Time to copy 1953 German Debt Write-Off?

golfwallah

sarumite wrote: »

Syriza have talked themselves into a corner, promising the undeliverable in return for votes. Now confronted with the reality of their demagoguery they are doubling down and digging themselves into an entrenched position. A compromise needs to be met, however worrying about the popularity of a bunch of populists should not be high on the list of priorities.

What’s more important about the Greek Debt Crisis – an honourable, workable solution for Greece and the EU or proving a point of view about austerity?

This article in the Fiscal Times throws an insightful perspective on the negotiations to date:

Bill Rhodes looks on, knowing it didn’t have to be this way.
Rhodes, formally William R. Rhodes, is a former Citigroup senior vice chairman, and he may have negotiated the successful end of more sovereign debt crises than anybody on the planet.

Buy-in from the Greek public, he said, is essential. “A problem of the previous Greek governments, starting with Papandreou, is they didn’t take account of the need to really sell the package to the public.”
That’s the task facing Tspiras and Varoufakis, he said.
“When you go through such a horrendous economic downturn like they have, this has the makings of revolution, both politically and economically. I think the key thing is that Tsipras and Varoufakis have to come up with a plan that they feel they can sell to their constituents that’s viable, and that the Europeans can accept.”
And, he added, Greece’s European creditors need to be practical about what they can expect — insisting on adherence to a specific pre-existing deal can’t be prioritized over a practical solution.
“We should really have substance here more than form – if the Europeans insist too much on form and not on substance, it’s a mistake,” he said. “They’ve got to be realistic.”
In the end, he said, “It doesn’t suit the creditors not to have Greece growing because then they’re not going to get their money back, or any part if it for that matter.”

sarumite

golfwallah wrote: »

What’s more important about the Greek Debt Crisis – an honourable, workable solution for Greece and the EU or proving a point of view about austerity?

This article in the Fiscal Times throws an insightful perspective on the negotiations to date:

An honourable workable solution is the obvious best outcome. However, Syriza have talked themselves into a position where an honourable solution and a workable solution would appear to be two mutually exclusive options. Hopefully I am wrong.

golfwallah

sarumite wrote: »

An honourable workable solution is the obvious best outcome. However, Syriza have talked themselves into a position where an honourable solution and a workable solution would appear to be two mutually exclusive options. Hopefully I am wrong.

Reconciling apparently irreconcilable differences is the art of a good negotiator and good politician. If you think about it, freedom and equality are also mutually exclusive ideas, but these are also the basic tenets of democracy.

All it requires is good will, the desire to find a solution (not just stick to existing positions that are not working), the will to compromise and the courage to implement it.

Set against that is the fear on both sides of facing their electorates. There hasn’t been much on TV here in Ireland about how the man on the street in Germany feels about the Greek Debt Crisis, but quite a few of interviews with ordinary Greeks. I don’t get the feeling that Greek people realistically expect Syriza to deliver on all their election rhetoric. Rather, I think they are hoping for a better way to get themselves out of their current situation than has been foisted on them in an unrealistic manner by outsiders for the last 4 years or so.

But, then I prefer to be optimistic (as Churchill said “there is not much point in being anything else") – and look at how seemingly mutually exclusive positions have and are being solved already, in Northern Ireland, for instance.

I would prefer to see the EU Finance Ministers sitting down, genuinely listening to and considering one another’s positions, finding common ground and solutions – as opposed, to immediately countering each sides positions and attacking them in public. Part of the solution is also finding the courage to bring realistic solutions that have a good chance of working before their people. But then, Churchill described courage as the one quality that determines all the rest.

Harry S. Truman:

Men make history and not the other way around. In periods where there is no leadership, society stands still. Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better.

Nobody said it was going to be easy or that there were perfect, guaranteed solutions. To my mind, what we want is leadership instead of dogma and a realistic planned approach as opposed to kicking the problem down the road with the appearance rather than the substance of a solution.

golfwallah

For now EU Finance Ministers seem to have the basis for an agreement covering the next 4 months, according to this Reuters report.

This morning’s Sean O’Rourke programme contained good coverage of the issues involved – ref. RTE1, RTE Player (1st 21 minutes of interviews with Channel 4’s Paul Mason in Brussels and then Irish economist, David McWilliams):

The following is a summarised version of many of the points made in the interviews (quite insightful, I think):

Paul Mason:
• Divisions emerging in the EU between Germany in alliance with Slovakia, Finland and Baltic states and the rest.
• 2 contentious areas - what will happen to Europe economically and politically?
• At EU Summit level, Prime Ministers see higher priorities, e.g. Ukraine, etc. They also seem able to see the scope for agreement on economic issues, leaving the details to be sorted out by the Finance Ministers, which is where it all seems to fall apart.
• The new Greek government has 80% support at home.

David McWilliams:
• Germans are playing a dangerous game.
• Northern Europeans led by Germany are the Creditor countries.
• The Euro is turning into a weaker currency which is not what Germany originally imagined.
• Germans willing to push Greece into a banking run.
• This could very likely lead to Germany becoming totally isolated with a threatening position of “their rules or else”. This prompts asking who’s next (France, Italy, the UK, etc.).
• Up to now it been one step forward and a few back but all moving forward collectively together.
• Now it’s creditor countries calling the shots and pointing the finger at debtor countries – when the Germans led the charge in granting huge unaffordable loans in the first place (despite protestations from other members states about this course of action).
• We are not all “little Germans”.
• The next 18 months bring about massive elections in France, UK and Ireland.
• If Germany “wins” and the Greeks are humiliated, austerity becomes the main policy in Europe.
• This will strengthen rather than weaken anti-austerity parties, who will increasingly move from being marginal to being mainstream.
• This poses dangers for both the Euro and the entire European project.
• A policy of austerity and “creditors first” becomes the norm.
• More austerity to heavily indebted countries is akin to proscribing starvation as the cure for anorexia – it simply cannot work.
• Issues that are currently localised play into a greater thing.
• The EU is ultimately a democracy – German view is working for Germany but for no one else.

Paul Mason contrasted what was being said by ordinary folk in Germany and in Greece:
• What is being said in Greek bars / pubs – resonances from WW2 – the Greek partisans won, Greece got no reparations, Germany got Debt forgiveness, my Grandfather fought in that war and still talks about it.
• German press are full of headlines such as “Smash the Greeks”.

David McWilliams:
• Eurocrats in Brussels are a very elitist lot, constantly talking about the European project but totally removed from what ordinary people are thinking and talking about. It’s the project, the project, the project all the time.
• What happens if Greece goes – Who’s next?
• The project was supposed to be irreversible.

Good loser

golfwallah wrote: »

For now EU Finance Ministers seem to have the basis for an agreement covering the next 4 months, according to this Reuters report.

This morning’s Sean O’Rourke programme contained good coverage of the issues involved – ref. RTE1, RTE Player (1st 21 minutes of interviews with Channel 4’s Paul Mason in Brussels and then Irish economist, David McWilliams):

The following is a summarised version of many of the points made in the interviews (quite insightful, I think):

Paul Mason:
• Divisions emerging in the EU between Germany in alliance with Slovakia, Finland and Baltic states and the rest.
• 2 contentious areas - what will happen to Europe economically and politically?
• At EU Summit level, Prime Ministers see higher priorities, e.g. Ukraine, etc. They also seem able to see the scope for agreement on economic issues, leaving the details to be sorted out by the Finance Ministers, which is where it all seems to fall apart.
• The new Greek government has 80% support at home.

David McWilliams:
• Germans are playing a dangerous game.
• Northern Europeans led by Germany are the Creditor countries.
• The Euro is turning into a weaker currency which is not what Germany originally imagined.
• Germans willing to push Greece into a banking run.
• This could very likely lead to Germany becoming totally isolated with a threatening position of “their rules or else”. This prompts asking who’s next (France, Italy, the UK, etc.).
• Up to now it been one step forward and a few back but all moving forward collectively together.
• Now it’s creditor countries calling the shots and pointing the finger at debtor countries – when the Germans led the charge in granting huge unaffordable loans in the first place (despite protestations from other members states about this course of action).
• We are not all “little Germans”.
• The next 18 months bring about massive elections in France, UK and Ireland.
• If Germany “wins” and the Greeks are humiliated, austerity becomes the main policy in Europe.
• This will strengthen rather than weaken anti-austerity parties, who will increasingly move from being marginal to being mainstream.
• This poses dangers for both the Euro and the entire European project.
• A policy of austerity and “creditors first” becomes the norm.
• More austerity to heavily indebted countries is akin to proscribing starvation as the cure for anorexia – it simply cannot work.
• Issues that are currently localised play into a greater thing.
• The EU is ultimately a democracy – German view is working for Germany but for no one else.

Paul Mason contrasted what was being said by ordinary folk in Germany and in Greece:
• What is being said in Greek bars / pubs – resonances from WW2 – the Greek partisans won, Greece got no reparations, Germany got Debt forgiveness, my Grandfather fought in that war and still talks about it.
• German press are full of headlines such as “Smash the Greeks”.

David McWilliams:
• Eurocrats in Brussels are a very elitist lot, constantly talking about the European project but totally removed from what ordinary people are thinking and talking about. It’s the project, the project, the project all the time.
• What happens if Greece goes – Who’s next?
• The project was supposed to be irreversible.

I am never much impressed by either of those two!

The new Greek Govt does not have 80% support at home.

Williams reckons if Germany 'wins' (and the numbers are 18 v 1) austerity (or, efficiency) becomes the norm - which will strengthen 'anti austerity parties' which in turn causes danger to 'the Euro and the entire European project'. Exaggerated, tendentious rubbish imo.
Surely if austerity is bad the advance of the anti-austerity parties is a good thing?

Anyway who is now proposing 'more austerity for heavily indebted countries'?

golfwallah

Good loser wrote: »

I am never much impressed by either of those two!

The new Greek Govt does not have 80% support at home.

Williams reckons if Germany 'wins' (and the numbers are 18 v 1) austerity (or, efficiency) becomes the norm - which will strengthen 'anti austerity parties' which in turn causes danger to 'the Euro and the entire European project'. Exaggerated, tendentious rubbish imo.
Surely if austerity is bad the advance of the anti-austerity parties is a good thing?

Anyway who is now proposing 'more austerity for heavily indebted countries'?

In fairness to the two commentators, their main points were around the futility of expecting any country (Greece, in this instance) to get back on a sound economic track using austerity alone, after that country’s means to generate growth had been removed.

Growth, as we all know, is one of the key enablers to service and repay debt and well as maintaining political and social cohesion. There are also other key enablers, such as reduction in corruption, tax evasion measures, affordable levels of social protection, health and the cost of the public sector, etc.

Good to see some progress now being made with approval of Greece’s fiscal reform proposals by EU Finance Ministers as a condition to extending loans: http://www.bbc.com/news/world-europe-31606986

The Greeks have also had to roll back on privatisations, minimum wage, etc. but have room for manoeuvre on some of the harsher sides of austerity. Let’s hope it enables them to bring the population along with them over the next few months and then for many years thereafter.

golfwallah

I’ve no doubt that Greek Finance Minister, Yanis Varoufakis, is an intelligent guy, trying to do his best for his country. We don’t expect him to dress in sackcloth and ashes but sometimes he sends out the wrong message with a high class lifestyle that is way beyond most Greeks:
• Re dress sense, as reported in Reuters:

Some pointed comments were directed at Varoufakis, an outspoken Marxist economist and blogger, and his casual style. "Even hardliners like us have to give the benefit of the doubt to a communist in a Burberry scarf," an official of one hawkish European country joked.

• Re French magazine shoot, “white wine socialism”: http://uk.businessinsider.com/varoufakis-paris-match-pr-disaster-2015-3?r=US
• Re “doctored” finger video: http://uk.businessinsider.com/yanis-varoufakis-middle-finger-controversy-real-fake-bohmermann-jauch-2015-3

This is the kind of stuff that leads many to believe that a “Grexit” might be better for all concerned in the long run.

But is a first exit from the single currency in anyone’s interest and how would it play out politically and in the markets?

And what kind of leadership should we expect from Germany – continuation of the softly softly consensus approach or more decisiveness, as per this BBC article? http://www.bbc.com/news/world-europe-31940452

It will be interesting to see how the Greeks perform against their plan over the next few months - the great Euro experiment continues!

micosoft

golfwallah wrote: »

Germany has benefited enormously from the Euro project and made other less well organised states poorer in the process by not being able to respond in the old pre-Euro way. Maybe some new found moral courage “to do the right thing” needs to be thought through and voiced by a lot more people. Kicking a neighbour who is down and removing all hope of recovery can never be the “right thing to do” – no matter what conventional wisdom has been up to now!

That's simply not true. Germany contributed during the good times through massive structural transfers to the likes of Greece and Ireland. It was up to the individual countries to decide how they invested that money. In the case of Ireland is was largely good. In the case of Greece it was largely poor.
This appalling attempt to blame the Germans of running the country properly is shameful. The Germans have had austerity since the early ninties when they reunified and rebuilt east Germany. At the same time they made the largest contribution to the EU Structural funds.

The Germans seem damned if they do and damned if they don't.

The simple reality is that if Greece had not joined the EU it would have had an economy similar to the other Balkan countries like Serbia. i.e. it would never have gotten the false wealth it had for a couple of years. Greece is still light years ahead of where it would have been had it not been in the EU. It's just adjusting downwards (Austerity) is much harder then never having the money in the first place.

golfwallah

micosoft wrote: »

That's simply not true. Germany contributed during the good times through massive structural transfers to the likes of Greece and Ireland. It was up to the individual countries to decide how they invested that money. In the case of Ireland is was largely good. In the case of Greece it was largely poor.
This appalling attempt to blame the Germans of running the country properly is shameful. The Germans have had austerity since the early ninties when they reunified and rebuilt east Germany. At the same time they made the largest contribution to the EU Structural funds.

The Germans seem damned if they do and damned if they don't.

The simple reality is that if Greece had not joined the EU it would have had an economy similar to the other Balkan countries like Serbia. i.e. it would never have gotten the false wealth it had for a couple of years. Greece is still light years ahead of where it would have been had it not been in the EU. It's just adjusting downwards (Austerity) is much harder then never having the money in the first place.

I think you are mixing the 2 concepts of the Euro Project (Monetary Union / Fiscal Compact Treaty) and the EU’s social cohesion policy and treating them as one.

Monetary policy and fiscal policy are related but separate. Additionally, some EU states have chosen to remain outside the Euro.

To illustrate the difference you only have to compare the EU with the USA. The USA has monetary and fiscal union, whereas the EU has elements of both but not the complete package. On the monetary side, the Euro is a common currency area without being a real monetary / banking union. On the fiscal side, EU backed spending represents about 1% of EU GDP, whereas federal spending in the USA comes to about 25% – 30% of GDP. (see post #53)

German business culture favours a strong currency and the country has been a great beneficiary of the Euro project – for example, German exports to Greece alone are around double its imports from Greece. Germany does not spend an enormous amount of its GDP on defence, whereas Greece, on the outer borders of the EU spends about 5% of GDP on defence. The EU does not have a common defence policy nor is it a political union.

And being in the Euro, the old pre-Euro policy of devaluation is not available to the Greeks – that is unless they opt for “Grexit”, which nobody in the EU (including the Greeks) really wants.

The current reality is that Greece has been given a 4 month extension in which to implement slightly different policies to those they had agreed in their last bailout. The deals on Euro and EU membership have been done. As they say “we are where we are” and comparisons with where Greece might have been if they remained outside either the EU or the Euro are like saying “I should have waited to sell my house and I would have gotten a lot more for it”.

All that can be done now is to move on from where we are and hope that the loan extension with its still onerous conditions start to work. The alternative may be “Grexit” with its message to the markets that the Euro is not “irrevocable” – and who knows where that will lead!

sarumite

golfwallah wrote: »

I’ve no doubt that Greek Finance Minister, Yanis Varoufakis, is an intelligent guy, trying to do his best for his country.

I have no doubt that he is an intelligent guy also, however his truculent attitude, belligerent negotiations style and his overtly loquacious nature is turning him into one of their main liabilities. Personally I think Tsipras would do well to replace him sooner rather than later.

golfwallah

sarumite wrote: »

I have no doubt that he is an intelligent guy also, however his truculent attitude, belligerent negotiations style and his overtly loquacious nature is turning him into one of their main liabilities. Personally I think Tsipras would do well to replace him sooner rather than later.

Maybe, maybe not! The labels certainly fit - not so sure about him being replaced.

What we are watching now is history in the making and maybe it will become a case of "cometh the hour, cometh the man"!

He is certainly not lacking in courage, nor is he afraid to speak his mind - qualities to be admired, even if it does make him some enemies among the Euro political elite. He is taking an adversarial approach, vaunted by many as the right one to be adopted by our political leaders, when we first faced the current economic crisis.

If you think about it, many would have applied the same negative labels and conclusions to Churchill before be was made prime minister in 1940.

Time will tell, I guess!

golfwallah

golfwallah wrote: »

I’ve no doubt that Greek Finance Minister, Yanis Varoufakis, is an intelligent guy, trying to do his best for his country. We don’t expect him to dress in sackcloth and ashes but sometimes he sends out the wrong message with a high class lifestyle that is way beyond most Greeks:
• Re dress sense, as reported in Reuters:
• Re French magazine shoot, “white wine socialism”: http://uk.businessinsider.com/varoufakis-paris-match-pr-disaster-2015-3?r=US
• Re “doctored” finger video: http://uk.businessinsider.com/yanis-varoufakis-middle-finger-controversy-real-fake-bohmermann-jauch-2015-3

This is the kind of stuff that leads many to believe that a “Grexit” might be better for all concerned in the long run.

Seriously?

Who advocates a Grexit based on Varoufakis's clothing, and vinous preferences?

The great intellects over on TV3's Exposé?

golfwallah

A Tyrant Named Miltiades! wrote: »

Seriously?

Who advocates a Grexit based on Varoufakis's clothing, and vinous preferences?

The great intellects over on TV3's Exposé?

Nobody!

But that's not the issue I was referring to, which is that all these histrionics and lifestyle messages are not in keeping with the position Greece is in - i.e. running out of money, needing support and goodwill from its EU and Euro fellow states, poor market rating, etc., etc.

I accept that Greece has points to make and wants to get the best deal possible for its people but why totally alienate powerful / influential people you depend upon?

This Bloomberg report illustrates recent thinking and actions in the bond markets.

golfwallah

golfwallah wrote: »

all these histrionics and lifestyle messages are not in keeping with the position Greece is in

In other words, you think the Greeks are getting above their station: "The rich man in his castle,/ The poor man at his gate", and so on?

This is an attitude at which Queen Victoria's governments would chortle in boisterous agreement.

I don't think it has any relevance at all, let alone a role in Eurozone policymaking. I can't tell whether or not you agree. I mean what's your point? Are you suggesting the cut of Varoufakis's jacket is relevant or not?

I accept that Greece has points to make and wants to get the best deal possible for its people but why totally alienate powerful / influential people you depend upon?

They don't necessarily depend on the Eurozone. Grexit is a viable option, which I think Greece ought to consider for its own sake.

golfwallah

A Tyrant Named Miltiades! wrote: »

In other words, you think the Greeks are getting above their station: "The rich man in his castle,/ The poor man at his gate", and so on?

This is an attitude at which Queen Victoria's governments would chortle in boisterous agreement.

I don't think it has any relevance at all, let alone a role in Eurozone policymaking. I can't tell whether or not you agree. I mean what's your point? Are you suggesting the cut of Varoufakis's jacket is relevant or not?


They don't necessarily depend on the Eurozone. Grexit is a viable option, which I think Greece ought to consider for its own sake.

It has been widely reported that Finance Minister, Varoufakis, himself regrets the photoshoot. See this article from the Guardian.

There's no need to make assumptions about what I think. It's how the negotiations are being conducted and public pronouncements / perceptions that matter here. What the Greeks need and most people would like to see is a "win / win" approach which is respectful to both sides of the argument. The flouting of ostentatious wealth, whilst looking for a fair crack of the whip on behalf of your countrymen, who are in deep financial trouble, is not exactly a recipe for gaining support.

golfwallah

Letter from Greek Prime Minister, Alexis Tsipras, to German Chancellor, Angela Merkel dated 15th March 2015: http://www.thetoc.gr/images/articles/2/article_63894/Letter_AM.pdf

This letter has been published on Facebook Page of Finance Minister, Yanis Varoufakis, and expresses concerns that the latest agreement with Euro Ministers is not being implemented as agreed, but in accordance with the much harsher terms of the Memorandum of Understanding that predates the agreement of 20th February 2015 and 25th January 2015.

It is difficult to believe that our partners consider that a successful reform drive can be carried out under such restrictive and pressing constraints, including the financial squeeze that my government is currently labouring under.

"All is fair in love and war", it would seem, but I'd like to see the latest agreement being given at least some chance of working!

sarumite

golfwallah wrote: »

"All is fair in love and war", it would seem, but I'd like to see the latest agreement being given at least some chance of working!

I would like to see the Greek government address the concern expressed by many that they have been somewhat lethargic in their implementation of reforms. The latest agreement can only work if the Greeks are willing to implement it. the ball is in their corner.

golfwallah

sarumite wrote: »

I would like to see the Greek government address the concern expressed by many that they have been somewhat lethargic in their implementation of reforms. The latest agreement can only work if the Greeks are willing to implement it. the ball is in their corner.

I’d agree to some extent that the Greeks have not implemented all the reforms they should have. But they have had austerity for the last 4 years and that didn’t produce the financial improvements forecast by the Troika either. Nothing much seems to have emerged in terms of political solution from yesterday’s high level meeting between Chancellor Merkel and Prime Minister Tsipras – so it looks like we’re back where we started – i.e. German and EU insistence on reforms and Greek difficulty in accepting this solution politically, forcing them to an extremely hard fight against ingrained cultural corruption / tax dodging plus austerity for years to come.

You might ask who is the real villain of the piece – Greece, Germany, Netherlands? Maybe it’s no particular EU state but more the Euro!
Before the Euro, national states had monetary options of national currency devaluation and interest rates to help them regulate their economies and keep them competitive. There were pros and cons to this approach but we all bought into the Euro / EU, perhaps without fully realising the downside risks that have only become apparent with hindsight.

That risk was availability of cheap credit from the wealthier states to the likes of Greece, Spain, Ireland, etc., who then went on to spend too little on wealth creating investment and too much on populist stuff like housing bubbles, increases in public service pay, welfare, excessive public infrastructure, etc.

When the party ended, the debt funded overspending was “socialised”, resulting in austerity and enforced immigration / poverty for years to come in all these debtor EU states (including ourselves). You only have to listen to reports of unaffordable housing, looming property repossession, unemployment, dissatisfaction with increased charges and the growth of “anti-austerity” political parties. Meanwhile political parties in opposition when the bubble burst blame their national political opponents (here it was FF) but never the Euro, which is seen as sacrosanct.

The jury is out on where this will all lead. Will populations put up with austerity for years under the Euro, with growing debt that the “slow adapters” (like Greece) may never repay, hoping economies gradually adapt to the strong currency model. Or are we watching the beginning of the end for the Euro and the EU?

golfwallah

Tax evasion on a massive scale has reportedly been happening in Greece. And it’s not just the rich who are at it – it appears to be widespread amongst self employed middle class professionals (and self employed people make up to a third of the workforce there). See this report in Business Insider UK re massive under reporting of income:

Among the reported tax reforms in Greece, there is a strong prospect of a tax windfall of €15b on its way to being recovered from Swiss bank deposits by the Greek super-rich, most of which is untaxed:
http://www.dw.de/greece-to-tackle-tax-evasion/av-18344561

Good to hear also, that the EU has drawn up an agreement with Switzerland to put an end to such tax evasion by EU citizens using Swiss banks – this type of action is long overdue.

Some evidence that the Greeks are working towards changing their deep rooted tax evasion culture is starting to emerge with the recent criticism in parliamentary debate by Prime Minister Tsipras of opposition leader Antonis Samaras’ failure to tackle tax evasion whilst in office. According to the Facebook page of Yanis Varoufakis, the question asked was:

why the previous government did not proceed with tax audits (mentioned Samaras' associate Mr.Papastaurou) on people included in the Lagarde List, out of which, -as he said-, only 25 of 2,062 names have been audited.

These names are now being investigated one by one. Further evidence of change is the setting up of a “bad bank” and increased auditing of Greek bank transfers abroad.

The present left wing Greek government, for all its faults, is at last starting to tackle the deep rooted problem of tax evasion in their own country (even if they are being forced into it, which probably helps politically). Let’s hope they succeed for the sake of the Euro project and the EU overall.

Farmer Pudsey

There is ''Labour's way and the Frankfurt way'' can now read ''the Greek way and Frankfurt way''. It looks like the same result. In reality with the Labour and Greek way you need to be willing to pull the trigger. Most politicians have not the guts to do that. If they decided to default and exit the euro would the Germans blink.

It looks like the Greeks lack a pair of liathroidi just like our crowd did. I do not think the Greeks can continue as they are. However they are unwilling to default

Farmer Pudsey

Farmer Pudsey wrote: »

It looks like the Greeks lack a pair of liathroidi just like our crowd did. I do not think the Greeks can continue as they are. However they are unwilling to default

Even if the Greeks accede to the diktats of those Germans, they'll have put in more of a resistance than anyone else. Even if people will say the risk wasn't worth it in the end, the actual magnitude of the risk the Greek people have taken is difficult to underestimate. It was a huge risk electing Syriza, and what Syriza are currently doing, i.e. risking default on the IMF loan in the coming weeks, is also a huge risk.

So, it isn't possible to compare Greece's mettle with Irish 'meekness' (I am tempted to use a c-word, alas the green jersey brigade will come over all-a-bother ... )

View

A Tyrant Named Miltiades! wrote: »

Even if the Greeks accede to the diktats of those Germans, they'll have put in more of a resistance than anyone else. Even if people will say the risk wasn't worth it in the end, the actual magnitude of the risk the Greek people have taken is difficult to underestimate. It was a huge risk electing Syriza, and what Syriza are currently doing, i.e. risking default on the IMF loan in the coming weeks, is also a huge risk.

So, it isn't possible to compare Greece's mettle with Irish 'meekness' (I am tempted to use a c-word, alas the green jersey brigade will come over all-a-bother ... )

Greece isn't engaging in a display of "mettle" but rather one of "theatrics", the sort than would almost be amusing in a bad production in a second-rate theatre but in a real life country with the livelihoods of millions of people being gambled with is just reckless.

Both Ireland and Portugal though have shown true mettle - namely, facing up to an awful economic situation and - despite the cries of the Cassandras - have stablised it and turned it around.

The previous Greeks governments were attempting that - and had made some progress toward that - but the current Greek government will if it continues it current performance almost certainly doom Greece to a situation where there they'll go from bad to much, much worse and have even less chance of clawing their way back from the depths of the abyss.

golfwallah

View wrote: »

Greece isn't engaging in a display of "mettle" but rather one of "theatrics", the sort than would almost be amusing in a bad production in a second-rate theatre but in a real life country with the livelihoods of millions of people being gambled with is just reckless.

Both Ireland and Portugal though have shown true mettle - namely, facing up to an awful economic situation and - despite the cries of the Cassandras - have stablised it and turned it around.

The previous Greeks governments were attempting that - and had made some progress toward that - but the current Greek government will if it continues it current performance almost certainly doom Greece to a situation where there they'll go from bad to much, much worse and have even less chance of clawing their way back from the depths of the abyss.

Whatever you call it – “mettle” or “theatrics” by the new Greek Government, it has flushed out into the open the huge problem of Greek tax evasion and now appears to have made a start on tackling the problem (not easy when a huge proportion – around 1/3rd - of the workforce is self employed – much higher than any other EU state).

Serious tackling of tax evasion never happened under previous Greek governments which, despite being fed Swiss banking specifics on thousands of named Greek individuals by Christine Legarde of the IMF, did little or nothing about it.

Previous Greek governments did make a very unbalanced attempt at austerity – foisting it mainly on the lower social echelons but leaving the wealthier sections of society, self-employed, professional middle classes, the rich and super-rich relatively unscathed.

Maybe that’s why Syriza were elected and are now trying to get out of the terrible situation their country was and still is in. They are new to all this stuff and have made lots of mistakes. But, to my mind so far, they seem to be driven by the desire to rescue their country in a much fairer way than previous Greek administrations. I believe this gives them a far greater chance of success than their predecessors!

The EU has been helping but it all takes so long – for example the new agreement between the EU and Switzerland to fight tax evasion is long overdue but doesn’t come into effect until 2018 – another 3 years: http://europa.eu/rapid/midday-express-19-03-2015.htm

Under this new agreement, Member States and Switzerland will automatically exchange information on the full range of financial account information from 2018. This means that EU residents will no longer be able to hide undeclared income in Swiss accounts to evade paying tax. Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "Today we are taking a decisive step towards total tax transparency between Switzerland and the EU. I am confident that our other neighbours will soon follow suit. This transparency is vital to ensure that each country can collect the tax revenues it is due."

View

golfwallah wrote: »

Whatever you call it – “mettle” or “theatrics” by the new Greek Government, it has flushed out into the open the huge problem of Greek tax evasion and now appears to have made a start on tackling the problem (not easy when a huge proportion – around 1/3rd - of the workforce is self employed – much higher than any other EU state).

Tax evasion has been out in the open there for decades, so it is not any surprise to them. As for the new government tackling the evasion, so far little - if anything - has happened. Indeed, tax receipts were down dramatically I believe.

golfwallah wrote: »

Serious tackling of tax evasion never happened under previous Greek governments which, despite being fed Swiss banking specifics on thousands of named Greek individuals by Christine Legarde of the IMF, did little or nothing about it.

Very true but as above, how much has changed?

golfwallah wrote: »

Previous Greek governments did make a very unbalanced attempt at austerity – foisting it mainly on the lower social echelons but leaving the wealthier sections of society, self-employed, professional middle classes, the rich and super-rich relatively unscathed.

You'll find that a world-wide issue. Cut-backs in services will disportionately hit those who depend on them (which are usually the poorer parts of society). Unfortunately also the richer parts of society although they have more money can rarely make up all the shortfall as there are never enough of them to do so.

golfwallah wrote: »

Maybe that’s why Syriza were elected

Maybe but it could just be unrealistic campaign promises like reversing spending cuts, exempting people from the tax net etc

golfwallah wrote: »

and are now trying to get out of the terrible situation their country was and still is in. They are new to all this stuff and have made lots of mistakes.

And the problem is they are like a begineer tightrope walker walking above Niagara falls. They can't make ANY mistakes and yet seem determined to devote energy to picking set-piece rows with the people they need to help them.

golfwallah wrote: »

But, to my mind so far, they seem to be driven by the desire to rescue their country in a much fairer way than previous Greek administrations. I believe this gives them a far greater chance of success than their predecessors!

In a crisis the job of a government is to be effective even if that is unfair. The strong possibility is the new government will end up ineffective and that wil probably prove to much less fair to most Greeks.

golfwallah wrote: »

The EU has been helping but it all takes so long – for example the new agreement between the EU and Switzerland to fight tax evasion is long overdue but doesn’t come into effect until 2018 – another 3 years: http://europa.eu/rapid/midday-express-19-03-2015.htm

Such is the way with all international agreements. It usually takes 5-10 years for them to be negotiated and come into force.

golfwallah

@view,
That’s the trouble with democracy, I guess, the people freely make their choices from the candidates and political parties, who present themselves for election, based on their own individual personal experiences and judgements about what is in their own and their country’s best interest. They then have to live with the consequences of their decisions.

Why people chose Syriza in greater numbers than the other parties and didn’t return Antonin Samaras’ New Democracy to office is irrelevant at this stage. All we know for certain, is the results – it’s votes that count.

Syriza are new to the game of government and however much was generally known about tax evasion in Greece, it is only recently becoming the subject of open debate in the Greek parliament – something which was long overdue. Hopefully, this is the start of doing something significant about this engrained problem.

It needs to be remembered that about 1/3rd of the workforce in Greece is self employed (higher than any other EU state), so this is not an insignificant problem to resolve.

Yes, Syriza are making mistakes but they are also facing up to many unpalatable issues. Most importantly, they are trying to bring the people along with them – something that the previous administration seemed to lose sight of.

It’s now their turn to run things – they are learning a lot of things the hard way – but that’s democracy – there’s really no certainty about it.

All that said, I am hopeful and cautiously optimistic that they will manage to get on top of things and restore their country to a better state – that is unless the people decide otherwise at a subsequent election. But hey, that’s democracy!

“Elections belong to the people. It's their decision. If they decide to turn their back on the fire and burn their behinds, then they will just have to sit on their blisters.”
― Abraham Lincoln

“I believe in a relatively equal society, supported by institutions that limit extremes of wealth and poverty. I believe in democracy, civil liberties, and the rule of law. That makes me a liberal, and I’m proud of it.”
― Paul Krugman (economist)

“Democracy is always an unfinished experiment, testing the capacity of each generation to live freedom nobly.”
― George Weigel (author and political and social activist)

Jim2007

A Tyrant Named Miltiades! wrote: »

So, it isn't possible to compare Greece's mettle with Irish 'meekness' (I am tempted to use a c-word, alas the green jersey brigade will come over all-a-bother ... )

Well over here (Switzerland) the Greeks are seen as fools incapable of managing their own affairs, while the Irish are seen a responsible hard working people whom you can do business with.

golfwallah

Jim2007 wrote: »

Well over here (Switzerland) the Greeks are seen as fools incapable of managing their own affairs, while the Irish are seen a responsible hard working people whom you can do business with.

Well into the 80’s, the Irish were seen in a similar light by some sections in Britain. We’ve worked our way out of that but there still remains some entrenched anti-Irish prejudice in the UK but far limited than before.

Like the Irish, it’s up to the Greeks themselves to sort this out with real action on the ground. But none of us are perfect, including the Swiss, particularly who have their own failings, such as how their banking has been facilitating tax evasion on a grand scale. Recent revelations about one of their major banking groups has highlighted this very prominently in the public consciousness.

We need to remember that the new agreement between the EU and Switzerland won’t come into effect until 2018. If they need time to sort things out on the ground, then so too does the new Greek government.

I believe that what we need for long term peace and prosperity is honesty and openness in business, public administration and politics, as well as a realistic level of support and solidarity between all EU member states. This does not mean capitulation to the weaknesses of fellow member states but firmness and realistically achievable targets for those who are in trouble and need support.

I think Angela Merkel and many of our EU leaders realise this, although it still doesn’t make it any easier to bring about change in a realistic, politically achievable manner.

Good loser

The trouble with Syriza/Greece is that the party is a coalition of at least five factions. I can't see them holding together long enough to get there. Surely it will take 2/3/4 years to get meaningful increases in tax payments.

In the election apparently Syz promised to get rid of the residential property tax, which is the last thing they should have done especially with the hopeless income tax returns, and got lots of votes from the wealthy in north Athens as a result.

Plus income tax collections have plummeted since before the election. Difficult to change a culture like that in the short term.
I doubt it will work.

golfwallah

Good loser wrote: »

The trouble with Syriza/Greece is that the party is a coalition of at least five factions. I can't see them holding together long enough to get there. Surely it will take 2/3/4 years to get meaningful increases in tax payments.

In the election apparently Syz promised to get rid of the residential property tax, which is the last thing they should have done especially with the hopeless income tax returns, and got lots of votes from the wealthy in north Athens as a result.

Plus income tax collections have plummeted since before the election. Difficult to change a culture like that in the short term.
I doubt it will work.

Indeed, it's very tight with IMF repayments due next Thursday, 9th April and doubts as to whether Greece will be able to meet its public service pay bill on 14th April.

Could be a return to the Drachma and who knows how this will impact on the Euro in the short, medium and long term - plus many other unpredictable consequences for the EU (e.g. including waves of economic migration), according to this report in the Express.

Jim2007

golfwallah wrote: »

Could be a return to the Drachma and who knows how this will impact on the Euro in the short, medium and long term - plus many other unpredictable consequences for the EU (e.g. including waves of economic migration), according to this report in the Express.

This is just 'pie in the sky' stuff - nobody is going to accept payment in Drachma not even the Greeks themselves!

Farmer Pudsey

Jim2007 wrote: »

This is just 'pie in the sky' stuff - nobody is going to accept payment in Drachma not even the Greeks themselves!

Most economists are predicting that Greece will leave the euro. If not now in the next two years. It will be better for Greece and for the euro. Greece has not the discipline to maintain a single currency. IMO we should have left in 2011. It would allow the Greeks to devalue there currency by 50%+. The Greeks have a history of default.

Jim2007

Farmer Pudsey wrote: »

Most economists are predicting that Greece will leave the euro. If not now in the next two years. It will be better for Greece and for the euro. Greece has not the discipline to maintain a single currency. IMO we should have left in 2011. It would allow the Greeks to devalue there currency by 50%+. The Greeks have a history of default.

How can you devalue something that is worthless! Greece has been a net importer since at least 2001, which means there would be little or no interest in their currency.

golfwallah

s

Jim2007 wrote: »

This is just 'pie in the sky' stuff - nobody is going to accept payment in Drachma not even the Greeks themselves!

Don't think so - remember the Euro was supposed to be indissoluble, irrevocable, etc. and look at Cyprus now, which has had capital controls for the past 2 years. Similar capital controls are being talked about for Greece, i.e. a "Greek Euro", which would not be interchangeable with the Euro used elsewhere in the EU monetary area.

The biggest problem is the Euro, which was introduced before we had the "closer political union", seen as the long term goal by EU visionaries, but not generally shared on the ground by the majority of the populations of EU member states.

Unlike the US Dollar, the Eurozone remains a common currency area rather than a monetary union, which took a couple of hundred years to evolve in the USA.

For example, economist, Colm McCarthy's article in today's Sunday Independent:

There remains a serious risk that Greece could end up outside the single currency, by accident or design.

and

Thus Greece could end up with a new currency (the Greek 'euro') in advance of the government actually printing new banknotes. Some commentators expect that this is precisely the way a Greek exit is most likely to happen. The public think so too: there have been large outflows from Greek banks, with funds transferred to safety abroad or converted to cash, which would be unaffected. If you hold deposits in a Greek bank, you should be nervous, even if you believe the bank to be entirely solvent.

As for the other "sabre rattling" stuff coming from Greece (e.g. on mass migration, alliance with Russia, etc.) - well maybe / maybe not. Who knows?

But illegal migration is already a major problem in Italy, Spain, Malta, etc. An exit by Greece, which spends around 5% of GDP on defence (as opposed to ourselves spending about 0.4%), from the Euro and ultimately the EU could have much more unpredictable impacts on the rest of the EU than many people think.

Farmer Pudsey

Jim2007 wrote: »

How can you devalue something that is worthless! Greece has been a net importer since at least 2001, which means there would be little or no interest in their currency.

In 2010 I know of people advised by there accountants to have part of there cash in German euro's. An Irish default was expected.

Everything has a value. Greece is still a holiday destination. Its whole economy is virtually dependent on it. If it devalued by 50% its costs as a holiday destination would reduced to south Mediterranean ( ie Egypt, Tunisia, etc) costs with the threat of ISIS or Al Queada.

golfwallah

The Euro and German hegemony or deficiencies in its leadership role loom large in the ongoing Greek Financial crisis. Makes you wonder, who will be next after Greece to suffer the consequences of a Euro without a workable political union in which all Europeans can really feel part of.

Here’s an interesting, though provoking article on the background and current state of these issues in Spiegel Online International of 23rd March 2015:

German economist Henrik Enderlein is not dogmatic and doesn't view the world through a national lens. A professor of political economics at the Hertie School of Governance in Berlin, Enderlein studied in both France and the US, worked at the European Central Bank (ECB) and taught at Harvard. He is an economic advisor to Germany's Social Democrats and his father was a politician with the business-friendly Free Democrats. "The fact that Germany today has the highest trade surplus of all countries has a simple reason," he says. "After the introduction of the euro, we had no other choice than to become more competitive. But it is absurd to believe that Germany did so in order to harm other countries."

Enderlein believes that Germany didn't consciously strive for its current roll but that it happened due to the structure of the euro zone. He also believes that the ECB is partially to blame because in the years after the euro's 1999 introduction, the euro zone's prime interest rate was kept between 3 and 4 percent. For southern European countries, this was much too low and led to a boom with rapidly climbing salaries and prices. For Germany, on the other hand, such interest rates were too high and employers had no choice but to keep salaries low so as to keep their products affordable. At first glance, that doesn't seem aggressive, but southern European countries complained that Germany was guilty of "wage dumping," or keeping domestic wages artificially low.

The resistance to rising wages led to German growth, self-confidence and, as a result, power. When Angela Merkel travels to Brussels, she does so as the leader of by far the strongest economy in the euro zone. Policies she doesn't agree with don't get passed. Power as such isn't a bad thing when those that have it use it wisely. But do they?

the euro arrived, which Mitterand hoped would take away Germany's "nuclear bomb." The euro was supposed to break Germany's economic dominance, but it has had the opposite effect. The shared currency has bound together the fates of euro-zone member states and granted Germany power over the others.
Which is why the "German question" has returned. Is the new Germany too big and powerful for the other European countries or is it too small and hesitant?

The problem, Kundnani believes, is not so much that Germany is exercising hegemonic power in Europe, but that it is only halfway exercising such power. It is focused entirely on itself -- and it may be too small for the role that it should be playing.

"Germany is once again a paradox. It is strong and weak at the same time -- just like in the 19th century after unification, it seems powerful from the outside but feels vulnerable to many Germans," Kundnani writes. "It does not want to 'lead' and resists debt mutualization, but at the same time it seeks to remake Europe in its own image in order to make it more 'competitive.'"
"Lead," in this context, means to frequently pay, which is also how Varoufakis sees things. The Greek finance minister wants Merkel to establish a kind of Marshall Plan, just like the US once did to get postwar Europe back on its feet.

A real hegemon like the US, Kundnani writes, doesn't just establish norms. It also creates incentives for those it rules over so that they remain part of the system. To do so, it must compromise in the short term so as to secure its long-term interests.

Germany is acting not like a hegemon, but like a "semi-hegemon." It
is an argument previously made by the German historian Ludwig Dehio in describing Germany's position in Europe after 1871. Though the context was radically different, former Polish Foreign Minister Radoslaw Sikorski also said in a speech in Berlin in November 2011 that he was less afraid of German power than he was of German inaction and urged Germany to take the lead in Europe.

View

golfwallah wrote: »

@view,
That’s the trouble with democracy, I guess, the people freely make their choices from the candidates and political parties, who present themselves for election, based on their own individual personal experiences and judgements about what is in their own and their country’s best interest. They then have to live with the consequences of their decisions.

That would be wonderful except it clearly is not true.

First, they are looking toward the IMF & the other EZ member states to loan them the monies to fund their finances while refusing to provide plans to those creditors that the creditors regard as credible.

Secondly, they simultaneously berate those creditors for having provided them with monies in the past and periodically threaten not to repay them - that is NOT facing up to the consequences of their decisions, much less reasonable grounds for their creditors to believe they will do so in future.

golfwallah wrote: »

Why people chose Syriza in greater numbers than the other parties and didn’t return Antonin Samaras’ New Democracy to office is irrelevant at this stage. All we know for certain, is the results – it’s votes that count.

On the contrary, to us as non-Greeks what counts is not the vote but the consequences that ensue. The Greeks have the right to elect whoever they want to govern them; we though have no obligation whatsoever to fund them if as a consequence they pursue policies we regard as unsound and/or likely to make their economic situation worse.

View

golfwallah wrote: »

s

Don't think so - remember the Euro was supposed to be indissoluble, irrevocable, etc. and look at Cyprus now, which has had capital controls for the past 2 years.

Capital controls are allowed for EZ member states in certain cases (but they are not the default option).

As the case of Cyprus demonstrates their usage does not alter a member state's usage of the Euro - you pay the same price for a cup of coffee there irrespective of where you or your Euro come from.

golfwallah wrote: »

The biggest problem is the Euro,

The biggest problem in some member
states was financial mismanagement. No budget is going to improve overnight because you suddenly use a different currency.

Eugene Norman

View wrote: »

That would be wonderful except it clearly is not true.

First, they are looking toward the IMF & the other EZ member states to loan them the monies to fund their finances while refusing to provide plans to those creditors that the creditors regard as credible.

Secondly, they simultaneously berate those creditors for having provided them with monies in the past and periodically threaten not to repay them - that is NOT facing up to the consequences of their decisions, much less reasonable grounds for their creditors to believe they will do so in future.



On the contrary, to us as non-Greeks what counts is not the vote but the consequences that ensue. The Greeks have the right to elect whoever they want to govern them; we though have no obligation whatsoever to fund them if as a consequence they pursue policies we regard as unsound and/or likely to make their economic situation worse.

Nobody is asking you to fund the Greeks. Instead use some of the printing presses already rolling to fund them.

got to love the right wing belief system.

Printing 1tr to rescue banks and push up asset prices of the bourgeoisie is ok.

Stopping a country from being destroyed is not ok.

At least the hard money opposition to bailing out the Greeks made some logical sense when the ECB wasn't printing money. Now it is so lets use the money.

Eugene Norman

View wrote: »

Capital controls are allowed for EZ member states in certain cases (but they are not the default option).

As the case of Cyprus demonstrates their usage does not alter a member state's usage of the Euro - you pay the same price for a cup of coffee there irrespective of where you or your Euro come from.



The biggest problem in some member
states was financial mismanagement. No budget is going to improve overnight because you suddenly use a different currency.

Nonsense. Without the ECB keeping interest rates too low, the criminal banking system, the shadow banking etc. system Greece would be fine. Greek spending on its public service did not create the great recession. The central banks and the bankers did.

View

Eugene Norman wrote: »

Nonsense. Without the ECB keeping interest rates too low,

The ECB sets interest rates based on the inflation rate, unless you are arguing that inflation was too high during this period, your comment is nonsense.

Eugene Norman wrote: »

the criminal banking system, the shadow banking etc.

All matters for national governments be they Eurozone or non-Eurozone.

Eugene Norman wrote: »

system Greece would be fine. Greek spending on its public service did not create the great recession. The central banks and the bankers did.

Nobody suggested that the Greeks created the recession, so stop creating straw men.

The Greeks, however, did run up a massive debt prior to the crisis which meant that that debt and their desire to continue spending (funded by more borrowing) resulted in them getting hammered when the recession hit. That falls into the category of plain old-fashioned financial mis-management.

golfwallah

View wrote: »

Capital controls are allowed for EZ member states in certain cases (but they are not the default option).

As the case of Cyprus demonstrates their usage does not alter a member state's usage of the Euro - you pay the same price for a cup of coffee there irrespective of where you or your Euro come from.



The biggest problem in some member
states was financial mismanagement. No budget is going to improve overnight because you suddenly use a different currency.

We’re not talking about the price of a cup of coffee in one EU state – we’re talking about the free movement of capital between EU states, which will stop for Greece if currency controls are put place as part of the sticking plaster solution to hold the Euro, and indeed the EU, together.
See Colm McCarthy in last Sunday’s Independent:

The eurozone was meant to be forever, and for every country which joined, not just a permanent monetary union but the decisive catalyst for the political dream of 'ever greater union'. It has instead been revealed as premature, poorly designed, poorly managed, a burden on economic recovery, a fruitful source of new divisions in Europe and a distraction from grave geopolitical challenges at Europe's borders.

Deposits in Greek banks account for most of the money supply in that country. If convertibility is suspended - prohibiting payments abroad, as was done in Cyprus - a euro in a Greek bank ceases to be equivalent to a euro anywhere outside Greece. The ECB can suspend the convertibility of Greek bank deposits without the agreement of the Greek authorities, either by collapsing the Greek banks or by denying them access to the so-called 'Target' settlement system which it controls. All payments between eurozone banks go through Target.

I’d agree that financial management was a big part of the problem but unresolved political issues were even more important. This applies not only for Greece and the peripheral EU states (including ourselves), but also for Germany and the economically stronger states. It was the overall design of the Euro, without having the necessary much closer political and banking union systems in place first that contributed most. We were all led to believe that the Euro would result in free movement of capital, an end to currency conversion costs and closer EU integration. What we got is nearer to economic meltdown, which could soon be followed on the political front.

The Euro is great in theory if all EU economies are aligned, but cheap interest rates led to a stronger Germany economically and disastrous misallocation of resources in the peripheral states. Nation states do not like being dominated by outsiders (we didn't and broke out of the previous economic / political union we were in). And we’re kidding ourselves if we think FG / Labour would have done any better than FF if they were in office in the Celtic Tiger days.

golfwallah

As the Greek Debt Crisis reaches its denouement (or maybe “not the end or the beginning of the end but more the end of the beginning”), there are still options for a solution other than what is being insisted upon by the powerful forces of the European and IMF banking establishment. What is on offer appears to be “go along with us in large part or face the consequences of a default".

I’m not saying that Greece is without fault or that certain changes will not have to be implemented, but maybe the best answer at this stage is simply to renegotiate extended loan dates and possibly some measure of “debt forgiveness” along the lines of this article in the Irish Independent.

But in reality who will lose most by a Greek default, possible Grexit from the Eurozone or even exit of Greece from the EU?

The Russians (with an oil / gas pipeline proposal) and the Chinese (already own one of Greece’s largest ports) are waiting in the wings, ready to mop up whatever is left in the event of the nuclear options of default, Grexit, etc.

It occurs to me that our political leaders need to start showing more independent thought than they seem to be at the moment. Many of those same leaders were quick to criticise the late Brian Lenihan, who appeared to cave in to EU demands about not burning bondholders, etc., now seem to want the same for Greece – regardless of whether they can pay or not – and perhaps, regardless of the longer term, big picture consequences for Europe as we know it.

sarumite

golfwallah wrote: »

As the Greek Debt Crisis reaches its denouement (or maybe “not the end or the beginning of the end but more the end of the beginning”), there are still options for a solution other than what is being insisted upon by the powerful forces of the European and IMF banking establishment. What is on offer appears to be “go along with us in large part or face the consequences of a default".

I’m not saying that Greece is without fault or that certain changes will not have to be implemented, but maybe the best answer at this stage is simply to renegotiate extended loan dates and possibly some measure of “debt forgiveness” along the lines of this article in the Irish Independent.

But in reality who will lose most by a Greek default, possible Grexit from the Eurozone or even exit of Greece from the EU?

The Russians (with an oil / gas pipeline proposal) and the Chinese (already own one of Greece’s largest ports) are waiting in the wings, ready to mop up whatever is left in the event of the nuclear options of default, Grexit, etc.

It occurs to me that our political leaders need to start showing more independent thought than they seem to be at the moment. Many of those same leaders were quick to criticise the late Brian Lenihan, who appeared to cave in to EU demands about not burning bondholders, etc., now seem to want the same for Greece – regardless of whether they can pay or not – and perhaps, regardless of the longer term, big picture consequences for Europe as we know it.

The solution you propose would merely kick the can down the road while setting a dangerous precedent of rewarding inaction and fiscal indiscipline. If Greece gets debt relief why not Italy, Spain, Ireland, Portugal, cyrpus. While I can understand the comparison of burning senior bondholders, it is not a valid comparison. The money Greece owes is largely to ordinary European Taxpayers, not bondholders. The bondholders took their haircut in the last round. The truth is Greece needs help, their economy is in trouble, their debt is unsustainable. The Greeks need a strong government with the will to push though genuine reforms, sadly they chosen Syriza as their political leaders who seem more intent on chest thumping and demagoguing than trying to solve Greeces structural problems.

golfwallah

sarumite wrote: »

The solution you propose would merely kick the can down the road while setting a dangerous precedent of rewarding inaction and fiscal indiscipline. If Greece gets debt relief why not Italy, Spain, Ireland, Portugal, cyrpus. While I can understand the comparison of burning senior bondholders, it is not a valid comparison. The money Greece owes is largely to ordinary European Taxpayers, not bondholders. The bondholders took their haircut in the last round. The truth is Greece needs help, their economy is in trouble, their debt is unsustainable. The Greeks need a strong government with the will to push though genuine reforms, sadly they chosen Syriza as their political leaders who seem more intent on chest thumping and demagoguing than trying to solve Greeces structural problems.

The ill-designed programmes of “extend and pretend” as between Greece and EU / ECB / IMF in 2010 and 2012 are what has Greece in the situation it now is. Blaming the recently elected Syriza government for this costly economic mess may be fashionable in some quarters and in accord with EU propaganda, but it simply does not stack up with the facts.

The motivation behind the 2012 Greek “bailout” was to rescue German and French Banks by socialising their unsustainable loans to Greece, made mainly to enable it to repay the unpaid loans made in 2010. Effectively, the European taxpayer has had to foot the bill for rescuing French and German Banks in 2012, when these self same banks should have been made carry the can for their own unwise lending (shares in French banks rose by 24% on the very day the rescue package was agreed). And remember, these loans were not made to the Syriza government but rather to earlier incarnations of “strong government” that you now see as being needed again.

The consequences for making unsustainable loans to a severely weakened economy such as Greece should have been the imposition of losses on foolish lenders, rather than being rescued by the European taxpayer and the blame placed on Greece.

The current Greek level of debt is unsustainable and will be impossible for Greece to repay. Moreover, saying that Greece now needs “strong government” to push through more reforms implies that no fiscal reform has taken place, which is completely untrue. Greece has already virtually eliminated its primary budget deficit, it has slashed public service headcount and extensively reformed its pension system. To move forward from the current impasse has to include an air of realism from Greek lenders as well. This cannot exclude some sort of debt write-down, whatever form this has to take, as a “quid pro quo” for any realistically achievable new measures to be taken by Greece.

Let’s hope that Monday’s meeting of EU Ministers produces more realistic results than heretofore!

Two informative articles on these issues appear in Colm McCarthy’s article in today’s Sunday Independent and in IMFDirect on 14/06/2015.

sarumite

sarumite wrote: »

The money Greece owes is largely to ordinary European Taxpayers, not bondholders.

That's not quite true, in fact.

You're mistakenly counting the 142 billion owed to the EFSF-ESM, as EU debt. That's not valid because Grexit would have no impact on the EFSF loans, whose repayments are not due to begin until 2023. That was negotiated in 2012.

Meanwhile, the banks in the EU are simply not exposed to Greece. Almost every red cent of privately held Greek debt is in the Greeks' own banks. This brings us up to 163 billion, give or take.

There's another 30 billion each owed to the ECB & IMF for which member states of the Eurozone are not liable.

That brings us up to around 220 billion.

There's about 40 billion owed in market debt, which again the sovereign states of the Eurozone are not responsible for.

Then finally, there's the EU loans to Greece which cost 53 billion. Technically, a default on Greek debts cannot affect them, and they are not due until 2020.

So the total direct exposure of EU/EA states to Greece is pretty much nothing, although they do owe us 50 billion in bilateral loans due in 2020.

50 billion out of 310 billion, approximately.

sarumite

A Tyrant Named Miltiades! wrote: »

That's not quite true, in fact.

You're mistakenly counting the 142 billion owed to the EFSF-ESM, as EU debt. That's not valid because Grexit would have no impact on the EFSF loans, whose repayments are not due to begin until 2023. That was negotiated in 2012.

Meanwhile, the banks in the EU are simply not exposed to Greece. Almost every red cent of privately held Greek debt is in the Greeks' own banks. This brings us up to 163 billion, give or take.

There's another 30 billion each owed to the ECB & IMF for which member states of the Eurozone are not liable.

That brings us up to around 220 billion.

There's about 40 billion owed in market debt, which again the sovereign states of the Eurozone are not responsible for.

Then finally, there's the EU loans to Greece which cost 53 billion. Technically, a default on Greek debts cannot affect them, and they are not due until 2020.

So the total direct exposure of EU/EA states to Greece is pretty much nothing, although they do owe us 50 billion in bilateral loans due in 2020.

50 billion out of 310 billion, approximately.

I wasn't referring to whether a Grexit would impact loans or not. I was referring to the greeks wanting debt forgiveness. I was including for example ECB debt as it is a 'public bank' and not a private bank so is effectively a taxpayers bank (ESFS-ESM, Direct EU loans ect- ditto). While the IMf is not specifically bankrolled by European taxpayers, it is funded by member states so I include them for the same reason.

I will grant you Greek banks, although I was working on the assumption that the Greeks want functioning banks so weren't looking to screw over their own banks.

sarumite

golfwallah wrote: »

The ill-designed programmes of “extend and pretend” as between Greece and EU / ECB / IMF in 2010 and 2012 are what has Greece in the situation it now is. Blaming the recently elected Syriza government for this costly economic mess may be fashionable in some quarters and in accord with EU propaganda, but it simply does not stack up with the facts.

The motivation behind the 2012 Greek “bailout” was to rescue German and French Banks by socialising their unsustainable loans to Greece, made mainly to enable it to repay the unpaid loans made in 2010. Effectively, the European taxpayer has had to foot the bill for rescuing French and German Banks in 2012, when these self same banks should have been made carry the can for their own unwise lending (shares in French banks rose by 24% on the very day the rescue package was agreed). And remember, these loans were not made to the Syriza government but rather to earlier incarnations of “strong government” that you now see as being needed again.

The consequences for making unsustainable loans to a severely weakened economy such as Greece should have been the imposition of losses on foolish lenders, rather than being rescued by the European taxpayer and the blame placed on Greece.

The current Greek level of debt is unsustainable and will be impossible for Greece to repay. Moreover, saying that Greece now needs “strong government” to push through more reforms implies that no fiscal reform has taken place, which is completely untrue. Greece has already virtually eliminated its primary budget deficit, it has slashed public service headcount and extensively reformed its pension system. To move forward from the current impasse has to include an air of realism from Greek lenders as well. This cannot exclude some sort of debt write-down, whatever form this has to take, as a “quid pro quo” for any realistically achievable new measures to be taken by Greece.

Let’s hope that Monday’s meeting of EU Ministers produces more realistic results than heretofore!

Two informative articles on these issues appear in Colm McCarthy’s article in today’s Sunday Independent and in IMFDirect on 14/06/2015.

The "pretend and extend" was a response to the Greek crisis, not the cause of it. The reason the Greeks are in such a sorry state is a result of years of financial mismanagement by successive governments. While I do not blame Syriza for the mess, having only been in office a few months, they have managed to make a bad situation worse in a surprisingly short time, Their Finance ministers incompetence at the negotiation table has been so bad he has all but been sidelined. Syriza has even managed to turn friends with a sympathetic ear into near enemies. While their central bank is run by a former opposition finance minister, it is still somewhat remarkable that he chose to so publicly rebuke Tsipras' crass handling of the situation.

To say Greece needs "genuine reform" is not the same as saying that no reform has taken place. That is a clear strawman. The fact is there has had been genuine reform, however Syriza seem intent on dismantling such reforms in favour of short term populist policies. I do agree the lenders need to be realistic about what Greece can repay, however the same applies to Tsipras. His election promises were unrealistic and sticking to them is irresponsible.

on edit:

To add a link of my own, here is news article from the BBC http://www.bbc.co.uk/news/business-33232074

The summary is thus

"The problem therefore is not so much that Greece is incapable of reform or does not know what needs doing, but that it has wasted five years of the bailout without making serious attempts to fix the structural problems that beset the economy - and in many cases it is actually going backwards.
If it had started five years ago it might have been seeing the results by now as countries like Ireland and Spain have done, but one of the reasons that the Greek bailout has reached another crisis point is that it has hardly started."

ardmacha

David McWilliams on this subject
http://www.davidmcwilliams.ie/2015/06/22/the-eus-disgraceful-treatment-of-greece

He contends that proposals by Greece to link debt repayment to economic performance, exports etc were rejected, despite being based on the type of formula applied to Germany after the war. This is not satisfactory, if true.

sarumite

sarumite wrote: »

I was including for example ECB debt as it is a 'public bank' and not a private bank so is effectively a taxpayers bank (ESFS-ESM, Direct EU loans ect- ditto).

First of all, the ECB has adequate reserves to absorb a complete repudiation of its Greek sovereign exposure.

But of course, that's not how the ECB works. It is not a taxpayer's bank in the sense that it cannot put any direct charge on taxpayers. The ECB is excempt from capital rules and solvency requirements that apply under the usual accounting conventions. Just as the ECB creates money from thin air, so too can it simply evergreen a debt... in perpetuum et unum diem.

A fairly similar situation applies to the EFSF-ESM exposure to Greece. It can again be evergreened away, since it doesn't appear on the balance sheets of the guarantors, except in the form of paid-up capital.

A Greek debt forgiveness is not going to take some dramatic form, whereby handsome Germans, sweaty from their toils, trundle wheelbarrows of euros to lazy mobs in Athens.

Greek debt forgiveness, when it happens, will be invisible. Lending facilities from SPIVs will be extended, and ne'er will anyone except the Greeks notice the slightest difference.

You are wrong to imply that European taxpayers will somehow be putting up a sacrifice for the Greeks.

The media do try to suggest that, but I hope people are smart enough to critique that notion.

jimmycrackcorm

ardmacha wrote:

He contends that proposals by Greece to link debt repayment to economic performance, exports etc were rejected, despite being based on the type of formula applied to Germany after the war. This is not satisfactory, if true.

What has Greece got to export that would gain from the equivalent, olive oil and feta? Without a willingness to reform, the Greeks would simply continue on the same path that got them into the mess.