agree­ment so far is not due to the sup­posed intran­si­gent, uncom­pro­mis­ing and incom­pre­hen­si­ble Greek stance,” Tsipras wrote in the arti­cle pub­lished on Sun­day. “It is due to the insis­tence of cer­tain insti­tu­tion­al actors on sub­mit­ting absurd pro­pos­als and dis­play­ing a total indif­fer­ence to the recent demo­c­ra­t­ic choice of the Greek peo­ple.”

    With tech­ni­cal talks yield­ing no break­through, Tsipras is seek­ing the inter­ven­tion of Ger­man Chan­cel­lor Angela Merkel and French Pres­i­dent Fran­cois Hol­lande. The three lead­ers held a call on Sun­day to dis­cuss what hap­pens next, with a Ger­man gov­ern­ment offi­cial call­ing them “con­struc­tive.” Merkel and Hol­lande are sched­uled to meet in Berlin on Mon­day.

    ...

    The biggest hur­dle is their insis­tence on addi­tion­al fis­cal mea­sures of as much as 3 bil­lion euros, a Greek offi­cial with knowl­edge of the mat­ter said. The offi­cial asked not to be named, as nego­ti­a­tions are pri­vate and ongo­ing.

    While Greece’s part­ners are aim­ing to do their utmost to keep the coun­try in the euro, “the ball is in Greece’s court” to ful­fill the pledges made in the cur­rent aid pack­age, Volk­er Kaud­er, the par­lia­men­tary chief of Merkel’s Chris­t­ian Demo­c­rat-led bloc told ARD TV on Sun­day.

    One Mes­sage

    Offi­cials rep­re­sent­ing cred­i­tor insti­tu­tions spent the week­end work­ing to con­verge among them­selves on all key issues relat­ed to the Greek bailout review, a per­son famil­iar with the mat­ter said. The com­mon posi­tion may be com­mu­ni­cat­ed to Tsipras by Euro­pean polit­i­cal lead­ers, the per­son said, ask­ing not to be named, as he wasn’t autho­rized to speak pub­licly on the mat­ter.

    Merkel will like­ly be more involved as time runs out between this week and a meet­ing of euro-region finance min­is­ters on June 18 in Lux­em­bourg, the per­son said. Accord­ing to the offi­cial, the agree­ment may be deliv­ered by lead­ers, but it will have been put togeth­er by the IMF, the Euro­pean Cen­tral Bank and the Euro­pean Com­mis­sion.

    ...

    “Merkel will like­ly be more involved as time runs out between this week and a meet­ing of euro-region finance min­is­ters on June 18 in Lux­em­bourg, the per­son said.” Yep. That’s pret­ty much how the euro­zone cri­sis works. Merkel “gets involved”, and deci­sions are made. And as we can see from the con­tin­ued insis­tence by Merkel and her part on no mean­ing­ful con­ces­sions at all, it’s look­ing more and more like that troika’s deci­sions for how it would nego­ti­ate with Greece dur­ing the four month nego­ti­a­tion peri­od that the Greece and the troi­ka agreed to back in Feb­ru­ary, were made by Angela back in Feb­ru­ary:

    The Guardian
    Ger­many refus­es Greece an hon­ourable sur­ren­der over aus­ter­i­ty

    Athens’ deci­sion to accept a euro­zone loan exten­sion shows the troi­ka did not real­ly want to nego­ti­ate with Syriza — it want­ed capit­u­la­tion

    Lar­ry Elliott

    Thurs­day 19 Feb­ru­ary 2015 07.24 EST

    There is a phrase for what Ger­many is seek­ing to do to Greece: a Carthagin­ian peace. It dates back to the Punic wars when Rome emerged vic­to­ri­ous in its long strug­gle with Carthage but refused to allow its oppo­nent the chance of an hon­ourable sur­ren­der. Instead, it enforced a bru­tal set­tle­ment, burn­ing Carthage to the ground and enslav­ing those inhab­i­tants it did not mas­sacre.

    A Carthagin­ian peace is what is being offered to Alex­is Tsipras. On Thurs­day, the Greek prime min­is­ter made it clear that he was will­ing to see the white flag of sur­ren­der flut­ter over Athens. He accept­ed that he would have to swal­low most of the con­di­tions demand­ed of him by Greece’s euro­zone part­ners but asked for a few con­ces­sions to sug­ar the pill.

    Wolf­gang Schaeu­ble, Germany’s finance min­is­ter, imme­di­ate­ly slapped Tsipras down. What Greece was propos­ing was unac­cept­able, Schaeu­ble said. Unless the Ger­mans are bluff­ing, and there’s noth­ing to sug­gest that they are, it leaves Greece with a bina­ry choice: abject sur­ren­der or going nuclear.

    Abject sur­ren­der means that Tsipras would have to explain to the Greek peo­ple why he was aban­don­ing the poli­cies on which he won the elec­tion less than a month ago. Going nuclear would involve cap­i­tal con­trols, fresh elec­tions on a “who gov­erns Greece” basis and pos­si­ble exit from the sin­gle cur­ren­cy.

    Tsipras occu­pies both the moral and intel­lec­tu­al high ground going into Friday’s talks in Brus­sels.

    In its pitch to the oth­er 18 euro­zone mem­bers, Greece has for­mal­ly asked for a six-month exten­sion to its bailout agree­ment. There is no longer the pre­tence that the bailout should be replaced by a loan agree­ment with no strings attached. The hat­ed troi­ka of the Euro­pean Cen­tral Bank (ECB), the Euro­pean Union and the Inter­na­tion­al Mon­e­tary Fund will be mon­i­tor­ing Greece’s econ­o­my for the next six months, some­thing that has been anath­e­ma until now.

    Greek gov­ern­ment has mod­est demands of its own. It wants to nego­ti­ate a new growth deal for the four years until 2019. It is ask­ing for debt relief under the terms of the Novem­ber 2012 bailout agree­ment, and it wants to be able to take steps to deal with the human­i­tar­i­an cri­sis caused by the 25% col­lapse in the size of the econ­o­my over the past five years.

    None of these demands are unrea­son­able. Indeed, they are all entire­ly sen­si­ble. As Dhaval Joshi of BCA Research has not­ed, for every euro the Greek gov­ern­ment has saved through spend­ing cuts or tax increas­es, the econ­o­my has con­tract­ed by €1.20. Aus­ter­i­ty has result­ed in Greece’s debt to GDP ratio going up, not down. A change of tack is over­due. But Germany’s response to Greece was sim­ple: stick to the exist­ing pro­gramme no mat­ter what the vot­ers want.

    ...

    Yes, back in Feb­ru­ary, the mes­sage from Merkel was “stick to the exist­ing pro­gramme no mat­ter what the vot­ers want.” Flash for­ward to today and the mes­sage com­ing from Berlin is that the “ball is in Greece’s court”. All Greece needs to do is ful­fill the pledges made in the cur­rent aid pack­age.

    At that point, every­one can pat them­selves on the back for a job well done, relax and bask in the calm­ing silence.

    Posted by Pterrafractyl | May 31, 2015, 10:36 pm
  27. It’s get­ting down to the wire in Greece’s show­down with the Troi­ka. And that means it’s time for fran­tic nego­ti­a­tions and duel­ing pro­pos­als:

    BBC
    Greek PM Tsipras has ‘real­is­tic’ debt deal pro­pos­al

    June 2, 2015

    Greek Prime Min­is­ter Alex­is Tsipras says he has issued “a real­is­tic pro­pos­al” to the coun­try’s inter­na­tion­al cred­i­tors in an attempt to secure a deal over its debts.

    “We have sub­mit­ted a real­is­tic plan for Greece to exit the cri­sis,” he said.

    Mr Tsipras said the plan includ­ed “con­ces­sions that will be dif­fi­cult”.

    He is due to meet Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er in Brus­sels on Wednes­day to dis­cuss the Greek pro­pos­als.

    Mr Tsipras’ state­ment fol­lows talks in Berlin late on Mon­day attend­ed by the heads of both the Inter­na­tion­al Mon­e­tary Fund and the Euro­pean Cen­tral Bank.

    Inter­na­tion­al Mon­e­tary Fund chief Chris­tine Lagarde and ECB pres­i­dent Mario Draghi’s pres­ence at the meet­ing between Ger­man Chan­cel­lor Angela Merkel and France’s Fran­cois Hol­lande under­lined the seri­ous­ness of the talks.

    Reports sug­gest the meet­ing was aimed at com­ing up with a “final pro­pos­al” to issue to Athens.

    But Mr Tsipras, who was not includ­ed at that meet­ing, said he had not yet been con­tact­ed by the IMF and Euro­pean offi­cials.

    “We are not wait­ing for them to sub­mit a pro­pos­al, Greece is sub­mit­ting a plan — it is now clear that the deci­sion on whether they want to adjust to real­ism... the deci­sion rests with the polit­i­cal lead­er­ship of Europe,” he added.

    A €300m (£216m) pay­ment from Greece to the IMF is due on Fri­day.

    ...

    Euro­pean lenders as well as the IMF are push­ing for greater aus­ter­i­ty reforms in return for the cash, which the Greek gov­ern­ment has so far refused to make.

    Ger­many’s Vice-Chan­cel­lor, Sig­mar Gabriel, said he sup­port­ed efforts by the French and Ger­man gov­ern­ments to reach a deal in nego­ti­a­tions about Athens’ mas­sive debts, warn­ing Greece’s exit from the euro­zone would have “gigan­tic con­se­quences”.

    “The polit­i­cal con­se­quences of a Greek bank­rupt­cy in the euro­zone would of course be gigan­tic. I think a lot of peo­ple have the impres­sion that we’re bet­ter off with­out Greece in the euro­zone.

    “The truth is that if we break the first piece out of the Euro­pean house, Europe would be in a dif­fer­ent state.”

    But Syriza par­lia­men­tary spokesman Nikos Fil­is reit­er­at­ed that the gov­ern­ment would not sign an agree­ment that was incom­pat­i­ble with its anti-aus­ter­i­ty pro­gramme.

    “If we’re talk­ing about an ulti­ma­tum... which is not with­in the frame­work of the pop­u­lar man­date, it is obvi­ous that the gov­ern­ment can­not co-sign and accept it,” Mr Fil­is told Anten­na TV.

    So Greece sub­mit­ted a plan that involves “con­ces­sions that will be dif­fi­cult”,” which prob­a­bly means Greece is will­ing to accept either the gut­ting of pen­sions, mass civ­il ser­vice lay­offs, or some sort of pri­va­ti­za­tions.

    So what’s the troika’s “final pro­pos­al” counter-offer going to look like? Oh, that’s right, it will look like the same offer the troi­ka has been offer­ing Greece all along: no mean­ing­ful com­pro­mis­es:

    Reuters

    Greece’s cred­i­tors draft deal to unlock aid, Athens resists

    BRUSSELS/ATHENS | By Jan Strupczews­ki and Renee Mal­te­zou
    Tue Jun 2, 2015 5:18pm EDT

    Greece’s cred­i­tors on Tues­day draft­ed the broad lines of an agree­ment to put to the left­ist gov­ern­ment in Athens in a bid to con­clude four months of acri­mo­nious nego­ti­a­tions and release aid before the cash-strapped coun­try runs out of mon­ey.

    The joint effort by the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank and the Inter­na­tion­al Mon­e­tary Fund to set out the terms for a cash-for-reforms deal came after the lead­ers of Ger­many and France held emer­gency talks with those insti­tu­tions in Berlin on Mon­day night to press the lenders to bridge their own dif­fer­ences and find a solu­tion.

    “It cov­ers all key pol­i­cy areas and reflects the dis­cus­sions of recent weeks. It will be dis­cussed with (Greek Prime Min­is­ter Alex­is) Tsipras tomor­row,” a senior EU offi­cial said.

    ...

    Tsipras, who has vowed not to sur­ren­der to more aus­ter­i­ty, tried to pre-empt a take-it-or-leave-it offer by the cred­i­tors, send­ing what he called a com­pre­hen­sive reform pro­pos­al to Brus­sels on Mon­day before they could com­plete their ver­sion.

    Euro zone offi­cials brand­ed the Greek text insuf­fi­cient and said it was not for­mal­ly on the table.

    The Greek leader faces a back­lash from his own sup­port­ers if he has to accept cuts in pen­sions and job pro­tec­tion to avert a default and keep Greece in the euro zone.

    Despite defi­ant rhetoric and face-sav­ing efforts, he seems like­ly to have to swal­low painful pen­sion and labor reforms, fac­ing the choice between putting them to par­lia­ment at the risk of a revolt in his Syriza par­ty, or call­ing a snap ref­er­en­dum.

    Starved of aid and access to bond mar­kets, Athens is pre­cip­i­tous­ly close to run­ning out of mon­ey. It has threat­ened to default on an IMF pay­ment this week with­out a deal, though it also says it will reject any ulti­ma­tums.

    Fail­ure to reach agree­ment this month could trig­ger a Greek default and lead to the impo­si­tion of cap­i­tal con­trols and a poten­tial exit from the euro zone, deal­ing a seri­ous blow to Europe’s sup­pos­ed­ly irre­versible sin­gle cur­ren­cy.

    The euro zone source said the Greek doc­u­ment con­tained no sig­nif­i­cant con­ces­sions on the main out­stand­ing issues of pen­sion and labor mar­ket reform, fis­cal tar­gets and the size of the civ­il ser­vice.

    The Euro­pean Union’s eco­nom­ics chief said ear­li­er Athens had put for­ward first pro­pos­als for pen­sion reform as the talks reach a crunch point this week with Greek funds dry­ing up.

    The chair­man of euro zone finance min­is­ters, Jeroen Dijs­sel­bloem, who was not at the Berlin meet­ing, said there were grow­ing indi­ca­tions that Greece want­ed a deal, but that required the Greek gov­ern­ment to tell its vot­ers the truth, that it will not be able to deliv­er on all its elec­tion promis­es.

    “There are signs that Greece and Tsipras are moti­vat­ed to achieve a break­through,” Dijs­sel­bloem told RTL Nieuws. “We aren’t far enough along and time is press­ing.”

    “The bot­tom line is that we are not going to meet them halfway,” he said. “The pack­age as a whole must make sense in bud­getary terms.”

    “REAL INTENSITY”

    The Berlin meet­ing showed that nation­al and inter­na­tion­al lead­ers have tak­en the bat­tle to keep Greece in the euro zone into their own hands after months of insist­ing it was a mat­ter for tech­ni­cal nego­ti­a­tions among experts.

    A Greek gov­ern­ment offi­cial said Athens would make a 300 mil­lion euro ($329.58 mil­lion) repay­ment to the IMF on Fri­day as due if there was an agree­ment with the cred­i­tors, hint­ing it might oth­er­wise with­hold the mon­ey with­out say­ing so explic­it­ly.

    “If we judge that a deal has been sealed, then we will make the June 5 pay­ment nor­mal­ly,” the offi­cial said, adding that the mon­ey would be trans­ferred even if a pre­lim­i­nary agree­ment had not yet been approved by Eurogroup finance min­is­ters.

    Greece’s cen­tral bank gov­er­nor, Yan­nis Stournaras, who served as finance min­is­ter in a pre­vi­ous con­ser­v­a­tive-led gov­ern­ment, urged the gov­ern­ment to respect the “sac­ri­fices” its peo­ple had made to stay in the euro, cit­ing a 35 per­cent drop in liv­ing stan­dards since the cri­sis began in 2009.

    EU Econ­o­my Com­mis­sion­er Pierre Moscovi­ci deflect­ed Greek demands for offi­cial debt relief, say­ing the issue of mak­ing Greek debt sus­tain­able in the longer term would only be addressed once Athens had accept­ed a reform deal to release some 7.2 bil­lion euros in frozen aid.

    That pro­gram expires at the end of June unless there is an agree­ment.

    The ECB’s top bank­ing super­vi­sor, Daniele Nouy, stressed on Tues­day that Greece’s banks remain sol­vent despite deposit out­flows and the gov­ern­men­t’s cash squeeze — a key con­di­tion for the cen­tral bank con­tin­u­ing to pro­vide emer­gency liq­uid­i­ty.

    Greek offi­cials say the IMF has been tough­est in demand­ing pen­sion cuts and oppos­ing any restora­tion of col­lec­tive wage bar­gain­ing, while some euro zone gov­ern­ments have pri­vate­ly accused Junck­er and Moscovi­ci of being too soft on Athens.

    Greece has received two EU/IMF bailouts total­ing 240 bil­lion euros since 2010, when it lost access to cap­i­tal mar­kets after admit­ting it had issued erro­neous fig­ures for years con­ceal­ing the true scale of its bud­get deficit.

    Ok, so accord­ing to the chair­man of euro zone finance min­is­ters, Jeroen Dijs­sel­bloem:

    ...
    “There are signs that Greece and Tsipras are moti­vat­ed to achieve a break­through,” Dijs­sel­bloem told RTL Nieuws. “We aren’t far enough along and time is press­ing.”

    “The bot­tom line is that we are not going to meet them halfway,” he said. “The pack­age as a whole must make sense in bud­getary terms.”

    ...

    That does­n’t sound very com­pro­mis­ing. And you have to won­der just how harsh the terms of the troika’s “final offer” are going to be giv­en Dijs­sel­bloem’s asser­tion that any pack­age “as a whole must make sense in bud­getary terms” and the fact that the debt relief is being effec­tive­ly ruled out, and a num­ber of gov­ern­ments were appar­ent­ly accus­ing the EU Com­mis­sion of “being too soft on Athens”:

    ...

    EU Econ­o­my Com­mis­sion­er Pierre Moscovi­ci deflect­ed Greek demands for offi­cial debt relief, say­ing the issue of mak­ing Greek debt sus­tain­able in the longer term would only be addressed once Athens had accept­ed a reform deal to release some 7.2 bil­lion euros in frozen aid.

    ...

    Greek offi­cials say the IMF has been tough­est in demand­ing pen­sion cuts and oppos­ing any restora­tion of col­lec­tive wage bar­gain­ing, while some euro zone gov­ern­ments have pri­vate­ly accused Junck­er and Moscovi­ci of being too soft on Athens.

    ...

    No, com­pro­mise from the troi­ka does­n’t sound like­ly. But that does­n’t mean no com­pro­mise has tak­en place. For instance, Greece was­n’t the only nego­ti­at­ing part­ner argu­ing for some sort of debt relief. The IMF has been mak­ing that case too. And then the IMF com­pro­mised. Or, rather, capit­u­lat­ed:

    Greece’s Cred­i­tors Agree on Bailout Pro­pos­al to Athens
    By Dow Jones Busi­ness News, June 02, 2015, 07:35:00 AM EDT

    Greece’s Cred­i­tors Set to Throw Down Gaunt­let

    ATHENS—Greece’s inter­na­tion­al cred­i­tors are poised to present the coun­try with the out­lines of a bailout deal that amounts to a take-it-or-leave-it offer, in a move aimed at break­ing a month­s­long stale­mate but which risks a polit­i­cal back­lash and even a gov­ern­ment col­lapse in Athens.

    The move marks a sharp shift in tac­tics by Ger­many, the IMF and oth­er Greek cred­i­tors, who have lost patience with what they see as months of fruit­less dia­logue with the Athens gov­ern­ment. Lenders draft­ed the pro­posed deal after key lead­ers, includ­ing Ger­man Chan­cel­lor Angela Merkel, met in Berlin late Mon­day to over­come their own divi­sions on how to keep Greece from bank­rupt­cy and an exit from the euro.

    The cred­i­tors’ pro­pos­al, which Euro­pean offi­cials say Greece will now be asked to accept with at most minor changes, would unlock bad­ly need­ed emer­gency financ­ing to avoid a Greek debt default in com­ing weeks, in return for Greece’s adher­ence to a set of tough eco­nom­ic-pol­i­cy over­hauls.

    Those pol­i­cy con­di­tions, includ­ing fis­cal aus­ter­i­ty, pri­va­ti­za­tions, and over­hauls of pen­sions and labor law, could prove extreme­ly chal­leng­ing for the gov­ern­ment of Greek Prime Min­is­ter Alex­is Tsipras to swal­low. The pre­mier’s left- wing Syriza par­ty won elec­tion in Jan­u­ary on a promise to halt and reverse aus­ter­i­ty and mar­ket-ori­ent­ed over­hauls. Some Syriza law­mak­ers are already call­ing for new elec­tions rather than what they see as sur­ren­der to cred­i­tors’ terms.

    Euro­pean pol­i­cy mak­ers are try­ing hard to avoid the appear­ance of an ulti­ma­tum to Greece, know­ing that this would make an already-dif­fi­cult deal even hard­er for Athens to swal­low. Most Euro­pean offi­cials were tight-lipped about the lenders’ lat­est ini­tia­tive. But some offi­cials admit­ted Tues­day that the move amounts to a “take it or leave it” offer to Greece.

    Led by the Ger­man chan­cellery, cred­i­tors have been mov­ing toward this tac­tic over the past two weeks, after grow­ing frus­trat­ed with the lack of progress in nego­ti­a­tions with Greek offi­cials aimed at a com­pro­mise.

    Lenders now hope that Mr. Tsipras can be pressed to accept the cred­i­tors’ out­line of a deal by the end of this week—allowing low­er-lev­el offi­cials to com­plete the details next week, Euro­pean offi­cials say. That would allow the Euro­pean Cen­tral Bank to make more liq­uid­i­ty avail­able to Greek banks, allow­ing them to buy more short-term debt from the Greek gov­ern­ment and reliev­ing some of the imme­di­ate finan­cial pres­sure.

    Greece is fac­ing a €300 mil­lion ($327 mil­lion) pay­ment to the IMF on Fri­day. The coun­try is believed to have enough cash left to repay that, but Euro­pean offi­cials say Athens prob­a­bly can’t meet fur­ther IMF repay­ments in June total­ing about €1.25 bil­lion unless it gets fresh financ­ing in some form. With­out a large sub­se­quent cash injec­tion from lenders, Greece faces a debt default in late July that could ulti­mate­ly push the coun­try out of the euro.

    Mr. Tsipras faces par­tic­u­lar­ly tough days and weeks ahead since Mon­day night’s sum­mit in Berlin result­ed in a con­sen­sus among cred­i­tors that leaves Greece will lit­tle scope to ful­fill Syriza­’s elec­tion promis­es. In Berlin, the IMF and the euro­zone bridged their dif­fer­ences over Greece by agree­ing that Athens must be made to enact com­pre­hen­sive eco­nom­ic over­hauls, as the IMF wanted—but that there will be no explic­it com­mit­ment, for now, to for­give some of Greece’s debt. Ger­many and oth­er euro­zone gov­ern­ments have strong­ly resist­ed IMF pres­sure to offer Greece debt relief that would impose loss­es on oth­er Euro­pean tax­pay­ers.

    The com­bi­na­tion of tough eco­nom­ic mea­sures and a delay to any poten­tial debt relief could test the uni­ty of Mr. Tsipras’s gov­ern­ing coali­tion. With a major­i­ty of only 12 in Greece’s 300-seat par­lia­ment, even a small rebel­lion by some of Syriza­’s hard-line left fac­tions could deprive Mr. Tsipras of cru­cial sup­port, forc­ing him to rely on oppo­si­tion votes and poten­tial­ly trig­ger­ing elec­tions or a ref­er­en­dum.

    “In terms of pack­ag­ing this deal, Tsipras does­n’t have any easy way to sell it to his par­ty,” said Wolf Pic­coli, direc­tor of research at polit­i­cal risk con­sul­tan­cy Teneo Intel­li­gence. “If Tsipras feels he might lose his par­lia­men­tary major­i­ty, he might pass the vote to the pub­lic.”

    The pro­posed deal would com­plete Greece’s cur­rent bailout pro­gram with its euro­zone part­ners, a process that some offi­cials say could extend over this sum­mer. By fall, offi­cials say, Greece will need a new bailout pack­age that keeps the coun­try afloat until it is able to access inter­na­tion­al bond mar­kets again—which many econ­o­mists say could take years.

    Ms. Merkel and oth­er euro­zone lead­ers are eager to avoid a default by Greece on its debt that could lead to the coun­try tum­bling out of the euro. But Ms. Merkel needs Mr. Tsipras to accept tough fis­cal dis­ci­pline and broad­er eco­nom­ic over­hauls if she is to sell fur­ther aid loans for Greece to a Ger­man par­lia­ment and pub­lic that is increas­ing­ly skep­ti­cal about Greece’s will­ing­ness to make its econ­o­my as lean and com­pet­i­tive as euro mem­ber­ship requires.

    Ever since Greece’s inter­na­tion­al bailout began in 2010, Ms. Merkel has made the IMF the arbiter of whether Greece is enact­ing enough aus­ter­i­ty and over­hauls to deserve aid loans. The IMF remains Ger­many’s ally on Greek over­hauls, in the face of reluc­tance else­where in Europe—including at the Brus­sels-based Euro­pean Commission—to impose dras­tic and polit­i­cal­ly dif­fi­cult pol­i­cy over­hauls on Athens. But the Wash­ing­ton-based fund has clashed with Berlin over Greek’s huge debt.

    The IMF insists Greece can be ren­dered sol­vent only through either far-reach­ing eco­nom­ic over­hauls, or through debt for­give­ness. Ger­many has so far staunch­ly reject­ed writ­ing off its aid loans to Greece.

    Late on Mon­day, the cred­i­tors bridged their dif­fer­ences by agree­ing that Greece must enact com­pre­hen­sive over­hauls to earn fresh financ­ing, while the IMF soft­ened its insis­tence that Europe offer explic­it com­mit­ments on debt relief.

    Greece’s high debt remains a con­tentious issue in the back­ground between the IMF and Europe, but isn’t hold­ing up the cred­i­tors’ pro­pos­al to Greece. IMF head Chris­tine Lagarde warned in Berlin that debt restruc­tur­ing will become nec­es­sary if Greece does­n’t enact thor­ough eco­nom­ic over­hauls that improve its bud­get bal­ance and lift its growth tra­jec­to­ry, peo­ple famil­iar with the meet­ing said.

    ...

    Well isn’t com­pro­mise grand!

    ...In Berlin, the IMF and the euro­zone bridged their dif­fer­ences over Greece by agree­ing that Athens must be made to enact com­pre­hen­sive eco­nom­ic over­hauls, as the IMF wanted—but that there will be no explic­it com­mit­ment, for now, to for­give some of Greece’s debt. Ger­many and oth­er euro­zone gov­ern­ments have strong­ly resist­ed IMF pres­sure to offer Greece debt relief that would impose loss­es on oth­er Euro­pean tax­pay­ers.

    ...

    The IMF insists Greece can be ren­dered sol­vent only through either far-reach­ing eco­nom­ic over­hauls, or through debt for­give­ness. Ger­many has so far staunch­ly reject­ed writ­ing off its aid loans to Greece.

    Late on Mon­day, the cred­i­tors bridged their dif­fer­ences by agree­ing that Greece must enact com­pre­hen­sive over­hauls to earn fresh financ­ing, while the IMF soft­ened its insis­tence that Europe offer explic­it com­mit­ments on debt relief.

    ...

    And now that we have a “com­pro­mise” with­in the troi­ka, it’s appar­ent­ly up to Greece to “to it for leave it”, where “it” is com­plete capit­u­la­tion.

    So we’re just going to have to wait and see how Greece accepts its “pover­ty or exile” offer. But notice just how hope­less the long-term sit­u­a­tion real­ly is for not just Greece but the rest of the euro­zone if Europe con­tin­ues down this path. The pub­lic real­ly seems to have no idea what it’s demand­ing:

    ...

    Ms. Merkel and oth­er euro­zone lead­ers are eager to avoid a default by Greece on its debt that could lead to the coun­try tum­bling out of the euro. But Ms. Merkel needs Mr. Tsipras to accept tough fis­cal dis­ci­pline and broad­er eco­nom­ic over­hauls if she is to sell fur­ther aid loans for Greece to a Ger­man par­lia­ment and pub­lic that is increas­ing­ly skep­ti­cal about Greece’s will­ing­ness to make its econ­o­my as lean and com­pet­i­tive as euro mem­ber­ship requires.

    ...

    The Ger­man pub­lic still does­n’t appear to have a clue about just how much the Ger­man econ­o­my’s rel­a­tive “com­pet­i­tive­ness” is a direct result of the lack of com­pet­i­tive­ness in Greece and else­where in the euro­zone that’s drag­ging down the val­ue of the euro. No clue! The elec­torates in Ger­many and else­where appear to have ful­ly embraced the idea that Europe, as a con­ti­nent, can run mas­sive sur­plus with the rest of the plan­et indef­i­nite­ly and, some­how, the euro isn’t going to sky­rock­et in val­ue and the rest of the world isn’t going to revolt.

    So let’s say Greece does bite the bul­let, sticks with the euro­zone, embraces some sort of neolib­er­al night­mare pro­gram, and ends up turn­ing itself into the low-wage export pow­er­house the rest of Europe seems to have in mind. And lets say the rest of the P.I.I.G.S. large­ly do the same. What is that going to do to the val­ue of the euro when the entire con­ti­nent is an export pow­er­house? What’s the pub­lic response going to be, say, a decade from now, if the euro­zone sticks with aus­ter­i­ty poli­cies, make a whole bunch of real­ly “com­pet­i­tive” economies (that most­ly became com­pet­i­tive by sup­press­ing wage and boost­ing prof­its) but the pub­lic basi­cal­ly nev­er sees any of the ben­e­fits of this strat­e­gy because all their extreme “com­pet­i­tive­ness”, low debt and deficits, and mas­sive sur­plus­es are effec­tive­ly can­celed out by a ris­ing euro? Won’t the whole world real­ly want to invest in the euro­zone if it real­ly does­n’t all become super-com­pet­i­tive and won’t that that effec­tive­ly under­mine that very same “com­pet­i­tive­ness”? And who’s going to get blamed when the mid­dle class­es every­where are basi­cal­ly evis­cer­at­ed because every nation engaged in aus­ter­i­ty simul­ta­ne­ous­ly and all of the gains go to the wealthy own­ers of the export sec­tors? Espe­cial­ly once those sec­tors become even more roboti­cized and well pay­ing man­u­fac­tur­ing jobs just dis­ap­pear. Is blam­ing Greece going to work for politi­cians in need of a scape­goat a decade from now?

    In oth­er words, isn’t the troika’s night­mare pack­age for Greece, and the junk eco­nom­ic assump­tions behind it, just one part of a larg­er unwork­able dream that Europe’s elites are sell­ing to the pub­lic? A dream that promis­es future pay­outs for present pain but is basi­cal­ly guar­an­teed to end in despair for almost every­one involved? A dream that’s basi­cal­ly Europe’s ver­sion of “sup­ply-side eco­nom­ics”? How is com­mit­ting itself to a joke dream of basi­cal­ly promis­ing to con­quer the world eco­nom­i­cal­ly (because that’s what will hap­pen if Europe runs Ger­man-style trade sur­plus­es) going to work out for Europe in the long-run?

    Oh...right.

    In oth­er news...

    Posted by Pterrafractyl | June 2, 2015, 7:20 pm
  28. We final­ly got some details on the “take it or leave it” troi­ka pro­pos­al to Greece. Let’s just say, if some­one mis­took the fol­low­ing arti­cle as some sort of unortho­dox mar­ket­ing cam­paign for the upcom­ing ‘Saw 8’ movie, it would be a very under­stand­able mis­take since the “take it or leave it” plans appears to revolve around more promis­es that self-muti­la­tion will give Greece a new lease on life:

    Reuters
    UPDATE 1‑EU/IMF lenders demand asset sales, pen­sion cuts in Greek pro­pos­al

    * EU/IMF demand pen­sion, labour reform not be rolled back

    * Axing low-income pen­sion­ers’ ben­e­fit to save 800 mln euros/yr

    * Deal would unlock near­ly 11 bln euros of aid (Adds detail)

    By Renee Mal­te­zou
    Thu Jun 4, 2015 9:25am EDT

    ATHENS, June 4 (Reuters) — Greece’s EU/IMF lenders have asked Athens to com­mit to sell off state assets, enforce pen­sion cuts and press on with labour reforms, two sources famil­iar with the plan said on Thurs­day, demands that would cross the Greek gov­ern­men­t’s “red lines”.

    If Greece were to accept the plan, lenders would aim to unlock 10.9 bil­lion euros in unused bank bailout funds that were returned to the Euro­pean Finan­cial Sta­bil­i­ty Fund. This would enable Greece to cov­er its finan­cial needs through July and August, the sources said.

    In a five-page pro­pos­al pre­sent­ed to Greek Prime Alex­is Tsipras in Brus­sels on Wednes­day, EU/IMF lenders asked Athens to reduce spend­ing on pen­sions by 1 per­cent of gross domes­tic prod­uct and promise not to reverse any leg­is­lat­ed reforms, the sources said.

    They also demand­ed Athens raise 1.8 bil­lion euros — or 1 per­cent of GDP — by increas­ing val­ue-added tax to 11 per­cent for items includ­ing drugs and 23 per­cent for items includ­ing elec­tric­i­ty, the sources told Reuters.

    They want Greece to scrap a ben­e­fit for low income pen­sion­ers, called EKAS, to save 800 mil­lion euros by 2016 — a move that if accept­ed, would force Tsipras to vio­late his pledge to avoid any new pen­sion cuts.

    The pro­pos­al also calls for a hike in health­care con­tri­bu­tions by Greeks and a cut in the fuel sub­sidy.

    The lenders have also demand­ed Tsipras not make any uni­lat­er­al move to restore col­lec­tive bar­gain­ing rights and raise min­i­mum wage lev­el to pre-cri­sis lev­els — pledges he made before com­ing to pow­er in Jan­u­ary.

    The pro­pos­al also asks Athens to com­mit to pri­vatis­ing Grid oper­a­tor ADMIE, Greece’s major ports in Piraeus and Thes­sa­loni­ki, the for­mer air­port com­plex of Hel­lenikon, Greece’s biggest oil refin­ery Hel­lenic Petro­le­um and Greek tele­coms oper­a­tor OTE.

    ...

    The pro­pos­al does not make any men­tion of offer­ing debt relief to Athens, the sources said, which was one of the gov­ern­men­t’s major demands though the two sides have sug­gest­ed it could be dealt with at a lat­er stage.

    Well that’s prob­a­bly not going to go over well in Greece.

    And guess what, it did­n’t:

    Reuters
    Cred­i­tors’ offer prompts anger, dis­may in Greece
    ATHENS | By Karoli­na Tagaris and Deepa Babing­ton

    Thu Jun 4, 2015 10:51am EDT

    Law­mak­ers from Greece’s rul­ing Syriza par­ty react­ed with dis­may and fury on Thurs­day to a pack­age of reforms cred­i­tors offered Prime Min­is­ter Alex­is Tsipras in return for cash, with one senior par­ty offi­cial call­ing it a “mur­der­ous” pro­pos­al.

    Oppo­si­tion to the plan was voiced by law­mak­ers on both the hard­line left as well as more mod­er­ate voic­es in the par­ty, like Labour Min­is­ter Panos Skourletis, who said Greeks could be sure that no agree­ment that adds bur­dens on them would be signed.

    The stark­ly neg­a­tive reac­tion points to a grow­ing risk of an out­right revolt with­in the rad­i­cal left­ist par­ty, which could prompt Prime Min­is­ter Alex­is Tsipras to resort to ear­ly elec­tions to over­come divi­sions should he accept the deal.

    Avgi, the Syriza par­ty news­pa­per, head­lined its Thurs­day edi­tion: “A con­tin­u­a­tion of aus­ter­i­ty? No, thanks!”, while the top-sell­ing cen­tre-left dai­ly Ta Nea splashed: “Death toll required for an agree­ment.”

    Details of the plan drawn up by Euro­pean and IMF cred­i­tors were leaked by sources on Thurs­day. They show demands for pen­sion cuts, tax hikes and asset sales that clear­ly cross what Tsipras has said are his non-nego­tiable “red lines”.

    Tsipras was out­lined the plan at late-night talks in Brus­sels with Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er, and said after­wards he thought a deal was “with­in sight”. But some of his senior par­ty mem­bers took a dif­fer­ent line.

    “(Junck­er) took on the dirty work and con­veyed the most vul­gar, most mur­der­ous, tough­est plan when every­one hoped that the deal was clos­ing,” Alex­is Mitropou­los, a deputy par­lia­ment speak­er and senior offi­cial with­in Syriza told Mega TV. “And that at a time when we were final­ly mov­ing towards an agree­ment we all want because we rule out a rift lead­ing to tragedy.”

    Deputy Ship­ping Min­is­ter Thodoris Drit­sas said the pro­pos­al was below expec­ta­tions “in every way”, adding: “If reports are con­firmed, obvi­ous­ly we can­not accept them.”

    Law­mak­ers were incensed in par­tic­u­lar by a pro­pos­al to scrap a ben­e­fit for low-income pen­sion­ers of 30 to 230 euros ($34 to $259) per month and a val­ue-added tax change that Tsipras said would raise the levy on elec­tric­i­ty by 10 per­cent­age points.

    Such mea­sures are anath­e­ma to Syriza, which in Jan­u­ary became the first rad­i­cal left­ist par­ty to assume pow­er in mod­ern Greek his­to­ry on a pledge to end aus­ter­i­ty and raise liv­ing stan­dards for Greeks bat­tered by five years of hard­ship.

    STOCKS FALL

    On the streets of Athens, the cred­i­tors’ pro­pos­al was met with a mix of anger and res­ig­na­tion. “The pro­gram they have pro­posed won’t work unless they want to dri­ve Greece to pover­ty,” said 70-year-old pen­sion­er Zois Sefer­li.

    Speak­ing in par­lia­ment, Deputy Labour Min­is­ter Dim­itris Stra­toulis said Athens would reject the “dis­grace­ful and shame­ful” pro­pos­al by lenders who want “to sub­due, to crush any resis­tance from the left­ist gov­ern­ment”.

    The angry reac­tions piled pres­sure on Tsipras, who has to bal­ance efforts to keep his par­ty togeth­er with the simul­ta­ne­ous need to seal a deal with cred­i­tors to get aid flow­ing into Greek state cof­fers before cash runs out in the com­ing days or weeks.

    ...

    In a sign of the lim­it­ed options fac­ing the gov­ern­ment, one Syriza offi­cial said any deal with lenders would win approval from law­mak­ers after both sides made con­ces­sions.

    “A solu­tion ... requires real­ism and mutu­al con­ces­sions, with­out ulti­ma­tums,” tweet­ed Dim­itris Papadi­moulis, vice-pres­i­dent of the Euro­pean Par­lia­ment and a Syriza par­ty mem­ber. Back­ing Tsipras was “a patri­ot­ic duty,” he said.

    “(Junck­er) took on the dirty work and con­veyed the most vul­gar, most mur­der­ous, tough­est plan when every­one hoped that the deal was closing...And that at a time when we were final­ly mov­ing towards an agree­ment we all want because we rule out a rift lead­ing to tragedy.” That pret­ty much sum­ma­rizes the sit­u­a­tion.

    So what’s next? That’s hard to say. But we do know, at this point, what isn’t next after get­ting anoth­er ‘Saw’ offer like that: Greece isn’t pay­ing the IMF the 300 mil­lion euros due Fri­day. At least, Greece isn’t pay­ing that mon­ey on Fri­day. It turns out there’s a loop­hole in the IMF rules that allows nations to defer pay­ments for a peri­od, and Greece is using it:

    Bloomberg Busi­ness
    Greece Defers IMF Pay­ment as Merkel Says Res­o­lu­tion Far Away

    by Nikos Chrysoloras and Andrew Maye­da
    June 4, 2015 — 1:07 PM CDT
    Updat­ed on June 4, 2015 — 4:19 PM CDT

    Greece became the first coun­try to defer a pay­ment to the Inter­na­tion­al Mon­e­tary Fund since the 1980s as its game of brinkman­ship with cred­i­tors goes down to the wire.

    With Prime Min­is­ter Alex­is Tsipras get­ting ready to address par­lia­ment on Fri­day after receiv­ing a list of cred­i­tors’ demands, the step under­scores the state of the country’s shriv­el­ing finances. While inter­na­tion­al offi­cials have report­ed some progress in recent days, Ger­man Chan­cel­lor Angela Merkel said “we’re still far from reach­ing a con­clu­sion.”

    The cur­rent phase of Greece’s cri­sis is near­ing its con­clu­sion as the coun­try runs out of mon­ey after four months of dead­lock. Stocks and bonds have whip­sawed this week amid a flur­ry of polit­i­cal activ­i­ty start­ing with a late-night meet­ing in Berlin between Euro­pean lead­ers and the IMF on Mon­day.

    “The delay in the pay­ment to the IMF is an esca­la­tion of the con­fronta­tion,” Nicholas Econo­mides, an eco­nom­ics pro­fes­sor at New York University’s Stern School of Busi­ness. “It increas­es the risk of bank­rupt­cy and Grex­it.”

    Tsipras was to hold a call with Merkel and French Pres­i­dent Fran­cois Hol­lande at 11:30 p.m. Athens time on Thurs­day, a Greek gov­ern­ment offi­cial who asked not to be named said in a text mes­sage.

    Greece reject­ed the lat­est pro­pos­al from its inter­na­tion­al cred­i­tors, with the Finance Min­istry say­ing the plan “can’t solve the rid­dle” and an agree­ment requires “imme­di­ate con­ver­gence of the insti­tu­tions to more real­is­tic” pro­pos­als.

    The euro fell 0.3 per­cent against the dol­lar to to $1.1238 at 3:50 p.m. New York time, after ris­ing to $1.1318 fol­low­ing a report that Greece request­ed the IMF pay­ment delay.

    1970s Pol­i­cy

    Greece on Thurs­day told the IMF it would delay a debt pay­ment of about $339 mil­lion (301 mil­lion euros) due Fri­day, sub­mit­ting a request to the fund to bun­dle pay­ments total­ing about $1.7 bil­lion due this month into one lump-sum pay­ment.

    “The Greek author­i­ties have informed the fund today that they plan to bun­dle the country’s four June pay­ments into one, which is now due on June 30,” IMF spokesman Ger­ry Rice said in an e‑mailed state­ment. Under an Exec­u­tive Board deci­sion adopt­ed in the late 1970s, coun­try mem­bers can ask to bun­dle togeth­er mul­ti­ple prin­ci­pal pay­ments falling due in a cal­en­dar month.”

    Only one coun­try, Zam­bia, has used the pro­ce­dure to bun­dle pay­ments, which hap­pened in the mid-1980s, anoth­er IMF spokesman, William Mur­ray, said last week.

    Work­ing Group

    The Euro Work­ing Group of euro-area finance min­istry offi­cials expects Greece to respond to an Euro­pean Union pro­pos­al to con­clude the country’s bailout by June 8, accord­ing to a per­son famil­iar with the talks. The group, which met Thurs­day in Brus­sels, hasn’t set a tar­get date to con­clude dis­cus­sions with Greece, said two peo­ple who request­ed anonymi­ty, cit­ing a lack of autho­riza­tion to speak pub­licly.

    Tsipras, who met Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er in Brus­sels Wednes­day, will address the Greek par­lia­ment at 6 p.m. local time on Fri­day, a Greek offi­cial said, with the euro region press­ing for an agree­ment to be wrapped up by June 14. A Euro­pean offi­cial said Greece will study the offer from its cred­i­tors and respond on Mon­day.

    The pay­ment delay prob­a­bly means the Greek gov­ern­ment believes it can get an agree­ment through par­lia­ment by the time liq­uid­i­ty is released, said Jacob Funk Kirkegaard, senior fel­low at the Peter­son Insti­tute for Inter­na­tion­al Eco­nom­ics in Wash­ing­ton. Alter­na­tive­ly, it could indi­cate that the gov­ern­ment is “des­per­ate” and cling­ing to the “false hope” that the IMF and U.S. will put pres­sure on euro-area offi­cials, he said.

    ...

    So Greece decid­ed to the leave the “take it or leave it” offer, and now we’ve now seen the first IMF pay­ment defer­ral in decades. And yet the “Eurogroup” of euro­zone finance min­is­ters appar­ent­ly “expects Greece to respond to an Euro­pean Union pro­pos­al to con­clude the country’s bailout by June 8, accord­ing to a per­son famil­iar with the talks”, while the euro­zone gov­ern­ments in gen­er­al seem to be hop­ing for a June 14 con­clu­sion to the four month show­down.

    Also, the sched­uled talks that were sup­posed to take place on Fri­day have been can­celled because, accord­ing one EU offi­cial, “there will be no meet­ing tomor­row. The Greeks last night agreed to send a com­pro­mise on how to solve the few out­stand­ing issues. They did not. So tomor­row no meet­ing is pos­si­ble.”

    Yep, accord­ing to the nego­ti­at­ing team that just offered Greece anoth­er ‘Saw’ offer after it rebelled over the pre­vi­ous ‘Saw’ offers, the break­down in the talks is appar­ent­ly due to Greece’s unwill­ing­ness to com­pro­mise:

    Reuters
    Greek PM Tsipras won’t come to Brus­sels Fri­day, talks becom­ing dif­fi­cult

    Thu Jun 4, 2015 3:35pm EDT

    Greek Prime Min­is­ter Alex­is Tsipras will not come to Brus­sels on Fri­day to con­tin­ue talks with the coun­try’s cred­i­tors, an EU offi­cial said, com­pli­cat­ing an agree­ment in the cash-for-reforms nego­ti­a­tions.

    ...

    To speed up talks, Tsipras flew into Brus­sels on Wednes­day evening to meet Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er but the meet­ing end­ed with­out an agree­ment although some progress was made, Junck­er said.

    More talks were to tale place on Fri­day evening, offi­cials said.

    “There will be no meet­ing tomor­row. The Greeks last night agreed to send a com­pro­mise on how to solve the few out­stand­ing issues. They did not. So tomor­row no meet­ing is pos­si­ble,” the offi­cial said.

    Greece was sup­posed to repay a 300 mil­lion euro an instal­ment of loan from the Inter­na­tion­al Mon­e­tary Fund on Fri­day, the first of four instal­ments due in June, but told the IMF it would pay every­thing at the end of the month.

    “The bundling of pay­ments is not a good sign, it will be dif­fi­cult from here on,” the EU offi­cial said.

    Yikes. So the basic offer to Greece remains the same: self-muti­late for a new lease on life and a brighter tomor­row. Take it or leave it.

    We’ve def­i­nite­ly seen this movie before.

    Posted by Pterrafractyl | June 4, 2015, 9:57 pm
  29. @Pterrafractyl–

    Von Clause­witz­ian eco­nom­ics, the con­tin­u­a­tion of war by oth­er means.

    Make no mis­take about it–this is low-inten­si­ty Nazism, low-inten­si­ty T‑4 pro­gram.

    The goal is to kill off the folks too old to work and to poor to live off their invest­ments.

    New­er lis­ten­ers should check out FTR #788: http://spitfirelist.com/for-the-record/ftr-788-greek-tragedy-part-2-clausewitzian-economics-the-continuation-of-war-by-other-means/

    Best,

    Dave

    Posted by Dave Emory | June 5, 2015, 10:55 am
  30. @Dave: Joseph Stiglitz recent­ly wrote a col­umn that high­lights just how dire the sit­u­a­tion is not just for Greece but for peo­ple all across the ‘periph­ery’: While the euro­zone was sup­pos­ed­ly intend­ed to not just unite Europe polit­i­cal­ly but also bring about eco­nom­ic con­ver­gence. But as we’ve seen (and as eco­nom­ic the­o­ry pre­dict­ed), the struc­ture of the euro­zone actu­al­ly encour­ages eco­nom­ic diver­gence.

    Sys­tem­at­i­cal­ly encour­ag­ing eco­nom­ic diver­gence is a big prob­lem, but not an insur­mount­able one, if the euro­zone would just do what the US does and sys­tem­at­i­cal­ly trans­fer wealth from the rich­est to poor­est states. But since the euro­zone appears to be based on a phi­los­o­phy of “social pro­grams are fine, as long as your coun­try can afford them on its own with­out any assis­tance from the wealth­i­er mem­bers (and let’s all ignore the myr­i­ad of ways the euro­zone harms the weak­est mem­bers and helps the strongest)”, that sug­gests what’s hap­pen­ing in Greece is inevitably going to keep hap­pen­ing to the rest of the eco­nom­i­cal­ly weak­er euro­zone states too.

    Espe­cial­ly if a ‘Grex­it’ occurs because, at that point, the whole world knows that when things get bad for a euro­zone mem­ber state, the rest of the euro­zone will just force poli­cieis that make the bad sit­u­a­tion worse and then even­tu­al­ly kick them out any­ways. And that’s the kind of les­son for “the mar­kets” that dou­bles as a self-ful­fill­ing prophe­cy:

    Project-Syn­di­cate
    Europe’s Last Act?

    Joseph E. Stiglitz
    JUN 5, 2015

    NEW YORK – Euro­pean Union lead­ers con­tin­ue to play a game of brinkman­ship with the Greek gov­ern­ment. Greece has met its cred­i­tors’ demands far more than halfway. Yet Ger­many and Greece’s oth­er cred­i­tors con­tin­ue to demand that the coun­try sign on to a pro­gram that has proven to be a fail­ure, and that few econ­o­mists ever thought could, would, or should be imple­ment­ed.

    The swing in Greece’s fis­cal posi­tion from a large pri­ma­ry deficit to a sur­plus was almost unprece­dent­ed, but the demand that the coun­try achieve a pri­ma­ry sur­plus of 4.5% of GDP was uncon­scionable. Unfor­tu­nate­ly, at the time that the “troi­ka” – the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank, and the Inter­na­tion­al Mon­e­tary Fund – first includ­ed this irre­spon­si­ble demand in the inter­na­tion­al finan­cial pro­gram for Greece, the country’s author­i­ties had no choice but to accede to it.

    The fol­ly of con­tin­u­ing to pur­sue this pro­gram is par­tic­u­lar­ly acute now, giv­en the 25% decline in GDP that Greece has endured since the begin­ning of the cri­sis. The troi­ka bad­ly mis­judged the macro­eco­nom­ic effects of the pro­gram that they imposed. Accord­ing to their pub­lished fore­casts, they believed that, by cut­ting wages and accept­ing oth­er aus­ter­i­ty mea­sures, Greek exports would increase and the econ­o­my would quick­ly return to growth. They also believed that the first debt restruc­tur­ing would lead to debt sus­tain­abil­i­ty.

    The troika’s fore­casts have been wrong, and repeat­ed­ly so. And not by a lit­tle, but by an enor­mous amount. Greece’s vot­ers were right to demand a change in course, and their gov­ern­ment is right to refuse to sign on to a deeply flawed pro­gram.

    Hav­ing said that, there is room for a deal: Greece has made clear its will­ing­ness to engage in con­tin­ued reforms, and has wel­comed Europe’s help in imple­ment­ing some of them. A dose of real­i­ty on the part of Greece’s cred­i­tors – about what is achiev­able, and about the macro­eco­nom­ic con­se­quences of dif­fer­ent fis­cal and struc­tur­al reforms – could pro­vide the basis of an agree­ment that would be good not only for Greece, but for all of Europe.

    Some in Europe, espe­cial­ly in Ger­many, seem non­cha­lant about a Greek exit from the euro­zone. The mar­ket has, they claim, already “priced in” such a rup­ture. Some even sug­gest that it would be good for the mon­e­tary union.

    I believe that such views sig­nif­i­cant­ly under­es­ti­mate both the cur­rent and future risks involved. A sim­i­lar degree of com­pla­cen­cy was evi­dent in the Unit­ed States before the col­lapse of Lehman Broth­ers in Sep­tem­ber 2008. The fragili­ty of America’s banks had been known for a long time – at least since the bank­rupt­cy of Bear Stearns the pre­vi­ous March. Yet, giv­en the lack of trans­paren­cy (owing in part to weak reg­u­la­tion), both mar­kets and pol­i­cy­mak­ers did not ful­ly appre­ci­ate the link­ages among finan­cial insti­tu­tions.

    Indeed, the world’s finan­cial sys­tem is still feel­ing the after­shocks of the Lehman col­lapse. And banks remain non-trans­par­ent, and thus at risk. We still don’t know the full extent of link­ages among finan­cial insti­tu­tions, includ­ing those aris­ing from non-trans­par­ent deriv­a­tives and cred­it default swaps.

    In Europe, we can already see some of the con­se­quences of inad­e­quate reg­u­la­tion and the flawed design of the euro­zone itself. We know that the struc­ture of the euro­zone encour­ages diver­gence, not con­ver­gence: as cap­i­tal and tal­ent­ed peo­ple leave cri­sis-hit economies, these coun­tries become less able to repay their debts. As mar­kets grasp that a vicious down­ward spi­ral is struc­tural­ly embed­ded in the euro, the con­se­quences for the next cri­sis become pro­found. And anoth­er cri­sis in inevitable: it is in the very nature of cap­i­tal­ism.

    ECB Pres­i­dent Mario Draghi’s con­fi­dence trick, in the form of his dec­la­ra­tion in 2012 that the mon­e­tary author­i­ties would do “what­ev­er it takes” to pre­serve the euro, has worked so far. But the knowl­edge that the euro is not a bind­ing com­mit­ment among its mem­bers will make it far less like­ly to work the next time. Bond yields could spike, and no amount of reas­sur­ance by the ECB and Europe’s lead­ers would suf­fice to bring them down from stratos­pher­ic lev­els, because the world now knows that they will not do “what­ev­er it takes.” As the exam­ple of Greece has shown, they will do only what short-sight­ed elec­toral pol­i­tics demands.

    The most impor­tant con­se­quence, I fear, is the weak­en­ing of Euro­pean sol­i­dar­i­ty. The euro was sup­posed to strength­en it. Instead, it has had the oppo­site effect.

    ...

    Europe’s lead­ers viewed them­selves as vision­ar­ies when they cre­at­ed the euro. They thought they were look­ing beyond the short-term demands that usu­al­ly pre­oc­cu­py polit­i­cal lead­ers.

    Unfor­tu­nate­ly, their under­stand­ing of eco­nom­ics fell short of their ambi­tion; and the pol­i­tics of the moment did not per­mit the cre­ation of the insti­tu­tion­al frame­work that might have enabled the euro to work as intend­ed. Although the sin­gle cur­ren­cy was sup­posed to bring unprece­dent­ed pros­per­i­ty, it is dif­fi­cult to detect a sig­nif­i­cant pos­i­tive effect for the euro­zone as a whole in the peri­od before the cri­sis. In the peri­od since, the adverse effects have been enor­mous.

    The future of Europe and the euro now depends on whether the eurozone’s polit­i­cal lead­ers can com­bine a mod­icum of eco­nom­ic under­stand­ing with a vision­ary sense of, and con­cern for, Euro­pean sol­i­dar­i­ty. We are like­ly to begin find­ing out the answer to that exis­ten­tial ques­tion in the next few weeks.

    As Stiglitz puts it, this is basi­cal­ly the future that the euro­zone is flirt­ing with:

    ...
    ECB Pres­i­dent Mario Draghi’s con­fi­dence trick, in the form of his dec­la­ra­tion in 2012 that the mon­e­tary author­i­ties would do “what­ev­er it takes” to pre­serve the euro, has worked so far. But the knowl­edge that the euro is not a bind­ing com­mit­ment among its mem­bers will make it far less like­ly to work the next time. Bond yields could spike, and no amount of reas­sur­ance by the ECB and Europe’s lead­ers would suf­fice to bring them down from stratos­pher­ic lev­els, because the world now knows that they will not do “what­ev­er it takes.” As the exam­ple of Greece has shown, they will do only what short-sight­ed elec­toral pol­i­tics demands.
    ...

    And that’s what’s Europe is flirt­ing with: teach­ing the world that short-sight­ed elec­toral pol­i­tics, the kind that cel­e­brate a ‘take no pris­on­ers’ atti­tude towards Greece while mas­querad­ing as sound eco­nom­ics, is exact­ly what to expect in the future.

    And it all rais­es a dis­turb­ing ques­tion: is teach­ing that les­son to the exact­ly what Europe’s right-wing elites want? Because it’s still not clear that Greece will leave the euro­zone even if it defaults. And it could very well stay in the EU even if it does leave the euro­zone. And thanks to the ‘Fis­cal Com­pact’ that near­ly all of the EU has signed onto, we could see euro­zone mem­ber states get kicked out of the euro­zone, but stay in the EU and still under the thumb of a fis­cal straight-jack­et that even euro­zone econ­o­mist tend to see as harm­ful.

    So who knows, maybe set­ting up the ‘Grex­it’ as a self-ful­fill­ing prophe­cy is actu­al­ly seen as desir­able? In the next cri­sis, the remain­ing coun­tries, maybe Italy or Spain next, could find them­selves first under­go even more severe aus­ter­i­ty than they did dur­ing this cri­sis (because the ECB won’t have the cred­i­bil­i­ty to step in and calm the mar­kets), and then, after the social safe­ty-net is shred­ded and the peo­ple are clam­or­ing for change, the euro­zone can just kick them out of the euro­zone and into the kinder, gen­tler aus­ter­i­ty of the Fis­cal Com­pact. Rebuild­ing the gov­ern­ment pro­grams that were destroyed and get­ting the econ­o­my back on track will still be impos­si­ble but it will still seem much, much bet­ter than before because they’ll be able to spend more than they could under the euro­zone straight-jack­et.

    Of course, the more weak mem­bers that get kicked out, the worse the euro is for the export pow­er­hous­es like Ger­many that ben­e­fit the most from hav­ing an artif­i­cal­ly weak­er cur­ren­cy as a result of shar­ing the euro with weak­er nations. But there’s plen­ty of poor nations in East­ern Europe that aren’t mem­bers yet!

    And rais­es anoth­er risk to the ‘Grex­it’: the worse Greece is treat­ed as a eruo­zone mem­ber, the less the rest of the non-euro­zone pub­lic is going to want to join. The euro­zone gen­er­ates an end­less stream of bad news because that’s what its poli­cies pro­duce: bad news.

    Poland’s right-wing Prime Min­is­ter, Don­ald Tusk, declared in April of last year that Poland should join the euro­zone, but in a few years cit­ing a lack of pop­u­lar sup­port for thd idea. He also not­ed that, while War­saw need­ed to make sure it was eco­nom­i­cal­ly safe to join, Poland should join any­ways because “it is not only an eco­nom­ic project. It is also a geopo­lit­i­cal project”. Yikes:

    Reuters
    Poland will join the euro but not for ‘sev­er­al years’: PM Tusk

    Wed Apr 9, 2014 12:22pm EDT

    Poland will join the euro in the future because adop­tion of Europe’s com­mon cur­ren­cy would raise its sta­tus among the West­ern nations and increase its secu­ri­ty, Prime Min­is­ter Don­ald Tusk said on Wednes­day.

    Tusk, who has led Poland’s gov­ern­ment since 2007, said, how­ev­er, that War­saw would not be tar­get­ing euro entry in the next “sev­er­al years”.

    “Enter­ing the euro zone would be, in a strate­gic take, anoth­er anchor that would main­tain Poland in the group of the most impor­tant West­ern nations and increase our secu­ri­ty,” Tusk told polityka.pl web­site in an inter­view.

    This is the first time Tusk has talked about War­saw’s strate­gic goal of enter­ing the euro zone in the con­text of secu­ri­ty.

    Oth­er pol­i­cy­mak­ers, includ­ing the cen­tral bank Gov­er­nor Marek Bel­ka, have said War­saw should con­sid­er faster euro adop­tion for geopo­lit­i­cal and safe­ty rea­sons in the wake of the mil­i­tary con­flict between Rus­sia and Ukraine.

    ...

    “Let’s not have any illu­sions. The (finan­cial) cri­sis has forced a deep inte­gra­tion of the euro zone. Poland will not be join­ing it in the next sev­er­al years for both polit­i­cal and eco­nom­ic rea­sons,” he said.

    Tusk said there was not a suf­fi­cient major­i­ty back­ing a nec­es­sary change in the con­sti­tu­tion, which says only the Nation­al Bank of Poland can issue mon­ey used in Poland.

    Enter­ing the euro zone would auto­mat­i­cal­ly trans­fer that respon­si­bil­i­ty to the Euro­pean Cen­tral Bank.

    He point­ed to eco­nom­ic fac­tors and said that War­saw need­ed to make sure that euro adop­tion was safe for the econ­o­my.

    “We should not stop aim­ing at euro mem­ber­ship as a tar­get because it is not only an eco­nom­ic project. It is also a geopo­lit­i­cal project,” Tusk said.

    So Poland’s Prime Min­is­ter wants the coun­try to join the thing that chews up weak coun­tries and takes over their policy-making...for sta­tus and geo­lit­i­cal pow­er. Wow.

    For­tu­nate­ly, the rest of Poland isn’t so star­ry-eyed with the lure of sta­tus, with 76% reject­ing the idea of join­ing the euro­zone in an Octo­ber poll. Still, opin­ions can be swayed, espe­cial­ly once the Greek cri­sis is resolved in a man­ner that isn’t total­ly bru­tal.

    So, all in all, when faced with the inex­plic­a­bly uncom­pro­mis­ing behav­ior of the troi­ka this whole time and the clear Clausi­witz­ian direc­tion that Europe keeps head­ing, it worth con­sid­er­ing the pos­si­bil­i­ty that exit­ing the euro­zone is a desired prece­dent to set because a sys­tem where nations get kicked out of the euro­zone but stays in the EU with its Fis­cal Com­pact would be a great way to gau­ran­tee the euro­zone can stay crazy for­ev­er. When the weak­er nations find that the rigged nature of the sys­tem against the weak­er nations and per­ma­nent right-wing-ish eco­nom­ic, fis­cal, and reg­u­la­to­ry poli­cies are too much to bare they can leave, stay in the EU, and let­ting the rest of the eur­zone take an uncom­pro­mis­ing stance with­out real­ly hav­ing to unrig the sys­tem against weak­er states. As long as the finan­cial fall­out can be con­tained, will the rest of the euro­zone care if that’s the way it works? (Maybe lat­er)

    Stiglitz warned that future crises are inevitable because that’s real­i­ty. And if a ‘Grex­it’ hap­pens those future crises are going to be worse, despite all the rhetoric from about cre­at­ing con­fi­dence by enforc­ing aus­ter­i­ty and usury. And if they can kick out Greece while keep­ing under an EU thumb, maybe that’s the desired out­come.

    In tan­gen­tial­ly relat­ed news, a num­ber of GOP mem­bers of con­gress are fac­ing the dilem­ma of what to do if the GOP’s pet King vs Bur­well law­suit that would elim­i­nate the sub­si­dies for the poor in states with­out state-run exchanges actu­al­ly wins. Which could hap­pen. And in a num­ber of states that will be impact­ed it looks like the elect­ed offi­cials’ respons­es are going to be to do noth­ing and say “who cares about the poor. No one I know.” It sounds like that’s basi­cal­ly the plan for one camp of the GOP­ers in con­gress.

    As you’re well aware, the amer­i­zone cri­sis has­n’t been fun either.

    Posted by Pterrafractyl | June 6, 2015, 8:07 pm
  31. Here’s an arti­cle that does a great job of sum­ma­riz­ing the sta­tus of the Greek nego­ti­a­tions with the troi­ka: First, EU Com­mis­sion Pres­i­dent Jean-Claude Junck­er is pub­licly whin­ing about Alex­is Tripras char­ac­ter­i­za­tion of the troika’s offer late last week as a “take it or leave it offer.” Junck­er empha­sized that some things, like cuts to income sup­port for pen­sion­ers, are still up for nego­ti­a­tion.

    Pre­sum­ably Junck­er was refer­ring to nego­ti­a­tions with Greece that assumes few­er cuts to pen­sions means more cuts else­where since that’s been the stance the troi­ka has tak­en thus far. Also, EU Par­lia­ment pres­i­dent Mar­tin Schulz warned Greece of dire con­se­quences if it did­n’t come to an agree­ment with the troi­ka and sug­gest­ed that Greece should get kicked out of the EU, and not just the euro­zone, if Greece defaults. And Ger­man Vice Chan­cel­lor Sig­mar Gabriel warned that Europe is as its lim­its with Greece.

    So the troi­ka is show­ing Greece flex­i­bil­i­ty (Greece gets to choose where it slits its own throat), but Greece is also warned that it faces dire con­se­quences if it can’t come to an agree­ment with the troi­ka. Also, Europe has reached its lim­its accord­ing to Ger­many’s Vice Chan­cel­lor. And Junck­er, not Tsipras, is the one that’s act­ing all per­son­al­ly wound­ed:

    The Tele­graph
    Greece told to strike a deal or face ‘dra­mat­ic con­se­quences’
    Time is run­ning out for Syriza and Greece’s lenders to find com­mon ground, Euro­pean lead­ers warn

    By Mar­i­on Dak­ers

    11:56 AM BST 07 Jun 2015

    Greece’s cred­i­tors are los­ing patience with the coun­try’s uncom­pro­mis­ing stance on its debt oblig­a­tions, with the heads of the Euro­pean Par­lia­ment and Com­mis­sion call­ing on Alex­is Tsipras’s gov­ern­ment to find com­mon ground for a deal or face “dra­mat­ic con­se­quences”.

    Jean-Claude Junck­er, Pres­i­dent of the Com­mis­sion, has vent­ed his frus­tra­tion at Mr Tsipras for reject­ing the lenders’ pro­pos­als last week with­out telling his par­lia­ment that stick­ing points such as income sup­port for pen­sion­ers had been put on the table for nego­ti­a­tions.

    “He did­n’t tell par­lia­ment that we did address that sub­ject already,” said Mr Junck­er, adding that he is yet to receive a revised pro­pos­al from the Greek lead­er­ship fol­low­ing Mr Tsipras’ “dis­ap­point­ing” com­ments.

    “I don’t have a per­son­al prob­lem with Alex­is Tsipras, quite the con­trary. He was my friend, he is my friend. But friend­ship, in order to main­tain it, has to have some min­i­mum rules,” he said at the G7 sum­mit in Ger­many.

    Mean­while, the Pres­i­dent of the Euro­pean Par­lia­ment has put fur­ther pres­sure on Greece to agree a deal with its inter­na­tion­al cred­i­tors and unlock res­cue fund­ing, warn­ing of “dra­mat­ic con­se­quences” if the indebt­ed coun­try resists com­pro­mise.

    Mar­tin Schulz told the Welt am Son­ntag news­pa­per that the anti-aus­ter­i­ty rul­ing par­ty Syriza has a respon­si­bil­i­ty towards the rest of the Euro­pean Union, not sim­ply its own vot­ers.

    Mr Tsipras took a defi­ant stance on Fri­day by post­pon­ing a €300m pay­ment to the Inter­na­tion­al Mon­e­tary Fund and describ­ing the lat­est reforms and fund­ing pro­pos­al from the troi­ka of lenders as an “unpleas­ant sur­prise” and “absurd”.

    Mr Schulz echoed Mr Tsipras’s fore­bod­ing tone about how quick­ly Europe needs to come to an agree­ment. “Time is run­ning out and the con­se­quences would be dra­mat­ic,” he said, warn­ing Greece against “turn­ing down the out­stretched hand again”.

    He has also sug­gest­ed over the week­end that if Greece were to depart from the euro­zone, it would spell “auto­mat­ic exit from the EU”..

    Greece’s finance min­is­ter Vanis Varo­ufakis has made a fresh push for debt relief as part of the revised pack­age. “As finance min­is­ter, I’ll refuse to put my sig­na­ture on a deal” like the one cur­rent­ly on the table, Mr Varo­ufakis told Pro­to The­ma news­pa­per. “We will not sign a deal that extends this self-feed­ing cri­sis of the last five years.”

    Mr Varo­ufakis likened Greece’s sit­u­a­tion to post-war Ger­many in a blog post on Sun­day. “As I write these lines, the Greek gov­ern­ment is pre­sent­ing the Euro­pean Union with a set of pro­pos­als for deep reforms, debt man­age­ment, and an invest­ment plan to kick-start the econ­o­my. Greece is indeed ready and will­ing to enter into a com­pact with Europe that will elim­i­nate the defor­mi­ties that caused it to be the first domi­no to fall in 2010.

    “But, if Greece is to imple­ment these reforms suc­cess­ful­ly, its cit­i­zens need a miss­ing ingre­di­ent: Hope. A ‘Speech of Hope’ for Greece would make all the dif­fer­ence now – not only for us, but also for our cred­i­tors, as our renais­sance would ter­mi­nate the default risk.”

    The bick­er­ing over the week­end comes ahead of a planned meet­ing between Mr Tsipras and oth­er Euro­pean lead­ers this week to dis­cuss the increas­ing­ly urgent fund­ing require­ments for Greece.

    Angela Merkel, the Ger­man Chan­cel­lor, and the French Pres­i­dent Fran­cois Hol­lande are expect­ed to meet with Mr Tsipras on Wednes­day, hav­ing spent the week­end mon­i­tor­ing the sit­u­a­tion from Bavaria, where Ger­many is host­ing the lat­est G7 sum­mit.

    ...

    Offi­cials have said a fresh bail-out deal must be done by mid-June, in time to get polit­i­cal approval for the next tranche of finan­cial sup­port before Greece’s €240bn pack­age runs out at the end of the month. The coun­try has invoked a rule cre­at­ed by the IMF in the 1970s that allows it to bun­dle all of its €1.6bn pay­ments due this month into one.

    Ger­man Vice-Chan­cel­lor Sig­mar Gabriel, a mem­ber of the Social Demo­c­ra­t­ic par­ty, said on Sat­ur­day that a deal “depends sole­ly on the Greek gov­ern­ment. Europe has gone to its lim­its.” How­ev­er, he added that the help will con­tin­ue as Greece remains part of the EU..

    Yes, Greece has been shown fex­i­bil­i­ty and options. Options like agree­ing to the pri­or offer with­out addi­tion­al relief since, as Sig­mar Gabriel warned, “Europe has gone to its lim­its”. And Sig­mar Gabiel was speak­ing for a grow­ing num­ber of Angela Merkel’s coali­tion mem­bers:

    Finan­cial Times
    Germany’s rul­ing coali­tion clos­es ranks on Greek cri­sis

    Ste­fan Wagstyl in Garmisch-Partenkirchen
    June 7, 2015 6:55 pm

    Ger­man chan­cel­lor Angela Merkel is under grow­ing domes­tic pres­sure to main­tain a tough line in the Greek cri­sis, as frus­tra­tion mounts at the fail­ure to reach a bailout deal with Athens.

    Lead­ers of the rul­ing con­ser­v­a­tive-social demo­c­rat coali­tion — includ­ing SDP politi­cians who have been more sym­pa­thet­ic to Greece than their con­ser­v­a­tive allies — are becom­ing increas­ing­ly blunt in blam­ing the Greek gov­ern­ment for the cri­sis.

    Any bailout deal Ms Merkel presents to par­lia­ment could now face an unprece­dent­ed lev­el of oppo­si­tion with­out dra­mat­ic last-minute con­ces­sions from Athens.

    “Europe had exhaust­ed its pos­si­bil­i­ties” in offer­ing com­pro­mis­es to Athens, Social demo­c­rat leader Sig­mar Gabriel said this week­end, adding his voice to those accus­ing the Syriza gov­ern­ment of intran­si­gence.

    Alex­is Tsipras, the Greek pre­mier, “is not ready to approach the things that he him­self must resolve,” Mr Gabriel said in a news­pa­per inter­view.

    Mar­tin Schulz, the Ger­man social demo­c­rat Euro­pean Par­lia­ment pres­i­dent, told anoth­er Ger­man news­pa­per: “The wrong­head­ed­ness of the Greek gov­ern­ment is irri­tat­ing.” He said the EU had come “very, very far” in accom­mo­dat­ing Greek demands and Athens should “now move in the direc­tion of the com­pro­mise” pre­sent­ed by the bailout mon­i­tors.

    The tougher line on the left of Ms Merkel’s coali­tion comes after MPs in the chancellor’s own CDU/CSU bloc have made clear that they may oppose any new aid for Greece with­out com­pre­hen­sive reforms.
    In depth

    Ger­man MPs’ views are crit­i­cal­ly impor­tant because par­lia­ment must approve any deal that involves lend­ing Athens more mon­ey.

    Peter Ram­sauer, CSU chair­man of parliament’s eco­nom­ic affairs com­mit­tee, summed up the frus­tra­tion on the right when he said in a week­end inter­view: “Ger­many can­not afford anoth­er dirty com­pro­mise.”

    “After the undig­ni­fied Mediter­ranean hag­gling over Greece’s reform promis­es” the Bun­destag had to vote both on changes in the cur­rent aid pack­age and on any future new pro­gramme, he added.

    Ms Merkel com­fort­ably won a Feb­ru­ary par­lia­men­tary vote on extend­ing the cur­rent aid pro­gramme for Greece to allow time for nego­ti­a­tions. But 29 of the 32 votes cast against the pro­pos­al came from the CDU/CSU. Since then 135 of the con­ser­v­a­tives’ 311 MPs (in the 630-seat assem­bly), have aired reser­va­tions.

    With the oppo­si­tion Green and far-left Linke par­ties still back­ing more aid for Greece, Ms Merkel would almost cer­tain­ly win a par­lia­men­tary vote on assist­ing Athens fur­ther. But a fail­ure to keep her own troops in order would embar­rass the chan­cel­lor.

    Detlef Seif, A CDU mem­ber of the EU affairs com­mit­tee, told the FT he would vote against any new aid pro­gramme. Mr Seif said that even the pro­pos­als now put for­ward by the bailout mon­i­tors were “unsus­tain­able” because Athens could not rea­son­ably repay its debt.

    “The EU is not a trans­fer union.”

    Bild, the tabloid news­pa­per, caused a stir by high­light­ing finance min­is­ter Wolf­gang Schäuble’s absence from last week’s the emer­gency Greece sum­mit host­ed by Ms Merkel. Although sug­ges­tions of a split between Ms Merkel and Mr Schäu­ble have been played down, the dif­fer­ence between the finance minister’s tough rhetoric and the chancellor’s more con­cil­ia­to­ry tone has grown in recent days.

    A CDU MP said that, despite Mr Schäuble’s appar­ent mis­giv­ings, if Ms Merkel pre­sent­ed par­lia­ment with a coher­ent res­cue pro­gramme she would win over most CDU/CSU crit­ics. But he admit­ted the job was get­ting hard­er by the day.

    Ok, so...:

    ...

    Any bailout deal Ms Merkel presents to par­lia­ment could now face an unprece­dent­ed lev­el of oppo­si­tion with­out dra­mat­ic last-minute con­ces­sions from Athens.

    ...

    Ger­man MPs’ views are crit­i­cal­ly impor­tant because par­lia­ment must approve any deal that involves lend­ing Athens more mon­ey.

    ...

    But also note the expec­ta­tion that Angela Merkel should be able to push through any deal she needs eve if it includes more aide for Greece, but it could come at a price:

    ...

    With the oppo­si­tion Green and far-left Linke par­ties still back­ing more aid for Greece, Ms Merkel would almost cer­tain­ly win a par­lia­men­tary vote on assist­ing Athens fur­ther. But a fail­ure to keep her own troops in order would embar­rass the chan­cel­lor.

    ...

    So if Greece appar­ent­ly faces dire con­se­quences unless it can nego­ti­ate a deal with the troi­ka which, as every­one knows, takes its march­ing orders from Ger­many. And Angela Merkel should be able to push through the kind of com­pro­mise pack­age Tsipras needs to ful­fill his elec­toral man­date, but would do so at her own grave polit­i­cal per­il, with the lead­ers from both the CDU and SPD pil­ing onto the ‘Greece gets noth­ing’ band­wag­on.

    The flex­i­bil­i­ty fac­ing Greece in the the remain­ing nego­ti­a­tions is going to be intense.

    Posted by Pterrafractyl | June 7, 2015, 11:50 pm
  32. It’s been quite a week for Greece and its troikan tor­menters. First, the IMF walked out on the talks cit­ing frus­tra­tion with...well, every­one. Every­one else also cit­ed frus­tra­tion with every­one:

    Reuters
    IMF angry at Greeks but frus­trat­ed at euro zone too
    When the Inter­na­tion­al Mon­e­tary Fund announced it had ordered its team home from stalled debt talks with Greece, the ges­ture of frus­tra­tion was aimed chiefly at Athens but also at euro zone gov­ern­ments, sources famil­iar with the talks say.

    June 12, 2015 10:51 pm

    When the Inter­na­tion­al Mon­e­tary Fund announced it had ordered its team home from stalled debt talks with Greece, the ges­ture of frus­tra­tion was aimed chiefly at Athens but also at euro zone gov­ern­ments, sources famil­iar with the talks say.

    The pull­back part­ly reflect­ed exas­per­a­tion at the chaot­ic way in which the talks have been con­duct­ed, with tech­ni­cal experts denied access to Athens’ pub­lic accounts, kept cooped up in hotels and lat­ter­ly forced to cool their heels while talks moved to a polit­i­cal lev­el involv­ing gov­ern­ment lead­ers.

    “The IMF want­ed to pass mes­sages to both sides,” one Brus­sels source famil­iar with the IMF’s posi­tion said.

    IMF spokesman Ger­ry Rice cit­ed “major dif­fer­ences” over pen­sions, tax­a­tion and financ­ing when he announced on Thurs­day that the glob­al lender’s rep­re­sen­ta­tives had returned to Wash­ing­ton in the absence of progress in the nego­ti­a­tions.

    The left­ist Greek gov­ern­ment has reject­ed pro­pos­als by the cred­i­tors to scrap an income top-up for poor­er pen­sion­ers and reduce state sub­si­dies of pen­sion funds, and refused to raise val­ue added tax on elec­tric­i­ty and oth­er house­hold neces­si­ties.

    But by men­tion­ing financ­ing, the IMF also want­ed to sig­nal is exas­per­a­tion at Euro­pean gov­ern­ments’ refusal to dis­cuss debt relief for Greece, with­out which IMF offi­cials say the country’s finances sim­ply won’t be sus­tain­able.

    In the Fund’s eyes, if Greece is allowed to make less of a fis­cal adjust­ment than orig­i­nal­ly sought, some­one else has to put in extra mon­ey or reduce debt costs to make the num­bers add up. And that some­one can only be Euro­pean gov­ern­ments.

    “The more dis­tant the mea­sures and tar­gets from the orig­i­nal com­mit­ment made in 2012, the high­er the need for addi­tion­al financ­ing and indeed debt relief to make Greece’s debt sus­tain­able,” Rice told reporters.

    A per­son famil­iar with the talks said the IMF has been telling euro zone cred­i­tors and the Euro­pean Cen­tral Bank for months that a com­bi­na­tion of restruc­tur­ing exist­ing loans and bonds and pro­vid­ing addi­tion­al lend­ing will be nec­es­sary to enable Greece to put its finances on a sound foot­ing and stay in the euro zone.

    “When we talk about debt relief, the Euro­peans just don’t want to lis­ten,” the per­son said.

    TRUTH-TELLER

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble has tak­en the lead in refus­ing to dis­cuss any eas­ing of Greece’s debt load until it has ful­ly imple­ment­ed the reforms promised by pre­vi­ous gov­ern­ments and com­plet­ed the bailout pro­gramme.

    Ger­man pub­lic opin­ion is so neg­a­tive about bail­ing out Greece that Schaeu­ble fears any men­tion of fresh mon­ey or write-offs for Athens could make it impos­si­ble to get the dis­burse­ment of the remain­ing bailout funds through the Ger­man par­lia­ment.

    But behind the cur­tain, infor­mal dis­cus­sion of debt relief is tak­ing place, one per­son famil­iar with the talks said.

    “There is a con­ver­sa­tion,” he said, with­out giv­ing details.

    The Fund sees its role as a truth-teller, ensur­ing that a bor­row­ing country’s pub­lic finances are sus­tain­able. That cal­cu­la­tion com­bines loan matu­ri­ties, inter­est rates, eco­nom­ic growth, pro­duc­tiv­i­ty and the fis­cal bal­ance.

    But unlike in dozens of bailouts around the world, the IMF is not in con­trol in the euro zone, where it plays sec­ond fid­dle to Euro­pean gov­ern­ments, with the Euro­pean Cen­tral Bank an uneasy third part­ner in try­ing to enforce the pro­gramme.

    And hav­ing lent sub­stan­tial­ly more to Greece than in any pre­vi­ous bailout in its his­to­ry, the IMF is unlike­ly to con­tribute mon­ey to any third pro­gramme, although it has not for­mal­ly ruled that out. Euro­pean cred­i­tors would insist that it con­tin­ue to pro­vide exper­tise and help mon­i­tor com­pli­ance.

    In the case of Greece, which has a debt moun­tain equal to 185 per­cent of gross domes­tic prod­uct, sus­tain­abil­i­ty requires run­ning a sig­nif­i­cant bud­get sur­plus before inter­est pay­ments.

    But with the econ­o­my back in reces­sion and the gov­ern­ment deter­mined to avoid harsh­er aus­ter­i­ty mea­sures, the cred­i­tors are talk­ing about reduc­ing the pri­ma­ry sur­plus tar­get.

    Rice not­ed that pen­sions and wages account for 80 per­cent of Greece’s total pri­ma­ry gov­ern­ment spend­ing.

    “So it’s not pos­si­ble for Greece to achieve its medi­um-term fis­cal tar­gets, with­out reforms and espe­cial­ly of pen­sions. I think it’s been acknowl­edged by all sides that the Greek pen­sion sys­tem is unsus­tain­able,” he said.

    Accord­ing to the IMF, the gov­ern­ment spends 10 per­cent of GDP sub­si­dis­ing pen­sions, com­pared to a 2.5 per­cent aver­age in the euro zone. The aver­age pen­sion in Greece is only slight­ly low­er than in Ger­many, although Greeks retire on aver­age six years younger and Greek GDP-per-capi­ta is half that of Ger­many.

    On tax­es, Rice said Greece’s pol­i­cy of impos­ing ever high­er tax rates on a nar­row tax base was unsus­tain­able, so it was essen­tial to broad­en the tax sys­tem.

    “Greece has among the largest gaps in the Euro­pean Union on VAT rev­enues that are actu­al­ly col­lect­ed ver­sus VAT that should be col­lect­ed, giv­en the rates,” he said.

    ...

    So no one is hap­py with any­one, and Ger­many is get­ting extra-pissed, with Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble tak­ing the lead for the “no concessions”-camp of Berlin’s pol­i­cy-mak­ers. At the same time, talk of Greek debt-relief is appar­ent­ly still tak­ing place. Infor­mal­ly:

    ...

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble has tak­en the lead in refus­ing to dis­cuss any eas­ing of Greece’s debt load until it has ful­ly imple­ment­ed the reforms promised by pre­vi­ous gov­ern­ments and com­plet­ed the bailout pro­gramme.

    Ger­man pub­lic opin­ion is so neg­a­tive about bail­ing out Greece that Schaeu­ble fears any men­tion of fresh mon­ey or write-offs for Athens could make it impos­si­ble to get the dis­burse­ment of the remain­ing bailout funds through the Ger­man par­lia­ment.

    But behind the cur­tain, infor­mal dis­cus­sion of debt relief is tak­ing place, one per­son famil­iar with the talks said.

    “There is a con­ver­sa­tion,” he said, with­out giv­ing details.

    ...

    And if the pic­ture paint­ed in the arti­cle below is cor­rect, if Wolf­gang Schaeu­ble decides to mount a revolt in the Ger­man par­lia­ment over how Merkel decides to han­dle the Greek nego­ti­a­tions, Wolf­gang will get that revolt:

    Der Spiegel

    Brew­ing Con­flict over Greece: Ger­many’s Finance Min­is­ter Mulls Tak­ing on Merkel

    By Peter Müller, René Pfis­ter and Chris­t­ian Reier­mann

    June 12, 2015 – 05:55 PM

    It was a dra­mat­ic week. One in which the rumors did the rounds that Finance Min­is­ter Wolf­gang Schäu­ble was basi­cal­ly as good as gone; that he had fall­en out with Chan­cel­lor Merkel and was plan­ning a coup. Then, at the end of this tur­bu­lent week, Schäu­ble made a joke.

    ...

    Schäu­ble is extreme­ly good at shrug­ging off con­flict with gal­lows humor — a gift that has served him well through­out his lengthy career. He is well aware that a hand­ful of Social Democ­rats aren’t the only ones talk­ing about the widen­ing rift in the gov­ern­ment. Insid­ers who know Merkel well are say­ing the same. The chan­cel­lor has to answer one of the hard­est ques­tions she’s had to face since assum­ing office, name­ly, should Greece be allowed to remain in the euro, or should the whole dra­ma be brought to a spec­tac­u­lar close with a Grex­it.

    Merkel would like Greece to remain in the euro. Not nec­es­sar­i­ly at any cost, but she’s pre­pared to pay a high price. Schäu­ble is not. He is of the opin­ion that a Greek with­draw­al from the euro zone is in Europe’s best inter­ests. Which of them is the more intran­si­gent? Merkel, whose pop­u­lar­i­ty serves as the back­bone of the EU? Or Schäu­ble, for whom there is con­sid­er­able good will among mem­bers of par­lia­ment, fed up as they are with hav­ing to approve one bailout pack­age after anoth­er?

    Schäu­ble is con­vinced that Europe can only suc­ceed if every­one abides by the rules and Greece is pre­pared to accept what he calls “con­di­tion­aity,” in oth­er words, that cred­it depends on Greece respect­ing the terms of its cred­i­tors. Merkel basi­cal­ly agrees. But a Grex­it could upset the finan­cial mar­kets, and then what? She is reluc­tant to risk look­ing like she pri­or­i­tized nation­al inter­ests and under­mined the found­ing prin­ci­ples of the EU.

    His Own Man

    It’s an emo­tion­al­ly-charged dis­agree­ment that reflects the com­plex rela­tion­ship between two politi­cians who do not com­plete­ly trust one anoth­er.

    Schäu­ble is some­thing of an émi­nence grise in the Ger­man gov­ern­ment: He became a mem­ber of par­lia­ment in 1972, when Merkel was prepar­ing to grad­u­ate from high school in Tem­plin. In 1998, as head of the CDU/CSU par­lia­men­tary group in the Bun­destag, he made Merkel his sec­re­tary gen­er­al, but then became enmeshed in the CDU dona­tions scan­dal. Merkel suc­ceed­ed him in 2000.

    Although she’s the one in charge, he inter­mit­tent­ly makes it clear that he remains his own man; that he does­n’t kow­tow to any­one. Appoint­ed finance min­is­ter in 2009, Schäu­ble remarked that Merkel likes to sur­round her­self with peo­ple who were uncom­pli­cat­ed, but that he him­self was not uncom­pli­cat­ed. He tends to be a lit­tle deriso­ry about Merkel, admir­ing her hunger for pow­er but deem­ing her too hes­i­tant when the chips are down.

    The euro cri­sis first drove a wedge between them in 2010, when they dis­agreed on the Inter­na­tion­al Mon­e­tary Fund’s con­tri­bu­tion to the Greek res­cue fund. Schäu­ble was against it, on the grounds that Europe should sort out its prob­lems by itself. Merkel, how­ev­er, was keen to enlist the help of a body that has clear cri­te­ria when it comes to offer­ing aid, and which would there­fore pre­vent the Euro­peans from mak­ing one con­ces­sion after anoth­er. Merkel pre­vailed.

    But they’ve now trad­ed posi­tions. Schäu­ble believes that enough con­ces­sions have been made to Greece and he’s bol­stered by the frus­tra­tion cur­rent­ly rife in his par­lia­men­tary group over Merkel’s strat­e­gy. It will be hard for Merkel to secure major­i­ty sup­port if he oppos­es her, so her fate is effec­tive­ly in his hands.

    Both of them under­stand the stakes, which is why they are both at pains to keep their dis­agree­ment under wraps. When­ev­er he’s asked if he has fall­en out with Merkel, Schäu­ble likes to pull a shocked expres­sion, respond with a bar­rage of insults and throw out terms such as “ama­teur econ­o­mist” — although this isn’t nec­es­sar­i­ly as bad as it sounds, giv­en that Schäu­ble describes him­self as a “mid­dling econ­o­mist,” at least in com­par­i­son to the “great econ­o­mist” Yanis Varo­ufakis.

    Turn­ing to Euphemisms

    When it got out that Schäu­ble had not been invit­ed to a recent sum­mit at the Chan­cellery of the Troi­ka, made up of the IMF, the Euro­pean Com­mis­sion and the Euro­pean Cen­tral Bank, his spokesman Mar­tin Jäger played down the snub. Gov­ern­ment spokesman Stef­fen Seib­ert, mean­while, insist­ed that “the Chan­cel­lor and the Finance Min­is­ter have an excel­lent work­ing rela­tion­ship that is both friend­ly and trust­ing.”

    As it hap­pened, Schäu­ble had engi­neered the sum­mit him­self at an ear­li­er meet­ing of the G7 finance min­is­ters in Dres­den. Which isn’t to say that he approved of it. His dis­plea­sure was not­ed at the Chan­cellery but met with bemuse­ment — after all, it is the Troika’s job to reach con­sen­sus on deal­ing with Greece, a fact it feared the Finance Min­istry had for­got­ten.

    The con­flict is not about dif­fer­ences in their respec­tive assess­ments of the sit­u­a­tion. Merkel’s peo­ple can cal­cu­late the extent of Greece’s prob­lems exact­ly. It’s a coun­try that in 2012 had to spend over 17 per­cent of its GDP on pen­sion pay­ments — a fig­ure unsur­passed any­where else in Europe. But Athens nonethe­less refus­es to makes cuts. Nei­ther Merkel nor Schäu­ble believe that the pri­va­ti­za­tion process is mak­ing any head­way and are con­cerned that the Greek gov­ern­men­t’s errat­ic poli­cies are scar­ing off investors. The EU Com­mis­sion has revised growth pre­dic­tions for this year down­wards from 2.5 per­cent to 0.5 per­cent.

    Where they dif­fer is when it comes to the con­se­quences. Schäu­ble is well aware that he’s the embod­i­ment of the despi­ca­ble Ger­man to most Greeks, and makes an effort to curb his trade­mark gruff­ness. When he was vis­it­ed in Berlin last week by Varo­ufakis he began their meet­ing by pre­sent­ing him with a gift of choco­late euros that he him­self had been giv­en by a reporter from a chil­dren’s TV show. “Yanis, have this nour­ish­ment for the nerves,” he said. “You’re going to need it.”

    Refus­ing to be Black­mailed

    But once the cour­te­sies had been dealt with, it was down to busi­ness. Varo­ufakis list­ed his objec­tions to the Troika’s pro­pos­als for what felt like the zil­lionth time: No, pen­sions can’t be cut; no, val­ue-added tax can­not be raised as Greece’s cred­i­tors are demand­ing — oh, and Greece would like debt relief. Rather than agree­ing to cuts to the tune of €5 bil­lion, Varo­ufakis asked for a new round of aid, which Schäuble’s experts cal­cu­lat­ed at some €30 bil­lion. “We have a respon­si­bil­i­ty to Europe,Wolfgang,” he told his host.

    For his part, Schäu­ble lis­tened patient­ly. But he essen­tial­ly has no desire left to talk to Varo­ufakis. He’s told his peo­ple that he feels too old to keep flog­ging the same dead hors­es. More­over, Varo­ufakis no longer has much say in Athens now that Prime Min­is­ter Alex­is Tsipras has begun nego­ti­at­ing with cred­i­tors him­self.

    There is noth­ing Schäu­ble hates more than being super­flu­ous to dis­cus­sions. So he told Varo­ufakis that he had no man­date to nego­ti­ate, nor did the chan­cel­lor. The Greeks could only talk to the Troi­ka, he stressed, and a polit­i­cal deci­sion could only be made if the Troi­ka accepts the Greek pro­pos­als.

    How­ev­er, as far as Schäu­ble can tell, the Greeks show no signs of progress — at least not to the extent he deems nec­es­sary. He believes that the Greek res­cue only makes sense if there is a real­is­tic chance that the coun­try can get back on its feet. Schäu­ble is eager to res­cue the euro, but not to res­cue a coun­try that has opt­ed to live at the expense of oth­ers and there­by to jeop­ar­dize the cur­ren­cy.

    Nor will he allow him­self to be black­mailed, and in his eyes, that’s exact­ly what Varo­ufakis’ tire­less reit­er­a­tion of Ger­many’s respon­si­bil­i­ty for keep­ing the EU togeth­er amounts to. After his meet­ing with Schäu­ble, Varo­ufakis gave a talk at the French Cathe­dral in the heart of Berlin, and called upon Merkel to make what he termed a “speech of hope” to the Greek peo­ple. To Schäuble’s ears, the appeal sound­ed sus­pi­cious­ly like a call to pay up, already!

    ...

    So far, Merkel has nev­er been over­ly both­ered about going down in the his­to­ry books. But if she does end up hound­ing Greece out of the euro, the devel­op­ment will cer­tain­ly be more than a foot­note. Which is one pos­si­ble rea­son for her hes­i­tan­cy. She, not Schäu­ble, will be the one who has to deal with the inevitable crit­i­cism and attacks.

    A Sin­is­ter Agen­da?

    That’s why she’s so annoyed with Schäu­ble. And he is sus­pect­ed of hav­ing more sin­is­ter motives. Could he be out to destroy Kohl’s lega­cy because he has been denied the oppor­tu­ni­ty to build on it him­self? It’s a stretch, to be sure, but the fact that many in the CDU are think­ing in such Shake­speare­an terms sug­gests that they are keep­ing a close eye on Schäu­ble.

    If he want­ed to, Schäu­ble could eas­i­ly drum up sup­port for a rebel­lion against Merkel. In Feb­ru­ary, when the Bun­destag vot­ed to extend finan­cial aid to Greece, over 100 mem­bers of par­lia­ment stressed it was for the last time — and only vot­ed in favor of the exten­sion because Schäu­ble had made his posi­tion on Greece clear. Were he to give it the thumbs down, Merkel will have a tough time per­suad­ing her par­ty oth­er­wise.

    ...

    Merkel could see the effect of Schäuble’s com­ment and chose not to respond with her own ver­sion of events. But she can only hope that he refrains from start­ing a rebel­lion. She knows how stub­born he is, but ulti­mate­ly, he has always end­ed up toe­ing the line. He owes his longevi­ty to his resilience. He put up with for­ev­er being Kohl’s crown prince, and he put up with Merkel pass­ing him over and appoint­ing Horst Köh­ler pres­i­dent. The expec­ta­tion in Merkel’s cir­cles is that he will now put up with her deci­sion on Greece — reluc­tant­ly, per­haps, but he will be loy­al nonethe­less.

    There is much to back up this the­o­ry. “The finance min­is­ter needs to accept that the chan­cel­lor might not always agree with him,” he said in the fall of 2009, short­ly after he assumed office. But now that he will be turn­ing 73 this Sep­tem­ber, he might no longer feel he needs to be as agree­able. Being obsti­nate, after all, is the pre­rog­a­tive of the elder­ly.

    Ok, so some­thing “Shake­spear­i­an” is going on between Merkel and Schaeu­ble right now:

    That’s why she’s so annoyed with Schäu­ble. And he is sus­pect­ed of hav­ing more sin­is­ter motives. Could he be out to destroy Kohl’s lega­cy because he has been denied the oppor­tu­ni­ty to build on it him­self? It’s a stretch, to be sure, but the fact that many in the CDU are think­ing in such Shake­speare­an terms sug­gests that they are keep­ing a close eye on Schäu­ble.

    If he want­ed to, Schäu­ble could eas­i­ly drum up sup­port for a rebel­lion against Merkel. In Feb­ru­ary, when the Bun­destag vot­ed to extend finan­cial aid to Greece, over 100 mem­bers of par­lia­ment stressed it was for the last time — and only vot­ed in favor of the exten­sion because Schäu­ble had made his posi­tion on Greece clear. Were he to give it the thumbs down, Merkel will have a tough time per­suad­ing her par­ty oth­er­wise.

    ...

    So there’s appar­ent­ly a belief that Ger­many’s Finance Min­is­ter is secret­ly plot­ting on under­min­ing the euro­zone as some sort of revenge on Hel­mut Kohl’s lega­cy and many in the CDU share that belief. And the ball is in Greece’s court, appar­ent­ly.

    And look at that. The talks col­lapsed again, with Ger­many’s SPD Vice Chan­cel­lor Sig­mar Gabriel announc­ing that “We will not let the Ger­man work­ers and their fam­i­lies pay for the overblown elec­tion promis­es of a par­tial­ly com­mu­nist gov­ern­ment”:

    Bloomberg Busi­ness

    Greece Enters Fate­ful Week After Brus­sels Talks End Fruit­less­ly

    by Jonathan Stearns and Mar­cus Ben­sas­son

    June 14, 2015 — 12:15 PM CDT
    Updat­ed on June 14, 2015 — 5:02 PM CDT

    Greece enters what could be a defin­ing week after last-ditch nego­ti­a­tions between rep­re­sen­ta­tives of the Greek gov­ern­ment and its cred­i­tors col­lapsed on Sun­day.

    The euro dropped as the Euro­pean Com­mis­sion said the talks in Brus­sels had bro­ken up after just 45 min­utes with the divide between what cred­i­tors asked of Greece and what its gov­ern­ment was pre­pared to do unbridged. The focus now shifts to a June 18 meet­ing in Lux­em­bourg of euro-area finance min­is­ters, known col­lec­tive­ly as the Eurogroup, that may become a make-or-break ses­sion decid­ing Greece’s abil­i­ty to avert default and its con­tin­ued mem­ber­ship in the 19-nation euro area.1
    “While some progress was made, the talks did not suc­ceed as there remains a sig­nif­i­cant gap,” the com­mis­sion said in a text mes­sage. “On this basis, fur­ther dis­cus­sion will now have to take place in the Eurogroup.”

    The lat­est failed attempt to find a for­mu­la to unlock as much as 7.2 bil­lion euros ($8.1 bil­lion) in aid for the anti-aus­ter­i­ty gov­ern­ment of Prime Min­is­ter Alex­is Tsipras brings Greece clos­er to the abyss. With two weeks until its euro-area bailout expires and no future financ­ing arrange­ment in place, cred­i­tors had set June 14 as a dead­line to allow enough time for nation­al par­lia­ments to approve an accord.

    The euro dropped 0.4 per­cent to $1.1219 in ear­ly trad­ing on Mon­day in New Zealand on news of the break­down. Greek bank stocks led the decline at the end of last week as the Athens Stock Exchange Index post­ed its biggest drop in four months.

    Ever Near­er

    Fail­ure to reach a deal in Lux­em­bourg wouldn’t nec­es­sar­i­ly spell the end of the road for Greece. Assum­ing the gov­ern­ment has enough cash tucked away, its finances could sur­vive until July, when it owes about 3.5 bil­lion euros in redemp­tions on bonds held by the Euro­pean Cen­tral Bank. Thursday’s meet­ing is still key to any res­o­lu­tion, with incal­cu­la­ble con­se­quences for Greece and the euro region if the sides remain dead­locked
    “The shad­ow of a Greek exit from the euro zone is becom­ing increas­ing­ly per­cep­ti­ble,” Ger­man Vice Chan­cel­lor and Econ­o­my Min­is­ter Sig­mar Gabriel wrote in an op-ed to be pub­lished in Bild on Mon­day. “Greece’s game the­o­rists are gam­bling the future of their coun­try. And Europe’s too.”

    Pen­sions, Tax­es

    More than four months after he was swept into office on a wave of pub­lic dis­con­tent about bud­get cuts that deep­ened a six-year Greek reces­sion, Tsipras has refused to meet the demands of the euro area and the Inter­na­tion­al Mon­e­tary Fund. The core points of con­tention are pen­sion cuts, tax ris­es and tar­gets for a bud­get sur­plus before inter­est pay­ments, known as a pri­ma­ry sur­plus.

    ...

    “The Greek pro­pos­als remain incom­plete,” the com­mis­sion said after Sunday’s ses­sion. The gap between the par­ties on fis­cal mea­sures need­ed is “in the order” of 2 bil­lion euros annu­al­ly, accord­ing to the com­mis­sion.

    The Greek gov­ern­ment blamed the euro area and the IMF, which togeth­er finance Greece’s 240 bil­lion-euro res­cue pro­gram first drawn up in 2010, for stick­ing with demands that it says are eco­nom­i­cal­ly sense­less and polit­i­cal­ly unac­cept­able.

    Ger­man Warn­ings

    Greece’s cred­i­tors insist­ed that the dif­fer­ence between the two sides on the size of the pri­ma­ry sur­plus need­ed to be cov­ered entire­ly by pen­sion cuts and increas­es in val­ue-added tax, Greek Deputy Prime Min­is­ter Yan­nis Dra­gasakis said in an e‑mailed state­ment on Sun­day. He was part of the Greek del­e­ga­tion in Brus­sels.

    As those delib­er­a­tions were tak­ing place, law­mak­ers from across the polit­i­cal divide in Ger­many, the biggest coun­try con­trib­u­tor to Greece’s aid, unit­ed to issue the most explic­it warn­ings yet that Greece is at risk of exit­ing the euro.

    “A Grex­it must be fac­tored in if the Greek gov­ern­ment doesn’t do what it’s long been called upon to do,” Michael Grosse-Broe­mer, the par­lia­men­tary whip for Chan­cel­lor Angela Merkel’s Chris­t­ian Demo­c­ra­t­ic-led bloc, said in a ZDF tele­vi­sion inter­view on Sun­day.

    Gabriel, the leader of Merkel’s Social Demo­c­ra­t­ic Par­ty coali­tion part­ner, who in Feb­ru­ary urged patience and dia­logue with Greece, was more direct.

    “We will not let the Ger­man work­ers and their fam­i­lies pay for the overblown elec­tion promis­es of a par­tial­ly com­mu­nist gov­ern­ment,” he said.

    It’s look­ing like, if there is an agree­ment, it’s going to be found at the absolute last minute because the way the sit­u­a­tion is being described Greece and the troi­ka are still far apart on the demand to gut Greece pen­sions. Greece’s
    not very gen­er­ous pen­sions:

    Asso­ci­at­ed Press

    Greece’s Pen­sion Sys­tem Isn’t That Gen­er­ous After All

    By Matthew Dal­ton

    Feb 27, 2015, 12:50 pm ET

    Greece’s pen­sion sys­tem has become a flash point in the new government’s talks with its inter­na­tion­al cred­i­tors. Prime Min­is­ter Alex­is Tsipras has vowed to fight more cuts to the sys­tem, while Greece’s cred­i­tors say more cuts are prob­a­bly nec­es­sary to ensure the gov­ern­ment can pay its bills.

    Before deal­ing with that ques­tion, they’ll need some facts about Greece’s baroque pen­sion sys­tem. At first glance, it might seem too gen­er­ous. But dig a lit­tle deep­er, and the pic­ture becomes more com­pli­cat­ed.

    First, how much does Greece spend as per­cent­age of GDP on pen­sions? The data from Euro­stat looks like this as of 2012, with Greece expen­di­ture eas­i­ly high­est in the euro­zone as a per­cent­age of GDP:

    [see Pen­sions Spend­ing, % of GDP, 2012]

    But part of that is due to the col­lapse in GDP suf­fered by Greece dur­ing the cri­sis. Sup­pose you look at pen­sion expen­di­ture as a per­cent­age of poten­tial GDP, the lev­el of eco­nom­ic out­put were euro­zone economies run­ning at full capac­i­ty:

    [see Pen­sions Spend­ing, % of Poten­tial GDP, 2012]

    Greece is still near the top, though it’s not so far from the euro­zone aver­age. More­over, Greece’s high spend­ing is large­ly the result of bad demo­graph­ics: 20% of Greeks are over age 65, one of the high­est per­cent­ages in the euro­zone. What if instead you attempt to adjust for that by look­ing at pen­sion spend­ing per per­son over 65 (see note below):

    [see Pen­sions Spend­ing, per 65+]
    Adjust­ing for the fact that Greece has a lot of old­er peo­ple, its pen­sion spend­ing is below the euro­zone aver­age. In fair­ness to Ger­many and oth­er scolds of Greece, this only hap­pened after major cuts imposed on the pen­sion sys­tem by the Euro­pean Com­mis­sion, the Inter­na­tion­al Mon­e­tary Fund and the Euro­pean Cen­tral Bank — the troi­ka rep­re­sent­ing its inter­na­tion­al cred­i­tors. But it’s also worth remem­ber­ing that 15% of old­er Greeks were at risk of pover­ty in 2013, above the euro­zone aver­age of 13% and a fig­ure that has almost cer­tain­ly risen over the last year.

    ...

    As we can see, Greece’s adjust­ed pen­sion costs may be below the euro­zone aver­age, and a col­laps­ing economo­ny and bad demo­graph­ics may be mak­ing Greece’s pen­sion unavoid­ably pricey, but, as we saw above, that’s not going to stop the troi­ka from mak­ing anoth­er ground of major pen­sion cuts an absolute demand to avoid a ‘Grex­it’. And anoth­er round of pen­sion gut­tings is one of Syriza­’s “red lines”.

    So that’s the state of the Greece/troika nego­ti­a­tions: the IMF walked out because Greece isn’t crazy enough to go along with its aus­ter­i­ty demands and the Euro­pean Com­mis­sion and Berlin are too crazy. And there were reports that many In Merkel’s own par­ty won­der if Wolf­gang Schaeu­ble might be try­ing to bring down the euro­zone out of some sort of Shakesper­ian revenge thing direct­ed at Hel­mut Kohl.

    It’s been quite a week.

    Posted by Pterrafractyl | June 14, 2015, 11:52 pm
  33. Isn’t this cute: Volk­er Kaud­er, a CDU par­lia­men­tary leader and close Merkel ally, announced that there’s just no way for the Ger­man par­lia­ment to back any new agree­ment for Greece because the IMF has backed out of the talks. As Kaud­er put it, “We all know what’s at stake. No one else in Europe is car­ry­ing the respon­si­bil­i­ty for this except Greece itself”:

    Reuters

    With­out IMF, Ger­man par­lia­ment won’t back any Greece deal ‑Kaud­er
    BERLIN, June 15
    Bonds | Mon Jun 15, 2015 2:23am EDT

    The Ger­man par­lia­ment will not back any agree­ment to res­cue Greece if the Inter­na­tion­al Mon­e­tary Fund (IMF) is not tak­ing part, the par­lia­men­tary leader of Chan­cel­lor Angela Merkel’s con­ser­v­a­tive Chris­t­ian Democ­rats (CDU) said on Mon­day.

    Volk­er Kaud­er, a close Merkel ally, also said that Merkel clear­ly wants Greece to remain in the euro zone. He said that Greece leav­ing the euro zone would def­i­nite­ly not be a cheap­er alter­na­tive to its stay­ing in the cur­ren­cy bloc.

    “I could­n’t vote for a fur­ther pay­ment if the IMF says it won’t work,” Kaud­er told ARD TV. “We’re pleased that the IMF is with us but if it says it won’t work then our par­lia­men­tary group will also say we can’t pay out fur­ther (loan) tranch­es.”

    “We all know what’s at stake. No one else in Europe is car­ry­ing the respon­si­bil­i­ty for this except Greece itself.

    “Not only Angela Merkel (wants to keep Greece in the euro), a lot of peo­ple want that....We’re say­ing Greece should remain. But it won’t work that Greece sets the terms and says ‘every­one else has to dance to our tune’. Greece needs to get back to real­i­ty.

    Yes, Greece needs to “get back to real­i­ty” because “No one else in Europe is car­ry­ing the respon­si­bil­i­ty for this except Greece itself”. Inter­est­ing­ly, the part of real­i­ty that involves the IMF also walk­ing out of the nego­ti­a­tions over frus­tra­tions with the Euro­pean Com­mis­sion and ECB over their refusal to for­give some of Greece’s debt appears to be left out of Kaud­er’s assess­ment of who all is “car­ry­ing the respon­si­bil­i­ty” for the sit­u­a­tion.

    It also seems to be leav­ing out this inter­est­ing report: Europe appar­ent­ly offered to let Greece defer pen­sion cuts, in exchange for mil­i­tary cuts instead. And the IMF vetoed it:

    Huff­in­g­ton Post
    Europe Offered Greece A Deal To Meet Its Oblig­a­tions By Cut­ting Mil­i­tary Spend­ing. The IMF Said No Way.

    Daniel Marans
    Post­ed: 06/15/2015 5:16 pm EDT

    While Euro­pean lead­ers and Inter­na­tion­al Mon­e­tary Fund rep­re­sen­ta­tives con­tin­ue to blame Greece for the impasse in nego­ti­a­tions over the terms of Greece’s bailout, a Sat­ur­day report by the Ger­man news­pa­per Frank­furter Alge­mein­er Son­ntagszeitung reveals the IMF vetoed a com­pro­mise that cut mil­i­tary spend­ing pro­posed by the Euro­pean Com­mis­sion.

    Euro­pean offi­cials involved in the nego­ti­a­tions told the Frank­furter All­ge­meine Son­ntagszeitung that the vetoed pro­pos­al, put for­ward by Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er, would have allowed Greece to defer 400 mil­lion euros in pen­sion cuts, as long as it cut an equiv­a­lent amount from its mil­i­tary bud­get. The Ger­man news­pa­per report­ed that Ger­man Chan­cel­lor Angela Merkel and French Pres­i­dent François Hol­land had signed off on Juncker’s com­pro­mise plan.

    The IMF denied the accounts of the offi­cials who spoke to the Frank­furter All­ge­meine Son­ntagszeitung.

    If the report is cor­rect, ide­ol­o­gy is play­ing just as much of a role as arith­metic in pre­vent­ing a res­o­lu­tion. The IMF’s refusal to con­sid­er a plan that would lessen pen­sion cuts is con­sis­tent with its his­tor­i­cal­ly neolib­er­al polit­i­cal phi­los­o­phy.

    The report also belies claims by Greece’s troi­ka of cred­i­tors — the IMF, Euro­pean Com­mis­sion and Euro­pean Cen­tral Bank — that they remain uni­fied in their firm nego­ti­at­ing stance. In addi­tion, it appears to con­firm that the IMF is the most hawk­ish of the three cred­i­tor par­ties.

    Greece owes the IMF a 1.6 bil­lion euro repay­ment by the end of June, but in order to make the repay­ment, it needs access to the final 7.2 bil­lion tranche of bailout mon­ey that the troi­ka is with­hold­ing. The troi­ka has made release of the last bailout install­ment con­di­tion­al on hard bud­get sur­plus tar­gets and reforms. Greece’s left-wing gov­ern­ment wants more flex­i­ble terms to allow its econ­o­my to recov­er and restore fund­ing to its social pro­grams.

    Talks between Greece and Euro­pean cred­i­tors fell apart on Sun­day after nego­tia­tors met briefly and were unable to bridge dif­fer­ences. Euro­pean Com­mis­sion nego­tia­tors said talks broke up over Greece refusal to agree to 2 bil­lion euros in per­ma­nent bud­get sav­ings. Greece said it want­ed to con­tin­ue nego­ti­at­ing, but the cred­i­tors refused to do so.

    Key stick­ing points between the two sides include the size of Greece’s pri­ma­ry sur­plus require­ment, a pro­posed val­ue-added tax increase and cuts to Greece’s pen­sion. Greece also wants a can­cel­la­tion of a sig­nif­i­cant por­tion of its debt, which the troi­ka has said it will not allow to become part of nego­ti­a­tions over the release of the 7.2 bil­lion euro bailout install­ment.

    ...

    So the IMF wants the euro­zone to agree to can­cel some of Greece’s debt, which is being refused. And the euro­zone wants Greece to cut its mil­i­tary spend­ing in place of pen­sion cuts (although it sounds like the cuts are just deferred) and IMF refused. And the Ger­man par­lia­ment refus­es to approve of any new pack­ages unless the IMF signs off on it.

    And yet...

    “We all know what’s at stake. No one else in Europe is car­ry­ing the respon­si­bil­i­ty for this except Greece itself.”

    Posted by Pterrafractyl | June 15, 2015, 2:39 pm
  34. One of the major stick­ing points in Greek dis­cus­sions is mil­i­tary spend­ing
    http://news.forexlive.com/!/one-of-the-major-sticking-points-in-greek-discussions-is-military-spending-20150616

    For all the aus­ter­i­ty, Greece has a very well-fund­ed mil­i­tary

    In debate and debate about glob­al aus­ter­i­ty, one thing we’ve learned time and time again is that mil­i­tary spend­ing is sacred. When there is talk about bud­get sav­ings, it’s almost nev­er in the dis­cus­sion.

    You can draw your own con­clu­sions why but this might be instruc­tive.

    In Greece, they’ve cut every­thing but the mil­i­tary bud­get is still high. The most-recent num­bers I can find show Greece spent 2.5% of GDP on the mil­i­tary in 2014 and that ratio has like­ly risen since. In com­par­i­son, Ger­many spends just 1.3%, Italy 1.5% and even nuclear pow­er France only 2.2%.

    Ger­man news­pa­per Frank­furter All­ge­meine Son­ntagszeitung report­ed yes­ter­day that the EU’s Junck­er put for­ward a pro­pos­al that would have allowed Greece to defer 400 mil­lion euros in pen­sion cuts if it cut the same amount from mil­i­tary spend­ing.

    What hap­pened? The IMF vetoed it.

    Evi­dent­ly, the EU has­n’t giv­en up on the idea and a report from MNI, cit­ing unnamed sources, says the Junck­er pro­pos­al is still on the table and that Greece can still sub­mit counter pro­pos­als to get a deal, includ­ing ones that increase cuts in mil­i­tary spend­ing.

    Posted by Doug the Idiot | June 16, 2015, 2:47 pm
  35. @Doug: Note that Junck­er’s offer was mere­ly to defer the pen­sion cuts in exchange for the mil­i­tary spend­ing cuts, so it was­n’t exact­ly a great offer. Still, any­thing that helps plug up a giant mil­i­tary hard­ware pro­cure­ment mon­ey-hole is some­thing worth con­sid­er­ing.

    But you also have to won­der how seri­ous this pro­pos­al was and how much of it was just the­atrics, the IMF play­ing the role of “bad cop” this time around. Because it’s not like the issue of Greek mil­i­tary cuts has­n’t hap­pened before, with sim­i­lar results:

    Greek Reporter
    Greece Waits for EU’s Answer: Pen­sions Cut, Mil­i­tary Spared

    econ­o­my
    Pol­i­tics

    by Andy Dabilis — Feb 17, 2012

    ATHENS – We’ve done our part, now you do yours, Greece has told lead­ers of the Euro­zone and Troi­ka who will decide whether the coun­try gets a sec­ond bailout of $169 bil­lion to com­ple­ment a first ongo­ing series of $152 bil­lion in res­cue loans to keep the coun­try from default­ing and being unable to pay work­ers and pen­sion­ers. Euro­pean Union lead­ers were sup­posed to decide on Feb. 15 whether to release the mon­ey after Greece’s coali­tion gov­ern­ment rammed through new aus­ter­i­ty mea­sures in the face of vio­lent protests, but has kept Greece twist­ing in the wind, say­ing it may make up its mind in a meet­ing in Brus­sels on Feb. 20 – or maybe March 2, and even float­ing the idea that it may not decide until after Greece’s elec­tions, ten­ta­tive­ly set for some time in April or May.

    All that delay has under­mined the urgency to pass new cuts of up to 32 per­cent in the min­i­mum wage and deprive pri­vate sec­tor work­ers of bar­gain­ing fights, pushed through Par­lia­ment in one day by inter­im Prime Min­is­ter Lucas Papademos, who said Greece would have col­lapsed into chaos oth­er­wise, and after Finance Min­is­ter Evan­ge­los Venize­los said he wouldn’t have enough time to fin­ish a deal to write down as much as 70 per­cent of Greece’s debt oth­er­wise. Those dead­lines have passed.

    Lead­ers of the Troi­ka of the EU-Inter­na­tion­al Mon­e­tary Fund-Euro­pean Cen­tral Bank said they want­ed writ­ten assur­ances from the coali­tion, now com­pro­mised of holdover min­is­ters of the for­mer rul­ing PASOK Social­ists and their bit­ter rival New Democ­ra­cy con­ser­v­a­tives to uphold the reform mea­sures, and got them. Then they said they want­ed Greece to show how it would make $426 mil­lion more in cuts in the 2012 bud­get and got it when PASOK leader George Papan­dreou, the for­mer Prime Min­is­ter hound­ed out of office late last year in the wake of two years of protests, riots and strikes against aus­ter­i­ty mea­sures and New Democ­ra­cy leader Anto­nis Sama­ras reneged on their promis­es not to allow cuts in pen­sions in return for cut­ting the min­i­mum wage.

    The news­pa­per Kathimeri­ni report­ed that oth­er cuts will come in spe­cial salaries, which include pub­lic sec­tor wages for doc­tors, judges, diplo­mat­ic staff and the police. The cuts are expect­ed to reach 10 per­cent and in some cas­es 20 per­cent of salaries and are set to come into effect on July 1, as opposed to Sep­tem­ber 1 as orig­i­nal­ly planned, and designed to save $118-$131 mil­lion, while anoth­er $65 mil­lion in cuts will be made in the health sec­tor. Pen­sion­ers who thought they had been spared by pledges from Papan­dreou and Sama­ras will see their ben­e­fits cut a report­ed 15 per­cent while defense spend­ing was exempt­ed after the Troi­ka reject­ed mil­i­tary cuts.

    Gov­ern­ment spokesman Pan­telis Kap­sis said Greece had no more loose ends. “The process for the new pro­gram and the cuts have been con­clud­ed,” he said. “There are no more eco­nom­ic issues out­stand­ing.” He denied that some Euro­zone finance min­is­ters had sug­gest­ed obtain­ing from Greece’s small­er par­ties a com­mit­ment to the pack­age of aus­ter­i­ty mea­sures and struc­tur­al reforms Par­lia­ment passed. He wouldn’t’ respond to a sug­ges­tion from Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble that Greece should post­pone elec­tions planned for April and install a tech­no­crat­ic gov­ern­ment instead. “It is absolute­ly up to Greece when to hold elec­tions,” Kap­sis said. Dutch Finance Min­is­ter Jan Kees de Jager added to the pres­sure on Greece. “We’re back at square one,” he told Dutch MPs. “Greece is in a much worse state than had been antic­i­pat­ed at the time.” When Euro­zone lead­ers agreed on more help for Greece in Octo­ber, 2011 the country’s debt was expect­ed to fall to 120 per­cent of GDP by 2020, which was tak­en to be the max­i­mum thresh­old. The new lev­el is now expect­ed to be clos­er to 129 per­cent, accord­ing to the lat­est study by the IMF.

    So back in Feb­ru­ary 2012, “Pen­sion­ers who thought they had been spared by pledges from Papan­dreou and Sama­ras will see their ben­e­fits cut a report­ed 15 per­cent while defense spend­ing was exempt­ed after the Troi­ka reject­ed mil­i­tary cuts.” And around this same time, the troi­ka was slow-foot­ing the release of a sec­ond “bailout” release and even sug­gest­ing that it might wait until after the upcom­ing elec­tions in April before it made a deci­sion while Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble was float­ing the idea that Greece should just skip the whole democ­ra­cy thing and install a tech­no­crat­ic gov­ern­ment instead (like what hap­pened to Italy). So it does­n’t sound like the troi­ka was too keen on those cuts back in 2012. Unsur­pris­ing­ly

    TheTyee.ca
    Europe’s Own Arms Deal­ers and Loan Ped­dlers Took Down Greece

    Prof­it-hun­gry bankers, weapons mak­ers pushed EU mem­ber over brink.

    By Mitchell Ander­son, 5 Oct 2011

    The eyes of the world are on Greece as the belea­guered coun­try lurch­es toward bank­rupt­cy, threat­en­ing to drag the glob­al econ­o­my into anoth­er reces­sion. There has been much fin­ger wag­ging from Ger­many about the need for Greek fis­cal restraint and dis­ci­pline, but what role have the Ger­man arms indus­try and preda­to­ry Euro­pean banks played in cre­at­ing this cri­sis?

    Over the last decade, Greece has been the largest importer of con­ven­tion­al mil­i­tary hard­ware in the Euro­pean Union. Greek mil­i­tary spend­ing as a per­cent­age of GDP is more than any oth­er EU mem­ber and tops even nations such as Pak­istan, which is engaged in a vari­ety of ongo­ing con­flicts.

    Greece now has more than 1,200 bat­tle tanks, 1,700 armoured per­son­nel car­ri­ers, 300 fight­er jets (includ­ing 156 F‑16s), eight sub­marines and more than 40 frigates, gun­boats and mis­cel­la­neous mis­sile car­ri­ers. The bloat­ed Greek mil­i­tary now has an air force sim­i­lar in size to Ger­many’s — a front line mem­ber of NATO with an econ­o­my 10 times larg­er than Greece and eight times as many peo­ple.

    And what coun­try is so threat­en­ing to Greece that could pos­si­bly jus­ti­fy this lev­el spend­ing by such a dan­ger­ous­ly indebt­ed coun­try? Appar­ent­ly their NATO part­ner, Turkey. Rich­er still is spec­u­la­tion from the CIA that the great­est per­il to the Greek gov­ern­ment is not a con­fronta­tion with Turkey, but a domes­tic mil­i­tary coup stem­ming from dra­con­ian cuts to the Greek pub­lic ser­vice and the pre­dictable civic unrest that has ensued.

    Pushed to human lim­its

    So severe are Greek aus­ter­i­ty mea­sures that the Unit­ed Nations has warned that basic human rights of Greek cit­i­zens are being vio­lat­ed. The Greek sui­cide rate has dou­bled since the bank-imposed aus­ter­i­ty mea­sures. Unem­ploy­ment is over 16 per cent. Cut­ting more or faster with­out threat­en­ing rev­o­lu­tion would like­ly be impos­si­ble since the Greek pop­u­la­tion has been pushed pre­cise­ly to the lim­its of human tol­er­ance.

    It is no small irony that mil­i­tary spend­ing, osten­si­bly aimed at mak­ing the world a safer place, could well trig­ger a bank­ing con­ta­gion that might unhinge the glob­al econ­o­my. The major­i­ty of Greek mil­i­tary equip­ment was also man­u­fac­tured in Ger­many, France, Britain and the Unit­ed States, cre­at­ing an inter­est­ing con­flict of inter­est.

    While the EU has repeat­ed­ly crit­i­cized Greece for their lack of fis­cal restraint, some of the loud­est voic­es, includ­ing Ger­many and France, have prof­it­ed mas­sive­ly by load­ing up the sag­ging Greek econ­o­my with bil­lions of dol­lars in their mil­i­tary exports. These pur­chas­es by Greece ful­ly account­ed for 15 per cent of Ger­man arms sales between 2006 and 2010.

    Trou­bling ques­tions are also raised by loan guar­an­tees pro­vid­ed by banks oper­at­ing in the EU. The risk to Euro­pean banks and arms man­u­fac­tur­ers in pro­vid­ing reck­less loans to Greece has been very low since these loans are guar­an­teed by the Euro­pean Finan­cial Sta­bil­i­ty Facil­i­ty. In the short term, bankers might even reap wind­fall prof­its from the ini­tial col­lapse of the Greek econ­o­my as inter­est rates on Greek bonds bal­loon to the stratos­phere. That is, unless the whole house of cards comes crash­ing down.

    Banks world­wide, how­ev­er, seem unable to restrain their col­lec­tive greed, even as it unrav­els their own indus­try. The IMF warned that the EU debt sit­u­a­tion has cost their bank­ing sec­tor almost $275 bil­lion since 2009, threat­en­ing anoth­er glob­al cred­it cri­sis.

    Mean­while, the enthu­si­as­tic Ger­man arms indus­try is fur­ther demon­strat­ing their fix­a­tion on prof­its over prin­ci­ples by sell­ing 200 Leop­ard bat­tle tanks to the repres­sive regime in Sau­di Ara­bia. The Saud­is helped crush a pop­u­lar upris­ing this year in neigh­bour­ing Bahrain as the Arab Spring spread through­out the Mid­dle East.

    We should also remem­ber that Greece was sad­dled with mas­sive debt ear­li­er this decade, par­tial­ly due to exor­bi­tant spend­ing dic­tat­ed by the Inter­na­tion­al Olympic Com­mit­tee (IOC) — an orga­ni­za­tion ranked as the least account­able on the plan­et.

    The nar­ra­tive most of us have been told of the lazy irre­spon­si­ble Greeks threat­en­ing glob­al sta­bil­i­ty ignores some obvi­ous facts. Euro­pean banks, the arms indus­try and even the IOC have prof­it­ed hand­some­ly from con­tribut­ing to this mess.

    ...

    As we can see, Greece has been one of the EU defense sec­tor’s best clients over the last decade, with Greece account­ing for 15 per­cent of Ger­many’s defense exports between 2006 and 2010. That includes being the first to pur­chase a line of new Ger­man subs. Glitchy Ger­man subs:

    The Tele­graph
    Greece sues for 7 bil­lion euros over Ger­man sub­marines that have nev­er sailed
    Exclu­sive: Mil­i­tary deal which became sym­bol­ic of finan­cial cri­sis now at cen­tre of inter­na­tion­al legal case over Greece’s geo-polit­i­cal rep­u­ta­tion

    By Hol­ly Watt, White­hall Edi­tor

    2:35PM BST 12 Jun 2014

    Greece has launched a mul­ti-bil­lion euro claim against one of Germany’s biggest defence firms who sold the finan­cial­ly-belea­guered coun­try four sub­marines in a com­pli­cat­ed deal which has become sym­bol­ic of the country’s eco­nom­ic woes.

    The con­tro­ver­sial deal has threat­ened Greece’s posi­tion in Nato, accord­ing to well-placed sources, led to the crim­i­nal pros­e­cu­tion of the country’s defence min­is­ter and the res­ig­na­tion of a senior Naval fig­ure.

    The Tele­graph today pub­lish­es pho­tographs of the four sub­marines, which are still unfin­ished in a Greek ship­yard almost 15 years after they were first ordered.

    It can now be dis­closed that the Greek Gov­ern­ment has launched a sev­en-bil­lion euro com­pen­sa­tion claim against ThyssenK­rupp Marine Sys­tems and Abu Dhabi Mar – the defence firm and ship­yard now respon­si­ble for the order.

    A 200-page doc­u­ment sent to the ICC Inter­na­tion­al Court of Arbi­tra­tion states that Greece’s inter­na­tion­al posi­tion was com­pro­mised by the fail­ure to sup­ply the sub­marines and its posi­tion in Nato was under­mined.

    “The issue is so sen­si­tive that we could claim even high­er eco­nom­ic com­pen­sa­tion from the Arabs and the Ger­mans because the sub­marines are con­nect­ed with the geostrate­gic role of the coun­try, its place with­in NATO, and the fact that the coun­try is await­ing the final­i­sa­tion of the Exclu­sive Eco­nom­ic Zone which has brought sev­er­al investors who want to invest in its nat­ur­al resources,” said a well-placed source.

    Fol­low­ing years of delay, the Greek Gov­ern­ment has recent­ly insist­ed that the sub­marines are final­ly due to start full sea tri­als immi­nent­ly, although no date has been set. When one of the Greek sub­marines first went to sea, it was found to list heav­i­ly in cer­tain sea con­di­tions.

    Greece’s spend­ing on defence sys­tems before the eco­nom­ic melt­down has attract­ed con­tro­ver­sy, with the four sub­marines com­ing to sym­bol­ise the waste. The coun­try was Europe’s largest importer of weapons, spend­ing four per­cent of GDP on arma­ments. It had 1,300 tanks – more than twice as many as Britain.

    Greek politi­cians claimed that Ger­many encour­aged Greece to spend vast sums on weapon­ry and then crit­i­cised the coun­try for profli­ga­cy. How­ev­er, a 3 bil­lion euro deal to buy the four sub­marines – ves­sels the coun­try does not even need – have become a tip­ping point and the new Greek admin­is­tra­tion now appears deter­mined to seek com­pen­sa­tion.

    The ICC appeal is like­ly to be part of Greece’s attempts to shift the blame for its mas­sive over­spend­ing onto oth­er Euro­pean coun­tries. The Inter­na­tion­al Court of Arbi­tra­tion resolves inter­na­tion­al com­mer­cial dis­putes.

    “If there is one coun­try that has ben­e­fit­ed from the huge amounts Greece spends on defence it is Ger­many,” said Dim­itris Papadi­moulis, an MP with the Coali­tion of the Rad­i­cal Left par­ty, said pre­vi­ous­ly.

    Last year, the for­mer defence min­is­ter Akis Tsochad­zopou­los was jailed after being found guilty of receiv­ing an €8m bribe from Fer­rostaal, one of the Ger­man com­pa­nies involved in the deal. Fer­rostaal agreed to pay a €140m fine.

    Ste­lios Fenekos, a 52-year-old vice admi­ral of the 22,000-man strong Greek Navy, also resigned his posi­tion in the wake of a row over the ves­sels. He said he did so in protest at the Greek defence minister’s deci­sion to pur­chase the sub­marines, as well as oth­er deci­sions tak­en that Mr Fenekos con­sid­ers “polit­i­cal­ly moti­vat­ed”.

    “How can you say to peo­ple we are buy­ing more subs at the same time we want you to cut your salaries and pen­sions?” said Admi­ral Fenekos.

    The four Class 214 sub­marines have been moth­balled in the Skara­man­gas ship­yard near Athens in Greece for over two years, hav­ing been ordered over 15 years ago.

    Work­ers left the ship­yard in April 2012, but were recent­ly told they would be rehired on wages 35 per cent low­er than their pre­vi­ous salaries.

    In total the sub­ma­rine deal has cost at least three bil­lion euros – three times more than the EU demand­ed that the Greek admin­is­tra­tion save from the country’s bud­get by cut­ting work­ers’ pen­sions, a move that sparked vio­lent unrest in Athens.

    Although the econ­o­my of the coun­try is now slow­ing improv­ing, Greece has received inter­na­tion­al finan­cial bailouts which total 215 bil­lion euros. In return for the bailout, Greek was ordered to adopt extreme aus­ter­i­ty mea­sures.

    The four boats that are cur­rent­ly in Skara­man­gas were final­ly hand­ed over to the Greek navy in March, although the deal was first signed in 2000. At that time, the Greeks ordered three Class 214 sub­marines with an option on a fourth.

    ThyssenK­rupp Marine bought the ship­yard, which was respon­si­ble for build­ing the sub­marines in 2002 and sub­se­quent­ly sold on a large share­hold­ing to Abu Dhabi Mar.

    ...

    “In total the sub­ma­rine deal has cost at least three bil­lion euros – three times more than the EU demand­ed that the Greek admin­is­tra­tion save from the country’s bud­get by cut­ting work­ers’ pen­sions, a move that sparked vio­lent unrest in Athens.” Yikes.

    So there’s all sorts of rea­sons for the troi­ka not want­i­ng to see Greece cut its mil­i­tary spend­ing too much. But who knows, maybe this time around we’ll see some big defense cuts for Greece. Although, as the arti­cle below sug­gests, those cuts prob­a­bly aren’t going to come in the form of cuts to waste­ful, expen­sive mil­i­tary hard­ware. No, the EU Com­mis­sion and ECB want to see Greece shift to a less man­pow­er-inten­sive force struc­ture, which means the troika’s pro­posed defense cuts prob­a­bly don’t involve things like can­celling the sub con­tracts but instead lay­ing off troops:

    Finan­cial Times
    Leaked paper: Should Greece cut defence spend­ing?
    Peter Spiegel

    Jun 16 10:45

    One of the odd­i­ties of Greece’s bailout pro­gramme has been that, despite five years of pun­ish­ing aus­ter­i­ty, its mil­i­tary bud­get remains amongst the high­est in the EU.

    ...

    And accord­ing to a doc­u­ment obtained by Brus­sels Blog and post­ed here, the issue has come up again dur­ing the cur­rent stand­off between Athens and its inter­na­tion­al cred­i­tors as a way to breach the fis­cal gap the two sides are cur­rent­ly wrestling over.

    To recap, Greece’s bailout mon­i­tors have pushed Athens to make up a €1bn-€2bn annu­al bud­get short­fall by cut­ting pub­lic sec­tor pen­sions and rais­ing val­ue-added tax­es on some items like elec­tric­i­ty, which Tsipras has resist­ed. Cred­i­tors have insist­ed they are open to oth­er ideas, but argue Athens has not come back with cred­i­ble alter­na­tives

    The three-page doc­u­ment, cir­cu­lat­ed among cred­i­tors, shows that two of Greece’s bailout mon­i­tors – the Euro­pean Com­mis­sion and Euro­pean Cen­tral Bank – think defence cuts would be one way to make up the dif­fer­ence and have sug­gest­ed changes (par­tic­u­lar­ly mov­ing to a less man­pow­er-inten­sive force struc­ture, a deci­sion sev­er­al Nato allies like the US have already tak­en) in talks with Greek nego­tia­tors:

    In dis­cus­sions with author­i­ties, both the Com­mis­sion and the ECB have been indi­cat­ing the scope for sav­ings in mil­i­tary spend­ing, while strength­en­ing the defence capac­i­ty of the coun­try. It should be pos­si­ble to gen­er­ate sav­ings in the order of €200 mil­lion in 2016 by putting low­er ceil­ings to the expen­di­ture of the Min­istry of Defence.

    Defence spend­ing is a high­ly sen­si­tive sub­ject in any coun­try, and the doc­u­ment notes that the third Greek bailout mon­i­tor, the Inter­na­tion­al Mon­e­tary Fund, is pro­hib­it­ed in its rules from requir­ing mil­i­tary cuts as part of a bailout pro­gramme.

    In addi­tion, offi­cials involved in the talks said the sug­ges­tion could be par­tic­u­lar­ly dif­fi­cult for Mr Tsipras, whose left­ist Syriza par­ty is in coali­tion with the nation­al­ist Inde­pen­dent Greeks par­ty, viewed by many as a defend­er of the country’s mil­i­tary. The group’s head and founder, Panos Kam­menos, is cur­rent­ly the government’s defence min­is­ter.

    Still, the paper notes that even with cuts under­tak­en over the course of the bailout pro­gramme, as of 2013 Greece was still spend­ing more as a per­cent­age of gross domes­tic prod­uct than any oth­er Nato ally save the US or Britain, and is “by far” the coun­try with the largest share of mil­i­tary per­son­nel to pop­u­la­tion in the EU.

    Greece could move to a more pro­fes­sion­al army and fur­ther reduce mil­i­tary expen­di­ture. Short­en­ing the con­scrip­tion peri­od, bet­ter pro­cure­ment ratio­nal­is­ing the mil­i­tary equip­ment acqui­si­tion plans, and the use of new means should be pur­sued to achieve sav­ings.

    “Defence spend­ing is a high­ly sen­si­tive sub­ject in any coun­try, and the doc­u­ment notes that the third Greek bailout mon­i­tor, the Inter­na­tion­al Mon­e­tary Fund, is pro­hib­it­ed in its rules from requir­ing mil­i­tary cuts as part of a bailout pro­gramme.” So there’s our expla­na­tion for the IMF’s refusal to endorse a cut to defense spend­ing: the IMF can’t demand mil­i­tary cuts accord­ing to its own bailout rules. Dou­ble yikes.

    So we’ll see if Greece some­how ends up cut­ting its mil­i­tary spend­ing and whether or not those cuts involve troop reduc­tions or actu­al cuts to over­priced, non-work­ing mil­i­tary hard­ware. But when you con­sid­er the fact that the EU asked the IMF to become part of the “bailout” process and there was nev­er a require­ment that the IMF play a role at all, you have to won­der if the IMF’s sys­temic refusal to endorse mil­i­tary cuts as part of a “bailout” pro­gram as actu­al­ly a desired “fea­ture” by the Euro­pean cred­i­tor states (that also hap­pened to be Europe’s defense export­ing states). It seems pos­si­ble.

    Posted by Pterrafractyl | June 16, 2015, 6:43 pm
  36. The euro­zone sent in one of its more sym­pa­thet­ic lead­ers, the cen­ter-left Chan­cel­lor of Aus­tria, to meet with Greek Prime Min­is­ter Alex­is Tsipras and find a way to avoid a loom­ing ‘Grex­it’. Specif­i­cal­ly, a way to avoid a loom­ing ‘Grex­it’ that involves Greece fur­ther gut­ting the pen­sions for low earn­ers.

    It does­n’t sound like there’s been much progress from the talks, but on the plus side the meet­ing made it quite clear that cuts to low earn­ers is exact­ly what the troi­ka is call­ing for as a price to avoid a ‘Grex­it’. You’d think there were be a more high-mind­ed stick­ing point for some­thing that puts the whole Euro­pean project at risk, but no. Cuts to low earn­ing pen­sion­ers is a par­tic­u­lar pound of flesh the troi­ka demands:

    Reuters
    Aus­tria seeks Greek deal, Tsipras says no to pen­sion cuts

    Wed Jun 17, 2015 10:06am EDT

    Greek Prime Min­is­ter Alex­is Tsipras main­tained his refusal to con­sid­er fur­ther pen­sion cuts to unlock finan­cial aid after meet­ing Aus­tri­a’s Chan­cel­lor, who trav­eled to Athens seek­ing an eleventh-hour solu­tion to keep­ing Greece in the euro zone.

    Wern­er Fay­mann — one of the Euro­pean lead­ers most sym­pa­thet­ic to the Greek gov­ern­men­t’s demands for an end to aus­ter­i­ty — met with Tsipras for near­ly two hours on Wednes­day at the prime min­is­ter’s office in Athens.

    But there was lit­tle sign of move­ment from Tsipras who sees fur­ther pen­sion cuts to low earn­ers, a core com­po­nent of demands for more eco­nom­ic reforms from Greece’s inter­na­tion­al lenders., as a red line his left­ist Syriza par­ty will not cross.

    “The mar­gins for new cuts in pen­sions have been exhaust­ed.

    We can’t under­stand the obses­sion of the lenders with pen­sion cuts,” Tsipras told reporters after the meet­ing.

    “...If we don’t have an hon­or­able com­pro­mise and an eco­nom­i­cal­ly viable solu­tion, we will take the respon­si­bil­i­ty to say no to the con­tin­u­a­tion of a cat­a­stroph­ic pol­i­cy.”

    Fay­mann coor­di­nat­ed his vis­it with Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er.

    It comes a day before a meet­ing of euro zone finance min­is­ters, seen as pos­si­bly the last chance to stop Greece slid­ing into a default that would push it towards the euro exit door.

    “I can’t see a solu­tion lying before me but I see that if we are con­vinced we want one, we have a good chance,” the cen­ter-left Aus­tri­an leader said.

    He said he could not imag­ine a pros­per­ous and peace­ful future for Europe if Greece left the euro zone, and said he knew that Junck­er want­ed to find a com­pro­mise.

    “So it is a joint task for Europe, includ­ing the euro zone, to look for­ward to the future togeth­er,” he said.

    ...

    After days of barbs and fin­ger-point­ing between Athens, Brus­sels and Berlin over the fail­ure of talks at the week­end, Fay­mann struck a con­cil­ia­to­ry tone, say­ing the two sides had to talk as equals, with­out “gloat­ing or Schaden­freude”.

    “I per­son­al­ly think it is sen­si­ble not to impose fur­ther cuts on pen­sions, par­tic­u­lar­ly low-income pen­sions,” he said.

    “But I think you have to offer some­thing in exchange in nego­ti­a­tions,” he said. “I have had some signs that the prime min­is­ter and the gov­ern­ment are work­ing on these coun­ter­pro­pos­als.”

    So that was a bit omi­nous:

    ...
    “I can’t see a solu­tion lying before me but I see that if we are con­vinced we want one, we have a good chance,” the cen­ter-left Aus­tri­an leader said.

    He said he could not imag­ine a pros­per­ous and peace­ful future for Europe if Greece left the euro zone, and said he knew that Junck­er want­ed to find a com­pro­mise.

    ...

    Now, pros­per­i­ty is pret­ty obvi­ous­ly at risk for Europe whether or not Greece ‘Grex­its’ giv­en the insane eco­nom­ic poli­cies and struc­tur­al prob­lems the euro­zone that its lead­ers refuse to address. But is peace at risk too? That seems a lit­tle over the top, at least when refer­ring to Europe as a who.

    But con­cerns about an increas­ing­ly rad­i­cal­ized Greek pop­u­lace emerg­ing from the short-term eco­nom­ic dev­as­ta­tion result­ing from a ‘Grex­it’ do seem rather rea­son­able. The Euro­pean pub­lic, in gen­er­al, appears to despise the Greeks, so it’s unclear how the social tur­moil that con­sumes Greece is going to be much more than an oppor­tu­ni­ty to point and laugh for the rest of Europe. But a lack of peace and pros­per­i­ty for Greece does­n’t appear to be out of the ques­tion with or with­out a ‘Grex­it’. That’s what hap­pens when you arti­fi­cial­ly and point­less­ly cre­ate a ‘lost’ gen­er­a­tion:

    Bloomberg Busi­ness
    It’s So Bad in Greece, Peo­ple Are Mov­ing Back in With Their Par­ents
    Youth job­less­ness is still alarm­ing­ly high, while fer­til­i­ty has cratered
    by Flavia Krause-Jack­son and Gio­van­ni Salzano
    June 16, 2015 — 1:46 PM CDT

    Mov­ing out of the house you grew up in is a rite of pas­sage. Mov­ing back in with your par­ents is a cry for help.

    ...

    The num­ber of peo­ple too broke to afford their own place has bal­looned since 2010, when the Mediter­ranean nation’s eco­nom­ic woes began. The share of mom­ma’s boys (and girls) between the ages of 18 and 34 has grown to 63.5 per­cent, accord­ing to Euro­stat, the Euro­pean Union’s sta­tis­tics agency. More than half of those between 25 and 34 live at home.

    The only coun­try that can hold a torch to Greece is Italy, where it’s a cliché how much kids love their moth­ers. Yet the rea­sons why so many adult chil­dren live with their par­ents is very much ground­ed in hard eco­nom­ic facts. Two fac­tors are crit­i­cal:

    Zero job prospects

    Look­ing at Greece’s youth unem­ploy­ment num­bers, where more than half of peo­ple under 25 are out of work, it’s hard­ly sur­pris­ing many of them set­tle for free home-cooked meals and their child­hood rooms.

    Declin­ing fer­til­i­ty

    Peo­ple in Greece just aren’t mak­ing babies. And who can blame them? Rais­ing a fam­i­ly is expen­sive. What that means is that the pop­u­la­tion just keeps get­ting old­er, which leaves a shrink­ing work­force bear­ing the brunt of high­er pen­sion costs as more peo­ple retire.

    For now, the par­ents are sus­tain­ing their adult chil­dren, but pret­ty soon it’s going to be the oth­er way around. And then what?

    “For now, the par­ents are sus­tain­ing their adult chil­dren, but pret­ty soon it’s going to be the oth­er way around. And then what?”
    That’s a good ques­tion. What exact­ly is going to hap­pen when those par­ents are forced to rely on their adult chil­dren for sup­port?

    Oh, that’s right, they’ll just be incred­i­ble poor and even more stressed out and filled with despair. Unless they’re one of the lucky Greeks liv­ing off of one of those awe­some gov­ern­ment pen­sion plans we hear so much about. The gold-plat­ed pen­sions plans that are appar­ent­ly bank­rupt­ing the Greek state. At least if Greece’s elder­ly have one of those plans they won’t be depen­dent on their cur­rent­ly-unem­ployed adult child liv­ing in the base­ment. No, they’ll be free to live in pover­ty with dig­ni­ty on their own:

    Reuters
    A Greek para­dox: many elder­ly are broke despite cost­ly pen­sions
    ATHENS | By Lef­t­eris Papadi­mas and Ange­li­ki Koutan­tou

    Tue Jun 16, 2015 12:28pm EDT

    The plight of 79-year-old Athen­ian Zina Razi and thou­sands like her strikes at the heart of why talks between Greece and its cred­i­tors have col­lapsed. She lives off a pen­sion sys­tem that helps to con­sume a huge pro­por­tion of state spend­ing and can appear over­ly indul­gent — but still she’s broke.

    Razi bare­ly keeps up with her pow­er and water bills, and since her mid­dle-aged son lost his job, sup­ports him as well. “I am always in debt,” she said. “I can’t even imag­ine going to the cin­e­ma or the the­ater like I did in the past.”

    This para­dox goes a long way to explain why the left­ist-led gov­ern­ment and its cred­i­tors at the Euro­pean Union and IMF have failed to bridge their dif­fer­ences over a cash-for-reform deal, lead­ing to Sun­day’s break­down of talks.

    Five years of aus­ter­i­ty poli­cies imposed at the cred­i­tors’ behest have helped to turn a reces­sion into a full-blown depres­sion, and still they want more. Athens has flat­ly refused to achieve fur­ther sav­ings by rais­ing val­ue-added tax on essen­tial items or, cru­cial­ly, slash­ing pen­sion ben­e­fits.

    As it inch­es clos­er to default and a poten­tial­ly calami­tous exit from the euro zone, the gov­ern­ment has dis­missed such demands as “absurd” or designed to pum­mel Greeks’ morale.

    To the lenders, the pen­sion sys­tem is still too gen­er­ous com­pared with what the coun­try can afford. Greece spent 17.5 per­cent of its eco­nom­ic out­put on pen­sion pay­ments, more than any oth­er EU coun­try, accord­ing to the lat­est avail­able Euro­stat fig­ures from 2012.

    With exist­ing cuts, this fig­ure has since fall­en to 16 per­cent.

    How­ev­er, one per­son famil­iar with the talks said wages and pen­sions togeth­er still eat up 80 per­cent of pri­ma­ry state spend­ing, before debt ser­vic­ing costs. “The remain­ing 20 per­cent is already cut to the bone, indeed too far,” he said. “Civ­il ser­vants have no pen­cils to write with, build­ings in need of main­te­nance are crum­bling. It’s not pos­si­ble to make pub­lic finances sus­tain­able with­out work­ing on wages and pen­sions.”

    Despite years of reforms, many Greeks can still retire ear­ly, espe­cial­ly work­ers in the pub­lic sec­tor and pro­fes­sions clas­si­fied as haz­ardous such as the army.

    One high pro­file exam­ple is Fofi Gen­ni­ma­ta, who became the leader of the oppo­si­tion PASOK par­ty last week­end. She is a for­mer bank clerk with three chil­dren who applied for a pen­sion last year aged just 51. Her office says she has stopped tak­ing the pen­sion pay­ment since becom­ing a mem­ber of par­lia­ment.

    Greece’s state spend­ing on pen­sions is three times’ high­er as a pro­por­tion than Ger­many’s, and crit­ics accuse Greece of want­i­ng a soft life at some­body else’s expense.

    UNHELPFUL DEMOGRAPHICS

    Demo­graph­ics haven’t helped Greece. The num­ber of pen­sion­ers has been ris­ing since 2009. That’s either because the state has offered incen­tives to work­ers to retire as part of efforts to cut wage costs, or because work­ers them­selves rushed to do so before the gov­ern­ment raised the retire­ment age.

    To many Greeks, not least the Syriza par­ty that stormed to pow­er in Jan­u­ary promis­ing to push the clock back on aus­ter­i­ty, the cred­i­tors’ demands are yet anoth­er way to clob­ber vul­ner­a­ble peo­ple need­less­ly.

    The lenders have denied ask­ing for spe­cif­ic pen­sion cuts. But the Greek side said among their sug­ges­tions was slash­ing a top-up pay­ment that sup­ports some of the poor­est pen­sion­ers. For Razi, that would mean los­ing 180 euros ($203) out of her 650-euro month­ly pen­sion.

    The aver­age Greek pen­sion is 833 euros a month. That’s down from 1,350 euros in 2009, accord­ing INE-GSEE, the insti­tute of the coun­try’s largest labor union. More­over, 45 per­cent of pen­sion­ers receive month­ly pay­ments below the pover­ty line of 665 euros, the gov­ern­ment says. With more than a quar­ter of Greek work­ers job­less, many rely on par­ents and grand­par­ents for finan­cial sup­port.

    ...

    CHRISTMAS BONUS

    Pen­sion reform is a vexed issue for many Euro­pean coun­tries with aging pop­u­la­tions that can no longer sup­port a gen­er­ous enti­tle­ment sys­tem. Italy raised the retire­ment age under unpop­u­lar reforms in 2012.

    With pen­sion spend­ing equiv­a­lent to 14 per­cent of eco­nom­ic out­put, France’s pen­sions advi­so­ry coun­cil esti­mates the sys­tem will run a deficit of 9.2 bil­lion euros by 2020 despite reforms decid­ed already. Attempts by Greece’s EU neigh­bor Bul­gar­ia, where some pub­lic sec­tor work­ers can retire in their for­ties, to raise the pen­sion age recent­ly pro­voked protests.

    ...

    Both sides have agreed on a bud­get sur­plus Greece should tar­get but not on how to achieve it. The lenders want Greece to make sav­ings on pen­sions equiv­a­lent to about 2 bil­lion euros a year. Greece offered cuts of only 71 mil­lion, the lenders said.

    Giv­ing ground on pen­sions would force Prime Min­is­ter Alex­is Tsipras into a U‑turn that could prompt calls for new elec­tions or a ref­er­en­dum. One of Tsipras’s cam­paign promis­es was restor­ing a Christ­mas bonus for low-income pen­sion­ers, although that plan may be post­poned.

    Pre­vi­ous gov­ern­ments have tack­led the prob­lem. Pen­sions have been cut by an aver­age of 27 per­cent between 2010–2014 and by 50 per­cent for the high­est earn­ers. The aver­age retire­ment age was raised by two years in 2013 and Greece has said it is will­ing to curb ear­ly retire­ment ben­e­fits fur­ther.

    On aver­age Greek men now retire at 63 and women at 59, accord­ing to gov­ern­ment data. In Ger­many, the aver­age retire­ment age for those receiv­ing an old age pen­sion in 2014 was 64 years. But that fig­ure goes down to 61.3 years once those tak­ing ear­ly retire­ment on health grounds is tak­en into account, accord­ing to 2013 data.

    Yes, the troi­ka appar­ent­ly denied ask­ing for spe­cif­ic pen­sion cuts...they mere­ly want two bil­lion euros cuts from the pen­sions some­how. But for some strange rea­son the Greeks have this idea that the troi­ka is demand­ing a cut pen­sions, espe­cial­ly for the poor­est pen­sion­ers:

    ...
    The lenders have denied ask­ing for spe­cif­ic pen­sion cuts. But the Greek side said among their sug­ges­tions was slash­ing a top-up pay­ment that sup­ports some of the poor­est pen­sion­ers. For Razi, that would mean los­ing 180 euros ($203) out of her 650-euro month­ly pen­sion.

    The aver­age Greek pen­sion is 833 euros a month. That’s down from 1,350 euros in 2009, accord­ing INE-GSEE, the insti­tute of the coun­try’s largest labor union. More­over, 45 per­cent of pen­sion­ers receive month­ly pay­ments below the pover­ty line of 665 euros, the gov­ern­ment says. With more than a quar­ter of Greek work­ers job­less, many rely on par­ents and grand­par­ents for finan­cial sup­port.

    ...

    Both sides have agreed on a bud­get sur­plus Greece should tar­get but not on how to achieve it. The lenders want Greece to make sav­ings on pen­sions equiv­a­lent to about 2 bil­lion euros a year. Greece offered cuts of only 71 mil­lion, the lenders said.

    ...

    Now where did the Greeks get that ‘troi­ka wants to kick the poors’ idea?

    Oh well. But a far big­ger ques­tion looms clos­er by the day: Will peace and pros­per­i­ty reign as long as Europe stays unit­ed in its quest to beat itself into socioe­co­nom­ic sub­mis­sion? Hmmm....

    Posted by Pterrafractyl | June 17, 2015, 2:35 pm
  37. With the euro­zone Dooms­day Clock con­tin­ue to tick down to mid­night, Der Spiegel has an inter­view of EU Com­mis­sion Pres­i­dent Jean-Claude Junck­er that explores the var­i­ous frus­tra­tions Junck­er feels are hin­der­ing the nec­es­sary for­ma­tion of com­mon ground between Greece and the troi­ka. One of the biggest sources of frus­tra­tion felt by Junck­er is direct­ed at Greek Prime Min­is­ter Alex­is Tripras, with Junck­er argu­ing that Tsipras pub­licly mis­char­ac­ter­izes the Euro­pean Com­mis­sion’s nego­ti­at­ing stances. In par­tic­u­lar, Junck­er is pissed that Tsipras isn’t telling the world about Junck­er’s awe­some offer (it’s not that great but bet­ter than what’s cur­rent­ly being offered). It’s an offer of 35 bil­lion euro stim­u­lus offer that would be put into effect until 2020 assum­ing Greece accepts all the aus­ter­i­ty demands. But, to Junck­er’s cred­it, he does make a rather crit­i­cal point that your rarely hear expressed by the euro­zone or EU offi­cials: “I reject the idea that the Greeks are lying around doing noth­ing. Pen­sions have been slashed, salaries reduced and pub­lic spend­ing reined in. Ger­mans, in par­tic­u­lar, have the impres­sion that the Greeks have done noth­ing to free them­selves from their plight. That impres­sion is incor­rect”:

    Der Spiegel
    EU Com­mis­sion Pres­i­dent Junck­er: ‘I Don’t Under­stand Tsipras’

    EU Com­mis­sion Pres­i­dent Jean-Claude Junck­er remains com­mit­ted to pre­vent­ing a Grex­it. But he tells SPIEGEL that his patience is wear­ing thin: “I don’t believe the Greek gov­ern­men­t’s response has been suf­fi­cient.”

    Inter­view con­duct­ed by Peter Müller, Michael Sauga and Christoph Schult

    June 19, 2015 – 06:35 PM

    SPIEGEL: Mr. Junck­er, we would like to speak with you about friend­ship.

    Junck­er: A vast top­ic. Go ahead.

    SPIEGEL: It says in the dic­tio­nary that friend­ship is a rela­tion­ship defined by mutu­al affec­tion and trust. If you use that as a guide, would you describe Greek Prime Min­is­ter Alex­is Tsipras as a friend of yours?

    Junck­er: There are two types of friend­ship. The first is root­ed in good­will, of the kind I feel for Mr. Tsipras. The sec­ond — true friend­ship — is much rar­er, because it must first over­come obsta­cles and grow.

    SPIEGEL: You began refer­ring to Tsipras as a friend soon after he took office. More recent­ly, though, you have begun com­plain­ing that he is incor­rect­ly depict­ing the offers you have made in Athens. Were your friend­ly over­tures to him some­what pre­ma­ture?

    Junck­er: No, my rela­tion­ship to Mr. Tsipras is, for the time being, a friend­ship in accor­dance with the word’s first def­i­n­i­tion. Only lat­er will it become clear if real friend­ship will grow out of that. I will, how­ev­er, acknowl­edge that the trust I placed in him is not always returned in equal mea­sure.

    SPIEGEL: You have made con­ces­sions to Mr. Tsipras on sev­er­al issues, but he is still accus­ing you and the oth­er cred­i­tors of want­i­ng to pil­lage Greece. Are you dis­ap­point­ed in him?

    Junck­er: One should nev­er take per­son­al­ly the rela­tion­ships between rep­re­sen­ta­tives and insti­tu­tions. We are here to work for the peo­ple. On the oth­er hand, pol­i­tics can­not func­tion with­out reli­able per­son­al rela­tion­ships. With all due respect to the new Greek gov­ern­ment, one has to point out that some of its rep­re­sen­ta­tives came into office with­out being ade­quate­ly pre­pared for the tasks await­ing them.

    ...

    SPIEGEL: For five years now, inter­na­tion­al cred­i­tors have been try­ing to stave off Greek insol­ven­cy with vast aid pack­ages worth hun­dreds of bil­lions of euros. But unem­ploy­ment in the coun­try remains at 25 per­cent and gross domes­tic prod­uct has plunged by a quar­ter. Don’t you have to admit that Europe’s attempts to save Greece have failed?

    Junck­er: You are fail­ing to men­tion the suc­cess­es we have achieved. Although Greece’s GDP has fall­en dra­mat­i­cal­ly, the gov­ern­ment has pre­sent­ed a bud­get in which rev­enues are sig­nif­i­cant­ly high­er than expen­di­tures. I reject the idea that the Greeks are lying around doing noth­ing. Pen­sions have been slashed, salaries reduced and pub­lic spend­ing reined in. Ger­mans, in par­tic­u­lar, have the impres­sion that the Greeks have done noth­ing to free them­selves from their plight. That impres­sion is incor­rect.

    SPIEGEL: But the Greeks no longer want aus­ter­i­ty. Peo­ple hate the Troi­ka and the gov­ern­ment is cheered when it blasts the para­me­ters laid down by the Inter­na­tion­al Mon­e­tary Fund as “crim­i­nal.” How can the bailout project be con­tin­ued on such a foun­da­tion?

    Junck­er: It both­ers me that the Tsipras gov­ern­ment acts as though we in the Euro­pean Com­mis­sion are aus­ter­i­ty fanat­ics who are crush­ing the dig­ni­ty of the Greek peo­ple under­foot. I am upset that the Greek gov­ern­ment acts as though the Com­mis­sion is seek­ing a high­er sales tax on elec­tric­i­ty, to men­tion one exam­ple. I have told Mr. Tsipras many times that I am open to oth­er sug­ges­tions if they result in the same rev­enues. Instead of com­plain­ing about the Com­mis­sion, Mr. Tsipras could one day tell Greeks that I have offered a €35 bil­lion invest­ment pro­gram for the years 2015 to 2020 to stim­u­late growth in his coun­try. I haven’t heard any­thing about that.

    SPIEGEL: Do you have an expla­na­tion?

    Junck­er: I don’t see myself as being in a posi­tion to psy­cho­an­a­lyze anoth­er Euro­pean gov­ern­ment. I some­times even find it dif­fi­cult to ana­lyze myself. But jokes aside: I don’t believe the Greek gov­ern­men­t’s response has been suf­fi­cient. If I were the Greek prime min­is­ter, I would sell that as an achieve­ment and say: I pushed through the €35 bil­lion pack­age in Brus­sels. I don’t under­stand Tsipras. In one of the pos­i­tive moments dur­ing our nego­ti­a­tions, I once told him dur­ing a cof­fee break: If I had cam­paigned on your plat­form, I would have won 80 per­cent of the vote. But he only got 36 per­cent.

    SPIEGEL: If Tsipras con­tin­ues to reject addi­tion­al spend­ing cuts, he would only be doing what he promised to do dur­ing the cam­paign. Do you fault him for that?

    Junck­er: I, too, am of the opin­ion that, fol­low­ing an elec­tion, a politi­cian should do what he or she promised before the vote. For that rea­son, politi­cians have to think care­ful­ly, before the elec­tion, whether they will be able to ful­fill their cam­paign promis­es. Euro­pean coun­tries make up a com­mu­ni­ty of des­tiny — one which only works if the mem­bers can depend on each oth­er. Unfor­tu­nate­ly, pri­or to tak­ing over the gov­ern­ment, Mr. Tsipras adopt­ed posi­tions, which, in part, are in con­flict with the rules gov­ern­ing this union. That is why his cam­paign promis­es can­not be 100 per­cent imple­ment­ed. Mr. Tsipras should have known that.

    SPIEGEL: Do you under­stand why anoth­er friend of yours, Ger­man Finance Min­is­ter Wolf­gang Schäu­ble, now believes that a Grex­it is the bet­ter alter­na­tive?

    Junck­er: I am not aware of any sen­tence uttered by Wolf­gang Schäu­ble that would lead you to draw such a con­clu­sion. The Ger­man finance min­is­ter is a devot­ed Euro­pean who, in his per­son, unites both the past and the future. As such, every­one — and the Greeks in par­tic­u­lar — would be well advised to lis­ten close­ly to this man.

    SPIEGEL: Schäu­ble is con­cerned that the case of Greece could send the wrong mes­sage. If cred­i­tors are too lenient and the Greek gam­ble is suc­cess­ful, oth­er euro-zone mem­ber states could seek to emu­late Athens’ chutz­pah.

    Junck­er: That is a dan­ger I see as well. I know that many, par­tic­u­lar­ly in Ger­many, see me as a naive pro­po­nent of Greece. But I am very clear that sol­i­dar­i­ty and solid­i­ty belong togeth­er. While I have under­stand­ing for a tem­po­rary inabil­i­ty to adhere to the rules, we can­not have a sit­u­a­tion where the one who breaks the rules is reward­ed. That is why the Greek gov­ern­ment must make clear that it is pre­pared to adhere to the rules.

    ...

    Well, Greece may be careen­ing towards a ‘Grex­it’ with basi­cal­ly no progress on the talks and even less time to work it out. But at least Junck­er and Alex­is Tsipras are still sort of friends.

    The 35 bil­lion euro pro­pos­al that Junck­er appar­ent­ly pro­posed to Tsipras is cer­tain­ly a note­wor­thy pro­pos­al giv­en the almost com­plete lack of any oth­er pro­pos­als of that nature emerg­ing from the troi­ka, although it does­n’t sound like it would involve any sort of renewed focus on the ongo­ing human­i­tar­i­an cri­sis. Still, it does raise the ques­tion of why Alex­is Tsipras has­n’t been telling the world about that poten­tial­ly sig­nif­i­cant con­ces­sion extract­ed from Jean-Claude Junck­er. Of course, that ques­tion is mere­ly a sub-ques­tion in the much larg­er ques­tion of why almost no one oth­er than Jean-Claude Junck­er has men­tioned the 35 bil­lion euro offer. None of the oth­er nego­tia­tors and almost none of the press reports have ever men­tioned the plan. But some of the press did. For instance, Greek Reporter had a brief report on the offer:

    Greek Reporter
    EC Pres­i­dent: Greece Can Get €35 Bln Until 2020 if Reforms are Imple­ment­ed

    by Philip Chrysopou­los — Jun 4, 2015

    Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er said on Thurs­day that he is pre­pared to make new con­ces­sions on the deal pro­pos­al for Greece. Fur­ther­more, he said that Greece can get 35 bil­lion euros for its real econ­o­my if Athens is will­ing to imple­ment reforms.
    “We made some progress last night, not suf­fi­cient,” Junck­er told a sem­i­nar of the Euro­pean Polit­i­cal Strat­e­gy Cen­tre.

    Junck­er spoke to Ger­man news agency MNI say­ing that he is wor­ried about Greece and its finan­cial woes. He said he loves Greece and espe­cial­ly the less priv­i­leged Greeks who have suf­fered from the aus­ter­i­ty mea­sures that had to be imple­ment­ed.

    The EC pres­i­dent denied that the Euro­pean Union tries to impose more aus­ter­i­ty in Greece, adding that there are 35 bil­lion euros avail­able for eco­nom­ic devel­op­ment in Greece, pro­vid­ed that the Greek gov­ern­ment is will­ing to imple­ment suc­cess­ful eco­nom­ic poli­cies. Specif­i­cal­ly, he said that there is a devel­op­ment pro­gram for Greece that will pro­vide 35 bil­lion euros for the real econ­o­my until 2020. Junck­er said that he would like to see the Greek gov­ern­ment do what is nec­es­sary to take advan­tage of the funds.

    ...

    That was one of the ear­ly reports on Junck­er’s 35 bil­lion offer. One of the only ones too, at least in Eng­lish lan­guage press.

    But, a few days lat­er, The Econ­o­mist did briefly men­tion it, while also point­ing out that Junck­er is wide­ly viewed as one of the only ‘allies’ Greece has in the bailout nego­ti­a­tions:

    The Econ­o­mist
    Danc­ing on a vol­cano
    Alex­is Tsipras’s manoeu­vres to pla­cate his rad­i­cals while deal­ing with Greece’s cred­i­tors look increas­ing­ly risky
    Jun 8th 2015 | ATHENS | Europe

    ALEXIS TSIPRAS, Greece’s prime min­is­ter, knows that time is run­ning short for his coun­try to reach a deal with its cred­i­tors. This makes it all the more remark­able that, on June 5th, he made a speech in par­lia­ment denounc­ing the cred­i­tors’ lat­est set of pro­pos­als. Mr Tsipras stat­ed that “there isn’t a spe­cif­ic dead­line for an agree­ment”. The country’s bail-out mon­i­tors (the Euro­pean Com­mis­sion , the Inter­na­tion­al Mon­e­tary Fund and the Euro­pean Cen­tral Bank) are grow­ing impa­tient with the Greek gov­ern­men­t’s delay­ing tactics—most recent­ly post­pon­ing a €300m ($337m) debt pay­ment to the IMF, then miss­ing a dead­line for pre­sent­ing a revised set of nego­ti­at­ing pro­pos­als to Jean-Claude Junck­er, the Com­mis­sion pres­i­dent. It may be polit­i­cal­ly nec­es­sary for Mr Tsipras to demon­strate his inde­pen­dence from Greece’s cred­i­tors and post­pone a deal until the last minute, but he is tak­ing his coun­try fright­en­ing­ly close to the edge.

    Mr Junck­er was long seen in Athens as Greece’s only ally among the bail-out mon­i­tors, nudg­ing Mr Tsipras towards a deal with promis­es of a €35 bil­lion aid pack­age over the next sev­en years. But by now he, too, has grown annoyed with Greek stonewalling. He turned down Mr Tsipras’s request for a tele­phone con­ver­sa­tion at the week­end, then com­plained pub­licly at the sum­mit of the Group of Sev­en (G7) eco­nom­ic pow­ers that the pre­mier had mis­led the Greek par­lia­ment over a draft pro­pos­al sub­mit­ted by the cred­i­tors. Mr Tsipras called the sug­gest­ed mea­sures “absurd”, imply­ing the doc­u­ment was a final offer, when it was in fact not.

    ...

    So at least the 35 bil­lion euro offer was men­tioned that report! Some­one was talk­ing about it.

    And then, a week lat­er, Deutche Welle had a report on the offer. It was actu­al­ly a report about Jean-Claude Junck­er com­plain­ing about how Alex­is Tripras was­n’t telling the world about his offer, but, as such, it also men­tioned the offer, so that sort of counts as a report that actu­al­ly men­tioned the exis­tence of the offer. As the report also points out, Junck­er’s 35 bil­lion offer
    isn’t actu­al­ly sup­port­ed by the rest of the IMF or ECB so, tech­ni­cal­ly, so only 1/3 of the Troi­ka sup­port Junck­er’s offer:

    Deutsche Welle
    Tsipras mis­lead­ing Greece, says EU com­mis­sion chief Junck­er

    Euro­pean Com­mis­sion chief Jean-Claude Junck­er has accused Greek Prime Min­is­ter Alex­is Tsipras of mis­in­form­ing his peo­ple. Athens’ vot­ers were not being told the truth about the com­mis­sion’s pro­pos­als, he alleges.

    Date 16.06.2015

    The Euro­pean Com­mis­sion’s Pres­i­dent Jean-Claude Junck­er tar­get­ed Greek Prime Min­is­ter Alex­is Tsipras with his crit­i­cism, say­ing the leader was­n’t giv­ing his cit­i­zens cor­rect infor­ma­tion about the EU’s pro­pos­als.

    “I don’t care about the Greek government…I do care about the Greek peo­ple, main­ly the poor­est part,” Junck­er said at a news brief­ing in Brus­sels.

    “The debate in Greece and out­side Greece would be eas­i­er if the Greek gov­ern­ment would tell exact­ly what the com­mis­sion is real­ly propos­ing,” the com­mis­sion chief added, refer­ring to lenders’ pro­pos­als which would pave the way for Athens to receive its 7.2 bil­lion euro (8.1 bil­lion dol­lars) install­ment — the last of the 240-bil­lion-euro eco­nom­ic recov­ery pack­age to the coun­try.

    Junck­er spoke about Greece in a news brief­ing with NATO chief Jens Stoltenberg

    Greece’s cred­i­tors, which include the Euro­pean Cen­tral Bank (ECB) and the Inter­na­tion­al Mon­e­tary Fund (IMF) pro­posed a 10 per­cent­age point increase in val­ue added tax (VAT) on elec­tric­i­ty. How­ev­er, Junck­er said he him­self opposed the pro­pos­al: “I’m not in favor, and the prime min­is­ter knows that, I’m not in favor of increas­ing VAT on medica­ments or elec­tric­i­ty.”

    He said the com­mis­sion had instead pro­posed a 35-bil­lion-euro pro­gram to sup­port invest­ments in Greece and float­ed the idea of a “mod­est cut in the Greek defense bud­get,” which con­sti­tutes two per­cent of the coun­try’s gross domes­tic prod­uct.

    ...

    So as of last week, two thirds of the troi­ka, the ECB and IMF, want a 10 per­cent increase in the VAT on elec­tric­i­ty, some­thing Junck­er opposed. And, instead of that tax, Junck­er pro­posed the 35 bil­lion invest­ment pro­gram? That seems strik­ing­ly at odds for a troi­ka that’s been ded­i­cat­ed to yield­ing no mean­ing­ful ground thus far. At a min­i­mum, this indi­cates a rather deep troikan divide, or at least a desire to pub­licly indi­cate that such a divide exists. Which all rais­es a ques­tion: Does Jean-Claude Junck­er think his 35 bil­lion pro­pos­al is seri­ous? Because it’s not just Alex­is Tsipras that does­n’t appear to be tak­ing it seri­ous­ly. Since the idea was first float­ed about three weeks ago, pret­ty much no one oth­er than Jean-Claude Junck­er, includ­ing his troikan part­ners, has ever men­tioned the 35 bil­lion pro­pos­al in any press reports.

    And that’s the state of the nego­ti­a­tions: The troi­ka con­tin­ues to make the same unrea­son­able demands its always made, but with just a week to go before the end of June dead­line, one third of the troi­ka is com­plain­ing that Greece won’t take seri­ous­ly a pro­pos­al that the rest of the troi­ka does­n’t take seri­ous­ly either. And this seem­ing­ly delu­sion third of the troi­ka is actu­al­ly less detached from real­i­ty than the rest of the troi­ka when it comes to the real sac­ri­fices Greece has already made. Com­pared to the IMF and ECB, Junck­er is the ‘good cop’, rel­a­tive­ly speak­ing, in this sit­u­a­tion.

    You know you’re in a bad sit­u­a­tion when the ‘good cop’ is the crazy guy no one lis­tens to.

    Posted by Pterrafractyl | June 21, 2015, 11:21 pm
  38. Believe it or not, at the begin­ning of this week, things were sort of look­ing up for Greece. At least in terms of com­ing to an agree­ment with Greece’s troikan tor­men­tors. The actu­al pro­pos­al by Greece that trig­gered the opti­mism was­n’t exact­ly a blue­print of opti­mism for the Greek peo­ple’s future. But in terms of mov­ing past the nego­ti­a­tion stage and on to the end­less pain phase, things were sort of look­ing up:

    Reuters
    WRAPUP 7‑Greece offers new pro­pos­als to avert default, cred­i­tors see hope

    Mon Jun 22, 2015 6:43pm EDT

    (Adds Tsipras com­ment)

    * Eurogroup chair­man says pro­pos­al is a basis for talks

    * Merkel warns that sum­mit can­not make a deci­sion

    * Greek stock mar­ket surges 9 per­cent on hopes of deal

    * ECB increas­es emer­gency liq­uid­i­ty for Greek banks

    By Renee Mal­te­zou and Jan Strupczews­ki

    BRUSSELS, June 22 — Greece took a step back from the abyss on Mon­day with the pre­sen­ta­tion of new bud­get pro­pos­als that euro zone lead­ers wel­comed as a basis for a pos­si­ble agree­ment in the com­ing days to unlock frozen aid and avert a loom­ing default.

    Euro­pean Coun­cil Pres­i­dent Don­ald Tusk, who chaired an emer­gency sum­mit of lead­ers of the 19-nation cur­ren­cy bloc, called the Greek pro­pos­als “a pos­i­tive step for­ward”. He said the aim was to have the Eurogroup finance min­is­ters approve a cash-for-reform pack­age on Wednes­day evening and put it to euro zone lead­ers for final endorse­ment on Thurs­day morn­ing.

    How­ev­er, there must first be a detailed agree­ment with rep­re­sen­ta­tives of Euro­pean gov­ern­ments, the Euro­pean Cen­tral Bank and the Inter­na­tion­al Mon­e­tary Fund to ensure the num­bers add up, he said.

    Euro­pean stock mar­kets and Greek assets surged on Mon­day on hopes of a last-minute deal to ease a cri­sis that is threat­en­ing to dri­ve Greece out of the euro and weak­en the foun­da­tions of the Euro­pean Union’s sin­gle cur­ren­cy.

    “I am con­vinced that we will come to a final agree­ment in the course of this week,” Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er told a late-night news con­fer­ence.

    Ger­man Chan­cel­lor Angela Merkel, whose coun­try is Greece’s biggest cred­i­tor, was more cau­tious. “I can’t give any guar­an­tee that that will hap­pen,” she said of a final agree­ment. “There’s still a lot of work to be done.”

    The Greek pro­pos­als includ­ed high­er tax­es and wel­fare charges and steps to cur­tail ear­ly retire­ment, but not the nom­i­nal pen­sion and wage cuts first sought by lenders. Left­ist Prime Min­is­ter Alex­is Tsipras, elect­ed in Jan­u­ary on a promise to end aus­ter­i­ty mea­sures, also appeared to have avoid­ed rais­ing val­ue added tax on elec­tric­i­ty or loos­en­ing job pro­tec­tion laws.

    Tsipras said the ball was back in the cred­i­tors’ court and they should pro­vide a deal that would make Greece’s huge debts afford­able. “We are seek­ing a com­pre­hen­sive and viable solu­tion that will be fol­lowed by a strong growth pack­age and at the same time ren­der the Greek econ­o­my viable,” he told reporters.

    The cash-starved coun­try must repay the IMF 1.6 bil­lion euros by June 30 or be declared in default, poten­tial­ly trig­ger­ing a bank run and cap­i­tal con­trols.

    Jeroen Dijs­sel­bloem, chair­man of the euro zone finance min­is­ters, known as the Eurogroup, described the new Greek doc­u­ment as com­pre­hen­sive and “a basis to real­ly restart the talks”. He said nego­ti­a­tions in the com­ing days would show whether the num­bers added up.

    He left the sum­mit say­ing only that there would be “hard work for the next few hours”.

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble was the most neg­a­tive, telling reporters ear­li­er in the day he had seen noth­ing real­ly new from Greece.

    Par­tic­i­pants said Schaeu­ble ques­tioned in the Eurogroup meet­ing whether the Euro­pean Cen­tral Bank should con­tin­ue emer­gency lend­ing to Greek banks if there was no deal this week and whether it should not be accom­pa­nied by cap­i­tal con­trols.

    A Greek offi­cial said ECB chief Mario Draghi had reas­sured Tsipras in a pri­vate meet­ing that the cen­tral bank would con­tin­ue to sup­port Greek banks as long as Athens remained in a bailout pro­gramme. An ECB source said there was no direct link between the emer­gency liq­uid­i­ty assis­tance and the pro­gramme.

    Par­tic­i­pants said IMF chief Chris­tine Lagarde cast doubt in the meet­ing on whether the pro­pos­als were suf­fi­cient to make Greece’s pub­lic finances sus­tain­able.

    “We have a huge amount of work to do in the next 48 hours. We are not at all at the end of the route,” Lagarde said on leav­ing the sum­mit.

    Tsipras had demand­ed a promise of debt relief as a con­di­tion for a deal, but both Merkel and Junck­er said now was not the time to dis­cuss it. An EU diplo­mat said Tsipras struck a very coop­er­a­tive tone in the sum­mit and promised to work fur­ther on the pro­pos­als to ensure a deal this week.

    Junck­er said he had pro­posed a 35 bil­lion euro pro­gramme for growth-enhanc­ing mea­sures in Greece up to 2020. The mon­ey appeared to be a restate­ment of exist­ing EU bud­get funds ear­marked for Athens.

    ...

    TAX AND PENSION REFORMS

    In its pro­pos­al, Greece offered to raise the retire­ment age grad­u­al­ly to 67 and curb ear­ly retire­ment. It also offered to reform the val­ue-added-tax sys­tem to set the main rate at 23 per­cent, and promised addi­tion­al tax­es on busi­ness and the wealthy.

    Eco­nom­ics Min­is­ter George Stathakis told the BBC that Athens had avoid­ed cross­ing “red lines” set by Syriza, since it would not cut pen­sions or wages or raise the VAT rate on elec­tric­i­ty.

    In an exam­ple of the anger that Athens has caused in north­ern Europe, Hans-Peter Friedrich, deputy par­lia­men­tary floor leader for Merkel’s con­ser­v­a­tives, said there was no point in “drag­ging out a bank­rupt­cy for polit­i­cal rea­sons”.

    “We do the great­est harm to Europe if we lie to our­selves”, he said, adding that he was scep­ti­cal that the Greek gov­ern­ment would pro­vide ade­quate assur­ances to win Ger­man par­lia­men­tary sup­port for fur­ther aid.

    Sev­er­al thou­sand pro-Euro­pean Greeks staged a demon­stra­tion in favour of stay­ing in the euro on Mon­day in cen­tral Athens, a day after thou­sands of left­ists had ral­lied to protest against a new round of cuts.

    First, note this lit­tle gem:

    ...

    Junck­er said he had pro­posed a 35 bil­lion euro pro­gramme for growth-enhanc­ing mea­sures in Greece up to 2020. The mon­ey appeared to be a restate­ment of exist­ing EU bud­get funds ear­marked for Athens.

    ...

    Huh. So all that huff­ing and puff­ing Jean-Claude Junck­er has been doing all month about how hurt he is over Alex­is Tsipras’s refusal to tell the world about his awe­some 35 bil­lion euro stim­u­lus (if you drink all the poi­son) offer was mere­ly refer­ring to mon­ey in the exist­ing EU bud­get already ear­marked for Athens. Was Junck­er basi­cal­ly offer­ing not to rescind mon­ey that was already slat­ed for Greece or was he engag­ing in pure puffery? Who knows, but that’s the kind of nego­ti­at­ing part­ner Greece gets to deal with.

    Still, as of Mon­day, things were look­ing up. At least from the nego­tia­tors’ per­spec­tive. Greece sub­mit­ted a pro­pos­al that rais­es the retire­ment age, rais­es the VAT tax, and every­one except Ger­many’s offi­cials struck an opti­mistic tone (imag­ine that).

    Of course, since this is the euro­zone we’re talk­ing about, when the sit­u­a­tion is look­ing up, it’s prob­a­bly head­ing down. That’s how it works when trick­le-down aus­te­ri­ans run your world: Unless you’re already on top, you have yet to hit rock bot­tom:

    The Guardian
    Greece debt cri­sis talks end in renewed dead­lock

    Nego­ti­a­tions in Brus­sels between Athens and its cred­i­tors break down again as opti­mism over new Syriza pro­pos­als evap­o­rates

    Ian Traynor in Brus­sels

    Wednes­day 24 June 2015 15.50 EDT

    Gru­elling nego­ti­a­tions between Greece and its cred­i­tors broke up with­out agree­ment on Wednes­day evening as lenders warned the coun­try that it must accept more aus­ter­i­ty if it is to avoid default­ing on its debts.

    A third meet­ing of euro­zone finance min­is­ters in less than a week was called to a halt amid fresh dead­lock over an agree­ment on greater spend­ing cuts in Athens in exchange for res­cue funds.

    The finance min­is­ters will reassem­ble on Thurs­day in a bid to achieve an elu­sive break­through, as Greece strives to meet next Tuesday’s dead­line for a €1.6bn (£1.1bn) pay­ment to the Inter­na­tion­al Mon­e­tary Fund. A deal could not be reached at the finance minister’s gath­er­ing despite six hours of talks ear­li­er in the day between Tsipras and the heads of the IMF, Euro­pean Cen­tral Bank and Euro­pean Com­mis­sion. Tsipras met the cred­i­tors again on Wednes­day night. The meet­ing end­ed in the ear­ly hours of Thurs­day with Greece “remain­ing firm on its posi­tion” accord­ing to a Greek gov­ern­ment offi­cial.

    Tsipras was dressed down at the cred­i­tors’ meet­ing on Wednes­day morn­ing, despite hav­ing pre­sent­ed new bud­get pro­pos­als on Mon­day that were gen­er­al­ly wel­comed as con­struc­tive. How­ev­er, by the time he met the cred­i­tors on Wednes­day he was being asked to tough­en his plans.

    Tsipras sound­ed bit­ter and wound­ed after the cred­i­tors, led by Chris­tine Lagarde of the Inter­na­tion­al Mon­e­tary Fund, raised a host of prob­lems with the 11-page pol­i­cy doc­u­ment he had tabled. A revised ver­sion of the Greek pro­pos­als, lit­tered with cor­rec­tions entered in red type by the cred­i­tors, was soon leaked to the media.

    “The repeat­ed rejec­tion of equiv­a­lent mea­sures by cer­tain insti­tu­tions nev­er occurred before, nei­ther in [bailout coun­tries] Ire­land nor Por­tu­gal,” said Tsipras. “This odd stance seems to indi­cate that either there is no inter­est in an agree­ment or that spe­cial inter­ests are being backed.”

    Both sides are in a race to cut a deal before five years of bailouts worth €240bn (£171bn) lapse next Tues­day, the same day that Greece must repay the IMF.

    The Tues­day dead­line is dou­bly press­ing because the ECB, which is keep­ing the Greek bank­ing sys­tem on life sup­port, has indi­cat­ed that it will not sup­port banks if the bailout pro­gramme expires with­out a new agree­ment in place. With­out ECB’s sup­port Greek banks are expect­ed to buck­le, which would force the Tsipras gov­ern­ment to impose cap­i­tal con­trols and threat­en the country’s exit from the euro­zone.

    Ear­li­er in the week the Euro­peans had been unan­i­mous in describ­ing Tsipras’s offer on Mon­day as the first seri­ous pro­pos­al he has deliv­ered since he was elect­ed in Jan­u­ary. Senior sources in Brus­sels had inti­mat­ed that a life­line deal was in the off­ing, which would involve extend­ing Greece’s bailout by six months, dol­ing out €18bn to see it through this year and work­ing on a fol­low-up pack­age like­ly to include a form of debt restruc­tur­ing – Athens’s cen­tral demand.

    But by Wednes­day the opti­mism was fad­ing fast, as the IMF start­ed pick­ing holes in the Greek fig­ures while also con­clud­ing that stop­gap mea­sures such as VAT hikes and increased pen­sion con­tri­bu­tions would not shift the Greek econ­o­my into recov­ery mode, and could wors­en a debt bur­den that the IMF already views as unsus­tain­able.

    Athens has pro­posed rais­ing more mon­ey from VAT, mak­ing more changes to the pen­sion sys­tem, end­ing ear­ly retire­ment and rais­ing cor­po­rate tax­es.

    Tsipras’s pro­pos­als would have deliv­ered almost €8bn in reduced gov­ern­ment spend­ing. Accord­ing to Greek state tele­vi­sion on Wednes­day, the heav­i­ly revised IMF ver­sion raised that fig­ure to €11bn.

    Most econ­o­mists have already dis­missed the deal being dis­cussed as ruinous and reck­less. But all the signs were that the nego­ti­a­tions could go almost right down to next Tuesday’s dead­line. Senior Ger­man offi­cials warned that the talks could last beyond the full two-day sum­mit of lead­ers on Thurs­day and Fri­day.

    The lead­ers instruct­ed Jeroen Dijs­sel­bloem, who chairs the “eurogroup” of euro­zone finance min­is­ters, to work non-stop if nec­es­sary in order to secure a deal that could be pre­sent­ed to euro­zone lead­ers. “[The lead­ers’] expec­ta­tion is not to nego­ti­ate. Their expec­ta­tion is to wel­come an agree­ment in the eurogroup,” said a senior EU source.

    The IMF has told Tsipras and his team that the Greek plan is too reliant on tax increas­es, which have failed to deliv­er antic­i­pat­ed rev­enue streams in the past. The fund has also crit­i­cised what it sees as only half-heart­ed mea­sures to reform the Greek econ­o­my by tear­ing down hun­dreds of reg­u­la­to­ry bar­ri­ers.

    Greece’s cred­i­tors are also demand­ing faster and more sweep­ing reforms to the Greek pen­sion sys­tem. Tsipras, who has vowed not to cut wages and pen­sions, is now under pres­sure to bring for­ward plans to raise the statu­to­ry retire­ment age to 67 and scale back pen­sion­er ben­e­fits fur­ther. Pen­sions is one of the most fraught areas for the Greek nego­tia­tors, who are already under fire for offer­ing more lim­it­ed con­ces­sions.

    ...

    One step for­ward, three steps back, and a dress­ing down by one of the least cred­i­ble groups of cred­i­tors on the plan­et. That must have been fun. And note the pass­ing com­men­tary on the troika’s demands: “Most econ­o­mists have already dis­missed the deal being dis­cussed as ruinous and reck­less”. And the troi­ka wants to make it even worse:

    ...

    But by Wednes­day the opti­mism was fad­ing fast, as the IMF start­ed pick­ing holes in the Greek fig­ures while also con­clud­ing that stop­gap mea­sures such as VAT hikes and increased pen­sion con­tri­bu­tions would not shift the Greek econ­o­my into recov­ery mode, and could wors­en a debt bur­den that the IMF already views as unsus­tain­able.

    Athens has pro­posed rais­ing more mon­ey from VAT, mak­ing more changes to the pen­sion sys­tem, end­ing ear­ly retire­ment and rais­ing cor­po­rate tax­es.

    Tsipras’s pro­pos­als would have deliv­ered almost €8bn in reduced gov­ern­ment spend­ing. Accord­ing to Greek state tele­vi­sion on Wednes­day, the heav­i­ly revised IMF ver­sion raised that fig­ure to €11bn.

    Most econ­o­mists have already dis­missed the deal being dis­cussed as ruinous and reck­less. But all the signs were that the nego­ti­a­tions could go almost right down to next Tuesday’s dead­line. Senior Ger­man offi­cials warned that the talks could last beyond the full two-day sum­mit of lead­ers on Thurs­day and Fri­day.

    ...

    So we’re back to square one. And, some­what strange­ly, now the fight appears to be over whether or not Greece should raise tax­es on busi­ness, or gut the pen­sions even more. Athens clear­ly would pre­fer a tax hike over fur­ther pen­sion­er pover­ty, but as we saw from the IMF’s com­ments, trick­le-down aus­te­ri­ans might spend lots of time talk­ing about debts and deficits. But when the top­ic of rais­ing tax­es on busi­ness comes up, it’s two thumbs down

    The Wash­ing­ton Post
    Europe is destroy­ing Greece’s econ­o­my for no rea­son at all

    By Matt O’Brien June 23

    This sto­ry has been updat­ed.

    His­to­ry repeats itself, first as tragedy, then as farce, and final­ly as trolling. That, at least, appears to be the case in Greece, where its lenders want it to cut its pen­sions rather than hike its busi­ness tax­es, because they’re afraid those increas­es would, as the Finan­cial Times’s Peter Spiegel reports, “crimp eco­nom­ic growth.”

    There is a cer­tain irony to Europe start­ing to wor­ry that aus­ter­i­ty is hurt­ing Greece’s econ­o­my. For years, Europe’s lead­ers have insist­ed Greece cut deficits in exchange for con­ces­sions. Greece’s econ­o­my has already shrunk 25 per­cent, and it is hav­ing trou­ble hon­or­ing its oblig­a­tions in part because it has had so much aus­ter­i­ty.

    Now, the lat­est Greek dra­ma isn’t over, but it is in its last act. A deal should—admittedly one of the more dan­ger­ous words in the Eng­lish language—be immi­nent. The prob­lem, as it has been for the past five years, is that Europe and Greece haven’t been able to agree on what aus­ter­i­ty the lat­ter will do in return for mon­ey from the for­mer. This time, Europe has want­ed Greece to cut its pen­sions more than the 40 per­cent they already have, but Greece has­n’t. And that was that. Both sides thought the oth­er would cave the clos­er they got to the dead­line, so there was a lot of talk about “red lines” and “final offers” but not much actu­al nego­ti­a­tion.

    That’s changed now. Why? Well, Greece has dis­cov­ered it has much less lever­age than it thought. Part of it is that pan­ic about Greece has stayed in Greece because the Euro­pean Cen­tral Bank has both begun to buy oth­er coun­tries’ bonds and promised to buy as many as it takes to keep their bor­row­ing costs down. And the rest is that Greece’s banks aren’t so much an Achilles heel as an Achilles whole. In oth­er words, they’re pret­ty easy to pres­sure. Greece’s banks not only need emer­gency loans from the Euro­pean Cen­tral Bank to stay afloat, but are also sit­ting on a pile of Greek gov­ern­ment bonds and deferred tax assets that would pre­sum­ably be worth a lot less if there isn’t a deal and Athens defaults.

    So all Europe has to do is say it isn’t sure Greece’s banks have enough cash to stay open, and peo­ple will pull their mon­ey out even faster than before. That’s what hap­pened when Euro­pean offi­cials appar­ent­ly leaked that they weren’t sure Greece’s banks could make it past Mon­day, and fol­lowed it up by say­ing they might have to stop peo­ple from mov­ing their mon­ey out of the coun­try. That’s like yelling run in a crowd­ed bank. And it worked. Greek depos­i­tors pulled out three times as much as nor­mal the past few days, and that’s left their banks even more at the mer­cy of the ECB — which has forced the gov­ern­ment to either leave the euro or accept Europe’s terms.

    Greece gave in. Well, most­ly. It’s propos­ing to cut its pen­sions about half as much as Europe wants — rais­ing con­tri­bu­tions and retire­ment ages, as well as cut­ting back on ear­ly retire­ment — and then rais­ing tax­es to make up for the rest. Specif­i­cal­ly, it would levy a new tax on cor­po­rate prof­its and increase its val­ue-added tax, basi­cal­ly a nation­al sales tax, to 23 per­cent on all but a hand­ful of items. In all, this would be a fis­cal tight­en­ing of 1.5 per­cent of gross domes­tic prod­uct this year and 2.9 per­cent the next.

    The only thing hold­ing up a deal is that Europe thinks this is the wrong kind of aus­ter­i­ty. Spend­ing cuts don’t seem to be as bad for the econ­o­my as tax hikes, so that’s what Europe wants Greece to do. On the one hand, this is sound eco­nom­ic advice. But on the oth­er, it might be impos­si­bly hard for the Greeks to accept. In the eyes of the Greeks, it’s as though Europe is telling them to kill their own econ­o­my — and then dis­ap­prov­ing of the way they’ll do it.

    A real ques­tion for many econ­o­mists, how­ev­er, is why Europe is forc­ing Greece to do any more aus­ter­i­ty at all. It’s already done so much that, before this lat­est show­down, it actu­al­ly had a bud­get sur­plus before inter­est pay­ments. And, in this view, that’s all it should shoot for, real­ly: the point at which it does­n’t need any more bailouts from Europe. Any­thing more than that, though, could just inflict unnec­es­sary harm to the econ­o­my. When inter­est rates are zero, like they are now, bud­get cuts of 3 per­cent of gross domes­tic prod­uct would, by Paul Krug­man’s cal­cu­la­tion, make the econ­o­my shrink some­thing like 7.5 per­cent. So even though you have less debt, your debt bur­den isn’t much bet­ter since you have less mon­ey to pay it back.

    In the end, there seems to be only one rea­son to make Greece do more aus­ter­i­ty, and it’s hard to see how it makes any sense. That’s to try to make it pay back what it owes. Indeed, one Euro­pean offi­cial said that the entire point of this was that they “want to get our mon­ey back some day.” The prob­lem, though, is it’s incon­ceiv­able Greece will ever do that. Many feel its debt should have been writ­ten down in 2010, but it was­n’t because it was “bailed out” to the extent that it was giv­en mon­ey to then give to French and Ger­man banks. The longer Europe demands this new debt be paid back, the longer Greece’s depres­sion will go on. Now, it’s true that Europe has low­ered the inter­est rates and extend­ed the matu­ri­ties on Greece’s debt so far out that, for now at least, it’s like a lot of it does­n’t exist. But even­tu­al­ly it will, and at that point they’ll either need to extend some more or hope that Greece has returned to growth.

    ...

    First, note that when you read:

    ...
    Greece gave in. Well, most­ly. It’s propos­ing to cut its pen­sions about half as much as Europe wants — rais­ing con­tri­bu­tions and retire­ment ages, as well as cut­ting back on ear­ly retire­ment — and then rais­ing tax­es to make up for the rest. Specif­i­cal­ly, it would levy a new tax on cor­po­rate prof­its and increase its val­ue-added tax, basi­cal­ly a nation­al sales tax, to 23 per­cent on all but a hand­ful of items. In all, this would be a fis­cal tight­en­ing of 1.5 per­cent of gross domes­tic prod­uct this year and 2.9 per­cent the next.

    The only thing hold­ing up a deal is that Europe thinks this is the wrong kind of aus­ter­i­ty. Spend­ing cuts don’t seem to be as bad for the econ­o­my as tax hikes, so that’s what Europe wants Greece to do. On the one hand, this is sound eco­nom­ic advice. But on the oth­er, it might be impos­si­bly hard for the Greeks to accept. In the eyes of the Greeks, it’s as though Europe is telling them to kill their own econ­o­my — and then dis­ap­prov­ing of the way they’ll do it.

    ...

    The study that claims that tax hikes are more dam­ag­ing than spend­ing cutswas co-authored by Alber­to Alesina, one of the econ­o­mists that was recent­ly push­ing the idea that spend­ing cuts are expan­sion­ary (due to Con­fi­dence Fairy mag­ic). So, for that rea­son alone, we might want to take that nugget of wis­dom with a grain of salt.

    But, of course, there’s an even larg­er rea­son we should be skep­ti­cal of the troika’s ‘cuts instead of tax­es’ demand: every­thing the troi­ka has done since 2010 to Greece has been a harm­ful fail­ure. As Matt O’Brien puts it:

    ...

    There is a cer­tain irony to Europe start­ing to wor­ry that aus­ter­i­ty is hurt­ing Greece’s econ­o­my. For years, Europe’s lead­ers have insist­ed Greece cut deficits in exchange for con­ces­sions. Greece’s econ­o­my has already shrunk 25 per­cent, and it is hav­ing trou­ble hon­or­ing its oblig­a­tions in part because it has had so much aus­ter­i­ty.

    ...

    Yep, it’s pret­ty iron­ic. And yet here we are, less than a week before the June 30 dead­line and two days after Greece makes the kind of pro­pos­al that could trig­ger a rebel­lion in the par­lia­ment, and the troi­ka wants more cuts and poor­er Greeks. But when you final­ly have a left­ist gov­ern­ment that might actu­al­ly try to seri­ous­ly tack­le Greece’s long-stand­ing tax-eva­sion prob­lems for the first time in decades, the troi­ka says no, do more cuts instead and the wealth will fol­low. So while the troika’s alleged con­cern about the Greek econ­o­my and the lives of the Greek peo­ple is indeed iron­ic, espe­cial­ly since that ‘con­cern’ is man­i­fest­ing as calls for more pen­sion cuts, it’s got to to be amus­ing too. For some.

    Posted by Pterrafractyl | June 24, 2015, 7:55 pm
  39. Paul Krug­man has more on the grow­ing prospects of a ‘Grex­it’ next week and makes a rather crit­i­cal point that isn’t said enough: not only are the troika’s demands, like oppo­si­tion to rais­ing tax­es on busi­ness while demand­ing push­ing pen­sion cuts, basi­cal­ly sup­ply-side demands. They’re sup­ply-side demands for an econ­o­my that’s already run­ning at 20 per­cent below its capac­i­ty. In oth­er words, while there are many prob­lems with the cur­rent sit­u­a­tion in Greece (like a heart­less troi­ka....that’s a prob­lem), a lack of “sup­ply” isn’t one those prob­lems even though that’s all the Troi­ka seems to care about:

    The New York Times
    The Con­science of a Lib­er­al

    Break­ing Greece

    Paul Krug­man
    Jun 25 7:22 am

    I’ve been stay­ing fair­ly qui­et on Greece, not want­i­ng to shout Grex­it in a crowd­ed the­ater. But giv­en reports from the nego­ti­a­tions in Brus­sels, some­thing must be said — name­ly, what do the cred­i­tors, and in par­tic­u­lar the IMF, think they’re doing?

    This ought to be a nego­ti­a­tion about tar­gets for the pri­ma­ry sur­plus, and then about debt relief that heads off end­less future crises. And the Greek gov­ern­ment has agreed to what are actu­al­ly fair­ly high sur­plus tar­gets, espe­cial­ly giv­en the fact that the bud­get would be in huge pri­ma­ry sur­plus if the econ­o­my weren’t so depressed. But the cred­i­tors keep reject­ing Greek pro­pos­als on the grounds that they rely too much on tax­es and not enough on spend­ing cuts. So we’re still in the busi­ness of dic­tat­ing domes­tic pol­i­cy.

    The sup­posed rea­son for the rejec­tion of a tax-based response is that it will hurt growth. The obvi­ous response is, are you kid­ding us? The peo­ple who utter­ly failed to see the dam­age aus­ter­i­ty would do — see the chart, which com­pares the pro­jec­tions in the 2010 stand­by agree­ment with real­i­ty — are now lec­tur­ing oth­ers on growth? Fur­ther­more, the growth con­cerns are all sup­ply-side, in an econ­o­my sure­ly oper­at­ing at least 20 per­cent below capac­i­ty.

    Talk to IMF peo­ple and they will go on about the impos­si­bil­i­ty of deal­ing with Syriza, their annoy­ance at the grand­stand­ing, and so on. But we’re not in high school here. And right now it’s the cred­i­tors, much more than the Greeks, who keep mov­ing the goal­posts. So what is hap­pen­ing? Is the goal to break Syriza? Is it to force Greece into a pre­sum­ably dis­as­trous default, to encour­age the oth­ers?

    At this point it’s time to stop talk­ing about “Grac­ci­dent”; if Grex­it hap­pens it will be because the cred­i­tors, or at least the IMF, want­ed it to hap­pen.

    “At this point it’s time to stop talk­ing about “Grac­ci­dent”; if Grex­it hap­pens it will be because the cred­i­tors, or at least the IMF, want­ed it to hap­pen..” Yep. And, boy oh boy, does the troi­ka want to see it hap­pen:

    Wash­ing­ton Post
    Europe strikes back: It seems to be try­ing to push Greece out of the euro

    By Matt O’Brien
    June 25 at 3:38 PM

    Europe is alter­ing the deal, and Greece bet­ter pray it does­n’t alter it any fur­ther.

    That, at least, was the mes­sage Europe sent with it lat­est bailout pro­pos­al that was real­ly just a restate­ment of its orig­i­nal one. If Greece wants to stay in the euro, it will have to accept aus­ter­i­ty on Europe’s terms and not its own. There will be no nego­ti­a­tion, not any­more.

    The stick­ing point is Greece’s pen­sions. Europe wants Greece to cut them even more than they already have—which, in some cas­es, has been 40 percent—while Greece only wants to cut them half as much and make up the rest with high­er tax­es on busi­ness­es. The two sides seemed close enough that a com­pro­mise was com­ing, but appar­ent­ly not. Europe sent a red-ink filled let­ter that your high school Eng­lish teacher would be proud of—even, at one point, cor­rect­ing the cap­i­tal­iza­tion of a word—that reject­ed almost all of Greece’s counter-pro­pos­als. Europe wants Greece to raise its retire­ment age to 67 by 2022, not 2025; to phase out a bonus for poor retirees in 2017, not 2018; and to cut back on ear­ly retire­ment start­ing now, not next Jan­u­ary. In oth­er words, to do what it was told the first time. Not only that, but Europe insists that Greece not tax its busi­ness­es more, since—this is fun­ny in a sad kind of way—that would hurt the econ­o­my too much, and tax its con­sumers more instead. About the only con­ces­sion is that elec­tric­i­ty prices would be exempt from these new con­sumer tax­es. If it seems strange that Europe would make demands, say yours are a “good basis for progress,” but then refuse to real­ly nego­ti­ate, it is.

    So now the ques­tion is whether Greece will accede to these terms. If it does­n’t, Europe won’t unlock the bailout mon­ey Greece needs to make its €1.5 bil­lion debt pay­ment at the end of the month, and it will default. That’s even worse than it sounds, though, since Greece’s banks are sit­ting on a pile of Greek bonds and deferred tax assets that would pre­sum­ably be worth a lot less in the case of non­pay­ment. The prob­lem is the banks need those bonds as col­lat­er­al for the Euro­pean Cen­tral Bank-approved emer­gency loans keep­ing them afloat, so they’d prob­a­bly be cut off with­out them—and the banks would col­lapse. Greece would have to stop peo­ple from mov­ing their mon­ey out of the coun­try, and decide whether it want­ed to take mon­ey from depos­i­tors to bail in the banks or leave the euro so it could print mon­ey to bail out the banks. Europe knows this, of course, so it’s been leak­ing sto­ries about how shaky Greece’s finan­cial sys­tem is—not so much shout­ing run in a crowd­ed bank as start­ing one—to put more pres­sure on the gov­ern­ment to agree to a deal and agree to it now.

    ...

    Europe is mak­ing life so dif­fi­cult for Greece with such spe­cif­ic demands for aus­ter­i­ty that it almost seems like Europe is try­ing to get Greece to leave the euro now. Before this lat­est show­down, Greece had actu­al­ly cut so much that it had a bud­get sur­plus before inter­est pay­ments. That was enough that it would­n’t have need­ed any more bailouts—if Europe would for­give its debt, like many econ­o­mists think Europe should. That is what for­mer IMF offi­cial Ashoka Moody thinks the Fund’s own research says it should do. The prob­lem is that rais­ing tax­es and cut­ting spend­ing dur­ing a reces­sion hurts the econ­o­my more than it saves mon­ey. By Paul Krug­man’s cal­cu­la­tion, bud­get cuts of 3 per­cent of gross domes­tic prod­uct, as Greece has pro­posed, would actu­al­ly make its GDP shrink some­thing like 7.5 per­cent, because of the spillover effects. So even though you have less debt, your debt bur­den isn’t any better—and might be worse—since you have less mon­ey to pay it back. It can be self-defeat­ing. That’s why the IMF usu­al­ly rec­om­mends that overindebt­ed coun­tries write down their debt enough that they don’t have to do as much aus­ter­i­ty.

    But Europe isn’t inter­est­ed in that. It’s inter­est­ed in mak­ing Greece run big­ger and big­ger bud­get sur­plus­es, with­out much regard for the eco­nom­ic con­se­quences. Not only that, but Greece has to run sur­plus­es the way Europe wants them to. Nev­er mind that Greece has already cut its spend­ing a lot, already cut its pen­sions a lot, and already reformed its labor mar­kets a lot. There are always new cuts and new reforms that Europe says will make Greece grow at some point in the future.

    If this is how it’s going to be, why should Greece stay in the euro? It sure seems like Europe is try­ing to force Syriza to do what Syriza said it would­n’t just to prove a point: don’t under­es­ti­mate the pow­er of the ECB. It’s a not-so-sub­tle mes­sage to the anti-aus­ter­i­ty par­ties in Spain and Por­tu­gal that they have noth­ing to gain and every­thing to lose from chal­leng­ing the bud­get-cut­ting sta­tus quo.

    Europe has struck back, and for the first time in a long time, it looks like Greece real­ly could leave the euro.

    Yes, the troi­ka has com­pro­mised its com­pro­mis­ing rhetoric from ear­li­er this week, and now we’re back to no com­pro­mis­es. Just raw aus­ter­i­ty and obe­di­ence. And as Matt O’Brien points out, not only is all of this troikan abuse rais­ing a num­ber of ques­tions regard­ing why exact­ly should Greece stay in euro, but it’s appar­ent­ly intend­ed give an answer to oth­ers in the euro­zone that might be ask­ing whether or not they should both­er try­ing to change the ongo­ing sup­ply-side aus­ter­i­ty in their own nations. And the answer is appar­ent­ly ‘if you want to see an end to the sup­ply-side aus­ter­i­ty, you’re going to have to leave the euro­zone too’:

    ...
    If this is how it’s going to be, why should Greece stay in the euro? It sure seems like Europe is try­ing to force Syriza to do what Syriza said it would­n’t just to prove a point: don’t under­es­ti­mate the pow­er of the ECB. It’s a not-so-sub­tle mes­sage to the anti-aus­ter­i­ty par­ties in Spain and Por­tu­gal that they have noth­ing to gain and every­thing to lose from chal­leng­ing the bud­get-cut­ting sta­tus quo.
    ...

    So that’s the mes­sage get­ting sent to the elec­torates in places like Spain or Por­tu­gal: don’t even think about chal­leng­ing the aus­ter­i­ty. You’ll just have done to you what’s being done to Greece and you will lose. That’s the mes­sage! It’s pret­ty clear at this point that fear of fuel­ing fur­ther anti-aus­ter­i­ty move­ments is a big pri­or­i­ty and using Greece as an exam­ple to oth­ers is cer­tain­ly one way to send that mes­sage.

    But even though that mes­sage get­ting sent to the rest of the euro­zone is get­ting increas­ing­ly loud and clear with each chap­ter of the troika’s abuse, it’s very unclear how such a mes­sage will be received. After all, if you’re one of the one-in-four unem­ployed adults in Spain or one of the many recent­ly employed that only got a tem­po­rary, low-wage job, and the troi­ka unam­bigu­ous­ly tells you to not both­er vot­ing for one of the anti-aus­ter­i­ty par­ties because Spain will just get ‘Greeced’ as a result, is that real­ly going to cause you with­hold sup­port for the anti-aus­ter­i­ty par­ties in the upcom­ing elec­tions?

    In the eyes of Spain’s busi­ness elites and polit­i­cal estab­lish­ment, yes, fear of get­ting ‘Greeced’ will cause vot­ers to reject Podemos. At least, that’s the hope. And the plan:

    Finan­cial Times
    Two-par­ty sys­tem lat­est vic­tim of Spain’s finan­cial cri­sis

    Tobias Buck
    June 25, 2015 5:29 am

    The almost count­less casu­al­ties in Spain who have suf­fered as a result of the glob­al finan­cial cri­sis include the mil­lions of work­ers now out of work, the fam­i­lies who lost their homes, the shops that were shut­tered and the busi­ness­es that went under. Many old cer­tain­ties were also swept away at the same time: that every gen­er­a­tion will live bet­ter than the last one, for exam­ple, or that buy­ing a house is nev­er a mis­take.

    How­ev­er, the lat­est — and per­haps the final — vic­tim of the cri­sis is only now com­ing into view: Spain’s decades-old two-par­ty regime. With every month that pass­es and every poll that is pub­lished, it becomes clear­er that the coun­try is head­ing for an impor­tant polit­i­cal shift. No mat­ter who emerges vic­to­ri­ous from the gen­er­al elec­tion lat­er this year, Spain’s next gov­ern­ment and par­lia­ment are like­ly to look rad­i­cal­ly dif­fer­ent from the ones the coun­try has now.

    On the face of it, the fact that Span­ish pol­i­tics is under­go­ing wrench­ing change now — and not at the height of the cri­sis three years ago — is puz­zling. The reces­sion offi­cial­ly came to an end in mid-2013 and growth rates have improved steadi­ly ever since.

    Accord­ing to the lat­est fore­cast by the Inter­na­tion­al Mon­e­tary Fund, the Span­ish econ­o­my will grow by no less than 3.1 per cent this year, which is one of the fastest growth rates in Europe. Unem­ploy­ment is falling (albeit from an appalling­ly high lev­el) and sur­veys show Spaniards are start­ing to feel more opti­mistic about their futures.

    And yet, recov­ery is becom­ing more sol­id, the country’s polit­i­cal scene is in melt­down. Take the plight of Spain’s estab­lished par­ties, the rul­ing Pop­u­lar par­ty on the right and the oppo­si­tion Social­ists on the left. Since 1982, the two have alter­nat­ed in gov­ern­ment, invari­ably endowed with com­fort­able or even absolute majori­ties. At the 2011 gen­er­al elec­tion, which saw a land­slide vic­to­ry for the PP’s Mar­i­ano Rajoy, their com­bined share was still more than 70 per cent. When Span­ish vot­ers return to the polls lat­er this year, it is fore­cast to be clos­er to 40 per cent.

    One impor­tant rea­son for their decline lies in a string of polit­i­cal cor­rup­tion scan­dals unearthed in recent years. But there is also a sense that Spain’s recov­ery, impres­sive as it may appear on paper, has not yet made a large enough dif­fer­ence to a big enough num­ber of peo­ple.

    “We have an eco­nom­ic recov­ery, but there is still a sense of dis­il­lu­sion­ment among vot­ers, espe­cial­ly those who have lost their jobs and see few prospects for them­selves despite the recov­ery,” says Jor­di Canals, the dean of Iese busi­ness school, which has cam­pus­es in Barcelona and Madrid. “The idea that the eco­nom­ic improve­ment will sim­ply trick­le down — peo­ple are still wait­ing for that to hap­pen.”.

    The estab­lished par­ties’ loss has been the gain of two upstart polit­i­cal forces. One is the anti-aus­ter­i­ty Podemos move­ment, led by the charis­mat­ic Pablo Igle­sias. The oth­er is Ciu­dadanos, a cen­trist par­ty head­ed by Albert Rivera, a youth­ful Cata­lan lawyer.

    Both new par­ties have seen dra­mat­ic swings in their poll num­bers in recent months, but have at dif­fer­ent times scored 20 per cent or more. Unless they go through a total col­lapse in the next six months, the sup­port of one or the oth­er (or both) will be need­ed to form the next Span­ish gov­ern­ment.

    ...

    There are some who argue that this polit­i­cal frag­men­ta­tion comes with far more oppor­tu­ni­ties than risks. They say, for exam­ple, that gov­ern­ments at all lev­els will face more checks and bal­ances than before; that nepo­tism and cor­rup­tion will become hard­er to hide; and pub­lic insti­tu­tions, from the bureau­cra­cy to state-backed media, will be forced to become more bal­anced.

    Busi­ness lead­ers and investors, how­ev­er, most­ly do not see it that way. They want a Span­ish gov­ern­ment that is both sta­ble and capa­ble of push­ing through fur­ther reforms of the Span­ish state and of the econ­o­my. And they wor­ry that a left-of-cen­tre gov­ern­ment, either with Podemos or under pres­sure from it, would unrav­el some of the struc­tur­al reforms that have been pushed through by Mr Rajoy.

    “The fear is not just that there will be insta­bil­i­ty,” says Loren­zo Bernal­do de Quirós, the chair­man of Freemar­ket, a Madrid-based con­sul­tan­cy. “The fear is also that this insta­bil­i­ty will be man­aged by the left.”

    Mr Rajoy and his min­is­ters clear­ly hope that Spain’s eco­nom­ic recov­ery, cou­pled with fear of polit­i­cal insta­bil­i­ty, will ulti­mate­ly per­suade vot­ers to give the PP anoth­er man­date.

    Based on cur­rent polling, the PP indeed looks like­ly to emerge as the biggest par­ty once again. How­ev­er, it will be the biggest of four small par­ties rather than the big­ger of two. What is more, it is far from obvi­ous where it can find the allies it needs to secure a work­ing major­i­ty for the cen­tre-right once again.

    ...

    Let’s see...as the tra­di­tion­al two par­ties frag­ment and the anti-aus­ter­i­ty Podemos con­tin­ues to surge, large num­ber of Span­ish vot­ers appear to be filled with despair over the prospects of ever see­ing any of those long-await­ed eco­nom­ic gains trick­le down, while the Spain’s polit­i­cal and busi­ness elites appear to desire polit­i­cal sta­bil­i­ty more than any­thing else so they can push through more sup­ply-side aus­ter­i­ty:

    ...
    One impor­tant rea­son for their decline lies in a string of polit­i­cal cor­rup­tion scan­dals unearthed in recent years. But there is also a sense that Spain’s recov­ery, impres­sive as it may appear on paper, has not yet made a large enough dif­fer­ence to a big enough num­ber of peo­ple.

    “We have an eco­nom­ic recov­ery, but there is still a sense of dis­il­lu­sion­ment among vot­ers, espe­cial­ly those who have lost their jobs and see few prospects for them­selves despite the recov­ery,” says Jor­di Canals, the dean of Iese busi­ness school, which has cam­pus­es in Barcelona and Madrid. “The idea that the eco­nom­ic improve­ment will sim­ply trick­le down — peo­ple are still wait­ing for that to hap­pen.”.
    ...

    Busi­ness lead­ers and investors, how­ev­er, most­ly do not see it that way. They want a Span­ish gov­ern­ment that is both sta­ble and capa­ble of push­ing through fur­ther reforms of the Span­ish state and of the econ­o­my. And they wor­ry that a left-of-cen­tre gov­ern­ment, either with Podemos or under pres­sure from it, would unrav­el some of the struc­tur­al reforms that have been pushed through by Mr Rajoy.

    “The fear is not just that there will be insta­bil­i­ty,” says Loren­zo Bernal­do de Quirós, the chair­man of Freemar­ket, a Madrid-based con­sul­tan­cy. “The fear is also that this insta­bil­i­ty will be man­aged by the left.”

    Mr Rajoy and his min­is­ters clear­ly hope that Spain’s eco­nom­ic recov­ery, cou­pled with fear of polit­i­cal insta­bil­i­ty, will ulti­mate­ly per­suade vot­ers to give the PP anoth­er man­date.

    ...

    So the big plan for Spain’s elites is to scare aus­ter­i­ty-weary vot­ers that if they reject the par­ty that wants to impose even more aus­ter­i­ty life will get much worse. But if they don’t reject the aus­ter­i­ty, they get the priv­i­lege of stay­ing in a ‘union’ that’s will­ing to devour one of its own in order to teach the rest the impor­tance of unques­tion­ing obe­di­ence in the face of abu­sive ide­o­log­i­cal insan­i­ty.

    That’s all part of the rea­son why the loom­ing risk of a ‘Grex­it’ to the rest of the euro­zone goes so much fur­ther than the risk of a finan­cial con­ta­gion spread­ing across Europe. Europe’s insti­tu­tions might be capa­ble of ward­ing off a bank run. But that voice in the back of your head, the one that yells “Run for your life!” in the face dan­ger, won’t be so easy to con­tain. The fight or flight response is like that and when “flight” is effec­tive­ly tak­en off the table (bar­ring a ‘Spex­it’), “fight” is all that’s left.

    Sure, scar­ing the poor into sub­mis­sion isn’t guar­an­teed to fail. But it’s not exact­ly a low risk strat­e­gy either. And since the only thing we should real­is­ti­cal­ly expect from a sup­ply-side Europe is that rich get rich­er and every­one else lan­guish­es at the bot­tom wait­ing for the pros­per­i­ty to trick­le down, the risks of scar­ing the poor into sub­mis­sion are only get­ting riski­er.

    Posted by Pterrafractyl | June 25, 2015, 10:16 pm
  40. So it turns out Greece is on the verge of not just a ‘Grex­it’, but also a bank run! Yep. Fol­low­ing a break­down in Greece’s ‘nego­ti­a­tions’ with the troi­ka, Alex­is Tsipras did some­thing folks like Wolf­gang Schaeu­ble have float­ed in the past: He called for a July 5th pub­lic ref­er­en­dum so the peo­ple of Greece can vote on whether or not that want to accept the same troikan ‘bailout’ terms that the Greek peo­ple pro­ject­ed when they vot­ed Syriza into pow­er back in Jan­u­ary.

    And, of course, the troi­ka is act­ing all hurt and shocked that Greek gov­ern­ment did­n’t do what it was explic­it­ly vot­ed not to do with­out ask­ing the peo­ple if that was ok:

    Bloomberg Busi­ness
    Door Clos­ing to Greece as Finance Chiefs Scorn Ref­er­en­dum

    by Cori­na Ruhe­Mark Deen
    June 27, 2015 — 6:10 AM CDT
    Updat­ed on June 27, 2015 — 7:47 AM CDT

    Euro-area finance chiefs poured scorn on the Greek government’s deci­sion to call a ref­er­en­dum on the terms of the country’s bailout and said the door was clos­ing to any fur­ther dis­cus­sion on resolv­ing a stand­off over aid.

    Finance chiefs from 18 euro nations said they would grill their Greek coun­ter­part, Yanis Varo­ufakis, on what his gov­ern­ment pro­posed after the sud­den announce­ment of a ref­er­en­dum upend­ed their work on the way for­ward for Greece. They are meet­ing in Brus­sels on Sat­ur­day hours after Prime Min­is­ter Alex­is Tsipras called a July 5 bal­lot on whether Greece should accept the demands of the country’s cred­i­tors.

    “It’s a very sad deci­sion for Greece because it’s closed the door to fur­ther talks, a door that was still open in my mind,” Jeroen Dijs­sel­bloem, the Dutch finance min­is­ter who chairs the meet­ings, told reporters as he arrived. “We will hear from the Greek min­is­ter today and then decide on the future con­se­quences.”

    Min­is­ters who had thought the fifth so-called Eurogroup meet­ing in lit­tle more than a week would ham­mer out the final pieces of a deal on aid must now take stock of one of the most dra­mat­ic moves yet in a debt cri­sis that began more than five years ago. The ref­er­en­dum throws into doubt future financ­ing for Greece after its cur­rent bailout ends on Tues­day.

    Plan B

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble said the Greek gov­ern­ment appeared to have “uni­lat­er­al­ly” pulled out of any fur­ther nego­ti­a­tion with its plan to a bal­lot on a com­mon pro­pos­al put for­ward by cred­i­tors.

    “We no longer have a basis for nego­ti­a­tion,” he told reporters as he arrived for the meet­ing.

    The talks will focus on ques­tions of the cred­i­tors’ bailout offer, whether to extend the bailout and con­tin­gency plans in the event of a break­down, a euro-area offi­cial said. The meet­ing is pre­dict­ed to be a long one, the offi­cial said, ask­ing not to be named because the talks.

    “Plan B is fast unrav­el­ling and becom­ing Plan A,” said Alexan­der Stubb of Fin­land. There’s a “clear con­sen­sus” among min­is­ters that a bailout exten­sion is “out of the ques­tion.” Min­is­ters are fac­ing “poten­tial­ly a very sad day,” he said.

    The out­come of the talks in Brus­sels will help deter­mine a series of events over the com­ing hours before mar­kets — and Greek banks — open on Mon­day morn­ing. With evi­dence that some ATMs in sub­urbs of Athens had run out of cash Sat­ur­day, Greek law­mak­ers began to debate the government’s ref­er­en­dum plan, includ­ing the pro­posed ques­tion to be put to the peo­ple.

    ‘Com­mon Decen­cy’

    The turn of events was sparked after mid­night in Athens, when Tsipras returned from week­long nego­ti­a­tions in Brus­sels and announced the ref­er­en­dum. In a nation­al­ly tele­vised address, he exco­ri­at­ed a take-it-or-leave it offer as a vio­la­tion of Euro­pean Union rules and “com­mon decen­cy.”

    The snap plebiscite was announced five months after Tsipras was swept into office on a wave of dis­con­tent about bud­get cuts that deep­ened a six-year reces­sion. Some mem­bers of his Syriza par­ty advo­cate default­ing rather than back­ing down from their anti-aus­ter­i­ty poli­cies and Greek min­is­ters, includ­ing the defense chief, urged the coun­try of 11 mil­lion peo­ple to vote “no.”

    “Our part­ners unfor­tu­nate­ly resort­ed to a pro­pos­al-ulti­ma­tum to the Greek peo­ple,” Tsipras said. “I call on the Greek peo­ple to rule on the black­mail­ing ulti­ma­tum ask­ing us to accept a strict and humil­i­at­ing aus­ter­i­ty with­out end and with­out prospect.”

    ‘Bizarre Move’

    Bel­gian Finance Min­is­ter Johan Van Overtveldt expressed bemuse­ment at the ref­er­en­dum. “I find it quite a bizarre move to ask the peo­ple what they think of some­thing and say at the same time the gov­ern­ment is opposed to it,” said

    A “no” vote could ulti­mate­ly draw the cur­tain on Greece’s mem­ber­ship of the euro. Faced by a rejec­tion of its demands and those of oth­er cred­i­tors, the Euro­pean Cen­tral Bank could feel oblig­ed to cut off the emer­gency funds that the country’s banks rely on for sur­vival. On the oth­er hand, a ‘yes’ vote would spell defeat for Tsipras and may force him into ear­ly elec­tions.

    “It looks as if we will have cap­i­tal con­trols as of Mon­day,” Gun­tram Wolff, direc­tor of the Brus­sels-based Bruegel group, said in an e‑mail. “The ECB will unlike­ly con­tin­ue to pro­vide ELA and cap­i­tal con­trols there­fore become imper­a­tive.”

    Yes, what a ‘bizarre move’ for the Greek gov­ern­ment to hold a ref­er­en­dum on whether or not Greece should accept terms that the vot­ers already reject­ed in Jan­u­ary. Espe­cial­ly after, back in May, Wolf­gang Schaeu­ble, who arguably has more pow­er than just about any­one else in Europe due to his stronger back­ing with­in the CDU than even Angela Merkel, pub­licly backed the idea of Greece hold­ing a pub­lic ref­er­en­dum. A ref­er­en­dum not just on the aus­ter­i­ty demands, but on mem­ber­ship in the euro­zone itself. One of his deputy also sug­gest­ed at the time that the only way Greece could actu­al­ly be eject­ed from the euro was via a pub­lic ref­er­en­dum. Schaeu­ble did­n’t seem to be par­tic­u­lar­ly per­turbed about either of the pos­si­ble vote out­comes at the time since he mused, “Maybe it would even be the right mea­sure to let the Greek peo­ple decide whether they’re ready to accept what needs to be done.”:

    Bloomberg Busi­ness
    Schaeu­ble Backs Greek Ref­er­en­dum to Break Bailout Impasse

    by Bir­git Jen­nen and Rain­er Buer­gin
    May 13, 2015 — 8:41 AM CDT
    Updat­ed on May 13, 2015 — 10:59 AM CDT

    Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble favors a Greek ref­er­en­dum on the country’s euro mem­ber­ship as a way to break the months-long stale­mate with Prime Min­is­ter Alex­is Tsipras’s gov­ern­ment.

    “Greece can’t be thrown out of the euro,” Thomas Stef­fen, one of Schaeuble’s deputies, said dur­ing a pan­el dis­cus­sion in Berlin. “The only thing remain­ing in the end would be if Greece said itself that it wants to leave the euro vol­un­tar­i­ly.”

    The Ger­man Finance Min­istry is sup­port­ing the idea of a vote by Greek cit­i­zens to either accept the eco­nom­ic reforms being sought by cred­i­tors to receive a pay­out from the country’s bailout pro­gram or ulti­mate­ly opt to leave the euro.

    A ref­er­en­dum could bring the con­flict to a head after months of incon­clu­sive talks between Greece and its cred­i­tors that have exas­per­at­ed Ger­many and oth­er euro-area coun­tries. Pub­lic sup­port for eco­nom­ic reforms might lead Greece toward a deal, while rejec­tion could set the coun­try on a path to leav­ing the euro.

    “If the Greek gov­ern­ment thinks it should hold a ref­er­en­dum, it should hold a ref­er­en­dum,” Schaeu­ble told reporters in Brus­sels on Mon­day. “Maybe it would even be the right mea­sure to let the Greek peo­ple decide whether they’re ready to accept what needs to be done.”

    Not 2011

    Schaeuble’s stance on a Greek plebiscite is a depar­ture from Germany’s posi­tion in 2011. Back then, Prime Min­is­ter George Papan­dreou dropped his plan for a ref­er­en­dum after Chan­cel­lor Angela Merkel and French Pres­i­dent Nico­las Sarkozy urged him not to hold the vote. A finan­cial back­stop for the euro region and pol­i­cy changes in for­mer cri­sis coun­tries since then have made con­ta­gion risks “mar­gin­al,” Schaeu­ble has said.

    Tsipras says he’s not con­sid­er­ing leav­ing the cur­ren­cy bloc and is focused on get­ting the aid he needs to avoid a default, while Merkel says her “polit­i­cal goal” is to keep Greece in the euro. His gov­ern­ment must still sub­mit a com­pre­hen­sive pro­gram of eco­nom­ic reforms, win approval from cred­i­tor insti­tu­tions, secure the endorse­ment of euro-region finance min­is­ters and then get past par­lia­ments in Berlin and else­where before any pay­ment will be made.

    “The Greek gov­ern­ment is increas­ing­ly fac­ing the dilem­ma that it can’t deliv­er on its own elec­tion promis­es and this is some­thing the Ger­man gov­ern­ment of course is also aware of,” Tan­ja Boerzel, a polit­i­cal sci­en­tist at Berlin’s Free Uni­ver­si­ty, said by phone. “Then it’s eas­i­er to let the Greek peo­ple decide in the hope that they vote to stay in the euro.”

    ...

    “The Ger­man Finance Min­istry is sup­port­ing the idea of a vote by Greek cit­i­zens to either accept the eco­nom­ic reforms being sought by cred­i­tors to receive a pay­out from the country’s bailout pro­gram or ulti­mate­ly opt to leave the euro.” That was last month.

    And as the arti­cle point­ed out, The Ger­man Finance Min­istry’s back­ing of the ref­er­en­dum in May was a sharp depar­ture from Ger­many’s staunch resis­tance to a Greek ref­er­en­dum that almost hap­pened back in 2011 when the Greek aus­ter­i­ty was already becom­ing unbear­able. This was right around the time Sil­vio Berlus­coni was dri­ven from office and Mario Mon­ti’s tech­no­crat­ic gov­ern­ment was installed in Italy and Greece’s Prime Min­is­ter George Papan­dreou was dri­ven from office by his own cab­i­net fol­low­ing his failed efforts to back the ref­er­en­dum (and even­tu­al­ly replaced with the cen­ter-right pro-aus­ter­i­ty Anto­nis Samaris fol­low­ing an incon­clu­sive elec­tion). It was back in 2011, when it was becom­ing increas­ing­ly clear that the aus­ter­i­ty mad­ness was here to stay, regard­less of who was in oppo­si­tion includ­ing the mar­kets. It was also back when Angela Merkel’s response to the Greek Prime Min­is­ter’s ref­er­en­dum pro­pos­al, “the real ques­tion is ‘Do you want to be in the euro, or not?’ ” and the taboo of talk of kick­ing out a euro­zone mem­ber was first bro­ken:

    The Wall Street Jour­nal
    Deep­en­ing Cri­sis Over Euro Pits Leader Against Leader

    By Mar­cus Walk­er in Berlin,
    Charles Forelle in Brus­sels and
    Sta­cy Meichtry in Rome
    Decem­ber 30, 2011

    BERLIN—On a chilly Octo­ber evening in her aus­tere chan­cellery, Angela Merkel placed a con­fi­den­tial call to Rome to help save the euro.

    Two years after the Euro­pean debt cri­sis erupt­ed in lit­tle Greece, the unthink­able had hap­pened: Investors were flee­ing the gov­ern­ment debt of Italy—one of the world’s biggest economies. If the sell­off could­n’t be stopped, Italy would go down, tak­ing with it Europe’s shared cur­ren­cy.

    Her phone call that night to the 16th-cen­tu­ry Quiri­nale Palace, once a res­i­dence of popes, now home to Italy’s octo­ge­nar­i­an head of state, Pres­i­dent Gior­gio Napoli­tano, trod on del­i­cate ground for a Ger­man chan­cel­lor. Europe’s lead­ers have an unwrit­ten rule not to inter­vene in one anoth­er’s domes­tic pol­i­tics. But Ms. Merkel was gen­tly prod­ding Italy to change its prime min­is­ter, if the incumbent—Silvio Berlusconi—couldn’t change Italy.

    Details of Ms. Merkel’s diplo­mat­ic chan­nel to Rome haven’t pre­vi­ous­ly been report­ed.

    Her impa­tience shows the extent to which Italy’s woes undid Europe’s strat­e­gy to fight the cri­sis. Until then, Europe had fol­lowed a sim­ple for­mu­la to pre­serve the euro: The finan­cial­ly strong would save the weak. But Italy, with near­ly €2 tril­lion, or about $2.6 tril­lion, in nation­al debt, was sim­ply too big to save.

    As well as nudg­ing Mr. Berlus­coni off the stage, Ms. Merkel had to smooth out her volatile rela­tion­ship with France’s pres­i­dent, Nico­las Sarkozy. The Fran­co-Ger­man cou­ple even­tu­al­ly over­came many of their differences—and Mr. Berlusconi—only to be blind­sided by fresh polit­i­cal chaos in Greece.

    Europe’s cri­sis is root­ed in deep wor­ries about gov­ern­ment debt and eco­nom­ic imbal­ances inside the euro zone. Those con­cerns have scared bond investors away from Europe’s weak­er states, leav­ing some, like Greece, with­out access to mon­ey with which to refi­nance or repay their debts. The great dan­ger is that Italy might join them.

    Greece and oth­ers were small enough to res­cue with inter­na­tion­al bailouts. But an Ital­ian default could severe­ly hurt Europe’s, and the world’s, finan­cial sys­tem, per­haps trig­ger­ing a worse glob­al slump than the 2008 fail­ure of Lehman Broth­ers did.

    The scram­ble to shore up investor con­fi­dence in Italy led to sim­mer­ing argu­ments over how to pay for a finan­cial safe­ty net. Europe’s lead­ers were reluc­tant­ly real­iz­ing that liv­ing with a com­mon cur­ren­cy meant sur­ren­der­ing more of their nation­al inde­pen­dence than they had bar­gained for.

    France and oth­ers urged draw­ing on the vir­tu­al­ly unlim­it­ed fire­pow­er of the Euro­pean Cen­tral Bank. But Ger­man stric­tures and the cen­tral bank’s own reluc­tance to bail out governments—for fear of ignit­ing infla­tion or reward­ing profligacy—frustrated that idea.

    And while Ger­man pres­sure helped bring about a new, reform-mind­ed gov­ern­ment in Italy, today Europe is still fight­ing to save the euro. The bat­tle ahead looks daunt­ing.

    The euro zone, which accounts for near­ly 20% of glob­al eco­nom­ic activ­i­ty, is slid­ing into reces­sion. France and oth­er coun­tries are strug­gling to save their cred­it rat­ings. And Italy must bor­row some €400 bil­lion in 2012.

    ...

    But the calm did­n’t last. Late on Oct. 31, Greek Prime Min­is­ter George Papan­dreou threw a wrench into the works by say­ing he would call a ref­er­en­dum on the bailout.

    Europe was hor­ri­fied. A “no” vote would sink the bailout and push Greece into the biggest sov­er­eign bank­rupt­cy in his­to­ry.

    Bond mar­kets tanked. Euro-zone lead­ers sum­moned Mr. Papan­dreou to Cannes, France, on Nov. 2, ahead of the Group of 20 sum­mit of world lead­ers.

    Pen­e­trat­ing rain dulled the Riv­iera resort, which in fair­er months wel­comes movie stars and oli­garchs with a palette of sparkling azure. “The real ques­tion” for the ref­er­en­dum, Ms. Merkel told Mr. Papan­dreou there, “is ‘Do you want to be in the euro, or not?’ ”

    A taboo had been bro­ken. For the first time, Europe’s lead­ers were open­ly sug­gest­ing that the euro’s weak­est mem­bers could be cast out.

    ...

    In the end, Mr. Papan­dreou’s own par­ty col­leagues rebelled against his idea for a plebiscite. He was forced out of office. The Greek bailout remained in place.

    The Cannes con­clave turned to Mr. Berlus­coni. Italy, Europe’s lead­ers told him, was close to being shut out of bond mar­kets. Dur­ing lengthy dis­cus­sions, Mr. Berlus­coni fell asleep until aides nudged him awake.

    Just days ear­li­er, Mr. Napoli­tano had released a cryp­tic state­ment. He con­sid­ered it his duty, he said, “to ver­i­fy the con­di­tions” of Italy’s “social and polit­i­cal forces.” It was code for speak­ing more open­ly with par­lia­men­t’s main groups about form­ing a new Ital­ian gov­ern­ment.

    On Nov. 8, Mr. Berlus­coni, a dom­i­nant fig­ure in Ital­ian pol­i­tics for 17 years, lost his par­lia­men­tary major­i­ty. Soon he resigned. Mr. Napoli­tano, with broad assent in par­lia­ment, named the respect­ed econ­o­mist Mario Mon­ti as Italy’s new pre­mier.

    As 2011 drew to a close, Ms. Merkel’s pres­sure had helped to install the reform-ori­ent­ed lead­ers in south­ern Europe that she want­ed, albeit ones that vot­ers had­n’t elect­ed. She and Mr. Sarkozy have also steered the euro zone as a whole toward Ger­man-style fis­cal rig­or aimed at bal­anc­ing bud­gets and cut­ting pub­lic debt.

    But while Ger­many touts pan-Euro­pean aus­ter­i­ty as the key to sta­bi­liz­ing the region, investors remain doubt­ful. Italy’s bond yields are still at a wor­ry­ing­ly high lev­el. And Europe is still look­ing for mon­ey.

    “A taboo had been bro­ken. For the first time, Europe’s lead­ers were open­ly sug­gest­ing that the euro’s weak­est mem­bers could be cast out.” That was the sta­tus of Greece’s “nego­ti­a­tions” with the troi­ka back in 2011.

    And here we are today, almost four years lat­er, and Greece is once again being told that it had bet­ter accept end­less aus­ter­i­ty else get ready to leave the euro­zone (the was the mes­sage of the Ger­man Finance Min­istry in May), while the troi­ka express­es scorn and out­rage that Greece’s gov­ern­ment would choose to hold a ref­er­en­dum on the troika’s demands (even though the Ger­man Finance Min­istry rec­om­mend­ed doing exact­ly that back May too).

    What’s next for Greece? Well, before the June 30th dead­line or July 5th ref­er­en­dum, there going to be a bank hol­i­day, which the ECB rec­om­mends as it caps its emer­gency fund­ing to Greece’s banks at the cur­rent leves in response to the ref­er­en­dum:

    Bloomberg Busi­ness
    ECB Said to See Greek Bank Hol­i­day Need­ed as ELA Dries Up

    by Angela Cullen

    June 28, 2015 — 9:00 AM CDT

    The Euro­pean Cen­tral Bank is of the opin­ion that Greece will need to impose a bank hol­i­day to stem deposit out­flows as liq­uid­i­ty dries up, accord­ing to a per­son famil­iar with the ECB’s think­ing.

    The lev­el of Emer­gency Liq­uid­i­ty Assis­tance avail­able to the Greek bank­ing sys­tem is insuf­fi­cient to cov­er lenders’ needs, the per­son said, ask­ing not to be iden­ti­fied as the infor­ma­tion isn’t pub­lic. An ECB spokesman declined to com­ment. The deci­sion to impose a bank hol­i­day is the respon­si­bil­i­ty of the Greek gov­ern­ment or the country’s cen­tral bank.

    The ECB decid­ed on Sun­day to cap ELA at cur­rent lev­els after Prime Min­is­ter Alex­is Tsipras’s gov­ern­ment quit talks with inter­na­tion­al cred­i­tors to resolve the country’s debt cri­sis on Fri­day and called a ref­er­en­dum on the terms of the bailout pro­gram. The gam­bit risks putting the coun­try on the path to a debt default, cap­i­tal con­trols and poten­tial­ly an exit from Euro­pean mon­e­tary union.

    The ECB’s Gov­ern­ing Coun­cil is cur­rent­ly cap­ping the amount of emer­gency cash avail­able to Greek banks at just below 89 bil­lion euros ($99 bil­lion).

    While the cash has helped keep Greek banks alive, the ECB needs to pro­tect itself should the gov­ern­ment default on its debt. The banks’ cap­i­tal lev­els and col­lat­er­al val­ues rely heav­i­ly on state guar­an­tees on their assets, mean­ing the risk of a default auto­mat­i­cal­ly casts a shad­ow over their cred­it­wor­thi­ness.

    So the ECB pret­ty much set­tled it: a bank hol­i­day is going to be required for Greece in response to the ref­er­en­dum. And while this bank­ing hol­i­day is going on, Greece’s pop­u­lace has about a week to decide how to vote in the upcom­ing ref­er­en­dum next week: ‘yes’ or ‘no’:

    The New York Times
    The Con­science of a Lib­er­al

    Gri­sis

    Paul Krug­man
    Jun 28 5:37 pm Jun 28 5:37 pm 97

    OK, this is real: Greek banks closed, cap­i­tal con­trols imposed. Grex­it isn’t a hard stretch from here — the much feared moth­er of all bank runs has already hap­pened, which means that the cost-ben­e­fit analy­sis start­ing from here is much more favor­able to euro exit than it ever was before.

    Clear­ly, though, some deci­sions now have to wait on the ref­er­en­dum.

    I would vote no, for two rea­sons. First, much as the prospect of euro exit fright­ens every­one — me includ­ed — the troi­ka is now effec­tive­ly demand­ing that the pol­i­cy regime of the past five years be con­tin­ued indef­i­nite­ly. Where is the hope in that? Maybe, just maybe, the will­ing­ness to leave will inspire a rethink, although prob­a­bly not. But even so, deval­u­a­tion couldn’t cre­ate that much more chaos than already exists, and would pave the way for even­tu­al recov­ery, just as it has in many oth­er times and places. Greece is not that dif­fer­ent.

    Sec­ond, the polit­i­cal impli­ca­tions of a yes vote would be deeply trou­bling. The troi­ka clear­ly did a reverse Cor­leone — they made Tsipras an offer he can’t accept, and pre­sum­ably did this know­ing­ly. So the ulti­ma­tum was, in effect, a move to replace the Greek gov­ern­ment. And even if you don’t like Syriza, that has to be dis­turb­ing for any­one who believes in Euro­pean ideals.

    ...

    As Krug­man points out, a ‘yes’ vote in favor of the troika’s offer is a vote for indef­i­nite aus­ter­i­ty and hope­less­ness. That’s what’s on the bal­lot next week: aus­ter­i­ty and despair. Should Greece vote for the chaos and despair it knows or take a risk, leave the euro­zone, and deal with the chaos does­n’t know because at least that’s not a sit­u­a­tion involv­ing chaos and despair?

    So in one week there’s a big vote: chaos and despair, or just chaos. Either way, the Euro­pean Project los­es.

    Posted by Pterrafractyl | June 28, 2015, 11:22 pm
  41. Joseph Stiglitz has a piece on Greece’s options in the face of default, draw­ing a num­ber of par­al­lels between the IMF’s treat­ment of Argenti­na in the lead up to its default in 2001 and the troika’s treat­ment of Greece. As Stiglitz points out, there are far worse things that could hap­pen to a coun­try than a default, espe­cial­ly in the face of what appears to be end­less aus­ter­i­ty sys­temic humil­i­a­tion of the Greeks.

    And as he also points out, “Some­how, one expect­ed some­thing bet­ter of Greece’s Euro­zone ‘part­ner.’ But the demands were every bit as intru­sive, and the poli­cies and mod­els were every bit as flawed.” In oth­er words, based on the behav­ior of the troi­ka thus far, is appears that the Euro­pean Mon­e­tary “Union” is bound togeth­er by a sim­i­lar lev­el of sol­i­dar­i­ty that, say, Argenti­na might find from the IMF. That’s not exact­ly a union you want to join. Or remain a mem­ber of:

    Huff­in­g­ton Post

    Argenti­na Shows Greece There May Be Life After Default

    Joseph E. Stiglitz
    Pro­fes­sor at Colum­bia Uni­ver­si­ty and a Nobel Lau­re­ate in Eco­nom­ics

    Mar­tin Guz­man
    Post­doc­tor­al Research Fel­low Colum­bia Uni­ver­si­ty GSB

    Post­ed: 06/30/2015 1:51 pm EDT

    When, five years ago, Greece’s cri­sis began, Europe extend­ed a help­ing hand. But it was far dif­fer­ent from the kind of help that one would have want­ed, far dif­fer­ent from what one might have expect­ed if there was even a bit of human­i­ty, of Euro­pean sol­i­dar­i­ty.

    The ini­tial pro­pos­als had Ger­many and oth­er “res­cuers” actu­al­ly mak­ing a prof­it out of Greece’s dis­tress, charg­ing a far, far high­er inter­est rate than their cost of cap­i­tal. Worse, they imposed con­di­tions on Greece — changes in its macro- and micro-poli­cies — that would have to be made in return for the mon­ey.

    Such con­di­tion­al­i­ty was a stan­dard part of the lend­ing prac­tices of the IMF and the World Bank. Typ­i­cal­ly, when they imposed these con­di­tions, they had lit­tle knowl­edge of the real work­ings of the econ­o­my; and fre­quent­ly, there was more than a lit­tle pol­i­tics in the demands. There was some­times an ele­ment of neo-colo­nial­ism: the old White Euro­peans once again telling their for­mer colonies what to do. More often than not, the poli­cies did­n’t work as they were sup­posed to. There were huge dis­crep­an­cies between what the West­ern experts expect­ed and what actu­al­ly hap­pened.

    Some­how, one expect­ed some­thing bet­ter of Greece’s Euro­zone “part­ner.” But the demands were every bit as intru­sive, and the poli­cies and mod­els were every bit as flawed. The dis­par­i­ty between what the Troi­ka thought would hap­pen and what has emerged has been strik­ing — and not because Greece did­n’t do what it was sup­posed to, but because it did, and the mod­els were very, very flawed.

    At last, after years of black­mail­ing Greece and demand­ing ever more aus­ter­i­ty that led to a cat­a­stroph­ic eco­nom­ic depres­sion, the Troi­ka has final­ly pushed the coun­try into the brink of default.

    The sit­u­a­tion has some impor­tant sim­i­lar­i­ties with Argenti­na’s 2001 default — and some dif­fer­ences as well. In both coun­tries, reces­sions turned into depres­sions as a con­se­quence of aus­ter­i­ty poli­cies — mak­ing the debt even more unsus­tain­able. In both cas­es, the poli­cies were demand­ed as a con­di­tion for assis­tance. Both coun­tries had rigid cur­ren­cy arrange­ments that gave them no pos­si­bil­i­ty for run­ning expan­sion­ary mon­e­tary poli­cies dur­ing the reces­sion. In both coun­tries, the IMF got it wrong, pro­vid­ing alarm­ing­ly flawed fore­casts of the con­se­quences of the imposed poli­cies. Unem­ploy­ment and pover­ty soared, and GDP plum­met­ed. Indeed, there is even a strik­ing sim­i­lar­i­ty in the mag­ni­tude of the fall in GDP and the increase in the unem­ploy­ment rate.

    In Argenti­na, youth unem­ploy­ment in par­tic­u­lar sky­rock­et­ed and stayed high for sev­er­al years. The lack of oppor­tu­ni­ties destroyed moti­va­tions and was an immense waste of the tal­ent of mil­lions of young peo­ple. With youth unem­ploy­ment at about 50 per­cent in Greece, a sim­i­lar saga is going on.

    Defaults are dif­fi­cult. But even more so is aus­ter­i­ty. The good news for Greece is that, as Argenti­na showed, there may be life after debt and default.

    The saga that led to the Greek default reminds us time and again of impor­tant lessons for the man­age­ment of sov­er­eign debt crises that we should have learned from ear­li­er such events. The first one is that there is no improve­ment in the capac­i­ty of debt repay­ment with­out eco­nom­ic recov­ery. At the same time, there is no eco­nom­ic recov­ery with­out a restora­tion of debt sus­tain­abil­i­ty.

    Both in Argenti­na and Greece, restor­ing debt sus­tain­abil­i­ty required a deep sov­er­eign debt restruc­tur­ing. In both cas­es, final­iz­ing a “good” debt restruc­tur­ing, a time­ly and suf­fi­cient­ly deep restruc­tur­ing con­ducive to eco­nom­ic recov­ery with access to inter­na­tion­al cred­it mar­kets, has proven to be quixot­ic. This is not due to any fault on the part of the coun­tries, but to defi­cien­cies in the frame­works in which nego­ti­a­tions were car­ried on.

    In both cas­es, cred­i­tor insti­tu­tions pre­tend­ed that sus­tain­abil­i­ty could be regained through “struc­tur­al adjust­ments.” Under intense pres­sure, the pro­grams that were foist­ed on them were accept­ed and imple­ment­ed — but they obvi­ous­ly did­n’t work. Exchang­ing “bailout” funds — funds that were most­ly used to repay the very same cred­i­tors that were pro­vid­ing them — for adjust­ments (and promis­es of even big­ger adjust­ments) spi­raled into economies that got ever weak­er. In the case of Argenti­na, after years of suf­fer­ing, the peo­ple went into the streets.

    In both cas­es, runs on the bank­ing sys­tem end­ed up with a par­tial freez­ing of bank deposits, which in the case of Argenti­na, trig­gered a full-fledged bank­ing cri­sis and a sub­se­quent con­ver­sion of deposits denom­i­nat­ed in a for­eign cur­ren­cy into domes­tic cur­ren­cy that led to a restruc­tur­ing of domes­tic lia­bil­i­ties — at a high cost for small domes­tic savers. In Greece, the con­se­quences still remain to be seen.

    ...

    Debt restruc­tur­ings are a nec­es­sary part of the lender-bor­row­er rela­tion­ship. They have occurred hun­dreds of times, and they will con­tin­ue occur­ring. The way in which they are resolved deter­mines the size of the loss­es. Bad man­age­ment of debt crises, such as demand­ing aus­ter­i­ty poli­cies dur­ing reces­sions — in spite of the­o­ry and empir­i­cal evi­dence show­ing that aus­ter­i­ty in reces­sions only makes reces­sions deep­er — inevitably leads to larg­er loss­es and more suf­fer­ing.

    Those who get saved by the bailouts (as the Ger­man and French banks in the case of Greece) usu­al­ly give moral haz­ard as the rea­son to avoid debt restruc­tur­ing. They claim that it would cre­ate per­verse incen­tives; oth­er debtors would be more inclined to “abuse” bor­row­ing by not repay­ing. But the moral haz­ard argu­ment is a fairy tale. Both Argenti­na and Greece had already paid a very high price for their debt prob­lems by the time of default. No coun­try in the world would be hap­py to fol­low the same road.

    Greece’s expe­ri­ence also teach­es us what should not be done in a debt restruc­tur­ing. The coun­try “restruc­tured” its debt in 2012, but it did it wrong. It was not only insuf­fi­cient­ly deep for eco­nom­ic recov­ery, but it also led to a change in the com­po­si­tion of debt — from pri­vate cred­i­tors to offi­cial cred­i­tors — mak­ing fur­ther restruc­tur­ings more dif­fi­cult.

    To some extent, Greece faces a more com­plex sit­u­a­tion than Argenti­na did in 2001. Argenti­na’s default was accom­pa­nied by a large cur­ren­cy deval­u­a­tion that made the coun­try more com­pet­i­tive and that, togeth­er with the debt restruc­tur­ing, pro­vid­ed the con­di­tions for a sus­tained eco­nom­ic recov­ery. In the case of Greece, default and Grex­it would require the re-imple­men­ta­tion of a domes­tic cur­ren­cy. It’s not the same to deval­ue an exist­ing cur­ren­cy than to cre­ate a new cur­ren­cy in the midst of a cri­sis. This addi­tion­al lay­er of uncer­tain­ty has enhanced the Troika’s capac­i­ty for pres­sur­ing Tsipras’s gov­ern­ment.

    When debt is unsus­tain­able, there needs to be a fresh start. This is a basic, well-rec­og­nized prin­ci­ple. So far, the Troi­ka is depriv­ing Greece from this pos­si­bil­i­ty. And there can’t be a fresh start with aus­ter­i­ty.

    This Sun­day, Greek cit­i­zens will debate two alter­na­tives: aus­ter­i­ty and depres­sion with­out end, or the pos­si­bil­i­ty of decid­ing their own des­tiny in a con­text of huge uncer­tain­ty. None of the options are nice. Both could lead to even worse social dis­rup­tions. But while with one of them there is some hope, with the oth­er there is not.

    So Joseph Stiglitz joins anoth­er Nobel win­ning econ­o­mist, Paul Krug­man, in rec­om­mend­ing that Greece choose a future out­side of Europe’s IMF-zone. And we’ll find out whether or not that’s a future the Greek peo­ple have a stom­ach for on Sun­day.

    It’s a big deci­sion, and not a lot of time is left to make it for any­one in Greece still on the fence. But it will prob­a­bly be a lot eas­i­er to decide how to vote the more the rest of Europe’s lead­ers demon­strate how lit­tle they think of the Greek peo­ple

    Bloomberg Busi­ness

    Merkel Says Ger­many Won’t Back Greek Aid at Any Price

    by Patrick Don­ahue and Rain­er Buer­gin

    July 1, 2015 — 6:32 AM CDT
    Updat­ed on July 1, 2015 — 8:02 AM CDT

    Chan­cel­lor Angela Merkel said Ger­many remains open to resum­ing nego­ti­a­tions with Greece on finan­cial assis­tance, though she won’t agree to a deal at any price.

    “The door for talks with Greece was always open and always remains open,” Merkel said in a speech to law­mak­ers in the low­er house of par­lia­ment in Berlin on Wednes­day. “We owe that to the peo­ple and we owe it to Europe.”

    At the same time, Merkel and Vice Chan­cel­lor Sig­mar Gabriel sent a mes­sage to Greek Prime Min­is­ter Alex­is Tsipras that he has to meet con­di­tions to win the release of fur­ther aid and that Greece doesn’t have the pow­er to cause an “eco­nom­ic cat­a­stro­phe” in Europe.

    “Yes, these are tur­bu­lent days and indeed a lot is at stake,” Merkel said. “The world is look­ing at us. But the future of Europe is not at stake. The future of Europe would be at stake if we for­got who we are and what makes us strong: A union based on the rule of law and respon­si­bil­i­ty. If we were to for­get that, the euro would fail and Europe with it.”

    ...

    “I want Europe to emerge from this cri­sis stronger than at the start so we can be strong in com­pe­ti­tion with Chi­na, India, South Amer­i­ca,” she said. “That’s what it’s about, not whether a dis­pute over 400 mil­lion or 1.5 or 2 bil­lion euros can be resolved or not.”

    Echo­ing Merkel

    Gabriel, whose Social Demo­c­ra­t­ic Par­ty is Merkel’s junior coali­tion ally, said the euro “isn’t under threat” from the Greek cri­sis. Tsipras can’t expect aid with­out an agree­ment on eco­nom­ic-pol­i­cy changes, he said.

    While Greece has the right to hold its planned ref­er­en­dum on July 5, the oth­er 18 euro-area mem­ber states have the right to take posi­tions that reflect their inter­ests, Merkel said.

    “Being a good Euro­pean doesn’t mean seek­ing an agree­ment at any price,” she said.

    No new nego­ti­a­tions can take place before the ref­er­en­dum, since Germany’s low­er house, or Bun­destag, must vote on open­ing any aid talks accord­ing to the rules of the Euro­pean Sta­bil­i­ty Mech­a­nism, Merkel said.

    Yes, Angela Merkel wants Greece to know that “The door for talks with Greece was always open and always remains open” while...:

    ...
    At the same time, Merkel and Vice Chan­cel­lor Sig­mar Gabriel sent a mes­sage to Greek Prime Min­is­ter Alex­is Tsipras that he has to meet con­di­tions to win the release of fur­ther aid and that Greece doesn’t have the pow­er to cause an “eco­nom­ic cat­a­stro­phe” in Europe.
    ...

    The door is also open for nego­ti­a­tions, but Greece has to “meet con­di­tions to win the release of fur­ther aid”. So the door for nego­ti­a­tions is always open, they just might not be nego­ti­a­tions over the things you actu­al­ly want­ed to talk about. Also, no new nego­ti­a­tions can take place before the ref­er­en­dum. But the door is always open.

    As Merkel says:

    “The world is look­ing at us. But the future of Europe is not at stake. The future of Europe would be at stake if we for­got who we are and what makes us strong: A union based on the rule of law and respon­si­bil­i­ty. If we were to for­get that, the euro would fail and Europe with it.”

    Yes, the euro­zone is a union based on “rule of law” and “respon­si­bil­i­ty” and every­thing that’s hap­pened to Greece thus far appar­ent­ly falls under the those two ban­ner prin­ci­ples. And that means the IMF’s head­space is appar­ent­ly the per­ma­nent head­space of the new Europe. It’s some­thing Greece’s vot­ers had bet­ter not for­get.

    They also might want to keep in mind anoth­er piece of Merkel’s advice:
    “Being a good Euro­pean doesn’t mean seek­ing an agree­ment at any price.”

    Posted by Pterrafractyl | July 1, 2015, 11:00 am
  42. From one bankster to anoth­er: Accord­ing to Tim Gei­th­n­er, this was the think­ing of Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble back in July 2012 on what should be done about the cri­sis in Greece: “He told me there were many in Europe who still thought kick­ing the Greeks out of the euro­zone was a plau­si­ble — even desir­able — strategy...The idea was that with Greece out, Ger­many would be more like­ly to pro­vide the finan­cial sup­port the euro­zone need­ed because the Ger­man peo­ple would no longer per­ceive aid to Europe as a bailout for the Greeks...At the same time, a Grex­it would be trau­mat­ic enough that it would help scare the rest of Europe into giv­ing up more sov­er­eign­ty to a stronger bank­ing and fis­cal union...The argu­ment was that let­ting Greece burn would make it eas­i­er to build a stronger Europe with a more cred­i­ble fire­wall.

    The New York Times
    The Hard Line on Greece

    Andrew Ross Sorkin
    JUNE 29, 2015

    In July 2012, Tim­o­thy F. Gei­th­n­er, the Unit­ed States Trea­sury sec­re­tary at the time, trav­eled to Sylt, an island off Ger­many in the North Sea.

    Mr. Gei­th­n­er was there for a meet­ing with Wolf­gang Schäu­ble, Germany’s finance min­is­ter, who would spend his sum­mers at his vaca­tion home on the tiny island.

    The top­ic was Greece.

    In the home’s library, the two men spoke about Greece’s prospects and begun dis­cussing ways for the Euro­pean Union to keep the coun­try in the euro­zone.

    To Mr. Geithner’s dis­may, how­ev­er, Mr. Schäu­ble took the con­ver­sa­tion in a dif­fer­ent direc­tion.

    “He told me there were many in Europe who still thought kick­ing the Greeks out of the euro­zone was a plau­si­ble — even desir­able — strat­e­gy,” Mr. Gei­th­n­er lat­er recount­ed in his mem­oir, “Stress Test: Reflec­tions on Finan­cial Crises.” “The idea was that with Greece out, Ger­many would be more like­ly to pro­vide the finan­cial sup­port the euro­zone need­ed because the Ger­man peo­ple would no longer per­ceive aid to Europe as a bailout for the Greeks,” he says in the mem­oir.

    “At the same time, a Grex­it would be trau­mat­ic enough that it would help scare the rest of Europe into giv­ing up more sov­er­eign­ty to a stronger bank­ing and fis­cal union,” Mr. Gei­th­n­er wrote. “The argu­ment was that let­ting Greece burn would make it eas­i­er to build a stronger Europe with a more cred­i­ble fire­wall.”

    Fast-for­ward three years. What Mr. Schäu­ble artic­u­lat­ed that sum­mer after­noon to Mr. Gei­th­n­er is final­ly tak­ing shape.

    Greece is in a har­row­ing last-minute stand­off with the Euro­pean Union over whether it will remain part of the euro­zone, and Greek cit­i­zens are set to make the deci­sion in a ref­er­en­dum vote on Sun­day. That vote is hap­pen­ing against a back­drop of bank runs; cit­i­zens are camped out­side of banks, where cap­i­tal con­trols now restrict the amount of mon­ey that can be removed.

    Politi­cians and investors have been try­ing to “war game” the out­come. Who is bluff­ing? The Greeks or the Euro­pean Union.

    The con­ver­sa­tion between Mr. Gei­th­n­er and Mr. Schäu­ble gives a strong indi­ca­tion. As Mr. Gei­th­n­er said of anoth­er con­ver­sa­tion he had with Mr. Schäu­ble: “He has a clear view: Greece had binged, so it need­ed to go on a strict diet.”

    Jean-Claude Junck­er, the head of the Euro­pean Union’s exec­u­tive branch, said on Mon­day that “the door is still open” and that he was hop­ing to bring Greece back to the nego­ti­at­ing table. But that was as far as he would go.

    He was no doubt sin­cere in his hopes that Greece would agree to the lat­est pro­posed bailout arrange­ment. But this time, the Euro­peans have noth­ing left to give Greece, and any con­ces­sion will only under­mine the strength of those left in the euro­zone — pos­si­bly inspir­ing oth­er coun­tries like Por­tu­gal, Spain and Italy to ask for even bet­ter loan terms.

    A cru­cial deci­sion made over the week­end had large­ly gone unre­marked upon but is telling. The Euro­pean Cen­tral Bank decid­ed to halt an expan­sion of its emer­gency lend­ing facil­i­ty to Greek banks. That facil­i­ty could have allowed the banks to con­tin­ue oper­at­ing with­out as much pan­ic and helped avoid some of the cap­i­tal con­trols by pro­vid­ing addi­tion­al liq­uid­i­ty.

    No cen­tral bank likes lend­ing into a bank run in which it expects it will lose mon­ey, so the deci­sion may make sense on the mer­its. But it also serves anoth­er pur­pose, one that is polit­i­cal.

    By clos­ing the cash spig­ot, the E.C.B. man­aged to instill addi­tion­al fear and pan­ic into the day-to-day lives of the Greek peo­ple, ahead of the vote on the ref­er­en­dum.

    That pan­ic could cut two ways. The Greeks could look at the lines around the banks as a warn­ing of what’s about to come, which would undoubt­ed­ly be worse in the short term, and vote in favor of the lat­est bailout agree­ment.

    Of course, they could also view the lines as fur­ther evi­dence of their sub­ju­ga­tion to the euro­zone and the con­tin­ued aus­ter­i­ty they would expe­ri­ence under the bailout, push­ing them to vote against it.

    The E.C.B.’s deci­sion also has anoth­er impor­tant pur­pose out­side of Greece: It might be a warn­ing to coun­tries like Spain and Italy, should they ever con­sid­er fol­low­ing Greece out of the euro­zone — if that comes to pass.

    It may seem coun­ter­in­tu­itive, but rather than make a Greece exit easy and seam­less to avoid dis­lo­ca­tions in finan­cial mar­kets, the E.C.B. has the per­verse incen­tive to make it messy and dif­fi­cult to deter oth­ers.

    ...

    “The eco­nom­ics behind the pro­gram that the ‘troi­ka’ (the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank, and the Inter­na­tion­al Mon­e­tary Fund) foist­ed on Greece five years ago has been abysmal, result­ing in a 25 per­cent decline in the country’s G.D.P.,” Joseph Stiglitz, an econ­o­mist and pro­fes­sor at Colum­bia Uni­ver­si­ty, wrote on Mon­day. “I can think of no depres­sion, ever, that has been so delib­er­ate.”

    In his book, Mr. Gei­th­n­er reflect­ed on his con­ver­sa­tions with Euro­pean lead­ers about the mea­sures they sought to take. “The desire to impose loss­es on reck­less bor­row­ers and lenders is com­plete­ly under­stand­able, but it is ter­ri­bly coun­ter­pro­duc­tive in a finan­cial cri­sis,” Mr. Gei­th­n­er said.

    At one point, he told Mr. Schäu­ble: “You know you sound a bit like Her­bert Hoover in the 1930s. You need to be think­ing about growth.”

    So at least we’ve reached the point where it can be open­ly dis­cussed in main­stream pub­li­ca­tions like the New York Times how the troi­ka is wag­ing a planned cam­paign of socioe­co­nom­ic ter­ror­ism. It’s progress! Or, at least, it would be progress if the world actu­al­ly cared and did­n’t rev­el in Greece’s pain. But since so much of the world either does­n’t care or has appar­ent­ly decid­ed that the joys of hat­ing on the Greeks is worth the cost of revers­ing decades of con­tem­po­rary eco­nom­ic expe­ri­ence and knowl­edge, it’s not real­ly clear reports like this actu­al­ly count as progress.

    But who knows, as more and more insid­er accounts make it increas­ing­ly unam­bigu­ous that the troika’s lead­er­ship view the rab­ble as burn­able effi­gies, maybe some­day sto­ries about major glob­al pow­ers inten­tion­al­ly trau­ma­tiz­ing a pop­u­lace for years in order to scare oth­er pop­u­la­tions into com­pli­ance will be report­ed on and the world will actu­al­ly care. Some­day, but not today.

    Posted by Pterrafractyl | July 3, 2015, 1:59 pm
  43. Goebbels would be proud of this mag­a­zine’s lam­poon cov­er of Greece’s Prime Min­is­ter hold­ing a gun to his own head and threat­en­ing to shoot him­self (a direct rip-off of Mel Brooks and Richard Pry­or’s script for the movie Blaz­ing Sad­dles with Cleav­on Lit­tle doing the same ‘self-threat’ as the new black sher­iff about to be lynched by the white towns-folk) the germ-men have much expe­ri­ence ridi­cul­ing and rip­ping off those they vicious­ly con­quer — one way or anoth­er

    http://www.bloomberg.com/news/articles/2015–07-03/greece-lampooned-by-german-media-as-voters-split-on-euro-future

    Greece Lam­pooned by Ger­man Media as Vot­ers Split on Euro Future

    by Angela Cullen
    July 3, 2015 — 3:54 AM PDT
    Share on Face­book­Share on Twit­ter
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    Flash
    The Greek Bailout: Deal or no Deal?
    Don’t Miss Out — Fol­low Bloomberg On
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    Rec­om­mend­ed

    Greece Ref­er­en­dum: What Hap­pens If They Vote “No”

    Greeks Split Down Mid­dle Before Bailout Ref­er­en­dum: Bloomberg Poll
    Tourism in Greece
    For­get Greece, We’re Going to Spain

    The Greek Bailout: Deal or no Deal?

    The gloves are off in Ger­man media cov­er­age of Greece’s spi­ral­ing debt cri­sis as the war of words between Europe’s rene­gade and its biggest stal­wart esca­lates in the count­down to Sunday’s ref­er­en­dum.
    Han­dels­blatt, a busi­ness and finance news­pa­per, trans­posed an image of Greek Prime Min­is­ter Alex­is Tsipras hold­ing a pis­tol to his head on its front page on Fri­day with the head­line “Hand over the mon­ey or I’ll shoot.”

    Inside, it car­ried a 12-page spread on Greece and Europe, attest­ing that the Greek gov­ern­ment is black­mail­ing its Euro­pean Union part­ners with demands for debt relief and Tsipras’s deci­sion to call the July 5 vote.
    Pub­lic broad­cast­er ARD, in its Mor­gen­magazin break­fast show, lam­pooned the tit-for-tat bat­tle that has ensued between Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble and Greek coun­ter­part Yanis Varo­ufakis, 54, in a video clip based on the 2011 French film The Intouch­ables, depict­ing the unlike­ly friend­ship between a wealthy quad­ri­pleg­ic and his African car­er. Schaeu­ble, 72, has been con­fined to a wheel­chair since he was shot by a deranged man in 1990.
    Germany’s main­stream media is turn­ing to satire as a poll showed Ger­mans blame the Greek gov­ern­ment for esca­lat­ing the cri­sis that has cat­a­pult­ed the Mediter­ranean coun­try to the brink of default and a poten­tial col­lapse of its bank­ing sys­tem, putting the future of the euro at risk.
    Six­ty-eight per­cent of 1,001 peo­ple sur­veyed in an ARD-Deutsch­landTrend poll con­duct­ed by Infrat­est Dimap on June 29 and June 30 held the Greek gov­ern­ment respon­si­ble, while 4 per­cent blamed the Euro­pean Union. Both sides are to blame, accord­ing to 24 per­cent of those sur­veyed.
    Tsipras Demands
    Schaeuble’s refusal to give in to Tsipras’s demands spurred the min­is­ter to his high­est ever approval rat­ing in the poll by the Ger­man pub­lic broad­cast­er as 70 per­cent said they were sat­is­fied with his work. That put Schaeu­ble ahead of Chan­cel­lor Angela Merkel, who scored 67 per­cent. For­eign Min­is­ter Frank-Wal­ter Stein­meier topped the rank­ing with 73 per­cent.
    Schaeu­ble has been the Ger­man government’s fiercest crit­ic of Greece’s unwill­ing­ness to reform and ful­fill its debt oblig­a­tions. Greece has pro­vid­ed “no basis for talk­ing about any seri­ous mea­sures” to break the dead­lock, he said on July 1 after the coun­try failed to make a June 30 pay­ment to the Inter­na­tion­al Mon­e­tary Fund.
    Varo­ufakis vowed to quit if Greek vot­ers don’t sup­port the gov­ern­ment in Sunday’s plebiscite. With banks shut and the econ­o­my hob­bled by cap­i­tal con­trols, Varo­ufakis said in a Bloomberg Tele­vi­sion inter­view in Athens that he would “rather cut my arm off” than sign a deal that fails to restruc­ture Greece’s debt.
    Ger­mans are split on whether Greece should remain in the euro. In the ARD poll, 45 per­cent said they want Greece to stay in the euro, the same num­ber as said the coun­try should leave. That com­pares with 51 per­cent in favor of Greece stay­ing and 41 per­cent against in a Feb­ru­ary sur­vey.

    Posted by participo | July 4, 2015, 12:29 am
  44. @Participo: One of the ques­tions raised by that kind high-pro­file mock­ery of a total­ly screwed pop­u­lace is just who the euro-elites run­ning the show, as opposed to the clue­less euro-rab­ble, are real­ly mock­ing when they think no one is lis­ten­ing. After, who would a euro-elite bul­ly respect more: the rab­ble that are actu­al­ly demon­strat­ing some mean­ing­ful resis­tance or the rab­ble that’s already ful­ly domes­ti­cat­ed, exhibit­ing symp­toms of Stock­holm syn­drome, and does­n’t seem to real­ize it yet:

    Escha­ton Blog
    What’s It All About Then

    Atrios
    Sat­ur­day, July 04, 2015 at 13:00

    Greece’s Euro “mem­ber­ship” isn’t about using the cur­ren­cy, it’s about hav­ing access to var­i­ous loan facil­i­ties and sup­port from the ECB, which it already does­n’t have..

    Bloomberg reports that Bul­gar­ia, which is not a Euro mem­ber but backs its cur­ren­cy with Euro reserves, has just been allowed to bor­row from the ECB at the same rate as Euro mem­bers, thus enabling it to fire­wall its banks from Greek con­ta­gion. This is a priv­i­lege nor­mal­ly only accord­ed to Euro mem­bers – and it has been WITHDRAWN from Greece. If this is true, then Bul­gar­ia (non-Euro mem­ber) can obtain Euros from the ECB while Greece (Euro mem­ber) can­not. It is hard to see what ben­e­fit Greece’s Euro mem­ber­ship con­fers, apart from redis­tri­b­u­tion of seignior­age receipts.

    And final­ly some­one gets the log­i­cal end­point of cen­tral bank “inde­pen­dence.”

    For the cen­tral bank of a cur­ren­cy union to delib­er­ate­ly restrict the mon­ey sup­ply in regions with­in the cur­ren­cy union is bizarre. No oth­er cur­ren­cy union cen­tral bank on earth does this. It would, for exam­ple, be unthink­able for the Bank of Eng­land to deny liq­uid­i­ty to Scotland’s banks. But the ECB has denied liq­uid­i­ty to Greece’s banks, not because they are insol­vent (which is a rea­son­able rea­son to deny liq­uid­i­ty to banks) but because the sov­er­eign won’t toe the fis­cal line. It has tak­en on a polit­i­cal role that it should not have.

    Of course, the ECB’s share­hold­ers are the mem­ber state gov­ern­ments. But those gov­ern­ments have bound them­selves by laws and treaties that pre­vent them inter­fer­ing with or in any way con­trol­ling the ECB. So the Euro­zone is in real­i­ty a finan­cial dic­ta­tor­ship run by bankers. I strug­gle to see why any­one would vol­un­tar­i­ly join it, let alone want to stay in it. But that’s democ­ra­cy for you.

    What­ev­er it is, it ain’t democ­ra­cy. It’s banks­te­ro­c­ra­cy. The con­cept of cen­tral bank inde­pen­dence was, once upon a time, thought to be nec­es­sary to pre­vent irre­spon­si­ble gov­ern­ments from doing, or being per­ceived as doing, irre­spon­si­ble things with the mon­ey sup­ply. Now the point of cen­tral bank inde­pen­dence is to hand immense pow­er to a bunch of unelect­ed unac­count­able peo­ple engaged in revolv­ing door careers with the bank­ing sys­tem. Let’s con­tin­ue laugh­ing at the sil­ly Greeks and their sil­ly cor­rup­tion.

    Yes, let’s con­tin­ue laugh­ing at the sil­ly Greeks and their sil­ly cor­rup­tion. But let’s end the laugh­ing there. Laugh­ter is con­ta­gious, after all, and when the joke’s on every­one, that can make laugh­ter some­what dan­ger­ous.

    So let’s hope July 5th becomes Greece new Inde­pen­dence (from bankster­ism) Day. And let’s hope the rest of the euro-rab­ble (and glob­al-rab­ble) that mock the plight of Greece some­day final­ly “get” the Big Joke. Because if the fate of the euro­zone is that of an ever clos­er banks­te­ro­c­ra­cy, we’re going to need a lot less laugh­ing and a lot more new inde­pen­dence days.

    Posted by Pterrafractyl | July 4, 2015, 1:26 pm
  45. And Greece rejects the ‘bailout’ with 60 per­cent vot­ing “No”! Wow. The trou­ble in Europe’s bankster par­adise just got a lot more trou­ble­some because democ­ra­cy won and, in doing so, democ­ra­cy taught cap­i­tal­ism a num­ber of lessons cap­i­tal­ism hates to learn. Lessons about usury and the lim­its to the log­ic of unmer­ci­ful behav­ior:

    Busi­ness Insid­er
    GREECE JUST TAUGHT CAPITALISTS A LESSON ABOUT WHAT CAPITALISM REALLY MEANS

    Jim Edwards

    Jul. 5, 2015, 6:48 PM

    Greece has effec­tive­ly vot­ed to default on its debt to the IMF and the EU, and it is a mas­sive defeat for Ger­many’s Angela Merkel and the troi­ka she led, which insist­ed there was no way out for Greece but to pay back its mas­sive debts.

    The vote is huge les­son for con­ser­v­a­tives and any­one else who thinks this is about a dilet­tante gov­ern­ment of left-wing ide­al­ists who think they can flout the law while stag­ing some kind of Che Gue­vara-esque dream:

    Wrong.

    This is what cap­i­tal­ism is real­ly about.

    From the begin­ning, Merkel and the EU have oper­at­ed from the posi­tion that because Greece took on debt, Greece now needs to pay it back. That posi­tion assumed — bizarrely, in hind­sight — that debt only works one way: if you lend some­one mon­ey, then they pay it back.

    But that is NOT how free mar­kets work.

    Debt is not a guar­ante of future pay­ments in full. Rather, it is a risk that cred­i­tors take, in hopes of maybe being paid tomor­row.

    The key word there is “risk.”

    If you’re will­ing to take the risk, you’ll get a pre­mi­um — in the form of inter­est.

    But the down­side of that risk is that you lose your mon­ey. And Greece just called Ger­many’s bluff.

    The IMF loaned Greece 1.5 bil­lion euros, due back in June, and Greece isn’t pay­ing it back. Greece has anoth­er 3.5 bil­lion due to the ECB in July, and that looks real­ly doubt­ful right now.

    This is how cap­i­tal­ism works. The fact that it took a demo­c­ra­t­i­cal­ly elect­ed gov­ern­ment whose own offices are adorned with posters of Lenin, Engels and Gue­vara to teach this les­son to Ger­many is aston­ish­ing.

    More aston­ish­ing still is that Merkel et al knew Greece could not pay back this debt before these nego­ti­a­tions start­ed. The IMF’s own assess­ment of Greek debt, pub­lished just a few days ago, states: “Com­ing on top of the very high exist­ing debt, these new financ­ing needs ren­der the debt dynam­ics unsus­tain­able ...”

    “Unsus­tain­able”! Ger­many’s own bankers knew Greece could­n’t pay this back. And yet Merkel per­sist­ed.

    Take a look at Greek GDP. In order to pay back debt, you have to have a grow­ing econ­o­my. That’s a basic law of eco­nom­ics. It’s how cred­it cards work. It’s how mort­gages work. And it is how sovereign/central bank debt works. But Greece’s econ­o­my was nev­er in a posi­tion to ben­e­fit from debt, because it has been shrink­ing for years:

    ...

    There is anoth­er key fact that the Greeks are keen­ly aware of (but which every­one else has for­got­ten). This debt was ini­tial­ly owed to pri­vate invest­ment banks, like Gold­man Sachs. But the IMF and the ECB made the sui­ci­dal deci­sion to let those pri­vate banks trans­fer that debt to EU insi­tu­tions and the IMF to “res­cue” Greece. As Busi­ness Insid­er report­ed back in April, for­mer ECB pres­i­dent Jean-Claude Trichet insist­ed that the debt trans­fer take place:

    The ECB pres­i­dent “blew up,” accord­ing to one attendee. “Trichet said, ‘We are an eco­nom­ic and mon­e­tary union, and there must be no debt restruc­tur­ing!’” this per­son recalled. “He was shout­ing.”

    The result was that the ECB made this cat­a­stroph­i­cal­ly stu­pid deal with Greece, accord­ing to our April report:

    And so there was no restruc­tur­ing agreed for Greece. The coun­try paid off its imme­di­ate debts to the pri­vate finan­cial sec­tor — invest­ment banks, basi­cal­ly — and replace­ment debt was laid onto Euro­pean tax­pay­ers. The gov­ern­ment agreed to a pack­age of harsh gov­ern­ment spend­ing cuts and struc­tur­al reforms in exchange for loans totalling €110 bil­lion over three years.

    Trichet made a colos­sal, ele­men­tary mis­take. The right place for risky debt by def­i­n­i­tion is in the pri­vate mar­kets, like Gold­man. The entire point of pri­vate debt invest­ment is that those cred­i­tors are pre­pared for a hair­cut. The risk absolute­ly should not be borne by cen­tral banks who rely on tax­pay­er mon­ey for bailouts.

    In fact, had Trichet made the oppo­site deci­sion — and left the Greek debt with Gold­man et al — then today’s vote would be a foot­note rather than a head­line in his­to­ry. “Gold­man Sachs takes a bath on Greek debt.” Who cares? Gold­man share­hold­ers and clients, sure­ly. But it would not have trig­gered a cri­sis at the heart of the EU.

    ...

    Now, before we all start singing “The Red Flag” and break­ing out old videos of “The Young Ones” in cel­e­bra­tion, let’s inject a note of real­ism. Greece isn’t actu­al­ly a coun­try full of crazy social­ists who don’t under­stand how the FX mar­kets work. In fact, a huge chunk of its tax col­lec­tion prob­lems stem from the fact that there are two and a half times more self-employed and small busi­ness peo­ple in Greece than there are in the aver­age coun­try. And small busi­ness­es are expert at avoid­ing tax, Greece’s for­mer tax col­lec­tor told Busi­ness Insid­er’s Mike Bird recent­ly.
    m
    Con­ser­v­a­tives who hate pay­ing tax­es and who urge small busi­ness­es to pur­sue tax avoid­ance strate­gies take note: Your dream just came true in Greece.

    If Greece was more social­ist — more like Ger­many, with its giant cor­po­ra­tions that have mas­sive unionised work­forces pay­ing tax­es off their pay­rolls — then tax col­lec­tion would be a lot high­er in Greece.

    Greece is now like­ly an inter­na­tion­al pari­ah on the debt mar­kets. It may have to start print­ing its own deval­ued drach­ma cur­ren­cy. It will have no access to cred­it. Sure, olive oil, feta and raki will sud­den­ly become incred­i­bly cheap com­modi­ties on the export mar­kets. Tourism in Greece is about to become awe­some. But most­ly it will be awful. Unem­ploy­ment will increase as Greece’s econ­o­my implodes.

    But the awful­ness will be Greece’s alone. Greece is now on its own path. It is decid­ing its own fate.

    There is some­thing admirable about that.

    There’s a lot to digest there giv­en that it sounds like Greece is teach­ing the rest of Europe (and most of the world) about the basics of how cap­i­tal­ism works and the nature of lend­ing and its asso­ci­at­ed cred­i­tor risks, but keep in mind this key point made in the arti­cle: Tourism in Greece is about to become awe­some.

    If this is it for Greece and it’s real­ly going to be on its own, it’s very easy for peo­ple around the world to help Greece con­tin­ue teach­ing the world basic lessons in cap­i­tal­ism and eco­nom­ics. Just take a trip to Greece. Vaca­tion­ing there is about to become awe­some­ly cheap and the for­eign cur­ren­cy that comes with tourism is going to be exact­ly what Greece needs. So it’s almost time to make that trip to the cra­dle of democ­ra­cy you’ve been pro­cras­ti­nat­ing on all these years.

    But before you buy those tick­ets to Athens, note the pro­found­ly depress­ing real­i­ty laid out above: by vot­ing “No” on the troika’s “bailout” offer (of unend­ing and inten­si­fy­ing aus­ter­i­ty), Greece was mere­ly abid­ing by the long-stand­ing rules of cap­i­tal­ism that every­one knows but almost every­one has sud­den­ly for­got­ten or decid­ed to ignore. Rules of cap­i­tal­ism that most­ly involve pre­vent­ing usury.
    For what­ev­er rea­son, those rules against usury that help keep cap­i­tal­ism func­tion­ing were sud­den­ly for­got­ten by Europe once the finan­cial cri­sis hit. Pri­vate cred­i­tors (of pub­lic and pri­vate debt) got bailed out by the pub­lic, gen­er­al­ly by pub­lic bailouts of pri­vate banks or, in the case of Greece, pub­lic bailouts of pri­vate bond­hold­ers of pub­lic debt. The IMF for­got and remem­bered some of those rules of usury at var­i­ous points over the last five years, but for the EU and espe­cial­ly the euro­zone, the hard­est line pos­si­ble was the norm in any giv­en aus­ter­i­ty debate since the cri­sis began.

    And as the piece above points out, by reject­ing its usu­ri­ous terms and pre­sum­ably default­ing on all of its troikan debt (although that’s no guar­an­tee), Greece is remind­ing Europe’s elite’s and their for­get­ful IMF allies that basic laws of eco­nom­ics and debt arith­metic can’t be over­come by a col­lec­tive polit­i­cal will when that will defies the laws of eco­nom­ics and math.

    Even when faced with the threat of eco­nom­ic exile, 60 per­cent of Greek vot­ers vot­ed “No” because that was their best option despite the end­less threats of ruin from Europe’s lead­er­ship. Because Karl Rove’s mock­ery of the “real­i­ty-based com­mu­ni­ty” isn’t actu­al­ly a good eco­nom­ic pol­i­cy, espe­cial­ly for a mon­e­tary union in cri­sis when the new real­i­ty the elite’s are try­ing to will into exis­tence is a world where flawed old eco­nom­ic mod­els that were aban­doned decades ago actu­al­ly work. When forced to choose between the increas­ing­ly unre­al real­i­ty of the sta­tus quo or risk­ing life out­side the Rov­ian-Real­i­ty Union, vot­ing “No” and accept­ing the risks of an eco­nom­ic and fis­cal shock sud­den­ly makes sense and is pos­si­bly a low­er-risk path than remain­ing in the Rov­ian-Real­i­ty Union.

    Rov­ian-Real­i­ty Unions are that lev­el of bad news and the Greeks may have escaped it. But beyond that, the Greeks may have saved Europe from its own trag­ic turn towards the kind of junk eco­nom­ics that have trashed the US’s econ­o­my since Rea­gan. Because if any­thing is going to trig­ger a rethink of Europe’s aus­ter­i­ty-onom­ics, it’s going to be see­ing a mem­ber state and find life gets bet­ter. If Greece gave anoth­er stamp of pub­lic approval to the euro­zone’s increas­ing­ly unwork­able aus­ter­i­ty mess, Europe real­ly could be fac­ing years of self-inflict­ed right-wing eco­nom­ic rule.

    It’s not going to stop as long as vot­ers keep sup­port­ing aus­ter­i­ty poli­cies, espe­cial­ly when coun­tries in Greece’s sit­u­a­tion do so. And now every­one, most espe­cial­ly euro­crat pol­i­cy-mak­ers, know that there is a lim­it to the mad­ness with Europe’s vot­ers, and they just might become ex-voters.And attempts to get the vot­ers to elect more com­pli­ant gov­ern­ments won’t suc­ceed either.

    In oth­er words, for a con­ti­nen­tal union with an elite bul­ly prob­lem, Greece did the euro­zone one of the biggest favors it could have: it stood up to an out of con­trol troikan bul­ly and lived to tell the tale:

    The New York Times
    Op-ed

    End­ing Greece’s Bleed­ing

    Paul Krug­man
    JULY 5, 2015

    Europe dodged a bul­let on Sun­day. Con­found­ing many pre­dic­tions, Greek vot­ers strong­ly sup­port­ed their government’s rejec­tion of cred­i­tor demands. And even the most ardent sup­port­ers of Euro­pean union should be breath­ing a sigh of relief.

    Of course, that’s not the way the cred­i­tors would have you see it. Their sto­ry, echoed by many in the busi­ness press, is that the fail­ure of their attempt to bul­ly Greece into acqui­es­cence was a tri­umph of irra­tional­i­ty and irre­spon­si­bil­i­ty over sound tech­no­crat­ic advice.

    But the cam­paign of bul­ly­ing — the attempt to ter­ri­fy Greeks by cut­ting off bank financ­ing and threat­en­ing gen­er­al chaos, all with the almost open goal of push­ing the cur­rent left­ist gov­ern­ment out of office — was a shame­ful moment in a Europe that claims to believe in demo­c­ra­t­ic prin­ci­ples. It would have set a ter­ri­ble prece­dent if that cam­paign had suc­ceed­ed, even if the cred­i­tors were mak­ing sense.

    What’s more, they weren’t. The truth is that Europe’s self-styled tech­nocrats are like medieval doc­tors who insist­ed on bleed­ing their patients — and when their treat­ment made the patients sick­er, demand­ed even more bleed­ing. A “yes” vote in Greece would have con­demned the coun­try to years more of suf­fer­ing under poli­cies that haven’t worked and in fact, giv­en the arith­metic, can’t work: aus­ter­i­ty prob­a­bly shrinks the econ­o­my faster than it reduces debt, so that all the suf­fer­ing serves no pur­pose. The land­slide vic­to­ry of the “no” side offers at least a chance for an escape from this trap.

    But how can such an escape be man­aged? Is there any way for Greece to remain in the euro? And is this desir­able in any case?

    The most imme­di­ate ques­tion involves Greek banks. In advance of the ref­er­en­dum, the Euro­pean Cen­tral Bank cut off their access to addi­tion­al funds, help­ing to pre­cip­i­tate pan­ic and force the gov­ern­ment to impose a bank hol­i­day and cap­i­tal con­trols. The cen­tral bank now faces an awk­ward choice: if it resumes nor­mal financ­ing it will as much as admit that the pre­vi­ous freeze was polit­i­cal, but if it doesn’t it will effec­tive­ly force Greece into intro­duc­ing a new cur­ren­cy.

    ...

    In the failed nego­ti­a­tions that led up to Sunday’s ref­er­en­dum, the cen­tral stick­ing point was Greece’s demand for per­ma­nent debt relief, to remove the cloud hang­ing over its econ­o­my. The troi­ka — the insti­tu­tions rep­re­sent­ing cred­i­tor inter­ests — refused, even though we now know that one mem­ber of the troi­ka, the Inter­na­tion­al Mon­e­tary Fund, had con­clud­ed inde­pen­dent­ly that Greece’s debt can­not be paid. But will they recon­sid­er now that the attempt to dri­ve the gov­ern­ing left­ist coali­tion from office has failed?

    I have no idea — and in any case there is now a strong argu­ment that Greek exit from the euro is the best of bad options.

    Imag­ine, for a moment, that Greece had nev­er adopt­ed the euro, that it had mere­ly fixed the val­ue of the drach­ma in terms of euros. What would basic eco­nom­ic analy­sis say it should do now? The answer, over­whelm­ing­ly, would be that it should deval­ue — let the drachma’s val­ue drop, both to encour­age exports and to break out of the cycle of defla­tion.

    Of course, Greece no longer has its own cur­ren­cy, and many ana­lysts used to claim that adopt­ing the euro was an irre­versible move — after all, any hint of euro exit would set off dev­as­tat­ing bank runs and a finan­cial cri­sis. But at this point that finan­cial cri­sis has already hap­pened, so that the biggest costs of euro exit have been paid. Why, then, not go for the ben­e­fits?

    Would Greek exit from the euro work as well as Iceland’s high­ly suc­cess­ful deval­u­a­tion in 2008-09, or Argentina’s aban­don­ment of its one-peso-one-dol­lar pol­i­cy in 2001-02? Maybe not — but con­sid­er the alter­na­tives. Unless Greece receives real­ly major debt relief, and pos­si­bly even then, leav­ing the euro offers the only plau­si­ble escape route from its end­less eco­nom­ic night­mare.

    And let’s be clear: if Greece ends up leav­ing the euro, it won’t mean that the Greeks are bad Euro­peans. Greece’s debt prob­lem reflect­ed irre­spon­si­ble lend­ing as well as irre­spon­si­ble bor­row­ing, and in any case the Greeks have paid for their government’s sins many times over. If they can’t make a go of Europe’s com­mon cur­ren­cy, it’s because that com­mon cur­ren­cy offers no respite for coun­tries in trou­ble. The impor­tant thing now is to do what­ev­er it takes to end the bleed­ing.

    As Paul Krug­man puts it:

    ...
    And let’s be clear: if Greece ends up leav­ing the euro, it won’t mean that the Greeks are bad Euro­peans. Greece’s debt prob­lem reflect­ed irre­spon­si­ble lend­ing as well as irre­spon­si­ble bor­row­ing, and in any case the Greeks have paid for their government’s sins many times over. If they can’t make a go of Europe’s com­mon cur­ren­cy, it’s because that com­mon cur­ren­cy offers no respite for coun­tries in trou­ble. The impor­tant thing now is to do what­ev­er it takes to end the bleed­ing.

    Yes, not only are the Greeks not bad Euro­peans if they end up leav­ing the euro­zone, the Greek vote is quite pos­si­bly going to go down in his­to­ry as the begin­ning of the end of Europe’s con­tem­po­rary exper­i­ment with vas­sal state debt bondage pol­i­tics. Whether or not that hap­pens all depends on what the rest of the euro­zone does next, which isn’t at all clear.

    But one thing is clear: in terms of liv­ing up to the ideals that the Euro­pean project is sup­posed to stand for, Greece is doing its part. After all, when democ­ra­cy itself it at risk of being lost, dis­sent becomes the most valu­able coin in the realm. And that’s why, despite the fact that Greece’s path for­ward might include anoth­er of addi­tion­al finan­cial up and downs, but Sun­day’s vote made every­one rich­er.

    Posted by Pterrafractyl | July 5, 2015, 11:43 pm
  46. The EU appears to be issu­ing an ulti­ma­tum of sorts: Greece has until Sun­day to work out a deal to avoid bank­rupt­cy. Also, nego­ti­a­tions with the troi­ka can’t hap­pen at the moment because Greece’s new finance min­is­ter did­n’t have a detailed enough pro­pos­al. And since any pro­pos­al Greece makes will almost cer­tain­ly be deemed inad­e­quate by the Europe’s elites, it looks like we have anoth­er few days of troikan the­atrics before we find out whether or not the Euro­pean Project is tru­ly about cre­at­ing a deep, mean­ing­ful union of the Euro­pean peo­ple under a “we don’t allow each oth­er to suf­fer in this fam­i­ly” social con­tract, or if it’s real­ly just a shal­low mon­e­tary union union and noth­ing more. We’ll find out in a few days, but based on the blus­ter and out­rage of the last few days, deep thoughts about the nature of “Europe” don’t appear to be on the agen­da:

    Wash­ing­ton Post
    Europe gives Greece 5 days to avoid bank­rupt­cy

    By Griff Witte and Michael Birn­baum July 7 at 7:10 PM

    ATHENS — An emer­gency sum­mit of Euro­pean lead­ers called to sal­vage Greece’s finan­cial res­cue broke up acri­mo­nious­ly late Tues­day night, with offi­cials say­ing the coun­try now has just five days to avoid bank­rupt­cy.

    Fol­low­ing a day’s worth of talks aimed at find­ing a way out of months of bit­ter dead­lock, Euro­pean lead­ers were scathing in their assess­ments of Greece’s pro­pos­als, call­ing them inad­e­quate and demand­ing the Greek gov­ern­ment return with a detailed plan by Thurs­day.

    The lead­ers of all 28 Euro­pean Union mem­bers will then meet Sun­day in what offi­cials said will be the final chance to save Greece from eco­nom­ic obliv­ion — or the moment the coun­try is eject­ed from the euro zone.

    “The stark real­i­ty is that we only have five days to find the ulti­mate agree­ment,” said a vis­i­bly irri­tat­ed Don­ald Tusk, the Euro­pean Coun­cil pres­i­dent. “Until now I have avoid­ed talk­ing about dead­lines. But tonight I have to say it loud and clear — the final dead­line ends this week.”

    Stand­ing at his side at E.U. head­quar­ters in Brus­sels, Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Junck­er pound­ed the lectern as he announced that Europe has detailed plans for Greece’s exit from the euro zone — known as “Grex­it” — and for deliv­er­ing human­i­tar­i­an aid to Athens.

    “I’m strong­ly against Grex­it,” he said. “But I can’t pre­vent it if the Greek gov­ern­ment is not doing what we expect the Greek gov­ern­ment to do.”

    Greek Prime Min­is­ter Alex­is Tsipras had a stark­ly dif­fer­ent account of the meet­ings, say­ing that they were “pos­i­tive” and that he had out­lined pro­pos­als for a “social­ly just and eco­nom­i­cal­ly viable agree­ment.”

    The wild­ly dif­fer­ent accounts sug­gest how dif­fi­cult it will be to reach a deal in time to pull Greece back from the edge of an abyss that both sides have said for months they are des­per­ate to avoid.

    Greece’s rad­i­cal left­ist gov­ern­ment had been wide­ly expect­ed to present a new, detailed plan to finance min­is­ters at a meet­ing Tues­day, just two days after a ref­er­en­dum in which Greek vot­ers emphat­i­cal­ly reject­ed Europe’s lat­est pro­posed cuts-for-cash deal. Before the vote, Tsipras promised he could strike an agree­ment with Europe “with­in 48 hours” if vot­ers backed him — as they did.

    But instead of a for­mal blue­print, Greece’s new finance min­is­ter, Euclid Tsakalo­tos, spoke from hand­writ­ten notes about his country’s inten­tions to rein in costs and prop up its creaky fis­cal under­pin­nings while avoid­ing some of the tough aus­ter­i­ty mea­sures that Greek cred­i­tors have demand­ed.

    Euro­pean offi­cials were incred­u­lous that Greece had not come bet­ter pre­pared, espe­cial­ly with the country’s bank­ing sys­tem sub­sist­ing from day to day and like­ly need­ing a fresh infu­sion of cash from the Euro­pean Cen­tral Bank on Wednes­day just to stay in busi­ness.

    Jeroen Dijs­sel­bloem, pres­i­dent of euro-zone finance min­is­ters, said it was not clear what the Greeks were offer­ing or whether it would meet the stan­dards Europe has set for autho­riz­ing a new multi­bil­lion-euro bailout.

    “In the eyes of the euro group, the prob­lems in Greece do real­ly need cred­i­ble reforms,” he said. “And, there­fore, we need to hear from the Greek gov­ern­ment whether they have such reforms in mind.”

    Hours lat­er, after the lead­ers had dined on cod and choco­late mousse and Tsipras had made his own pre­sen­ta­tion, Ger­man Chan­cel­lor Angela Merkel said there still was not suf­fi­cient detail to for­mal­ly restart nego­ti­a­tions.

    “We respect the results of the ref­er­en­dum of one coun­try, but we have 18 oth­er coun­tries where polit­i­cal deci­sions are also dis­cussed,” Merkel said after the meet­ing. “We have only a few days left to find a solu­tion.”

    Greece — with a debt moun­tain of more than 180 per­cent of its gross domes­tic prod­uct — owes 3.5 bil­lion euros to the Euro­pean Cen­tral Bank on July 20 but has no mon­ey with which to pay. Last week, the coun­try became the first devel­oped nation to miss a repay­ment to the Inter­na­tion­al Mon­e­tary Fund.

    ...

    Euro­pean offi­cials say they believe the impact of a Greek exit from the euro could be con­tained. But no one knows how it could play out, because in the 16-year his­to­ry of the euro, no mem­ber has ever left.

    With so much at stake in Europe, Pres­i­dent Oba­ma on Tues­day esca­lat­ed his involve­ment, speak­ing in sep­a­rate con­ver­sa­tions to Merkel and to Tsipras. The White House said Oba­ma and Merkel dis­cussed the need “to reach a durable agree­ment that will allow Greece to resume reforms, return to growth, and achieve debt sus­tain­abil­i­ty with­in the Euro­zone.”

    But that prod­ding appeared to do lit­tle to bridge a divide that has only widened as Greece’s cri­sis has deep­ened.

    Tues­day was sup­posed to be the day when Greece and Europe forged a bet­ter path fol­low­ing the res­ig­na­tion Mon­day of Greek Finance Min­is­ter Yanis Varo­ufakis, whose abra­sive style had alien­at­ed his nego­ti­at­ing part­ners.

    No spe­cif­ic details of Tsakalotos’s pre­sen­ta­tion were made pub­lic. But a pho­to gave a clue of the tone. Tsakalo­tos held notes, writ­ten on hotel sta­tionery, that includ­ed the words “no tri­umphal­ism” — an appar­ent reminder not to gloat after the Sun­day ref­er­en­dum.

    Dijs­sel­bloem said Tues­day after­noon that he expect­ed a detailed Greek pro­pos­al by Wednes­day morn­ing, when Tsipras is also due to address the Euro­pean Par­lia­ment. . Junck­er lat­er said the dead­line for a Greek pro­pos­al was Fri­day morn­ing, while an offi­cial state­ment said it was Thurs­day — dis­crep­an­cies that reflect­ed the con­fused and flu­id nature of the sit­u­a­tion.

    Even as sev­er­al Euro­pean offi­cials expressed grave dis­ap­point­ment with Tuesday’s talks, oth­ers held out hope that the worst out­comes can still be avoid­ed. French Pres­i­dent François Hol­lande said France will do “every­thing to save all those who want­ed this Europe.”

    Ital­ian Prime Min­is­ter Mat­teo Ren­zi said he was opti­mistic that “we can achieve an agree­ment on Sun­day.”

    Ana­lysts, too, said there remained rea­son to think the two sides can reach a last-minute deal — but only because the dire cir­cum­stances in Greece have left no doubt about the poten­tial con­se­quences.

    “The cost of a Grex­it is quite awful for every­one, but espe­cial­ly for Greece,” said George Pagoulatos, a Uni­ver­si­ty of Athens econ­o­mist. “And now it’s very clear: It’s an agree­ment or Grex­it.”

    That’s the sit­u­a­tion: Five days until...well, some­thing hap­pens. Some form of bank­rupt­cy prob­a­bly, and per­haps a ‘Grex­it’ too, although that will pre­sum­ably take a while longer and is no guar­an­tee. But unless one side of the nego­ti­a­tions or anoth­er gets a set of brain trans­plants soon, it’s look­ing like a Greek bank­rupt­cy is on the way in under a week.

    What impact a Greek bank­rupt­cy has on the over­all ‘Grex­it’ ques­tion is hard to say, but assum­ing the mar­kets don’t send sig­nals of finan­cial “con­ta­gion” to the rest of the Euro­pean bond mar­kets, it’s very pos­si­ble that we’ve reached that point where com­mon ground between the two sides is no longer there and can’t fea­si­bly be built. After all, for the Greeks, the sit­u­a­tion was clear­ly one about end­ing the dam­age done to actu­al peo­ple’s lives. Where­as for the troi­ka, and espe­cial­ly for the key deci­sion-mak­ers in Berlin, Greek lives and real-time suf­fer­ing were obvi­ous­ly a ter­tiary con­cern and it’s not at all clear how to find com­mon ground between peo­ple that care about peo­ple and peo­ple that care about
    dis­cred­it­ed pseu­do-eco­nom­ic the­o­ries about the evils of gov­ern­ment debt and end­less util­i­ty of aus­ter­i­ty:

    The Wash­ing­ton Post
    Meet Germany’s hard-line finance min­is­ter who won’t budge on Greece

    By Chico Har­lan July 7 at 7:17 PM

    Wolf­gang Schäu­ble is a wheel­chair-bound 72-year-old who’s spent much of his career call­ing for a har­mo­nious, inte­grat­ed Europe. He is also an aus­ter­i­ty advo­cate whose inflex­i­bil­i­ty in the face of Greece’s eco­nom­ic mis­ery has come to sym­bol­ize Europe’s tough pre­scrip­tions for the nation.

    “He’s been suck­ing your blood for five years,” said a poster bear­ing Schäuble’s dour image that popped up across Athens last week. “Now tell him NO.”

    In the great­est test yet of Europe’s sin­gle-cur­ren­cy exper­i­ment, Schäu­ble, Germany’s finance min­is­ter, is both a pio­neer and a pub­lic ene­my. Few on the con­ti­nent hold a more impas­sioned view about the impor­tance of eco­nom­ic inte­gra­tion. But for Schäu­ble (pro­nounced SHOY-bleh), mem­ber­ship in the euro zone comes at a price: Mon­ey bor­rowed in bailouts must be paid back, no mat­ter how crush­ing the bur­den of that debt.

    The five-year debate over how — or whether — to res­cue Greece has come to a poten­tial break­ing point in Brus­sels, where Athens and its Euro­pean cred­i­tors have been spar­ring over new bailout terms. Though Schäu­ble is just one in a room­ful of politi­cians with a say in the mat­ter, he has helped craft the aus­ter­i­ty terms of Euro­pean cred­i­tors, fol­low­ing a code of fis­cal pru­dence that is near-sacred among Ger­mans of his gen­er­a­tion. His sup­port is like­ly to be nec­es­sary for any new deal that restores emer­gency fund­ing to Greece.

    In his years deal­ing with the euro cri­sis, Schäu­ble has become one of the most vivid play­ers in the saga — some­one who sur­vived an assas­si­na­tion attempt, resus­ci­tat­ed his career after scan­dal and occa­sion­al­ly tries to under­cut his rep­u­ta­tion as a humor­less nego­tia­tor. (Sev­er­al months ago, he offered Greece’s finance min­is­ter a box of choco­late euros, say­ing that he’d need “nour­ish­ment for the nerves.”)

    ...

    After the shoot­ing, Schäu­ble was one of Germany’s most vis­i­ble politi­cians, often men­tioned as a future chan­cel­lor. But he was forced to step down as par­ty chair­man in 2000 because of a wide dona­tions scan­dal in which he accept­ed $50,000 from an arms lob­by­ist. He was replaced by Angela Merkel, who is now chan­cel­lor.

    Since 2009, Schäu­ble and Merkel have man­aged the euro cri­sis for Ger­many, Greece’s largest cred­i­tor. Merkel is wide­ly con­sid­ered the more con­cil­ia­to­ry of the two, while Schäu­ble has become known for a con­tro­ver­sial doc­trine that coun­tries — even those in cri­sis — should cut spend­ing rather than rack up debt to stim­u­late growth.

    Dur­ing a vis­it to Wash­ing­ton in April, Schäu­ble, speak­ing at the Brook­ings Insti­tu­tion, point­ed to debt as the tox­in in almost every glob­al finan­cial ill over the past 20 years. He crowed about bal­anc­ing Germany’s bud­get and shrugged off a sug­ges­tion that his coun­try, which can bor­row on favor­able terms, should be doing more to invest in edu­ca­tion and oth­er assets. “One of the major prob­lems of the world econ­o­my is a high lev­el of indebt­ed­ness,” he said. “To increase this indebt­ed­ness is not a good solu­tion.”

    The Greek prime min­is­ter, Alex­is Tsipras, has been embold­ened by a ref­er­en­dum Sun­day in which vot­ers sig­naled that they want a more gen­er­ous pack­age from Europe — and are will­ing to crash out of the euro zone if they can’t get it. But view­points have also hard­ened among fis­cal con­ser­v­a­tives in cred­i­tor nations who are wary of grant­i­ng lenien­cy to a gov­ern­ment they see as reck­less. Accord­ing to polit­i­cal sci­en­tists and Ger­man media accounts, Schäu­ble believes that Europe could sur­vive a Greek exit and might emerge bet­ter off with­out its weak­est link.

    “He views Greece as a threat to his par­tic­u­lar vision for where Europe should be going,” said Jacob Funk Kirkegaard, a senior fel­low and Europe spe­cial­ist at the Peter­son Insti­tute for Inter­na­tion­al Eco­nom­ics. “And he’d be will­ing to sac­ri­fice Greece. Maybe you have to break a few eggs to make that omelet.”

    In large part because of his ideals, Greece has espe­cial­ly frus­trat­ed Schäu­ble. In his view, the plan to reha­bil­i­tate the Greek econ­o­my was work­ing until ear­li­er this year, when frus­trat­ed vot­ers ush­ered in a left­ist par­ty that pledged a big step back from aus­ter­i­ty. At Brook­ings, Schäu­ble men­tioned that Greece until recent­ly was see­ing nascent growth. He didn’t men­tion that its econ­o­my has shrunk 25 per­cent over the past five years.

    “Greece has been on a promis­ing way,” he said, giv­ing a lit­tle shrug. “Then they cam­paigned; it’s a sov­er­eign deci­sion of the Greek peo­ple. And now we have a new gov­ern­ment, and they want to change things.”

    Merkel and Schäu­ble remain tight allies, though some ques­tion whether their dif­fer­ing opin­ions on Greece have caused fric­tion. In deal­ing with Athens, Schäu­ble is a “coun­ter­weight to Merkel’s con­cil­ia­to­ry stance,” said Her­fried Mün­kler, a polit­i­cal sci­en­tist at Berlin’s Hum­boldt Uni­ver­si­ty. “He has a much clear­er, straight­for­ward line.”

    The Inter­na­tion­al Mon­e­tary Fund said recent­ly that Greece’s debt is unsus­tain­able and will require anoth­er sig­nif­i­cant “hair­cut.” But Schäu­ble in April said he thought Greece could repay its debt with­out any restruc­tur­ing, and he point­ed to what he said were uncor­rect­ed struc­tur­al prob­lems, includ­ing a bloat­ed pub­lic sec­tor and an exces­sive min­i­mum wage.

    “Those are the real chal­lenges of Greece,” he said, “not to blame the Euro­peans.”

    As the fel­low from the pro-aster­i­ty Peter­son Insti­tute puts it, Ger­many’s Finance Min­is­ter Wolf­gang Schaeu­ble, who is arguably more pow­er­ful than any­one else in Europe giv­en his sway with the CDU, has a par­tic­u­lar vision for Europe, it’s a vision that’s failed spec­tac­u­lar­ly thus far, and if a Greek gov­ern­ment gets in the way by mak­ing a point of that spec­tac­u­lar fail­ure and demand­ing signs of human­i­ty from its Euro­pean part­ners, Wolf­gang just might be will­ing “sac­ri­fice Greece”:

    ...
    “He views Greece as a threat to his par­tic­u­lar vision for where Europe should be going,” said Jacob Funk Kirkegaard, a senior fel­low and Europe spe­cial­ist at the Peter­son Insti­tute for Inter­na­tion­al Eco­nom­ics. “And he’d be will­ing to sac­ri­fice Greece. Maybe you have to break a few eggs to make that omelet.”
    ...

    And why would we be sur­prised? The entire aus­ter­i­ty ide­ol­o­gy is about sac­ri­fic­ing the poor and mid­dle class so the gods of cap­i­tal­ism will swoop in and save every­one. That’s his “vision” for Europe: A con­ti­nent where sac­ri­fic­ing the poor to the rich is the only allowed response to a cri­sis. When some­thing that insane is your vision, pret­ty much any­thing that devi­ates from it is unbear­able and must be squashed at all costs. That’s how cults work and the con­tem­po­rary euro-debt cult is no excep­tion. When you look at just how insane Schaeuble’s eco­nom­ic the­o­ries are, where “expan­sion­ary aus­ter­i­ty” is always but one more cut away, only cult-like think­ing can jus­ti­fy the troika’s demands. What’s a few more sac­ri­fices when you’ve already casu­al­ly sac­ri­ficed a gen­er­a­tion.

    So it’s look­ing like Europe has col­lec­tive­ly is about to strike a major blow for Wolf­gang’s “par­tic­u­lar vision” (a per­ma­nent embrace of right-wing eco­nom­ic poli­cies) by ‘crack­ing’ the Greek ‘egg’ so Europe’s exper­i­men­tal sup­ply-side ‘omelet’ can come into being. The fact that this omelet is demon­stra­bly poi­so­nous is demon­stra­bly beside the point by now. We’ve been here before...not this par­tic­u­lar point, with a ‘Grex­it’ knock­ing at the door, but we’ve def­i­nite­ly seen this gen­er­al sit­u­a­tion. Despite the var­ied chat­ter that we get from Europe’s euro­crats in dai­ly reports, when it comes down to the real nego­ti­a­tions, Europe has spo­ken with a near­ly unan­i­mous voice time and again regard­ing Greece or any of its oth­er unfor­tu­nate brethren and that voice could be chan­nel­ing Wolf­gang Schaeu­ble on almost all occa­sions. Europe’s elites are obvi­ous­ly either shar­ing with Wolf­gang’s vision for the future or at least total­ly cowed into sub­mis­sion and it’s been appar­ent for years now.

    But if there’s any bright point in this entire affair, it’s that the “troi­ka” part of it might final­ly be over soon. At least for the Greeks. Yes, reboot­ing their econ­o­my is going to be painful (although it does­n’t have to be super painful), espe­cial­ly since the Europe Wolf­gang envi­sions will prob­a­bly sab­o­tage Greece on prin­ci­ple unless they adopt right-wing poli­cies. Still, if Greece goes it alone, no more troi­ka. And that means no more lec­tures about how slit­ting the Greek econ­o­my’s wrists with no blood trans­fu­sion is actu­al­ly a real­ly good idea. And manda­to­ry. Because Europe cares about Greece. No more of that.

    Yes, ‘going it alone’ again will be scary at first for Greece, and its over­all sit­u­a­tion cer­tain­ly puts it in some­what unknown ter­ri­to­ry. But if you’re cur­rent­ly a mem­ber of a club that engages in irre­spon­si­ble exper­i­ments on its mem­bers, up to the point of ‘sac­ri­fic­ing’ them, there are cer­tain­ly worse things than going it alone. It’s a sit­u­a­tion that can’t help but remind one of the clas­sic nurs­ery rhyme, Hump­ty Dump­ty. The sim­i­lar­i­ties are cer­tain­ly eery:

    Hump­ty Dump­ty sat on a wall,

    Hump­ty Dump­ty had a great fall.

    All the king’s hors­es and all the king’s men

    Could­n’t put Hump­ty togeth­er again

    because they kept telling him to remove his shell so his yoke would be forced to tough­en up.

    And when that did­n’t work they boiled his remains while chant­i­ng about the need for more sac­ri­fices.

    They also told Hump­ty they loved him. That hurt most of all. Espe­cial­ly when they told him they love him but he had bet­ter sign an agree­ment to be fried on grill and if he does­n’t agree they’ll kick him out of their weird cult.

    Whether or not Hump­ty leaves his cult remains to be seen, but if you’re a crack­able egg, avoid that wall.

    You don’t want real­i­ty to resem­ble that rhyme, but it is what it is.

    Posted by Pterrafractyl | July 7, 2015, 9:08 pm
  47. Isn’t this adorable: The troi­ka is deal­ing with the loom­ing real­i­ty that its pre­cious euro­zone is about to lose some of its irre­versibil­i­ty lus­ter by reit­er­at­ing its demands that Greece had bet­ter imme­di­ate­ly come up with a detailed plan that meets the troika’s soci­ety-gut­ting stan­dards or Greece is going bank­rupt on Sun­day. Also, it real­ly wants Greece to stay in euro­zone. Also, what­ev­er plan Greece comes up with had bet­ter be even more aus­tere than the plan that was reject­ed in the July 5th ref­er­en­dum because the econ­o­my has got­ten so much worse in the last 10 days. And let’s for­get the fact that the ECB froze its emer­gency crte­d­it sup­ply just over 10 days ago). And let’s also for­get the fact that the IMF just reit­er­at­ed the need for Greece to get a debt write-off, which Berlin con­tin­ues to resist.

    That all needs be for­got­ten and/or hap­pen by Sat­ur­day night the euro­zone min­is­ters who can get togeth­er and rec­om­mend an emer­gency loan. A loan that will allow the fun of the euro­zone expe­ri­ence to chug along until the next race to avert col­lapse:

    Reuters
    Greece seeks new EU loan deal in race to avert col­lapse
    STRASBOURG/BRUSSELS | By Bar­bara Lewis and Alas­tair Mac­don­ald

    Wed Jul 8, 2015 11:36pm EDT

    A race to save Greece from bank­rupt­cy and keep it in the euro gath­ered pace on Wednes­day when Athens for­mal­ly applied for a three-year loan and Euro­pean author­i­ties launched an accel­er­at­ed review of the request.

    Greek Prime Min­is­ter Alex­is Tsipras called in a speech to the Euro­pean Par­lia­ment for a fair deal, acknowl­edg­ing Greece’s his­toric respon­si­bil­i­ty for its plight, after EU lead­ers gave him five days to come up with con­vinc­ing reforms.

    The gov­ern­ment sub­mit­ted a request to the Euro­pean Sta­bil­i­ty Mech­a­nism bailout fund to lend an unspec­i­fied amount “to meet Greece’s debt oblig­a­tions and to ensure sta­bil­i­ty of the finan­cial sys­tem”. It promised to begin imple­ment­ing tax and pen­sion mea­sures sought by cred­i­tors as ear­ly as Mon­day.

    With its banks closed, cash with­drawals rationed and the econ­o­my in freefall, Greece has nev­er been clos­er to a state bank­rupt­cy that would prob­a­bly force it to leave the euro and print an alter­na­tive cur­ren­cy.

    ...

    The head of the Eurogroup of finance min­is­ters of the 19-nation cur­ren­cy area, Jeroen Dijs­sel­bloem, asked the Euro­pean Com­mis­sion and the Euro­pean Cen­tral Bank to eval­u­ate the loan request, assess Greek debt sus­tain­abil­i­ty and study whether Greece pos­es a risk to the finan­cial sta­bil­i­ty of the euro zone.

    IMF chief Chris­tine Lagarde reit­er­at­ed that Greece’s mas­sive debt would need restruc­tur­ing, some­thing Ger­many is resist­ing. “Greece is in a sit­u­a­tion of acute cri­sis, which needs to be addressed seri­ous­ly and prompt­ly,” she said at the Brook­ings Insti­tu­tion think-tank in Wash­ing­ton.

    EMERGENCY FINANCE

    The aim is for Eurogroup min­is­ters meet­ing on Sat­ur­day to be in a posi­tion to rec­om­mend a loan, and some emer­gency bridg­ing finance, which a full sum­mit of the 28 EU lead­ers would approve on Sun­day if they are sat­is­fied with Greek reform com­mit­ments.

    That is a big ‘if’, both due to Athens’ che­quered record and because many of the lib­er­al­iza­tion mea­sures required run counter to the left­ist ide­ol­o­gy of Tsipras’ Syriza par­ty.

    The prime min­is­ter promised to deliv­er detailed reform plans on Thurs­day and avoid­ed the angry rhetoric that has alien­at­ed many Euro­pean part­ners. He did how­ev­er crit­i­cize attempts to “ter­ror­ize” Greeks into vot­ing for “nev­er-end­ing aus­ter­i­ty”.

    The Euro­pean Cen­tral Bank kept Greece’s banks on a tight leash, hold­ing a freeze on emer­gency fund­ing that means they could soon run out of cash. The Greek gov­ern­ment said banks would remain closed until July 13, with an ATM with­draw­al lim­it unchanged at 60 euros per day.

    Euro­pean Coun­cil Pres­i­dent Don­ald Tusk reit­er­at­ed that the final dead­line for Greece to sub­mit con­vinc­ing reform plans and start imple­ment­ing them was this week.

    “Our inabil­i­ty to find an agree­ment may lead to the bank­rupt­cy of Greece and the insol­ven­cy of its bank­ing sys­tem,” Tusk told EU law­mak­ers.

    In the tur­bu­lent cham­ber, some law­mak­ers held up “Oxi” (No) signs to back Greek vot­ers’ rejec­tion of more aus­ter­i­ty, while far-right speak­ers praised the rad­i­cal left­ist gov­ern­ment for stand­ing up to what sev­er­al called the Euro­pean “oli­garchy”.

    Euro zone offi­cials want Greece to rush a first wave of mea­sures through par­lia­ment before Sun­day to prove its seri­ous intent. Ger­man Chan­cel­lor Angela Merkel has said she would ask par­lia­ment in Berlin to autho­rize the open­ing of loan nego­ti­a­tions if the Greek mea­sures are deemed sat­is­fac­to­ry.

    Merkel made clear ear­li­er that she was “not exag­ger­at­ed­ly opti­mistic” that a deal could be found to save Greece by Sun­day.

    Euro zone sources said one key ques­tion was whether the pack­age will be more ambi­tious than the spend­ing cuts, tax increas­es and mod­est reforms that Greek vot­ers reject­ed on Sun­day in a ref­er­en­dum on a pre­vi­ous bailout plan.

    “The num­bers have to add up, and the num­bers have become vast­ly more unfa­vor­able since the banks were shut and the econ­o­my seized up in the last 10 days,” one euro zone finance offi­cial said.

    “ADMISSION OF IMPOTENCE”

    France, which has tried to medi­ate between Athens and Berlin, nailed its col­ors to the mast on Wednes­day, warn­ing of the per­ils of a “Grex­it”.

    Social­ist Prime Min­is­ter Manuel Valls told par­lia­ment in Paris: “Keep­ing Greece in the euro and there­fore in the heart of Europe and the EU is some­thing of the utmost geostrate­gic and geopo­lit­i­cal impor­tance.” To let Greece go would be “an admis­sion of impo­tence”, he added.

    Despite the last-minute efforts to con­jure up a deal, a Reuters poll of econ­o­mists found the prob­a­bil­i­ty of Greece leav­ing the euro zone had risen to 55 per­cent from 45 per­cent last week, the first time it was deemed more like­ly than not.

    Tsipras admit­ted that after win­ning pow­er on a promise to end aus­ter­i­ty, his gov­ern­ment had “spent more time nego­ti­at­ing than gov­ern­ing” but he dis­ap­point­ed those who had hoped to hear con­crete imme­di­ate mea­sures to trans­form the shat­tered econ­o­my.

    ...

    And once again:

    ...

    IMF chief Chris­tine Lagarde reit­er­at­ed that Greece’s mas­sive debt would need restruc­tur­ing, some­thing Ger­many is resist­ing. “Greece is in a sit­u­a­tion of acute cri­sis, which needs to be addressed seri­ous­ly and prompt­ly,” she said at the Brook­ings Insti­tu­tion think-tank in Wash­ing­ton.

    ...

    The Euro­pean Cen­tral Bank kept Greece’s banks on a tight leash, hold­ing a freeze on emer­gency fund­ing that means they could soon run out of cash. The Greek gov­ern­ment said banks would remain closed until July 13, with an ATM with­draw­al lim­it unchanged at 60 euros per day.

    ...

    Merkel made clear ear­li­er that she was “not exag­ger­at­ed­ly opti­mistic” that a deal could be found to save Greece by Sun­day.

    Euro zone sources said one key ques­tion was whether the pack­age will be more ambi­tious than the spend­ing cuts, tax increas­es and mod­est reforms that Greek vot­ers reject­ed on Sun­day in a ref­er­en­dum on a pre­vi­ous bailout plan.

    “The num­bers have to add up, and the num­bers have become vast­ly more unfa­vor­able since the banks were shut and the econ­o­my seized up in the last 10 days,” one euro zone finance offi­cial said.

    ...

    Cred­it where cred­it’s due: No one does in-your-face usury quite like the troi­ka.

    Posted by Pterrafractyl | July 8, 2015, 9:29 pm
  48. It’s look­ing like the lat­est install­ment of the Great Greek Cliffhang­er isn’t going to disappoint...at least in terms of being a cliffhang­er. It’s def­i­nite­ly dis­ap­point­ing from a col­lec­tive san­i­ty stand­point, as tales from the euro­zone’s halls of pow­er tend to be:

    First, check out the zeit­geist as of Thurs­day. It was, strange­ly, some­what opti­mistic. Maybe, just maybe, Berlin was going to be open some­thing Greece has been demand­ing all along and even the IMF has kind of sort of (but not real­ly) demand­ed for its approval on any new deal: debt-relief for Greece. Now, even the Euro­pean Com­mis­sion, a third of the troi­ka, is call­ing for debt-relief. And while Angela Merkel con­tin­ues to refuse any sort of out­right debt-for­give­ness for Greece, she’s appar­ent­ly now open to extend­ing the exist­ing debt matu­ri­ties. In oth­er words, Greece won’t nec­es­sar­i­ly get a “bailout”, but it might be allowed to pay back its exist­ing debt a lit­tle more slow­ly assum­ing it agrees to all the aus­ter­i­ty demands that are killing the econ­o­my with or with­out debt relief:

    The Tele­graph
    Greek deal in sight as Ger­many bows to huge glob­al pres­sure for debt relief
    Angela Merkel faces a defin­ing moment in her polit­i­cal career as cho­rus of voic­es push for Greek debt relief

    By Ambrose Evans-Pritchard, Mehreen Khan

    7:40PM BST 09 Jul 2015

    Ger­many is at last bow­ing to pres­sure as a cho­rus of coun­tries and key insti­tu­tions demand debt relief for Greece, a shift that could break the five-month stale­mate and avert a poten­tial­ly dis­as­trous rup­ture of mon­e­tary union at this Sunday’s last-ditch sum­mit.

    In a high­ly sig­nif­i­cant move, the Euro­pean Coun­cil has called on both sides to make major con­ces­sions, insist­ing that the cred­i­tor pow­ers must do their part as the rad­i­cal Syriza gov­ern­ment puts for­ward a new raft of pro­pos­als on eco­nom­ic reforms before a dead­line expires tonight.

    “The real­is­tic pro­pos­al from Greece will have to be matched by an equal­ly real­is­tic pro­pos­al on debt sus­tain­abil­i­ty from the cred­i­tors,” said Don­ald Tusk, the Euro­pean Coun­cil pres­i­dent.

    ...

    This is the first time Europe’s insti­tu­tions have acknowl­edged clear­ly that Greece’s pub­lic debt – 180pc of GDP – can nev­er be repaid and that no last­ing solu­tion can be found until the boil is lanced.

    Any such deal would give Greek pre­mier Alex­is Tspi­ras a prize to take back to the Greek peo­ple after they vot­ed by 61pc to 39pc to reject aus­ter­i­ty demands in a land­slide ref­er­en­dum last week­end.

    While he would still have to deliv­er on tough reforms and breach key red lines, a debt restruc­tur­ing of suf­fi­cient scale would prob­a­bly be enough to clinch a deal, and allow him to return to Athens as a con­quer­ing hero..

    The Greek par­lia­ment is due to vote to rat­i­fy the mea­sures on Fri­day.

    Ger­man Chan­cel­lor Angela Merkel said “a clas­sic hair­cut” is out of the ques­tion, but tac­it­ly opened the door to oth­er forms debt restruc­tur­ing, con­ced­ing that it had already been done in 2012 by stretch­ing out matu­ri­ties.

    The con­tours of a deal on Sun­day are start­ing to emerge.

    Syriza has request­ed a three-year pack­age of loans from the euro­zone bail-out fund (ESM) — per­haps worth as much as €60bn – and is report­ed­ly ready give ground on tax ris­es and pen­sion cuts.

    Germany’s sub­tle shift in posi­tion comes as the Unit­ed States, France, and Italy joined in a unit­ed call for debt relief, but­tressed by a crescen­do of emphat­ic state­ments by Chris­tine Lagarde, the head of the Inter­na­tion­al Mon­e­tary Fund.

    “Greece is clear­ly in a sit­u­a­tion of acute cri­sis, which needs to be addressed seri­ous­ly and prompt­ly. We remain ful­ly engaged in order to find a solu­tion to restore sta­bil­i­ty, growth and debt sus­tain­abil­i­ty,” said Ms Lagarde.

    A report by the IMF said a debt hair­cut of 30pc of GDP “would be required” to meet the orig­i­nal debt tar­gets agreed in 2012. This could be achieved be stretch­ing out the matu­ri­ties of bonds to forty years and low­er­ing the inter­est rate, spar­ing EMU gov­ern­ments the polit­i­cal pain of hav­ing to crys­tal­ize direct loss­es for their tax­pay­ers.

    The US has clear­ly lost patience with the Euro­peans is now bring­ing its huge diplo­mat­ic pow­er to bear, fear­ing that mis­takes in Greece could lead to a geostrate­gic fias­co and seri­ous dam­age to the Nato alliance.

    “Greece’s debt is not sus­tain­able,” said Jacob Lew, the US Trea­sury Sec­re­tary. “I think it’s a mis­take for the Euro­pean econ­o­my, the glob­al econ­o­my, to take the risks that are involved with an uncon­trolled cri­sis in Greece,” he said.

    ...

    For Berlin, the Greek cri­sis threat­ens to mush­room into a much big­ger cri­sis in inter­na­tion­al diplo­ma­cy and Fran­co-Ger­man rela­tions as Paris digs in its heels.

    “France refus­es to allow Greece’s exit from the euro,” said Manuel Valls, the French prime min­is­ter.

    ...

    “Keep­ing Greece in the euro and there­fore in the heart of Europe and the EU is some­thing of the utmost geostrate­gic and geopo­lit­i­cal impor­tance. Allow­ing Greece to leave would be an admis­sion of impo­tence,” he said.

    Yet even if Europe’s lead­ers to agree to a com­pre­hen­sive pack­age for Greece on Sun­day, any bail-out still has to be rat­i­fied by the Ger­man Bun­destag as well as by the par­lia­ments of Fin­land, Slove­nia, Por­tu­gal, and Esto­nia.

    Up to a hun­dred MPs from Angela Merkel’s Chris­t­ian Demo­c­rat fam­i­ly (CDU/CSU) have already threat­ened to vote against fresh mon­ey for Greece.

    This is quick­ly turn­ing into a make-or-break moment for her own polit­i­cal career.

    So that was the mood Thurs­day: Cau­tious opti­mism based on the fol­low­ing:

    ...

    In a high­ly sig­nif­i­cant move, the Euro­pean Coun­cil has called on both sides to make major con­ces­sions, insist­ing that the cred­i­tor pow­ers must do their part as the rad­i­cal Syriza gov­ern­ment puts for­ward a new raft of pro­pos­als on eco­nom­ic reforms before a dead­line expires tonight.

    “The real­is­tic pro­pos­al from Greece will have to be matched by an equal­ly real­is­tic pro­pos­al on debt sus­tain­abil­i­ty from the cred­i­tors,” said Don­ald Tusk, the Euro­pean Coun­cil pres­i­dent.

    ...

    Ger­man Chan­cel­lor Angela Merkel said “a clas­sic hair­cut” is out of the ques­tion, but tac­it­ly opened the door to oth­er forms debt restruc­tur­ing, con­ced­ing that it had already been done in 2012 by stretch­ing out matu­ri­ties.

    ...

    This is the first time Europe’s insti­tu­tions have acknowl­edged clear­ly that Greece’s pub­lic debt – 180pc of GDP – can nev­er be repaid and that no last­ing solu­tion can be found until the boil is lanced.

    ...
    A report by the IMF said a debt hair­cut of 30pc of GDP “would be required” to meet the orig­i­nal debt tar­gets agreed in 2012. This could be achieved be stretch­ing out the matu­ri­ties of bonds to forty years and low­er­ing the inter­est rate, spar­ing EMU gov­ern­ments the polit­i­cal pain of hav­ing to crys­tal­ize direct loss­es for their tax­pay­ers.

    ...

    The door to indi­rect debt-relief is tac­it­ly open! All Greece needs to do is sign on the dot­ted aus­ter­i­ty line!

    And then Fri­day hap­pened and things got weird­er: Greece’s gov­ern­ment offered to pret­ty much do exact­ly what was being pro­posed Thurs­day. It made an offer to impose even more aus­ter­i­ty than the troi­ka demand­ed before cross the var­i­ous “red lines” that the Greek elec­torate had explic­it­ly and over­whelm­ing­ly reject­ed in the July 5th ref­er­en­dum. In return, the Greek gov­ern­ment request­ed a +50 bil­lion euro loan. All in all, it was a move that left many shocked and puz­zled. But it also made a deal that would avoid a Greek bank­rupt­cy on Mon­day a lot more like­ly:

    Wash­ing­ton Post
    In Greece, defi­ance dis­si­pates into capit­u­la­tion

    By Ylan Q. Mui and Antho­ny Faio­la July 10 at 7:50 PM

    ATHENS — Less than a week ago, Greece stood defi­ant.

    Thou­sands of peo­ple flood­ed the square out­side Par­lia­ment, drap­ing them­selves in blue-and-white flags to cel­e­brate the country’s sweep­ing rejec­tion of the tough aus­ter­i­ty mea­sures demand­ed by its Euro­pean cred­i­tors, which Greece’s fiery young leader had likened to “black­mail.”

    But by Fri­day, the eupho­ria had fad­ed as Prime Min­is­ter Alex­is Tsipras’s vows to stand up to ­Europe caved to the harsh real­iza­tion that the birth­place of democ­ra­cy stood just 48 hours away from finan­cial ruin — and Greeks were poised to swal­low what amount­ed to the same dose of aus­ter­i­ty they had refused in a vote Sun­day.

    “Each one of us shall be con­front­ed with his stature and his his­to­ry. Between a bad choice and a cat­a­stroph­ic one, we are forced to opt for the first one,” Tsipras said in a speech before his party’s law­mak­ers, accord­ing to local media. “It is as if one asks you for your mon­ey or your life.”

    Fri­day, Tsipras pre­sent­ed mem­bers of Par­lia­ment with an ­eleventh-hour plea to cred­i­tors for more than 50 bil­lion euros in emer­gency fund­ing, which could car­ry Greece through the next three years. The mon­ey would pave the way for shut­tered banks to reopen, return some sem­blance of nor­mal­i­ty to belea­guered cit­i­zens and affirm this Mediter­ranean nation’s iden­ti­ty as an inte­gral part of Europe. Euro­pean lead­ers will con­sid­er the plan Sun­day.

    The pro­posed deal amounts to an acknowl­edg­ment that while the aus­ter­i­ty Tsipras so dis­dained may be painful — and may deep­en the finan­cial cri­sis in Greece — sev­er­ing ties with the 19-mem­ber euro zone and its com­mon cur­ren­cy would undoubt­ed­ly be worse.

    “The rev­o­lu­tion­ary moment has fiz­zled,” said Mark Medish, who served as a top offi­cial in the Trea­sury Depart­ment and the Nation­al Secu­ri­ty Coun­cil under Pres­i­dent Bill Clin­ton. “In effect, the no vote would be turn­ing into a yes.”

    Par­lia­ment is sched­uled to vote on the plan in the ear­ly hours of Sat­ur­day.

    As law­mak­ers debat­ed the pro­pos­al Fri­day, even some mem­bers of the far left of Tsipras’s rul­ing Syriza par­ty con­ced­ed that the brinks­man­ship had gone far enough.

    Par­lia­ment Vice Pres­i­dent Alex­is Mitropou­los, a Syriza mem­ber, called the bailout a “polit­i­cal muta­tion” but said that Greece had no options.

    “We can­not cause our peo­ple even greater harm,” he said.

    In return for a bailout, Tsipras offered to under­take a mas­sive restruc­tur­ing of the nation­al bud­get that has elud­ed his pre­de­ces­sors but that ana­lysts say may be unavoid­able if Greece is to sta­bi­lize its founder­ing econ­o­my. The pack­age of spend­ing cuts and tax increas­es is esti­mat­ed to total 12 bil­lion to 13 bil­lion euros — even more than pre­vi­ous Greek pro­pos­als had offered. It includes abol­ish­ing key tax breaks for islands that are pop­u­lar tourist des­ti­na­tions, phas­ing out a sub­sidy for poor pen­sion­ers and pri­va­tiz­ing sprawl­ing state indus­tries..

    “This could be called the edu­ca­tion of Alex­is Tsipras,” said Aris­to­tle Tzi­am­piris, asso­ciate pro­fes­sor of inter­na­tion­al rela­tions at the Uni­ver­si­ty of Piraeus. “The over­whelm­ing major­i­ty of the Greek peo­ple were unit­ed in fact in their desire to stay in the euro zone.”

    The appar­ent capit­u­la­tion by Greece, though, still need­ed the back­ing of its cred­i­tors, some of whom remained decid­ed­ly una­mused by the antics in Athens.

    Greece’s troi­ka of lenders — the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank and the Inter­na­tion­al Mon­e­tary Fund — dis­cussed Greece’s request for a bailout in a con­fer­ence call Fri­day after­noon. Euro-zone finance min­is­ters will review the pro­pos­al Sat­ur­day before send­ing it to heads of state in the Euro­pean Union for con­sid­er­a­tion Sun­day.

    A com­mit­ment of fresh mon­ey could open the door for the ECB to lift its cap on emer­gency aid for Greece’s banks, which have been shut for two weeks. The cen­tral bank is slat­ed to meet Mon­day.

    French offi­cials, who sent advis­ers to help Greece craft its pro­pos­al, lob­bied for lenien­cy, with Pres­i­dent François Hol­lande describ­ing the offer as “seri­ous and cred­i­ble.”

    But Ger­many, the sin­gle largest cred­i­tor nation, is like­ly to be a deci­sive voice, and hard ques­tions were still being asked in Berlin. Ger­man offi­cials were call­ing for signs of fol­low-through by the Greeks, and a strong endorse­ment of the pro­pos­al by the Greek Par­lia­ment — which is expect­ed to vote in favor of it — might help.

    This is the third bailout that Athens has asked for in five years. Greece had sought an exten­sion of its pre­vi­ous pro­gram, but now it is to start a whol­ly new one.

    “The sit­u­a­tion of the expired old pro­gram does not exist any­more,” Ger­man gov­ern­ment spokesman Stef­fen Seib­ert told reporters in Berlin. “There­fore, what we need is a new, mul­ti-year pro­gram which in its require­ments and com­mit­ments by far exceeds what was dis­cussed at the end of June.”

    Yet there seemed to be a slight open­ing by the Ger­mans on the thorny but piv­otal issue of eas­ing Greece’s crip­pling debt, even if slight­ly. Ger­man Finance Min­istry spokesman Mar­tin Jäger said a major debt-slash­ing was out of the ques­tion. But he left open the pos­si­bil­i­ty of a debt restruc­tur­ing that eas­es Greece’s terms, say­ing the intent was not to “sig­nif­i­cant­ly reduce the cash val­ue of the debt.”

    ...

    Yes, as of Fri­day, Greece’s gov­ern­ment basi­cal­ly gave in to, well, if not all of the troi­ka, at least 2/3rds of it (the IMF and EU Com­mis­sion). And this was just days after an his­toric ref­er­en­dum where the Greek peo­ple total­ly reject­ed a less aus­tere plan. Not only that, but the Greek par­lia­ment over­whelm­ing­ly backed the pro­pos­al.

    So, while things were still most cer­tain­ly look­ing down for the Greek peo­ple, who appeared head­ing towards a fate of end­less aus­ter­i­ty and despair, if you’re a fan of the troi­ka and turn­ing Europe into a cred­i­tor’s par­adise, things were indeed look­ing up. Even Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble appeared to be on board with the debt “repro­fil­ing” plan. At least, he agreed that, while a “hair­cut” was com­plete­ly unac­cept­able and could not take place, a debt “repro­fil­ing”, like extend­ing matu­ri­ties, might be accept­able.

    And then he point­ed out that, with­out an actu­al “hair­cut”, Greece’s debts would still be unsus­tain­able. In oth­er words, the man who is arguably the most pow­er­ful per­son in the euro­zone and the man who has resist­ed a “hair­cut” for Greece prob­a­bly more than any­one else, just argued that Greece does indeed need a “hair­cut” but can’t have one any­ways because that would break the rules:

    Reuters
    Greece sends reform plan to EU, sets par­lia­ment vote
    ATHENS/FRANKFURT | By Renee Mal­te­zou and John O’Don­nell

    Thu Jul 9, 2015 6:35pm EDT

    The Greek gov­ern­ment sent a pack­age of reform pro­pos­als to its euro zone cred­i­tors on Thurs­day in a race to win new funds to avert bank­rupt­cy and will seek a par­lia­men­tary vote on Fri­day to endorse imme­di­ate actions.

    The chair­man of Eurogroup finance min­is­ters, Jeroen Dijs­sel­bloem, con­firmed receiv­ing the doc­u­ments and said through a spokesman that he would not com­ment until they had been assessed by experts from the Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank and Inter­na­tion­al Mon­e­tary Fund.

    ...

    Ger­many, Athens biggest cred­i­tor, mean­while made a small con­ces­sion by acknowl­edg­ing that Greece will need some debt restruc­tur­ing as part of the new pro­gram to make its pub­lic finances viable in the medi­um-term.

    The admis­sion by hard­line Ger­man Finance Min­is­ter Wolf­gang Schaeu­ble came hours before the mid­night dead­line for Athens to sub­mit its reform plan.

    Schaeu­ble, who makes no secret of his doubts about Greece’s fit­ness to remain in the cur­ren­cy area, told a con­fer­ence in Frank­furt: “Debt sus­tain­abil­i­ty is not fea­si­ble with­out a hair­cut and I think the IMF is cor­rect in say­ing that.

    But he added: “There can­not be a hair­cut because it would infringe the sys­tem of the Euro­pean Union.”

    He offered no solu­tion to the conun­drum, which implied that Greece’s debt prob­lem might not be sol­u­ble with­in the euro zone.

    But he did say there was lim­it­ed scope for “repro­fil­ing” Greek debt by extend­ing loan matu­ri­ties, shav­ing inter­est rates and length­en­ing a mora­to­ri­um on debt ser­vice pay­ments.

    Schaeu­ble also com­plained that he had not seen any sign of “pri­or actions” by the Greek gov­ern­ment. Fri­day’s vote should go some way towards dis­arm­ing such crit­i­cism, although a fur­ther vote will be required to turn the “pri­or actions” into law next week if an agree­ment is reached, the Greek offi­cial said.

    ...

    Ger­man Bun­des­bank chief Jens Wei­d­mann said cap­i­tal con­trols should remain in force in Greece until there was any deal, and that the ECB should not increase its liq­uid­i­ty assis­tance for Greek banks, with­out which they may col­lapse next week.

    So, accord­ing to Schaeu­ble...:

    ...
    Schaeu­ble, who makes no secret of his doubts about Greece’s fit­ness to remain in the cur­ren­cy area, told a con­fer­ence in Frank­furt: “Debt sus­tain­abil­i­ty is not fea­si­ble with­out a hair­cut and I think the IMF is cor­rect in say­ing that.

    But he added: “There can­not be a hair­cut because it would infringe the sys­tem of the Euro­pean Union.”

    He offered no solu­tion to the conun­drum, which implied that Greece’s debt prob­lem might not be sol­u­ble with­in the euro zone.

    But he did say there was lim­it­ed scope for “repro­fil­ing” Greek debt by extend­ing loan matu­ri­ties, shav­ing inter­est rates and length­en­ing a mora­to­ri­um on debt ser­vice pay­ments.
    ...

    Let’s attemtp to parse that: So Schaeu­ble agrees that a “hair­cut” is need­ed but can’t hap­pen. But debt “repro­fil­ing”, that the kind the IMF and EU Com­mis­sion appear to be advo­cat­ing, might be accept­able but only in a lim­it­ed scope, which means any indi­rect “hair­cuts” that Schaeu­ble might agree to won’t give the lev­el of debt relief that even Wolf­gang Schaeu­ble now admits Greece needs.

    So one of the pri­ma­ry fig­ures demand­ing aus­ter­i­ty with­out debt relief for Greece all these years is now, at this late hour, using the argu­ment that Greece actu­al­ly needs more debt relief than he is will­ing to allow as an argu­ment for kick­ing Greece out of the euro­zone. Wow.

    And, adding to the weird­ness, Wolf­gang Schaeu­ble might actu­al­ly be doing a Greece a favor because he’s prob­a­bly cor­rect. Sim­ply extend­ing Greece debt while con­tin­u­ing to stran­gle the econ­o­my with insane aus­ter­i­ty mea­sures real­ly is a recipe for doom.

    Still, fol­low­ing Schaeuble’s com­ments it was still up to the eurogroup of euro­zone finance min­is­ters to meet Sat­ur­day and make a deci­sion. And they met. And they decided...to meet again Sun­day since it sounds like Ger­many and some of the oth­er hard­line gov­ern­ments want to tem­porar­i­ly kick Greece out of the euro­zone for five years instead of accept­ing the incred­i­bly painful con­ces­sions Greece just made:

    Bloomberg Busi­ness
    Greece Talks Spill Into 2nd Day as Finance Chiefs Dead­lock
    by Karl Stag­no Navar­ra, Radoslav Tomek, and Ott Umme­las
    July 11, 2015 — 9:08 AM CDT
    Updat­ed on July 11, 2015 — 6:13 PM CDT

    Euro­pean finance min­is­ters dead­locked over how to keep Greece in the euro, forc­ing emer­gency talks to con­tin­ue Sun­day and threat­en­ing to delay the infu­sion Prime Min­is­ter Alex­is Tsipras des­per­ate­ly needs.

    With Greece run­ning out of mon­ey and its banks shut for the past two weeks, the hard­line group led by Ger­many sig­naled that the country’s debt was too great, Tsipras’s reform pro­pos­als were inad­e­quate and, in any event, the Greeks couldn’t be trust­ed to keep their word. Finance min­istry aides will work through the night, allow­ing finance chiefs to recon­vene at 11 a.m. in Brus­sels before a lead­ers’ sum­mit.

    “It’s still very dif­fi­cult, but work is still in progress,” Dutch Finance Min­is­ter Jeroen Dijs­sel­bloem, the head of the Eurogroup, told reporters after nine hours of talks that end­ed at mid­night. “The issue of cred­i­bil­i­ty and trust was dis­cussed and also, of course, the finan­cial issues.”

    The skep­ti­cism expressed by the pol­i­cy mak­ers came hours after Tsipras won over­whelm­ing sup­port in the Greek Par­lia­ment for a pack­age of spend­ing cuts, pen­sion sav­ings and tax increas­es intend­ed to win finan­cial aid of at least 74 bil­lion euros ($83 bil­lion). Among its short­com­ings, the pro­pos­als failed to reflect the eco­nom­ic dete­ri­o­ra­tion since talks col­lapsed and cap­i­tal con­trols were imposed two weeks ago, accord­ing to Dijs­sel­bloem.

    Their con­cerns were reflect­ed by the media back home. Germany’s Frank­furter All­ge­meine Son­ntagszeitung report­ed a finance min­istry pro­pos­al to sus­pend Greece from the euro area for five years. The idea was dis­missed as ille­gal and non­sense by a Euro­pean Union offi­cial who asked not to be named because the talks are pri­vate.

    Finnish media report­ed the Helsin­ki gov­ern­ment flat­ly opposed the bailout.

    Finland’s Oppo­si­tion

    “I don’t believe that we are at this point autho­ris­ing any kind of addi­tion­al loan to Greece,” Finland’s Alexan­der Stubb said. “About half of mem­bers had the same stance as us and maybe a few had anoth­er view.”

    ...

    The finance chiefs also rebuffed any talk of debt relief, a step that the IMF has backed.

    “Debt relief is impos­si­ble,” Germany’s Wolf­gang Schaeu­ble said on his way into Saturday’s meet­ing.

    The country’s three cred­i­tor insti­tu­tions — the IMF, the Euro­pean Com­mis­sion and the Euro­pean Cen­tral Bank — ear­li­er assessed the pro­gram pos­i­tive­ly as a basis for the bailout, accord­ing to a euro-area offi­cial who spoke on con­di­tion of anonymi­ty.

    Moscovici’s Hope.

    “There’s always hope,” Euro­pean Union Eco­nom­ic Affairs Com­mis­sion­er Pierre Moscovi­ci told reporters.

    The sched­ule for the sum­mits of both the euro-area and Euro­pean Union lead­ers will be deter­mined by EU Pres­i­dent Don­ald Tusk after meet­ing Dijs­sel­bloem Sun­day morn­ing.

    The cred­i­tors still view the country’s reform pro­pos­als as insuf­fi­cient to meet fis­cal tar­gets, Frank­furter All­ge­meine Son­ntagszeitung said, cit­ing an assess­ment paper pro­vid­ed to euro-area finance min­is­ters.

    Tsipras faces polit­i­cal antag­o­nists not just in Berlin and Brus­sels but with­in his own par­ty. More than a dozen Syriza mem­bers refused to back the plan, with some of them denounc­ing the harsh mea­sures it pre­scribes less than a week after Tsipras won an anti-aus­ter­i­ty ref­er­en­dum. The prime min­is­ter said after the vote that his pri­or­i­ty would be to com­plete nego­ti­a­tions with the cred­i­tors on a bailout deal.

    ...

    “The cred­i­tors still view the country’s reform pro­pos­als as insuf­fi­cient to meet fis­cal tar­gets, Frank­furter All­ge­meine Son­ntagszeitung said, cit­ing an assess­ment paper pro­vid­ed to euro-area finance min­is­ters.” Greece just upped its con­ces­sions and the demands got upped again.

    So Greece basi­cal­ly gave the troi­ka every­thing it wants even though every­thing the troi­ka wants is still an unsus­tain­able mess of inten­si­fy­ing aus­ter­i­ty (with inad­e­quate debt relief). And Berlin and its fel­low far right hard­lin­ers appear to be on the verge of reject­ing the offer because what the troi­ka wants is more debt relief than the the sup­ply-side-aus­ter­i­ty-wing of the euro­zone gov­ern­ments are will­ing to allow even though the debt relief that troi­ka is demand­ing is prob­a­bly not enough to sus­tain­able giv­en the crush­ing degree of aus­ter­i­ty demands and almost com­plete lack of any stim­u­lus pro­grams.

    It rais­es an inter­est­ing ques­tion: Did the Greek gov­ern­ment sud­den­ly capit­u­late to the troi­ka on all of the aus­ter­i­ty mea­sures vot­ers just reject­ed as part of a gam­ble that Berlin and its far right allies are even cra­zier than the troi­ka and would refuse what amounts to almost com­plete capit­u­la­tion by Greece, there­by mak­ing it clear to the world that the euro­zone has always been a dys­func­tion­al mess that damned Greece from the begin­ning of the cri­sis? If so, bra­vo, because it appears to have worked.

    Either way, it appears that a num­ber of bluffs are about to be called. And either way, aus­ter­i­ty for the mass­es due to high-lev­el malfea­sance wins the day. Some­one is very pleased.

    Posted by Pterrafractyl | July 11, 2015, 7:30 pm
  49. Say hel­lo to the new meme that sym­bol­izes the state of affairs for one of the most impor­tant demo­c­ra­t­ic projects in his­to­ry: #Thi­sIsACoup:

    The Huff­in­g­ton Post

    Ger­man-Led Eurogroup Launch­ing Coup Against Greek Gov­ern­ment

    Ryan Grim
    Post­ed: 07/12/2015 9:38 pm EDT

    After the fall of the Berlin Wall and the col­lapse of the Sovi­et Union, Fran­cis Fukuya­ma famous­ly declared an end to his­to­ry. Things, of course, would con­tin­ue to hap­pen, he said, but the clash of rival ide­olo­gies was over with the “unabashed vic­to­ry of eco­nom­ic and polit­i­cal lib­er­al­ism.”

    It was 1992, and it was a time to cel­e­brate. “What we may be wit­ness­ing is not just the end of the Cold War, or the pass­ing of a par­tic­u­lar peri­od of post­war his­to­ry, but the end of his­to­ry as such: that is, the end point of mankind’s ide­o­log­i­cal evo­lu­tion and the uni­ver­sal­iza­tion of West­ern lib­er­al democ­ra­cy as the final form of human gov­ern­ment,” he wrote in his land­mark essay-turned-book.

    With Ger­many and its Euro­zone squeez­ing the life out of Greece on Sun­day night — and the hash­tag #Thi­sIsACoup trend­ing — it became clear­er than ever that only one half of that bar­gain — the eco­nom­ics — remained alive.

    With­in just a few years of Fukuya­ma’s pro­nounce­ment, pro­test­ers in West­ern nations, and gov­ern­ments and peo­ple in the glob­al South, began sug­gest­ing that the new demo­c­ra­t­ic sys­tem was, in the end, per­haps not so demo­c­ra­t­ic. The Inter­na­tion­al Mon­e­tary Fund and oth­er glob­al cred­i­tors began writ­ing laws, most­ly for Third World coun­tries, enforc­ing what they called “struc­tur­al adjust­ment” — which was blood­less bureau­crat­ic lan­guage refer­ring to the pil­lag­ing of a nation’s assets and resources, cou­pled with the gut­ting of its social ser­vices, pen­sions and oth­er advances that came in the 20th Cen­tu­ry. The first major protest to cap­ture glob­al atten­tion was in Seat­tle, Wash­ing­ton, in 1999, at a World Trade Orga­ni­za­tion meet­ing. The move­ment spread around the globe, with protests hit­ting cap­i­tal after cap­i­tal, wher­ev­er eco­nom­ic lead­ers gath­ered, until the attacks of Sep­tem­ber 11, 2001. A planned protest in Wash­ing­ton, D.C., against the IMF and World Bank was sup­plant­ed by a peace march.

    The world’s rich nations assumed that what insti­tu­tions like the IMF did in the South would­n’t hit the North. Cap­i­tal, how­ev­er, marched on. And on Sun­day night, it marched into Athens with an offer to Greece that would end the idea that cap­i­tal­ism and democ­ra­cy can sur­vive togeth­er there. Reads the offer, pro­vid­ed by a source close to the talks, from the Euro­pean finan­cial elite, which call them­selves the insti­tu­tions: “The [Greek] gov­ern­ment needs to con­sult and agree with the insti­tu­tions on all draft leg­is­la­tion in rel­e­vant areas with ade­quate time before sub­mit­ting it for pub­lic con­sul­ta­tion or to Par­lia­ment.” It would be a gov­ern­ment in name only. Not only would the Greek peo­ple be forced to accept the kind of deal they reject­ed over­whelm­ing­ly at the polls just a week ear­li­er, but they’d be blocked from imple­ment­ing any future poli­cies Ger­many dis­ap­proved of.

    “The tri­umph of the West, of the West­ern idea, is evi­dent first of all in the total exhaus­tion of viable sys­tem­at­ic alter­na­tives to West­ern lib­er­al­ism,” Fukuya­ma wrote. But, instead, the absence of a viable alter­na­tive embold­ened cap­i­tal: with the threat of social­ism gone, there is less need for either half of what’s known in Europe as social democ­ra­cy. In a pre­vi­ous inter­view with Huff­Post, French econ­o­mist Thomas Piket­ty high­light­ed the inter­ac­tion. “The exis­tence of a counter mod­el was one of the rea­sons that a num­ber of reforms or poli­cies were accept­ed,” he said, argu­ing that peo­ple in cap­i­tal­ist coun­tries fared bet­ter thanks to the threat of com­mu­nism. “In France, it’s very strik­ing to see that in 1920, the polit­i­cal majori­ties adopt­ed steeply pro­gres­sive tax­a­tion. Exact­ly the same peo­ple refused the income tax in 1914 with a 2 per­cent tax rate. And in between, the Bol­she­vik rev­o­lu­tion made them feel, after all, that pro­gres­sive tax­a­tion is not so dan­ger­ous as rev­o­lu­tion.”

    Dur­ing nego­ti­a­tions over the future of Greece, the Greek Syriza gov­ern­ment repeat­ed­ly offered such pro­gres­sive tax­a­tion as a way of achiev­ing some of the bud­get sur­plus­es the insti­tu­tions were demand­ing. The offer was reject­ed, how­ev­er, with the insti­tu­tions argu­ing that high­er tax­es on the rich might slow growth. With no fear of rev­o­lu­tion, the inter­est in pro­gres­sive tax­a­tion is gone.

    Paul Krug­man, under the head­line “Killing the Euro­pean Project,” put the blame square­ly on Ger­many::

    The trend­ing hash­tag Thi­sIsACoup is exact­ly right. This goes beyond harsh into pure vin­dic­tive­ness, com­plete destruc­tion of nation­al sov­er­eign­ty, and no hope of relief. It is, pre­sum­ably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betray­al of every­thing the Euro­pean project was sup­posed to stand for.

    Rena Dourou, a mem­ber of Syriza, wrote for Huff­Post Greece that the next few days and hours “will either meet the goals of its founders — Democ­ra­cy and Sol­i­dar­i­ty for the pros­per­i­ty of the peo­ple of Europe — or enter on a path of decay.”

    Yanis Varo­ufakis, the econ­o­mist who was until recent­ly Greece’s finance min­is­ter, said in a blog post Sun­day that his Ger­man coun­ter­part, Wolf­gang Schäu­ble, flat-out told him that his end goal was to ease Greece out of the Euro­zone in order to teach a les­son to oth­er nations that might want to pur­sue polit­i­cal paths at odds with his vision. Fox Busi­ness report­ed Sun­day that the IMF was demand­ing Greek Prime Min­is­ter Alex­is Tsipras resign, a claim the bank lat­er denied...

    Italy’s Prime Min­is­ter, mean­while, begged Ger­many to call off the dogs. “Now com­mon sense must pre­vail and an agree­ment must be reached. Italy does not want Greece to exit the euro and to Ger­many I say: enough is enough,” Ital­ian Prime Min­is­ter Mat­teo Ren­zi said. “Now that Tsipras has made pro­pos­als in line with the Euro­pean demands, we must absolute­ly sign a deal. Humil­i­at­ing a Euro­pean part­ner after Greece has giv­en up on just about every­thing is unthink­able.”

    The Unit­ed States has done pre­cious lit­tle to sup­port Greece or the prin­ci­ple of democ­ra­cy in Europe. The Sovi­et Union may be gone, but the U.S. reluc­tance to inter­vene comes large­ly from the desire to keep Ger­many as a strong ally while the U.S. wages a proxy war against Rus­sia in the Ukraine.

    If Euro­pean his­to­ry is any guide, the too-clever cal­cu­la­tions and the pet­ty vin­dic­tive­ness will back­fire in a bad way.

    ...

    Yes, the West­ern World is now force-feed­ing a taste of the ‘cap­i­tal­ism or democ­ra­cy’ treat­ment the IMF has been dish­ing out to the rest of the world to a place like the euro­zone. If Greece takes the offer to stay in the euro­zone, it also has to put +50 bil­lion euros in top assets under troikan con­trol while new gov­ern­ment poli­cies are sub­ject to troikan review:

    ...

    The world’s rich nations assumed that what insti­tu­tions like the IMF did in the South would­n’t hit the North. Cap­i­tal, how­ev­er, marched on. And on Sun­day night, it marched into Athens with an offer to Greece that would end the idea that cap­i­tal­ism and democ­ra­cy can sur­vive togeth­er there. Reads the offer, pro­vid­ed by a source close to the talks, from the Euro­pean finan­cial elite, which call them­selves the insti­tu­tions: “The [Greek] gov­ern­ment needs to con­sult and agree with the insti­tu­tions on all draft leg­is­la­tion in rel­e­vant areas with ade­quate time before sub­mit­ting it for pub­lic con­sul­ta­tion or to Par­lia­ment.” It would be a gov­ern­ment in name only. Not only would the Greek peo­ple be forced to accept the kind of deal they reject­ed over­whelm­ing­ly at the polls just a week ear­li­er, but they’d be blocked from imple­ment­ing any future poli­cies Ger­many dis­ap­proved of.

    ...

    So that’s where we are. The new terms for keep­ing Greece in the euro­zone is a troikan takeover of “all draft leg­is­la­tion in rel­e­vant areas with ade­quate time before sub­mit­ting it for pub­lic con­sul­ta­tion or to Par­lia­ment”. Or Greece gets some sort of ambigu­ous five-year “time out” from the euro­zone. That the direc­tion it appears the troi­ka is going (despite all the dis­agree­ment with the euro­zone)

    And yes, accord­ing to Greece’s recent­ly depart­ed finance min­is­ter Yanis Varo­ufakis, Wol­fang Schaeu­ble told him that kick­ing Greece out to teach the rest of Europe not to oppose his vision was the goal

    ...

    Yanis Varo­ufakis, the econ­o­mist who was until recent­ly Greece’s finance min­is­ter, said in a blog post Sun­day that his Ger­man coun­ter­part, Wolf­gang Schäu­ble, flat-out told him that his end goal was to ease Greece out of the Euro­zone in order to teach a les­son to oth­er nations that might want to pur­sue polit­i­cal paths at odds with his vision.

    ...

    Now that we’ve seen Berlin and its right-wing aus­ter­i­ty-allies issue an ulti­ma­tum only a fas­cist could love, Varo­ufakis is assert­ing that the ‘Grex­it’ was a fore­gone con­clu­sion because Wolf­gang told Varo­ufakis that Schaeu­ble needs to make sure that every­one knows he means busi­ness:

    Yanis Varo­ufakis
    thoughts for the post-2008 world

    Dr Schäuble’s Plan for Europe: Do Euro­peans approve? – Arti­cle to appear in Die Zeit on Thurs­day 16th July 2015

    Post­ed on July 13, 2015 by yanisv
    Pre-pub­li­ca­tion sum­ma­ry: Five months of intense nego­ti­a­tions between Greece and the Eurogroup nev­er had a chance of suc­cess. Con­demned to lead to impasse, their pur­pose was to pave the ground for what Dr Schäu­ble had decid­ed was ‘opti­mal’ well before our gov­ern­ment was even elect­ed: That Greece should be eased out of the Euro­zone in order to dis­ci­pline mem­ber-states resist­ing his very spe­cif­ic plan for re-struc­tur­ing the Euro­zone.

    * This is no the­o­ry.
    * How do I know Grex­it is an impor­tant part of Dr Schäuble’s plan for Europe?
    * Because he told me so!

    I wrote this arti­cle not as a Greek politi­cian crit­i­cal of the Ger­man press’ den­i­gra­tion of our sen­si­ble pro­pos­als, of Berlin’s refusal seri­ous­ly to con­sid­er our mod­er­ate debt re-pro­fil­ing plan, of the Euro­pean Cen­tral Bank’s high­ly polit­i­cal deci­sion to asphyx­i­ate our gov­ern­ment, of the Eurogroup’s deci­sion to give the ECB the green light to shut down our banks.

    I wrote this arti­cle as a Euro­pean observ­ing the unfold­ing of a par­tic­u­lar Plan for Europe – Dr Schäuble’s Plan.

    And I am ask­ing a sim­ple ques­tion of Die Zeit’s informed read­ers:

    Is this a Plan that you approve of?
    Do you con­sid­er this Plan good for Europe?

    “I wrote this arti­cle as a Euro­pean observ­ing the unfold­ing of a par­tic­u­lar Plan for Europe – Dr Schäuble’s Plan.”

    And it’s cer­tain­ly look­ing like Wolf­gang Schaeuble’s plan will indeed end up being the plan guid­ing the fate of the Euro­pean project dur­ing the crit­i­cal junc­ture although it remains to be seen. But what we’ve seen so far does­n’t make Greece time in the euro­zone seem like it can go on for much longer because, as Matt O’Brien points out, the offer Ger­many wants to impose on Greece is so bad for Greece that it’s an offer it can’t pos­si­bly accept:

    The Wash­ing­ton Post
    Ger­many doesn’t want to save Greece. It seems to want to humil­i­ate Greece.
    By Matt O’Brien July 12 at 7:08 AM

    Greece has offered an almost uncon­di­tion­al sur­ren­der on its bailout, but Ger­many might not accept any­thing less than a Carthagin­ian peace. In oth­er words, a deal that not only forces Athens to sub­mit, but also humil­i­ates it in the process.

    This lat­est melo­dra­ma, play­ing out in Brus­sels as Euro­pean finance min­is­ters meet to dis­cuss whether or not to approve a new Greek bailout, appears so non­sen­si­cal that it can be hard to believe these peo­ple are decid­ing the future of Europe. Although you would­n’t know it from the head­lines, the truth is that Greece and Europe have been close to a deal for awhile now. Both sides agreed about how much aus­ter­i­ty Athens should do, but dis­agreed about how Athens should do it—at least until last Thurs­day. That’s when Greece came up with an offer that was not only near­ly iden­ti­cal to Europe’s, but also to the one its peo­ple had just reject­ed in a ref­er­en­dum. French Pres­i­dent François Hol­lande, whose gov­ern­ment helped put the pro­pos­al toge­hter, called it a “seri­ous” and “cred­i­ble” one. At the very least, it seemed like the basis for new nego­ti­a­tions.

    But maybe not. The prob­lem is that Greece’s econ­o­my is in so much worse shape now than it was even a few weeks ago that the tax hikes and spend­ing cuts, which would have pro­duced a 1 per­cent bud­get sur­plus before, won’t any­more. That’s what hap­pens , after all, when the Euro­pean Cen­tral Bank pulls enough of the plug on your banks that they have to close their doors for now to avoid hav­ing to close their doors for good. Busi­ness­es can’t get the cred­it they need to, well, stay in busi­ness, and will then default on the banks that are about to go out of busi­ness them­selves. The entire econ­o­my, in oth­er words, shuts down. And that’s why Europe esti­mates that Greece would actu­al­ly need an 82 bil­lion euro bailout—with 25 bil­lion of that going to its banks—instead of the 53.5 bil­lion euros Athens is ask­ing for. So Greece would have to do more aus­ter­i­ty than Europe want­ed before to get more mon­ey than Europe was offer­ing before.

    If, that is, Europe is even offer­ing Greece any mon­ey any­more. It might not be. The sim­ple sto­ry is that Ger­many and the oth­er hard­line coun­tries don’t trust Greece’s anti-aus­ter­i­ty Syriza par­ty to actu­al­ly imple­ment, well, aus­ter­i­ty. And so rather than cough­ing up anoth­er 60 or 70 or 80 bil­lion euros, they seem to want to push to kick Greece out of the com­mon cur­ren­cy instead. That, at least, was the plan that leaked on Sat­ur­day. And now it’s part of the actu­al plan on Sun­day. Indeed, it’s ten­ta­tive­ly been includ­ed in the Euro­pean finance min­is­ters’ lat­est joint state­ment. This isn’t just what Ger­many is con­sid­er­ing. It’s what Ger­many is try­ing to get the rest of Europe to go along with.

    Under the plan, the only way Ger­many would let Greece stay in the euro now is if it sells 50 bil­lion euros of “very valu­able Greek assets,” allows inter­na­tion­al observers to mon­i­tor its bailout, and puts auto­mat­ic spend­ing cuts in place in case it miss­es its deficit tar­gets. Oth­er­wise, Ger­many wants Greece to take at least a five year “time­out” from the euro, dur­ing which time its debts could be restruc­tured and it could receive human­i­tar­i­an aid. The entire pro­pos­al was less than a page long.

    In case there was any doubt, this is an offer Greece can’t accept. Sure, sell­ing assets would low­er Greece’s debt today, but it would make the rest of Greece’s debt hard­er to pay back tomorrow—which, accord­ing to the Inter­na­tion­al Mon­e­tary Fund, is already unpayable. It’s the kind of thing you ask for if you want Athens to say no.

    But does that mean Ger­many real­ly wants to get rid of Greece or is this just a ploy to get more con­ces­sions out of Greece? Yes. The prob­lem is it’s hard to know what Chan­cel­lor Angela Merkel real­ly wants. Up till now, she’s been will­ing to do what­ev­er the least is to keep Greece in the euro, but her finance min­is­ter Wolf­gang Schäu­ble has been push­ing her to give them the boot. That’s let them play a pret­ty effec­tive good-cop, bad-cop to get the most out of Athens, but this time that’s turned into bad-cop, worse-cop. Schäuble’s plan—and it is his plan—for Greece to “tem­porar­i­ly” exit the euro report­ed­ly has Merkel’s back­ing. There are even rumors it has Fin­land, the Nether­lands, Esto­nia, Lithua­nia, Slo­va­kia, and Slove­ni­a’s sup­port as well.

    If Greece does leave the euro, though, it will only be tem­po­rary in the sense that all life is tem­po­rary. Bring­ing back the drach­ma would either be such a boon to Greece’s econ­o­my that it’d nev­er want to go back to the euro, or be such a dis­as­ter that Europe would nev­er want to invite it back. But in either case, Greece and Europe’s tri­al sep­a­ra­tion would turn into a divorce. That might actu­al­ly be bet­ter for Greece now that it’s already gone through a lot of the pain of ditch­ing the euro—like a finan­cial crisis—but it could be a cat­a­stro­phe for Europe. It would­n’t just show that coun­tries can leave the euro, but maybe that coun­tries have to leave the euro to recov­er. So the next time an anti-aus­ter­i­ty par­ty wins pow­er, it might decide to do the same, at which point the euro zone would be more like a north­ern euro zone, if that. Espe­cial­ly if France decides that this makes the euro not worth sav­ing any­more.

    ...

    Yes, Berlin just inter­vened in Greece’s act of falling on its sword and accept­ing all of the bailout terms in order to troll Greece with an offer it can’t pos­si­bly accept:

    ...
    Under the plan, the only way Ger­many would let Greece stay in the euro now is if it sells 50 bil­lion euros of “very valu­able Greek assets,” allows inter­na­tion­al observers to mon­i­tor its bailout, and puts auto­mat­ic spend­ing cuts in place in case it miss­es its deficit tar­gets. Oth­er­wise, Ger­many wants Greece to take at least a five year “time­out” from the euro, dur­ing which time its debts could be restruc­tured and it could receive human­i­tar­i­an aid. The entire pro­pos­al was less than a page long.

    In case there was any doubt, this is an offer Greece can’t accept. Sure, sell­ing assets would low­er Greece’s debt today, but it would make the rest of Greece’s debt hard­er to pay back tomorrow—which, accord­ing to the Inter­na­tion­al Mon­e­tary Fund, is already unpayable. It’s the kind of thing you ask for if you want Athens to say no.
    ...

    And the best part of the trolling is that if Greece says “No” to the 50 bil­lion asset stripping/sovereignty strip­ping pro­pos­al, it gets to spend the next five years being told that if the nation does­n’t cut more social spend­ing it won’t be allowed back into the club that’s cur­rent­ly try­ing to troll it into quit­ting as an exam­ple to oth­ers. And this is all while Greece is deal with­out the fall­out of switch­ing back to the Drach­ma.

    It all rais­es the ques­tions: does the ‘5 year exit’ offer extend to the rest of the euro­zone mem­bers? And do they need to wait for a finan­cial cri­sis to take the offer? Because if Greece is get­ting kicked out in order to send the mes­sage to the rest of the euro­zone not to mess with Wolf­gang’s right-wing vision, isn’t Berlin simul­ta­ne­ous­ly trolling the rest of the euro­zone about how they now live under per­ma­nent right-wing rule too? And does­n’t that mean Europe is basi­cal­ly trolling itself at this point? It sure seems like it.

    The Euro­pean project has tak­en a turn for the worse in recent years.

    Posted by Pterrafractyl | July 12, 2015, 11:21 pm
  50. Big news for Europe and the world today: The euro­zone lost a mem­ber state but gained a brand new vas­sal state! Yes, instead of head­ing out the ‘Grex­it’, the Greek gov­ern­ment chose to accept a set of terms that were not only much worse than the aus­ter­i­ty pack­age Greek vot­ers reject­ed last week, but basi­cal­ly end the notion of Greece as a nation. But the deal has been reached! Greece gets to stay in the euro­zone. All it needs to do is give up it’s sov­er­eign­ty and let its new troikan tech­nocrats impose an unstop­pable aus­ter­i­ty regime that’s worse than any­thing the Greeks have expe­ri­enced thus far. That’s seri­ous­ly the deal:

    The Tele­graph
    Greece is being treat­ed like a hos­tile occu­pied state
    A new deal for Athens is the worst of all worlds and solves noth­ing

    By Ambrose Evans-Pritchard

    5:39PM BST 13 Jul 2015

    Like the Neapoli­tan Bour­bons – benign by com­par­i­son – the lead­ers of the euro­zone have learned noth­ing, and for­got­ten noth­ing.

    The cru­el capit­u­la­tion forced upon Greece after 31 hours on the diplo­mat­ic rack offers no con­ceiv­able way out the country’s per­pet­u­al cri­sis. The terms are harsh­er by a full order of mag­ni­tude than those reject­ed by Greek vot­ers in a land­slide ref­er­en­dum a week ago, and there­fore can nev­er com­mand demo­c­ra­t­ic assent.

    They must be car­ried through by a Greek par­lia­ment still dom­i­nat­ed by MPs from Left and Right who loathe every line of the sum­mit state­ment, the infa­mous SN 4070/15, and have only agreed – if they have agreed – with a knife to their throats.

    EMU inspec­tors can veto leg­is­la­tion. The emas­cu­la­tion of the Greek par­lia­ment has been slipped into the text. All that is miss­ing is a unit of EMU gen­darmes.

    Such terms are unen­force­able. The cred­i­tors have sought to nail down the new mem­o­ran­dum by trans­fer­ring €50bn of Greek assets to “an inde­pen­dent fund that will mon­e­tise the assets through pri­vati­sa­tions and oth­er means”. It will be used in part to pay off debts.

    This fund will be under EU “super­vi­sion”. The cos­met­ic niceties of sov­er­eign­ty will be pre­served by let­ting the Greek author­i­ties man­age its day to day affairs. Nobody is fooled.

    In oth­er words, they are seiz­ing Greece’s few remain­ing jew­els at source. This is not real­ly dif­fer­ent from the Inter­na­tion­al Com­mit­tee for Greek Debt Man­age­ment in 1898 imposed on Greece after the coun­try went bank­rupt fol­low­ing a dis­as­trous Balkan war.

    A six-pow­er league of bond­hold­ers, led by British bankers, impound­ed cus­toms duties in the Port of Piraeus, and seized rev­enues from stamp duty, tobac­co, salt, kerosene, all the way down to play­ing cards. But at least there was no hum­bug about sol­i­dar­i­ty and help­ing Greece on that occa­sion.

    “It is the Ver­sailles Treaty for the present age,” said Mr Varo­ufakis this morn­ing, talk­ing to me from from his island home in Aegi­na.

    Under the new terms, Greece must tight­en fis­cal pol­i­cy by rough­ly 2pc of GDP by next year, push­ing the coun­try fur­ther into a debt-defla­tion spi­ral and into the next down­wards leg of its six-year depres­sion.

    This will cause the gov­ern­ment to miss the bud­get tar­gets yet again – prob­a­bly by a large mar­gin – in an exact repeat of the self-defeat­ing pol­i­cy that caused Greek debt dynam­ics to spin out of con­trol in the last two Troi­ka loan pack­ages.

    As the Inter­na­tion­al Mon­e­tary Fund acknowl­edged in its famous mea cul­pa, if you mis­judge the fis­cal mul­ti­pli­er and force aus­ter­i­ty beyond the ther­a­peu­tic dose, you make mat­ters worse. The debt to GDP ratio ris­es despite the cuts.

    EMU lead­ers have an answer to this. Like Canute’s courtiers, they will sim­ply com­mand the waves to retreat. The text states that on top of pen­sion cuts and tax increas­es there should be “qua­si-auto­mat­ic spend­ing cuts in case of devi­a­tions from ambi­tious pri­ma­ry sur­plus tar­gets”,.

    In oth­er words, they will be forced to imple­ment pro-cycli­cal con­trac­tionary poli­cies. The fis­cal slip­page that act­ed as a slight cush­ion over the last five years will be not be tol­er­at­ed this time.

    And let us not for­get that these pri­ma­ry sur­plus­es nev­er made any sense in the first place. They were not drawn up on the basis of macro-eco­nom­ic analy­sis. They were writ­ten into pri­or agree­ments because that is what would be need­ed – ceteris paribus – to pre­tend that debt is sus­tain­able, and there­fore that the IMF could sign off on the accords. What a cha­rade.

    Nobel econ­o­mist Paul Krug­man says the EMU demands are “mad­ness” on every lev­el. “What we’ve learned these past cou­ple of weeks is that being a mem­ber of the euro­zone means that the cred­i­tors can destroy your econ­o­my if you step out of line. This has no bear­ing at all on the under­ly­ing eco­nom­ics of aus­ter­i­ty,” he said.

    “This goes beyond harsh into pure vin­dic­tive­ness, com­plete destruc­tion of nation­al sov­er­eign­ty, and no hope of relief. It is, pre­sum­ably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betray­al of every­thing the Euro­pean project was sup­posed to stand for,” he said.

    Yes, Syriza has blinked, though there are many chap­ters in this sor­ry saga yet to come.

    The Greek banks are on the verge of col­lapse. There is not enough cash left to cov­er ATM with­drawals of €60bn each day through this week, or to cov­er week­ly pay­ments of €120 to pen­sion­ers and the unem­ployed – that is the to say, the tiny frac­tion of the job­less who receive any­thing at all.

    Cap­i­tal con­trols have led to an eco­nom­ic stand-still. Almost noth­ing is com­ing into the coun­try. Firms are run­ning down their last stocks of raw mate­ri­als and vital imports. Hun­dreds of fac­to­ries, mills, and pro­cess­ing plants have already cut shifts and are prepar­ing to shut down oper­a­tions as soon as this week.

    Late tourist book­ings have crashed by 30pc. Syriza faced a seri­ous risk that the coun­try would run out of import­ed food stocks by end of this month, with calami­tous con­se­quences at the peak of the tourist sea­son. So yes, faced with the full hor­ror of what is hap­pen­ing, they recoiled.

    There is no doubt that Syriza sold the Greek peo­ple a false prospec­tus with its incom­pat­i­ble promis­es both to tear up the Troi­ka Mem­o­ran­dum and to keep Greece in the euro. They have learned a hor­ri­ble les­son.

    Yet that is only half the sto­ry. We have also watched the EMU cred­i­tor pow­ers bring a coun­try to knees by cut­ting off the emer­gency liq­uid­i­ty (ELA) to the bank­ing sys­tem.

    Let there be no doubt, it was the deci­sion by the Euro­pean Cen­tral Bank to freeze ELA at €89bn two weeks ago that pre­cip­i­tat­ed the final cri­sis and broke Syriza’s will to resist. The lines of author­i­ty on this episode are blurred. Per­son­al­ly, I do not blame the ECB’s Mario Draghi for this abuse of pow­er. It was in essence a polit­i­cal deci­sion by the Eurogroup.

    But how­ev­er you dress it up, the fact remains that the ECB is by its acts dic­tat­ing a polit­i­cal set­tle­ment, and serv­ing as the enforce­ment arm of the cred­i­tors rather than uphold­ing EU treaty law.

    It took a stand that fur­ther desta­bilised the finan­cial sys­tem of an EMU mem­ber state that was already in grave trou­ble, and arguably did so in breach of its pri­ma­ry treaty duty to uphold finan­cial sta­bil­i­ty. It is a water­shed moment.

    What we have all seen with great clar­i­ty is that the EMU cred­i­tor pow­ers can sub­ju­gate an unruly state – pro­vid­ed it is small — by shut­ting down its bank­ing sys­tem. We have seen too that a small coun­try has no defences what­so­ev­er. This is mon­e­tary pow­er run amok.

    To make mat­ters worse Greek pre­mier Alex­is Tsipras can­not make a plau­si­ble case to his own peo­ple that he has secured debt relief, the one prize that could have saved him. Ger­many blocked even this.

    It did so despite mas­sive pres­sure from the Oba­ma White House and the IMF, and even though France, Italy, and the lead­ers of the EU Com­mis­sion and Coun­cil accept that a hair­cut of some sort is nec­es­sary.

    The IMF says debt relief must be at least 30pc of GDP. Even this is too low. Giv­en the dam­age done by six years of eco­nom­ic implo­sion, a lost decade of invest­ment, chron­ic hys­tere­sis, youth unem­ploy­ment of 50pc or high­er, a brain drain of the edu­cat­ed, and a ruined bank­ing sys­tem, it would still be inad­e­quate even if the entire debt was writ­ten off. That is what this EMU exper­i­ment has done to the coun­try.

    Yet all the Greeks get is vague talk of a “pos­si­ble” exten­sion of matu­ri­ties, at some point in the future, once they have jumped through umpteen hoops and passed their exams. This is what they were promised in 2012. It nev­er hap­pened.

    “If the specifics of debt relief are not writ­ten clear­ly into the over­all pack­age, this is not worth any­thing,” said Mr Varo­ufakis.

    The sum­mit doc­u­ment asserts with self-serv­ing dis­hon­esty that Greece’s debt has come off the rails due to the fail­ure of Greek gov­ern­ments to stick to the Mem­o­ran­dum over the last year. Had this not occurred, the debt would still be sus­tain­able.

    This is a lie. Pub­lic debt bal­looned to 180pc late last year – long before Syriza was elect­ed – and even though the New Democ­ra­cy gov­ern­ment had com­plied with most Troi­ka demands.

    The truth is that Greece was already bank­rupt in 2010. EMU cred­i­tors refused to allow a nor­mal debt restruc­tur­ing to take place because it would have led to instant con­ta­gion to Por­tu­gal, Spain, and Italy at a time when the euro­zone had no lender-of-last resort or defences.

    Leaked doc­u­ments from the IMF leave no doubt that the res­cue was intend­ed to save the euro and Euro­pean banks, not Greece. More debt was shov­eled onto the Greek tax­pay­ers in order to buy time, both in 2010 and again in 2012, stor­ing up the cri­sis that Europe faces today.

    In an odd way, the only Euro­pean politi­cian who was real­ly offer­ing Greece a way out of the impasse was Wolf­gang Schauble, the Ger­man finance min­is­ter, even if his offer was made in a grace­less fash­ion, almost in the form of dik­tat.

    His plan for a five-year vel­vet with­draw­al from EMU – a euphemism, since he real­ly meant Grex­it – with Paris Club debt relief, human­i­tar­i­an help, and a pack­age of growth mea­sures, might allow Greece to regain com­pet­i­tive­ness under the drach­ma in an order­ly way.

    Such a for­mu­la would imply inter­ven­tion by the ECB to sta­bilise the drach­ma, pre­vent­ing an over­shoot and dan­ger­ous down­ward spi­ral. It would cer­tain­ly have been bet­ter than the atro­cious doc­u­ment that Mr Tsipras must now take back to Athens.

    The crushed Syriza leader must sell a set­tle­ment that leaves Greece in a per­ma­nent debt trap, under neo-colo­nial con­trol, and so eco­nom­i­cal­ly frag­ile that it is almost guar­an­teed to crash into a fresh cri­sis in the next glob­al down­turn or Euro­pean reces­sion.

    At that point, every­body will blame the Greeks again, unfair­ly, and we will go through yet anoth­er round of bit­ter nego­ti­a­tions, until some­thing final­ly breaks this grim cycle of fail­ure and recrim­i­na­tion.

    For the euro­zone this “deal” is the worst of all worlds. They have solved noth­ing. Ger­many and its allies have for the first time attempt­ed to eject a coun­try from the euro, and by doing so have vio­lat­ed the sanc­ti­ty of mon­e­tary union.

    ...

    I will return to the behav­iour of Ger­many and the diplo­mat­ic dis­as­ter that has unfold­ed over com­ing days. For now let me just quote the ver­dict of his­to­ri­an Simon Schama.

    “If Tsipras was wear­ing the crown of King Pyrrhus this time last week, Merkel is wear­ing it now. Her ulti­ma­tum the begin­ning of the end of the EU,” he said. Exact­ly.

    Note this key point in the new terms that make Greece new troikan-straigh­jack­et so much more dan­ger­ous than the one it’s cur­rent­ly wear­ing: Under the new terms, if Greece’s manda­to­ry sur­prlus­es ever fall behind and pre­vent it from ful­ly mak­ing the sched­uled debt repay­ments, a qua­si-auto­mat­ic mech­a­nism will step in to force addi­tion­al spend­ing cuts...and since those repay­ment short­falls are most like­ly to hap­pen dur­ing an eco­nom­ic down­turn, those auto-cuts are like­ly going to just lead to more auto-cuts!

    ...

    Under the new terms, Greece must tight­en fis­cal pol­i­cy by rough­ly 2pc of GDP by next year, push­ing the coun­try fur­ther into a debt-defla­tion spi­ral and into the next down­wards leg of its six-year depres­sion.

    This will cause the gov­ern­ment to miss the bud­get tar­gets yet again – prob­a­bly by a large mar­gin – in an exact repeat of the self-defeat­ing pol­i­cy that caused Greek debt dynam­ics to spin out of con­trol in the last two Troi­ka loan pack­ages.

    As the Inter­na­tion­al Mon­e­tary Fund acknowl­edged in its famous mea cul­pa, if you mis­judge the fis­cal mul­ti­pli­er and force aus­ter­i­ty beyond the ther­a­peu­tic dose, you make mat­ters worse. The debt to GDP ratio ris­es despite the cuts.

    EMU lead­ers have an answer to this. Like Canute’s courtiers, they will sim­ply com­mand the waves to retreat. The text states that on top of pen­sion cuts and tax increas­es there should be “qua­si-auto­mat­ic spend­ing cuts in case of devi­a­tions from ambi­tious pri­ma­ry sur­plus tar­gets”,.

    In oth­er words, they will be forced to imple­ment pro-cycli­cal con­trac­tionary poli­cies. The fis­cal slip­page that act­ed as a slight cush­ion over the last five years will be not be tol­er­at­ed this time.

    ...

    Yes, the troi­ka isn’t just impos­ing terms that are even harsh­er than the exist­ing aus­ter­i­ty-man­dates and active­ly tak­ing pos­ses­sion of 50 bil­lion euros worth of Greece’s crown jew­els. The troi­ka is also adding new rules that ensure the dam­age inflict­ed by those poli­cies are even worse than before by ensure that the aus­ter­i­ty is doled out at the worst pos­si­ble time.

    And this is after the troi­ka already made this exact same mis­take with not only Greece but the rest of the aus­ter­i­ty-rid­dle nations that are still suf­fer­ing mas­sive unem­ploy­ment and lost gen­er­a­tions. The IMF, one third of the troi­ka, even pub­lished a mea cul­pa paper on that exact top­ic. A mea cul­pa pub­lished just two years ago. It turns out time real­ly does heal all wounds. Includ­ing wounds like feel­ings of guilt and remorse, appar­ent­ly:

    Reuters
    For hard-hit Greeks, IMF mea cul­pa comes too late
    ATHENS | By Lef­t­eris Papadi­mas and Renee Mal­te­zou

    Thu Jun 6, 2013 1:35pm EDT

    Greeks react­ed with an air of vin­di­ca­tion and out­rage at the Inter­na­tion­al Mon­e­tary Fund’s admis­sion it erred in its han­dling of the coun­try’s bailout, berat­ing an apol­o­gy that comes too late to sal­vage an econ­o­my and count­less lives in ruins.

    Anger was pal­pa­ble on the streets of Athens, where the EU-IMF aus­ter­i­ty recipe that the Wash­ing­ton-based fund says it sharply mis­judged has left rows of shut­tered stores and many scroung­ing for scraps of food in trash cans.

    “Real­ly? Thanks for let­ting us know but we can’t for­give you,” said Apos­to­los Trikali­nos, a 59-year old garbage col­lec­tor and a father of two.

    “Let’s not fool our­selves. They’ll nev­er give us any­thing back. I’m sor­ry for all the peo­ple who killed them­selves because of aus­ter­i­ty. How are we going to bring them back? How?”

    The IMF acknowl­edged on Wednes­day that it under­es­ti­mat­ed the dam­age done to Greece’s econ­o­my from spend­ing cuts and tax hikes imposed in a bailout, which was accom­pa­nied by one of the worst eco­nom­ic col­laps­es ever expe­ri­enced by a coun­try in peace­time.

    A report look­ing back on the bailout said the Fund veered from its own stan­dards to over­es­ti­mate how much debt Greece could bear, and should have pushed hard­er and soon­er for pri­vate lenders to take a “hair­cut” to reduce Greece’s debt bur­den.

    Prime Min­is­ter Anto­nis Sama­ras told reporters the acknowl­edg­ment jus­ti­fied his posi­tions. He had crit­i­cized from the out­set “what the IMF has called mis­takes”.

    “And we have been cor­rect­ing those mis­takes over the past year,” Sama­ras told reporters dur­ing a vis­it to Helsin­ki.

    Greeks have seen their incomes plunge by about a third since the debt cri­sis erupt­ed in 2009 and prompt­ed Greece to seek two bailouts from the EU and the IMF. The unem­ploy­ment rate has hit near­ly 27 per­cent and sui­cide rates have soared. Worst hit have been the youth, near­ly 60 per­cent of whom are unem­ployed.

    “The IMF admits to the crime,” the left­ist Avgi news­pa­per declared on its front page. Top sell­ing news­pa­per Ta Nea brand­ed it an “admis­sion of fail­ure”.

    In the cor­ri­dors of pow­er, some offi­cials sug­gest­ed the admis­sion could strength­en their hand in future talks with the IMF, Euro­pean Union and Euro­pean Cen­tral Bank, col­lec­tive­ly known as the troi­ka, on debt relief or new aus­ter­i­ty mea­sures.

    “It is pos­i­tive that the report rec­og­nizes that there were mis­takes in Greece’s pro­gram in the past and we hope that they will not be repeat­ed in the future and then cre­ate the need for cor­rec­tive action,” a senior gov­ern­ment offi­cial told Reuters.

    ...

    Again, this “oop­sy!” report from the IMF is bare­ly more than two years old and it was explic­it­ly about how much worse the aus­ter­i­ty for coun­tries like Greece was than they pre­dict­ed. And now we have the IMF basi­cal­ly agree­ing to a new “bailout” that includes NO debt relief (it’s all loans to Greece) and a take-over of Greece’s gov­ern­ment so auto­mat­ic-spend­ing cuts can be imposed should Greece’s econ­o­my implode exact­ly like it did last time the troi­ka did this.

    And as Ambrose Evans-Pritchard points out, what all this prob­a­bly means is that it’s just a mat­ter of time before we’re right back in this same sit­u­a­tion, with a crushed Greece clam­or­ing for escape from what can only be fair­ly char­ac­ter­ized as a usu­ri­ous, inescapable debt trap:

    ...
    The crushed Syriza leader must sell a set­tle­ment that leaves Greece in a per­ma­nent debt trap, under neo-colo­nial con­trol, and so eco­nom­i­cal­ly frag­ile that it is almost guar­an­teed to crash into a fresh cri­sis in the next glob­al down­turn or Euro­pean reces­sion.

    At that point, every­body will blame the Greeks again, unfair­ly, and we will go through yet anoth­er round of bit­ter nego­ti­a­tions, until some­thing final­ly breaks this grim cycle of fail­ure and recrim­i­na­tion.

    For the euro­zone this “deal” is the worst of all worlds. They have solved noth­ing. Ger­many and its allies have for the first time attempt­ed to eject a coun­try from the euro, and by doing so have vio­lat­ed the sanc­ti­ty of mon­e­tary union.
    ...

    The worst of all worlds. That’s the direc­tion of the Europe project. It rais­es the ques­tion of what the troika’s plan is for blam­ing the Greeks dur­ing the next crisis...assuming such ques­tions will actu­al­ly be asked. After all, if there’s one take away les­son from the entire troikan expe­ri­ence up to this point it’s that the wis­dom of the troika’s eco­nom­ic poli­cies shall nev­er be ques­tioned. Even when one of the mem­bers of the troi­ka write a paper explain­ing how its poli­cies were a harm­ful mis­take, those poli­cies may nev­er seri­ous­ly be ques­tioned.

    But giv­en the bla­tant attempts to extract as much humil­i­a­tion from Greece as much as pos­si­ble (keep in mind that Greece could poten­tial­ly be forced to sell off islands and ruins), it also rais­es the ques­tion of whether or not Berlin real­ly was actu­al­ly try­ing to get Greece to leave and was thwart­ed in the process or if mere­ly ter­ror­iz­ing Greece into com­plete capit­u­la­tion was enough. In oth­er words, is a ‘Grex­it’ still a pos­si­ble strate­gic objec­tive by Wolf­gang Schaeu­ble and oth­ers?

    Recall the asser­tion by for­mer Greek finance min­is­ter Yanis Varo­ufakis that Wolf­gang Schaeu­ble explic­it­ly told Varo­ufakis that he want­ed to force a ‘Grex­it’ in order to scare the rest of the euro­zone mem­bers into line. So...is every­one ade­quate­ly ter­ror­ized yet? France, are you ter­ror­ized into per­ma­nent sub­mis­sion? Italy, you aren’t feel­ing frisky again, are you? It’s sad, but giv­en every­thing we’ve seen, we actu­al­ly have to ask the ques­tion of whether or not Greece’s night­mare “bailout” con­di­tions ade­quate­ly ter­ror­ized the rest of euro­zone.

    That’s our new world thanks to this “bailout”. Scared yet? You should be. That was the point.

    Posted by Pterrafractyl | July 13, 2015, 7:29 pm

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