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. EDTBy 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.
Fascism and the Dangers of Economic Concentration
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?
“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:
Yes, former EU Commission president Manual Barroso is of the opinion that:
And once again from the first article:
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.
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:
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.
Surprise! After dismissing Greece’s proposed list of reforms on Friday the troika did it again on Tuesday:
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...
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?
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 devaluation” as 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:
So, to summarize the view from Berkshire Hathaway, Warren Buffet doesn’t see a ‘Grexit’ as necessarily bad because...
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, etc” kicks 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:
Well that was some cheery prognosticating from Pimco:
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.
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
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:
So that was last month. Flash forward month and the situation looks like pretty similar...similarly urgent as last month, but more so:
Feel the urgency:
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:
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:
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.
@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:
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:
Ok, so to summarize ominousness:
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’.
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:
Ok, so apparently:
but now that’s just not an option because:
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:
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:
Once again:
“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:
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.
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:
Uh oh, it looks like the IMF doesn’t just envision an unsuccessful end to Greece’s bailout negotiations:
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:
Sane or insane fiscal union? What should we expect from the folk that brought us this? Hmmmmm....
“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!
If Greece declared bankruptcy. Maybe Obama and the U.S. could offer Greece the chance to join our union as a state.
@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:
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:
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.
@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.
@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.
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’:
Well, that was at least vaguely nonthreatening, which is a nice change of pace from the ECB. Well, except for this part...:
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:
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”:
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).
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:
Note that when you read
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:
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...
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:
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:
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:
“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.
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:
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:
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”:
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.
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.
@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:
“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:
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’:
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, :
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
“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.
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:
Oh what a tangle troika we weave:
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:
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:
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.
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:
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:
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.
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:
So Greece’s surplus falls into a deficit and the troika’s response? Just keep cutting until it’s a surplus again!
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:
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.
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...
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:
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:
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”:
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:
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.
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”:
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.
Spain’s ruling conservative party just had its worst electoral showing in more than two decades. Imagine that:
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:
Note German Finance Minister Wolfgang Schaeuble’s words of confidence in the ‘Confidence Fairy’ form of faith healing:
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:
“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):
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?”
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:
So...
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.
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:
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:
“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:
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.
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:
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:
Ok, so according to the chairman of euro zone finance ministers, Jeroen Dijsselbloem:
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”:
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:
Well isn’t compromise grand!
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:
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...
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:
Well that’s probably not going to go over well in Greece.
And guess what, it didn’t:
“(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:
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:
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.
@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: https://spitfirelist.com/for-the-record/ftr-788-greek-tragedy-part-2-clausewitzian-economics-the-continuation-of-war-by-other-means/
Best,
Dave
@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:
As Stiglitz puts it, this is basically the future that the eurozone is flirting with:
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:
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.
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:
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:
Ok, so...:
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:
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.
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:
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:
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:
Ok, so something “Shakespearian” is going on between Merkel and Schaeuble right now:
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”:
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:
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.
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”:
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:
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...
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.
@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:
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
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:
“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:
“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.
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:
So that was a bit ominous:
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:
“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:
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:
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....
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”:
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:
First, note this little gem:
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:
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:
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
First, note that when you read:
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:
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.
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:
“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:
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’:
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:
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:
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.
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:
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.”:
“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:
“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:
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’:
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.
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:
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
Yes, Angela Merkel wants Greece to know that “The door for talks with Greece was always open and always remains open” while...:
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:
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.”
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.”
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.
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
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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.
@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:
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.
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:
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:
As Paul Krugman puts it:
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.
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:
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:
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”:
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:
You don’t want reality to resemble that rhyme, but it is what it is.
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:
And once again:
Credit where credit’s due: No one does in-your-face usury quite like the troika.
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:
So that was the mood Thursday: Cautious optimism based on the following:
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:
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:
So, according to Schaeuble...:
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:
“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.
Say hello to the new meme that symbolizes the state of affairs for one of the most important democratic projects in history: #ThisIsACoup:
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:
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
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:
“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:
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:
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.
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:
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!
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:
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 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.