Greece Debt Crisis - Après Oxi

Eugene Norman

marmurr1916 wrote: »

Uncertainty shocks, banking friction and economic activity.



http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1825.en.pdf

We can expect continued lower investment in Greece and continued lowering of its GDP due to the uncertainty shocks generated by the antics of its current government over the past five months.

If uncertainty only causes a drop of 0.2% then it's largely insignificant compared to other effects on GDP.

FreudianSlippers

Sorry for the random pic post guys - genuinely thought I was in the cafe thread there for a sec


Anyway, back on topic, I don't agree that the Greeks genuinely raised taxes in a meaningful way or implemented cuts in a meaningful way prior to the Syriza government coming in and, even with that insignificant change, they were moving in the right direction.

It's a bit rich to expect "austerity" to work immediately. The Greeks didn't even give it a chance before running to the hard-left.

marmurr1916

marmurr1916 wrote: »

Greece lies to the European Commission. The EC gives Greece the all-clear based on this lie. The EC is partially liable for being naive enough to believe Greece?

Let me clarify my point for you as conclusively as I can.

As we know, the Stability & Growth deficit limit was a supra-national fiscal framework, meaning that in monitoring the domestic fiscal balance, the EU Commission had a duty to protect both third-party member states, but to the member state in question, specifically its taxpayers.

In 2005, the ECB took the unusual step of very publicly criticising new, lax application of the Stability and Growth Pact, saying it was very concerned. Lars Calmfors remarked :

"The statistical misreporting that allowed the Greek breaches of the deficit ceiling to go unnoticed for so long has very clearly illustrated the weaknesses of statistical monitoring in the EU. Given the extent of breaches of the deficit criterion and the very high debt levels in Greece, the Council’s extension of the deadline (ex post allowing ten years of deficits above three per cent of GDP) can hardly be judged to be consistent with the fiscal framework."

In its October 2008 bulletin, the ECB remarked that the European Commission had failed to properly implement the SGP as early as 2001, pointing out the slippages that had consistently been allowed to develop. It said the Stability & Growth Pact had "lacked sufficient rigour".

Now, this in no way excuses the government of any member state for breaching the SGP, nor does it excuse the European Council for tinkering with the rules. However, it does raise legitimate questions about a degree of co-responsibility for excessive deficits, given that it was a supra-national fiscal framework.

And where there is a degree of co-responsibility for a crisis, there should also be a degree of burden sharing.

dlouth15

FreudianSlippers wrote: »

Anyway, back on topic, I don't agree that the Greeks genuinely raised taxes in a meaningful way or implemented cuts in a meaningful way prior to the Syriza government coming in and, even with that insignificant change, they were moving in the right direction.

It's a bit rich to expect "austerity" to work immediately. The Greeks didn't even give it a chance before running to the hard-left.

However, whilst none of us can speak for the Greeks, it may not be apparent to the typical Greek that austerity has been a huge success in that country.

I think austerity is something that can work in certain situations. If the debt is relatively small and the economy robust then a country can survive a period of austerity. It is not so much that the austerity "works" but rather that that the economy is sufficiently strong to withstand it and come out the other side. For example, in the case of Ireland, which is a very open economy, austerity did suppress domestic activity, but much of our economy has nothing to do with domestic demand and so we got through it.

Even here, though, we still have high legacy debts and are dependent on low interest rates for the foreseeable future. If something were to change in that regard, the country would have trouble servicing its debts and then we would go back to being the lazy Irish who don't want to pay their way.

A Tyrant Named Miltiades!

A Tyrant Named Miltiades! wrote: »

And where there is a degree of co-responsibility for a crisis, there should also be a degree of burden sharing.

I would agree to an extent. A faulty regulator should bear some of the costs.

What kind of ratio of 'blame' would you consider?

Regulator : Perpetrator
X : 1

What roughly is X?

K-9

Mod:

I've had to hand out a good few cards for below standard posts, basically posters playing the man, not the ball.

I also had to delete numerous posts this morning, a couple that somehow veered into talking about the US and Iraq! Basically if a post doesn't add anything to the topic it stands a high chance of getting deleted, as do replies to it. Something to bear in mind when spending time posting and replying.

Video, picture and link only posts are covered in the charter, we generally frown on them. Please add a few lines about what they are about and they are fine. Some people just don't have the time or bandwidth to read or watch these. Picture only posts mocking posters or points of view we really frown on.

If posters are going to assert someone is lying, be prepared to stand over it 100% with proof. A difference of opinion or a different view is not lying, that's just discussing politics on a politics board!

Things get heated, we understand and indeed expect that, keep it civil and respectful and we'll be fine. Otherwise you'll get cards and more importantly, your post will be deleted so nobody sees it, a bit of a waste of time really!

Deleted User

Deleted User wrote: »

I would agree to an extent. A faulty regulator should bear some of the costs.

What kind of ratio of 'blame' would you consider?

Regulator : Perpetrator
X : 1

What roughly is X?

This is first and foremost an economics issue, not one of morality. Therefore the solution is not the magnitude of retribution where each side must pay for its respective sinning.

Theoretically, the problem can be solved by neither side paying anything. For example, the proposal to extend the maturities on Greek obligations to the EFSF would not cost anything except the paper it is written on, since it doesn't even appear on government debt statistics. Similarly, cancelling the excess interest on the Greek loan facility would cost nothing to EU creditor governments, it would mean they stop making a profit on Greek debt, but they wouldn't make a loss either.

Even more dramatic proposals like the Eurozone using its central bank to swap certain sovereign obligations for zero-coupon bonds would be unusual, but would cost nothing to taxpayers and governments.

The problem is that these are theoretical solutions that are available to economists and internet forum posters. In the real world, politicians have to answer to irrational electorates.

K-9

A Tyrant Named Miltiades! wrote: »

Let me clarify my point for you as conclusively as I can.

As we know, the Stability & Growth deficit limit was a supra-national fiscal framework, meaning that in monitoring the domestic fiscal balance, the EU Commission had a duty to protect both third-party member states, but to the member state in question, specifically its taxpayers.

In 2005, the ECB took the unusual step of very publicly criticising new, lax application of the Stability and Growth Pact, saying it was very concerned. Lars Calmfors remarked :

"The statistical misreporting that allowed the Greek breaches of the deficit ceiling to go unnoticed for so long has very clearly illustrated the weaknesses of statistical monitoring in the EU. Given the extent of breaches of the deficit criterion and the very high debt levels in Greece, the Council’s extension of the deadline (ex post allowing ten years of deficits above three per cent of GDP) can hardly be judged to be consistent with the fiscal framework."

In its October 2008 bulletin, the ECB remarked that the European Commission had failed to properly implement the SGP as early as 2001, pointing out the slippages that had consistently been allowed to develop. It said the Stability & Growth Pact had "lacked sufficient rigour".

Now, this in no way excuses the government of any member state for breaching the SGP, nor does it excuse the European Council for tinkering with the rules. However, it does raise legitimate questions about a degree of co-responsibility for excessive deficits, given that it was a supra-national fiscal framework.

And where there is a degree of co-responsibility for a crisis, there should also be a degree of burden sharing.

Wait a sec, am I understanding this correctly?

Greece was warned in 2005 about statistical misreporting, yet then in 2009/10 had to adjust budget figures again due to misreporting?

I do get what you're saying, but these are budgetary and economic statistics, there's a level of trust involved that Governments are being honest and up front about this stuff.

The Irish Government had similar credibility problems with the banking crisis and Anglo in particular, something that gets forgotten with the anger over the bailout. The level of ineptness and the amount of times we got the estimates wrong made IMF/EU intervention a certainty.

I suppose the new budgetary overseeing measure brought in a couple of years ago are part of the plans for more oversight. Not something the more Euro sceptical are fond of, but we can now see why it is necessary. Budgets need to be subject to outside monitoring to avoid huge bail outs like us and Greece.

Seriously though, yep monitoring and checks seem to have been nonexistent, but we're talking sovereign Governments here, an element of trust should be a given.

Permabear

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K-9

K-9 wrote: »

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Yes, 'an element' of trust should be a given. Ultimately, even today Europe has no choice except to rely on the Greek government to tell us the truth, to an extent. But at the same time, you cannot blindly ignore the risks.

I should be able to sleep in my bed with the hall-door unlocked. I should be able to swing my motor round a corner at the peak of the speed limit where children are playing tag.

In life, we must reckon for the risk of others not complying with their obligations. Especially where those people have shown prior form. Especially where someone is paying us a salary to moderate that risk.

Good risk management is vigilance. Or to quote Warren Buffet on the corrollary, risk comes from not knowing what's happening.

Permabear wrote: »

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No, not all the rules. I claim it played by certain rules that were being discussed specifically, such as the SGP under the pre-2000 Eurostat framework on debt metrics, and the GS derivatives transaction, which now that you discover was compliant, you ignore and are trying to imply that my statements refer to the totality of Greece's compliance.

marmurr1916

A Tyrant Named Miltiades! wrote: »

Yes, 'an element' of trust should be a given. Ultimately, even today Europe has no choice except to rely on the Greek government to tell us the truth, to an extent. But at the same time, you cannot blindly ignore the risks.

I should be able to sleep in my bed with the hall-door unlocked. I should be able to swing my motor round a corner at the peak of the speed limit where children are playing tag.

In life, we must reckon for the risk of others not complying with their obligations. Especially where those people have shown prior form. Especially where someone is paying us a salary to moderate that risk.

Good risk management is vigilance. Or to quote Warren Buffet on the corrollary, risk comes from not knowing what's happening.

No, not all the rules. I claim it played by certain rules that were being discussed specifically, such as the SGP under the pre-2000 Eurostat framework on debt metrics, and the GS derivatives transaction, which now that you discover was compliant, you ignore and are trying to imply that my statements refer to the totality of Greece's compliance.

Summary - the EU shouldn't have trusted that shower of Greeks. They've only themselves to blame. We all know what those fecking Greeks are like...

And while we're on the subject of the Greek deficit:

Don’t Blame Debt for Austerity in Greece
As Greece heads to the polls, there is one enduring myth that is worth addressing: that debt brought austerity.

This is the narrative: Greece found itself with an unsustainable debt in 2010, and the troika, in order to avoid the repercussions of a Greek default, demanded that Greece take up new loans and implement a very strict diet (austerity). The result was an economic catastrophe, and for years, Greeks have suffered to service a debt that will never be repaid. Greece, the syllogism continues, needs a haircut to breathe and kick-start economic growth.

The problem is that this narrative is not true. After five years of austerity, five years of confiscatory tax increases, five years of spending cuts, the state in 2014 barely broke even. Very little of the austerity has gone to pay back debt. Instead, this effort has been about bringing spending in line with revenues.

Yes, Greece has gotten new loans to pay back old loans; yes, the Europeans lent money to Greece in order to bail out their own banks; yes, only a small share of those loans went to support state spending; and yes, Greece’s debt burden has risen in relative terms due to a shrinking economy.

But none of this has anything to do with austerity.

To understand why, recall that in 2009, Greece had a primary budget deficit of €24.4 billion. Primary means without interest payments on debt—which means that even if in early 2010, there was a deal to eliminate all of Greece’s public debt, the Greek government would still be €24.4 billion short (10.3% of GDP) relative to the 2009 numbers.

The austerity of the past five years has been about closing this hole and reducing spending to the amount of money that the Greek state can collect. The state finally managed to do this and it ran a primary surplus of €630 million, which is a mere 0.4% of GDP, in 2014 (it also ran a surplus in 2013 if one excludes government support for financial institutions; the IMF excludes it but Eurostat includes it).

Greece went from minus €24.4 billion to plus €630 million by cutting €34 billion in spending—but its revenues declined by €10 billion because the economy contracted (even though revenues as a share of GDP were at all-time highs in 2012, 2013 and 2014).

In other words, this entire effort has been about no longer gaining weight—Greece has not even gone on a real diet yet to pay back the debt. This means that even if one were to assume a debt haircut in 2010, Greece would have had to implement a similar austerity package.

There are only two scenarios under which a haircut would have made Greece’s austerity path less severe. First, if one assumes that immediately after defaulting on €301 billion of debt in 2010, Greece would have been able to borrow again in order to finance its deficits (which is impossible; in a 2010 paper, IMF staff estimated that countries regain partial market access after about 5 years).

Alternatively, one could say that Greece would have recovered faster because no one wanted to invest in a country with such high debt. That’s a counter-factual that is impossible to prove. I find it implausible given that Greece has never managed to attract serious levels of foreign investment, which would be susceptible to such calculations, and because the major driver of the recession has been a decline in consumption which is linked to austerity.

The only legitimate counter-factual is to say that austerity should have been implemented sooner rather than drag on for five years. In that case, the secondary effects on the economy could have, likely, been milder. But as the IMF acknowledged, in its ‘mea culpa’, a sharp adjustment was inevitable:

In any event, a deep recession was unavoidable. Greece lost market access in the first half of 2010 with a fiscal deficit so large and amortization obligations so onerous that it is difficult to see how a severe economic contraction could have been avoided. Indeed, if Greece had defaulted, the absence of deficit financing would have required primary fiscal balance from the second half of 2010. This would have required an abrupt fiscal consolidation, and led to an evaporation of confidence and huge deposit outflow that would have most likely made the contraction in output even larger. (p. 22)

Now, the story going forward is different. The more debt Greece has, the more of a primary surplus it needs to maintain in order to repay it. The IMF, for instance, said that a primary surplus of 2.5% of GDP is not enough to render the debt sustainable. Many argue that a primary surplus of this scale will impede growth, which is not what the evidence shows, and especially not in a country like Greece were deficits are usually associated with transfers (pensions, wages) rather than investment.

But that’s another debate for another day: the important point is that one should not confuse debt and austerity, and one should not think that Greece has had austerity because there was no debt restructuring. Austerity was almost exclusively about the deficit so far.

http://www.greekdefaultwatch.com/

Permabear

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marmurr1916

Eugene Norman wrote: »

If uncertainty only causes a drop of 0.2% then it's largely insignificant compared to other effects on GDP.

The study's model found that a "one-standard deviation increase in uncertainty" causes a drop of 0.2% in GDP and 0.5% in investment with an average time lag of 4 quarters.

Let's just say that I'm certain that the uncertainty in Greece will have increased to the extent that it causes a much larger fall in GDP than 0.2%.

molloyjh

Eugene Norman wrote: »

But that's all wrong no matter how many times it is stated Greece has raised its taxes and dropped its spending and that's what has accerbated the problem.

They haven't done it anywhere near enough though. There's still massive VAT discounts for the islands and they haven't even reduced their military spend by half of what is required for example.

BoJack Horseman

molloyjh wrote: »

They haven't done it anywhere near enough though. There's still massive VAT discounts for the islands and they haven't even reduced their military spend by half of what is required for example.

Apparently its vital to still have 1000+ Patton tanks still in service, despite them being last useful in combat in the Korean war.

Jawgap

BoJack Horseman wrote: »

Apparently its vital to still have 1000+ Patton tanks still in service, despite them being last useful in combat in the Korean war.

In fairness to them, the M60s they have aren't the same Pattons used in the Korean War which were M48s. Plus according to Jane's they 'only' have 350 of which most have been placed in reserve or are in the process of being.

Plus the M60s did perform quite well during the Yom Kippur War once combat there became mobile.

Saying that they're completely obsolete now - they'd be better selling them off as lawn ornaments! You'd have to question why they're holding on to them, unless they want to hang for them for use in extreme internal security situations!

BoJack Horseman

Then there is the 2,500+ APCs..... And near 600 self propelled howitzers.

The Greek army has far far more kit than the UK army....

All must cost a lot to maintain & the stupidest part is, that its mostly (aside from the Paladins) obsolete.

An utter waste & useless in an actual war.

Jawgap

BoJack Horseman wrote: »

Then there is the 2,500+ APCs..... And near 600 self propelled howitzers.

The Greek army has far far more kit than the UK army....

All must cost a lot to maintain & the stupidest part is, that its mostly (aside from the Paladins) obsolete.

An utter waste & useless in an actual war.

Indeed.

I suppose they do have to live up to their NATO obligations and spend around 2% GDP on defence - although spending is one thing, wasting is different.

I think they still have conscription / military service - again not very useful for going anywhere to fight a war, but handy to have around if the population get too uppity.

Permabear

Permabear wrote: »

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I'm referring only to the rules that you and others have referred to specifically.

I challenged you earlier on Greek rulebreaking, whereupon you attempted to limit the focus to accession convergence and entry into EMU. Let me remind you of the following exchange.

Permabear wrote: »

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A Tyrant Named Miltiades! wrote: »

Nonsense. Greece wouldn't have received previous bailout tranches if it hadn't been meeting the terms of its crisis programme...

Permabear wrote: »

This post had been deleted.

The rules I have been referring to throughout are accession convergence, and Eurostat's handbook on government debt statistics, which was amended and applied retroactively to Greece's pre-accession debt metrics.

I also clarified the accusations regarding the Goldman Sachs transaction, which you called unethical, despite the fact that is specifically sanctioned in black & white in Eurostat's handbook on government debt statistics, and is a legitimate financial transaction according to Eurostat.

I do not claim that Greece played by all the rules.

However, I did clarify that when the European authorities were quite aware that Greece broke fiscal rules after the relevant EMU convergence reference period, the European authorities responded in a way that was inconsistent with the SGP, and came under criticism of the ECB for so-doing.

But you don't want to admit that the European authorities have any culpability for having overlooked and tolerated rulebreaking.

Because if you admitted that, it would imply a degree of co-responsibility, which might justify burden sharing.

Permabear

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marmurr1916

Some Greek banks face closure or merger with other banks even if there is a bailout.

http://www.reuters.com/article/2015/07/08/us-eurozone-greece-bankclosures-idUSKCN0PI2KI20150708

The damage caused to the banks over the past five months is so bad that some of them aren't viable any longer.

Permabear

Permabear wrote: »

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The European Commission did not play by the rules. The European Council did not play by the rules. Don't take my word for it, read the ECB criticism of the weak implementation of SGP, and tolerance of shortcomings even where they were known.

The SGP under the aegis of the European Commission and the EC effectively made these institutions a supra-national regulator with obligations to the EU/EA, AND to the people of Greece who had relied on the authority of those institutions to oversee fiscal restraint, as all Europeans do.

The Commission and the European Council [who are democratically well-endowed, as we are often reminded] have failed in their role as a supra-national regulator, as have successive Greek governments, although the latter is usually exaggerated at the expense of the former.

Neither failure can be ignored.

I can't edit posts, perhaps it's something to do with the boards.ie outage.

The last sentence in the third paragraph of the preceding post should read, "the latter is usually exaggerated [to the benefit of] of the former."

KingBrian2

A Tyrant Named Miltiades! wrote: »

I'm not trying to drum up pity for Greeks. Nobody in Greece cares about what boards.ie users think. Pity is irrelevant to the facts, and the fact is that the Greek cross-currency swaps were not only legal, they were explicitly acceptable under Eurostat rules [pp. 201--202; ESA95].

Presumably you don't blame Goldman Sachs for the transaction. They were breaking no rules; neither were Greece.

This is important because the whole exchange on culpability began by one poster asking a very sensible question: To paraphrase, he asked, 'If Greece were playing by the rules, which turn out to be unwise, or even harmful (like much of the euro architecture), is it Greece who should bear all the costs of the subsequent fallout?'

That's a legitimate question, it is critical to the Greek argument for debt relief, and it is the question that plenty of idealogues in this thread would rather evade.

Because the Eurozone has to take some blame here. Not only was the Eurozone weakly designed, not only did it accept the use of derivatives to 'hide' fiscal deficits, it actively ignored deficits when they did arise on the statistics they had before them.

As late as 2007, the European Commission actually abrogated an Excessive Deficit Procedure on Greece in 2007, on the Commission's own initiative!

The excessive and emotional outbursts against Tspiras and even the Greek people are perhaps not solely the product of genuine frustration at Greek inertia and obstinacy. Perhaps this multi-lingual rally of Single European Outrage is also intended to distract from the embarrassing realization that the Eurozone and the Commission have failed quite spectacularly in their fumbling attempts at currency union.

Insofar as this has aggravated the Greek situation, it is fair that both sides share in the costs.

The Greeks bear the most as they failed to come up with any proposals for the 18 countries that use the € would be prepared to listen to. Time and energy has been wasted while the Greek gvt have pushed the country back into recession. Europe is marching on with tensions on the Ukrainian border and a migrant crisis in the Mediterranean. Europe cannot be preoccupied with one country.

Despite all the doom and gloom with Greece's debt a more sensitive discussion with the Iranians and Syrians have merited ever more positive news so at least we can see that not all shouting matches like what is happening in Brussels over Athens are taking place. Reasoned calm conversations do take place over arguable more delicate subject matters elsewhere on the globe.

KingBrian2

marmurr1916 wrote: »

Some Greek banks face closure or merger with other banks even if there is a bailout.

http://www.reuters.com/article/2015/07/08/us-eurozone-greece-bankclosures-idUSKCN0PI2KI20150708

The damage caused to the banks over the past five months is so bad that some of them aren't viable any longer.

That is Syriza's Achilles heel. Who cares what happens to the country? Democracy will trump financial matters. So it should. Look at those banks and you see a different story. Those banks keep the state functional. Allow them to shut down would be like if Chancellor Merkel decided to let the Landesbanks disappear from the German landscape. The Berliners must be thinking "bloody hell" as they watch Greece prepared to dismantle their banks.

KingBrian2

KingBrian2 wrote: »

The Greeks bear the most as they failed to come up with any proposals for the 18 countries that use the € would be prepared to listen to.

Lets establish some basic points.

Any 'moral responsibility' for a catastrophe must first look to its causes, not in its policy responses.

For example, if I knock you off your bike on my way to work, I can hardly claim to be exempt because I loaned you the healthcare bill.

We need to look to the origins of the crisis, and why it happened in the first place. The origin being offered by the likes of Permabear, that everything was the Greeks' fault, does not quite square with the role of the European institutions as supra-national invigilators of European fiscal prudence.

Permabear

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Permabear

Permabear wrote: »

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Now for the first time in this exchange we are getting somewhere.

If we can momentarily abstain from allocating specific magnitudes of blame, do you accept that there was some degree of European institutional fault for having failed to adequately react to known shortcomings on Greek government debt during its membership of EMU?

If you can answer that question reasonably frankly, we might be able to occupy some common hround.

Permabear

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Permabear

Permabear wrote: »

This post had been deleted.

OK, this is progress.

Since the SGP was a supra-national instrument, I assume we accept a degree of supra-national responsibility?

However, it was not the known extent of Greek debt that triggered a crisis; it was the sudden revelation of hitherto unknown debt, that successive Greek governments had gone to some lengths to conceal.

Come now; do you really believe so? The European Authorities expressed their belief in major problems with the Greek economic statistics from [at least] 2004, but there was no crisis until 2010.



After the European Authorities [publicly] became aware of serious Greek imbalances from 2004, the ECB became critical of Greek imbalances, DESPITE WHICH the Commission & Council embarked on a response of ignore & delay, in contravention of its obligations to all Europeans, including Greek people, since theirs was a supra-national regulatory framework with common, European obligations.

I hope that I can pre-empt any immediate response by saying that Greece does indeed bear a significant burden of the responsibility for its own fiscal metrics. This situation, however, must take account of wider EU/ EA failures.

swampgas

Neither the EU nor Greece are blameless, but they are to blame for two different things.

The EU failed to protect the Euro itself, and wasted huge chunks of EU money on what appears to be a rogue member state.

Greece has massively and systematically misrepresented its own finances, damaging the Euro, and should take the hit for the consequences of its deception.

So what if Greece wasn't stringently policed to ensure it was reporting its economic status properly? Should that even be necessary? Their fiddling of their books is not anyone else's responsibility, it's theirs and theirs alone.

The moral hazard for the EU is losing the money poured into Greece that will probably never be repaid, and reputational damage to the EU project.

The moral hazard for Greece is bankruptcy, Grexit and possibly becoming a failed state.

.

Jonblack

Will the US stand by and let it become a failed state with a left goverment. Look at map of were Greece sits and its relation to countries the US is involved with.

swampgas

Jonblack wrote: »

Will the US stand by and let it become a failed state with a left goverment. Look at map of were Greece sits and its relation to countries the US is involved with.

If there is a Grexit, a lot will depend on what happens next - will there be a snap election, a military coup, who knows ???

Thomas_.

swampgas wrote: »

If there is a Grexit, a lot will depend on what happens next - will there be a snap election, a military coup, who knows ???

Everything is open there but I think that Tsipras is rather reckoning that it will lead to new GE in Greece with him and his party getting a majority to rule alone.

Jawgap

Jonblack wrote: »

Will the US stand by and let it become a failed state with a left goverment. Look at map of were Greece sits and its relation to countries the US is involved with.

I think the US will pressure the EU to sort it out especially as has been pointed out Greece is two borders away from ISIS/ISIL.

swampgas wrote: »

If there is a Grexit, a lot will depend on what happens next - will there be a snap election, a military coup, who knows ???

I doubt there'd be a coup (though never say never!) as it would lead to the immediate suspension of their EU membership.

swampgas

Jawgap wrote: »

I think the US will pressure the EU to sort it out especially as has been pointed out Greece is two borders away from ISIS/ISIL.

The problem is the US doesn't have much leverage, as this is not something that can be resolved behind closed doors. All 18 EZ governments are involved, and their electorates have very strong feelings about this.

If there is a perception that the US is trying to interfere it could backfire badly.

USA are more than welcome to buy billions of Greek Bonds at a low interest rate to sort all this out.

Money talks.

molloyjh

swampgas wrote: »

Neither the EU nor Greece are blameless, but they are to blame for two different things.

The EU failed to protect the Euro itself, and wasted huge chunks of EU money on what appears to be a rogue member state.

Greece has massively and systematically misrepresented its own finances, damaging the Euro, and should take the hit for the consequences of its deception.

So what if Greece wasn't stringently policed to ensure it was reporting its economic status properly? Should that even be necessary? Their fiddling of their books is not anyone else's responsibility, it's theirs and theirs alone.

The moral hazard for the EU is losing the money poured into Greece that will probably never be repaid, and reputational damage to the EU project.

The moral hazard for Greece is bankruptcy, Grexit and possibly becoming a failed state.

.

I'd agree with this. I do get what A Tyrant Named Miltiades! is saying but I don't agree with the ultimate conclusion (s)he has reached. The EU have a certain amount of responsibility for the situation, to the point where I believe they have a responsibility to try and help Greece out of their self-imposed situation. The EU have been doing just that. They then have a responsibility to the rest of Europe to ensure that something like this doesn't happen again. I've no idea if they've reviewed their processes and procedures to address that.

They do not have any responsibility in my eyes for carrying any of the burden of the debt. The debt in its entirety belongs to Greece and Greece alone. The EU didn't help, but the EU is not responsible for the actual debt itself.

BoJack Horseman

Its easy to call for a deal when you don't have to pay & you only want smooth seas.

Your right, the USA could buy all of Greece's debt tomorrow if they really cared.

Jawgap

swampgas wrote: »

The problem is the US doesn't have much leverage, as this is not something that can be resolved behind closed doors. All 18 EZ governments are involved, and their electorates have very strong feelings about this.

If there is a perception that the US is trying to interfere it could backfire badly.

I wouldn't say they're trying to interfere per se - but they would see themselves as having an interest from the perspective of avoiding turmoil in the markets, and one of their most affluent export markets - the EU - suffering a weakening currency at a time when they're trying to add jobs with a strengthening dollar.

Deleted User wrote: »

USA are more than welcome to buy billions of Greek Bonds at a low interest rate to sort all this out.

Money talks.

Indeed it does - and just behind the German banks, US banks have the greatest exposure to Greece

BoJack Horseman wrote: »

Its easy to call for a deal when you don't have to pay & you only want smooth seas.

Your right, the USA could buy all of Greece's debt tomorrow if they really cared.

One assumes they would change their tune rapidly if the Greeks took a dig out from the Russians!

Bob24

Deleted User wrote: »

USA are more than welcome to buy billions of Greek Bonds at a low interest rate to sort all this out.

Money talks.

That sums it up. The US will give a few phone calls and tell others what to do, but they don't want to have skin in the game ... meaning at the end of the day their influence is minimal.

Permabear

This post has been deleted.

Very interesting article here which claims to be an interview with a Syriza insider.

Honestly, I think that's probably true enough, there's probably enough valid points raised on both sides of the coin to envisage it being from someone close enough to the coalface.

It's a bizarre enough interview, the lack of foresight regarding what would happen in the case of a bank run/ default, the lack of understanding of the legal obligations of the ECB to the currency itself (liquidity, ELA etc) are all pretty damning indictments of the Syriza 'strategy'.

Though I'm hoping that the quote/paraphrase from Dijsselbloem is a misquote and not an accurate portrayal of what he actually said, as that's a pretty scary thing for someone to say.

Worth a read in any case.

marmurr1916

The head of the Greek banking association has announced that ATMs will run out of cash from Monday.

Yannis Koutsomitis ‏@YanniKouts 6h6 hours ago

#Greece banks association head Katseli says banks will have cash in ATM's until Monday

So that €60 daily ATM withdrawal limit for Greek bank account holders, and unlimited daily ATM withdrawals for visitors to Greece, will become purely theoretical limits - the actual limit in practice for everyone will be €0 per day.

I sincerely hope this simple fact is uppermost in the minds of the current Greek government.

marmurr1916

A Tyrant Named Miltiades! wrote: »

OK, this is progress.

Since the SGP was a supra-national instrument, I assume we accept a degree of supra-national responsibility?

Come now; do you really believe so? The European Authorities expressed their belief in major problems with the Greek economic statistics from [at least] 2004, but there was no crisis until 2010.



After the European Authorities [publicly] became aware of serious Greek imbalances from 2004, the ECB became critical of Greek imbalances, DESPITE WHICH the Commission & Council embarked on a response of ignore & delay, in contravention of its obligations to all Europeans, including Greek people, since theirs was a supra-national regulatory framework with common, European obligations.

I hope that I can pre-empt any immediate response by saying that Greece does indeed bear a significant burden of the responsibility for its own fiscal metrics. This situation, however, must take account of wider EU/ EA failures.

The claim that the wider EU authorities should have known that the Greeks were falisfying their accounts is simply not credible. Does the Garda Fraud Squad bear some joint responsibility if a company director commits fraud?

In answer to your questions posed to Permabear in previous posts about whether the EU institutions bear some degree of responsibility for Greece cooking its books - OXI!

marmurr1916

The Greek cabinet begins a meeting in 30 minutes to make a decision on the final reform proposals. I'd love to be a fly on the wall at that meeting!

Yannis Koutsomitis ‏@YanniKouts 4 mins4 minutes ago

#Greece Cabinet council meeting in 30 minutes. Should make final decision on reform proposal. #GreeceCrisis

Very interesting developments.

There is growing concern among opposition parties that Tsipras is either unable or unwilling to reach an agreement with lenders. New Democracy leader Evangelos Meimarakis met with Tsipras and four other party leaders on Monday, resulting in the issuing of a joint statement. However, the conservative said on Wednesday that he refused to hold another meeting in private with Tsipras and called on him to address Parliament.

Meimarakis said that he wanted Tsipras’s comments to be officially recorded, which suggests that the New Democracy chief has become suspicious of the prime minister’s motives. Meimarakis also decided to send ex-ministers Dora Bakoyannis and Costis Hatzidakis to Brussels for discussions with officials there.

I absolutely hate the interior politics of this situation. There's a chance that both 'sides' (within Greece) are still trying to play a game against each without considering the ramifications of a failure. The side show has to stop.

marmurr1916

Deleted User wrote: »

Very interesting developments.



I absolutely hate the interior politics of this situation. There's a chance that both 'sides' (within Greece) are still trying to play a game against each without considering the ramifications of a failure. The side show has to stop.

Not much chance of a government of national unity emerging if the political parties are still trying to gain party advantage from the situation.

The other key internal political question is whether Tsipras has the guts to stand up to the hardliners in Syriza who want Greece to withdraw from the euro:

Greece’s Prime Minister Alexis Tsipras is faced with the ultimate dilemma: accept German-advocated austerity measures opposed by hardliners in his own party or take his country out of the euro.

While Sunday’s referendum delivered a strong rebuke from Greek voters to the austerity demands, it also put pressure on Tsipras to strike a deal after many people cast their vote as a desire to stay in the euro on better terms. For some hardline members of his Coalition of the Radical Left or Syriza party, however, the vote was a firm sign of rejection of euro membership at all costs.

“Tsipras will probably face significant party unrest from the left bloc, which is already calling for him to insist on the path indicated in their view by the ‘no’ vote in the referendum,” Nomura analysts including Lefteris Farmakis and Nick Matthews wrote in a note to clients Wednesday.

The most clear salvo came Thursday from Energy Minister Panagiotis Lafazanis, the head of the so-called Left Platform which controls about 40 hardline leftist lawmakers in parliament, mostly former communists, many of whom advocate unilateral default, bank nationalization and euro exit.

“We don’t want a third memorandum with tough austerity measures,” Lafazanis said at a conference in Athens. “The Greek people’s ’no’ isn’t going to be turned into a humiliating ’yes’ and a new bailout crematorium.”

His remarks came a day after Tsipras applied for a three-year loan from the European Stability Mechanism, in a letter promising to implement tax and pension system reforms as soon as early next week.

The government has until Thursday midnight to present an economic plan that includes spending cuts, in exchange for the new bailout. Failure to deliver a credible proposal will set off a process for the country’s exit from the single currency as early as Sunday, its European partners have warned.

http://www.bloomberg.com/news/articles/2015-07-09/tsipras-stuck-between-a-german-rock-and-a-greek-left-hard-place

marmurr1916

Why Estonians aren't especially sympathetic towards Greece:

Janina Lind
‏@LindJanina

@NickMalkoutzis @MatinaStevis
My mother in Estonia with pension €345 will be ecstatic that we can contribute some more from EST budget, sry

A €345 monthly pension is far lower than any Greek state pension, even after cuts.

Bob24

marmurr1916 wrote: »

Why Estonians aren't especially sympathetic towards Greece:



A €345 monthly pension is far lower than any Greek state pension, even after cuts.

Yes these 2 charts show the political challenge for leaders of easter European EZ members:
- http://www.google.ie/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_kd&scale_y=lin&ind_y=false&rdim=region&idim=country:EST:GRC:SVK:LVA:LTU&ifdim=region&ind=false
- http://www.google.ie/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=central_government_deficit_and_financing_of_gdp&fdim_y=revenue_expense:3&scale_y=lin&ind_y=false&rdim=region&idim=country:EST:GRC:SVK:LVA:LTU&ifdim=region&ind=false

Basically they are all growing, keeping their budget more or less under control, and still poorer that Greece.
At the end of the day, what is called austerity measures in Greece is just business as usual for them.

Asking their people to lend/give money to Greece (i.e. that money won't be used at home) whereas they are less well off than Greece and could use the money to improve their own living conditions (which they have been doing with restrain to keep budgets balanced) is political suicide.

And this is before even mentioning that Greece has benefited from dramatically more EU structural funds to help develop its economy (and at a time when the world economy was doing much better) than those new members have.