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30 Years Ago, Greece Bluffed Europe... And Won
While tomorrow America's population (and carbon-based traders) enjoys a day off to celebrate the birthday of the first US president, Europe will be gripped by the high drama that is the latest Eurogroup summit to take place in a few short hours, and during which the fate of Greece - either in or out of the European monetary union - may finally be decided. Tomorrow is also the expiration of Dijsselbloem's 10 day ultimatum to Greece by which the country "must apply for a bailout extension to keep Eurozone financial backing."
Still, as the WSJ reports and as many talking heads opined over the past 48 hours, the probability of a successful outcome tomorrow is slim to none, with the best possible outcome being the can getting kicked once again. According to the WSJ, 'Few believe that finance ministers will resolve this impasse at a special summit on Monday—or even by the end of the week, the point at which it becomes too late to secure the necessary parliamentary ratification in several member states for a program extension."
As it further adds: "any hope of a deal hinges on what Athens means by “70% of the program” and whether Prime Minister Alexis Tsipras can wring sufficient fiscal and reform concessions to enable him to sell an extension as a “new” program. The crucial sticking point is Greece’s insistence on reversing key labor-market reforms. “That is nonnegotiable,” says a senior German official. “We consider these to be 80% of the program."
The compromise option is the so-called Plan B:
Faced with the risk that Greece does allow its current program to lapse when it expires at the end of this month, some eurozone officials have started to discuss how to make a program exit as “clean” as possible. This would involve setting out a clear timetable for negotiations on a new program, including a deadline for a deal, says one of these officials. The hope is that this would encourage Greeks to keep their money in the banks and persuade the European Central Bank to continue to allow the banks to receive emergency funding. That might buy a little extra time to negotiate a new long-term deal.
But... "As a Plan B, this is deeply flawed. The Greek economy contracted by 0.2% in the fourth quarter of 2014, on a quarterly basis, confounding expectations of 0.4% growth; tax receipts came in more than 20% below target in January and an estimated €14 billion ($15.95 billion) of deposits have been withdrawn from banks since the end of last year, forcing the ECB last week to increase the ceiling for emergency liquidity assistance to €60 billion. No one knows for sure when Athens will run out of money, but there are fears it could be as soon as March. Yet officials say that negotiating a new deal would take a minimum two to three months."
In any event, for Greece the euphoria of the past month, which has seen the poularity of Syriza soar with polls showing approval for the ruling coalition’s policies shooting to about 70%, a record for any Greek government, due to the new government's defiance of Europe, is about to come crashing down with a hangoverish bang, as either the new Greek parliament concedes to what is essentially a continuation of the status quo, if only under a different name, or see the country ejected from the Eurozone, an alternative that would lead to even more acute pain up front, if a far stronger recovery in the years to come as per the Iceland case study.
But it wasn't always Greece on the receiving end of Europe's good, or not so good, will.
Surely many Greeks and other proud Europeans will recall that some 30 years ago, it was none other than Greece that called the shots, and had nearly unlimited leverage in Europe courtesy of its veto: a veto which back then nearly derailed the entry of Spain and Portugal into Europe's Common Market.
Ah, what joys to the impoverished people of Greece, when what is now the Eurozone's poorest country would singlehandedly determine the future of Europe. It is for their sake that we take this trip down memory lane, going all the way back to 1985 with the following article from the NYT, laying out a very different European world.
COMMON MARKET DISCUSSING GREEK VETO THREAT
BRUSSELS, Saturday, March 30— Western European leaders of the Common Market began crucial negotiations here Friday night with Prime Minister Andreas Papandreou of Greece, who has threatened to veto the entry of Spain and Portugal into the market next year.
After late-night talks with Mr. Papandreou, the leaders said early today that he stuck by his vow to block the two countries unless the other market members gave Greece nearly $2 billion in special agricultural aid.
Greece has said it needs the money to offset the effects on its economy of increased competition from Spanish and Portuguese products when those nations join the market, formally called the European Economic Community.
The European leaders gathered in Brussels on Friday afternoon, just hours after their foreign ministers worked out terms to make Spain and Portugal the 11th and 12th members of the trading group. It was thought that the ministers' accord had brought an end to several years of negotiations over the entry of the two nations. Chairman Expresses Disappointment
But today, the meeting's chairman, Prime Minister Bettino Craxi of Italy, told reporters he was ''disappointed'' by the lack of agreement so far in talks with Mr. Papandreou. Other high Italian officials said a settlement seemed unlikely at this two-day meeting.
A spokesman for Prime Minister Margaret Thatcher of Britain said of the negotiations Friday night, ''Frankly, we are not getting anywhere.'' The British spokesman said all the other Common Market governments were ''delighted with the enlargement agreement.''
Many of the leaders called the accord on the complex package of membership terms, which Greece had accepted, a historic step in Europe's quest for greater unity.
''The European Community is alive and in the final phase of its completion,'' Prime Minister Wilfried Martens of Belgium said Friday as the session opened.
Mr. Craxi said, ''Europe is now finally achieving its true shape.''
Admitting Spain and Portugal should also help the Common Market solve its longstanding fiscal problems and enable it to concentrate on strengthening free trade between the members and building up their industrial and technological base.
Some Action on Budget
Last year, the member nations agreed to reduce Britain's contribution to the organization because the British Government complained it was too large. The market also decided to increase the amount of tax revenues that member governments pay to the Common Market.
But West Germany linked its acceptance of that plan to a successful conclusion of the negotiations with Spain and Portugal, saying it would refuse to pay more unless the 10 members agreed to admit the two countries at the start of next year.
Many European officials also say they hoped the expansion will increase public support in Spain for staying in the North Atlantic Treaty Organization, to which all other Common Market members except Ireland belong. That support would help Prime Minister Felipe Gonzalez of Spain win a referendum scheduled on that issue next year.
Prime Minister Papandreou's threat centers on a plan for the other market countries to finance a new agricultural subsidy. His plan, known as Integrated Mediterranean Programs, would help Greek, Italian and French farmers adapt to the increased competition that their wine, fruit, olive oil and other products would face when Spain and Portugal join the market.
Threat Carries Weight
Mr. Papandreou can carry out his threat because the entry of the new member nations will go before the parliaments of all the Common Market members, as well as the parliaments of the two countries seeking membership. If approved, Spain and Portugal would become members on Jan. 1, 1986.
Other market members also take Mr. Papandreou's threat seriously because of his long record of provocative statements against other Western powers.
In particular, Mr. Papandreou has threatened to withdraw from both the Common Market and NATO and to close United States military bases in Greece.
At the last high-level meeting of Common Market nations in Dublin last December, Mr. Papandreou angered other leaders by demanding that the market pay the three present Mediterranean members $6 billion over five years in special agricultural aid, with about $2 billion going to Greece. Chancellor Helmut Kohl of West Germany and Prime Minister Thatcher of Britain immediately dismissed the sum as too large.
Since then, Jacques Delors, president of the Common Market's executive commission, has offered to give the farmers in Greece, France and Italy $1.4 billion in grants over the next five years and $1.7 billion in loans.
Compromise Seems Possible
Mr. Papandreou was reported by other delegations Friday to have said he was willing to negotiate on Mr. Delors's proposals, provided that Greece gets close to the $2 billion that it would have received under Mr. Papandreou's demand. But Chancellor Kohl's spokesman said the trade group's offer was still too large for Bonn to accept.
Officials from several market countries noted that Mr. Papandreou faced difficult domestic pressures that might make it hard for him to compromise.
They mentioned the national elections that are due in Greece by October, saying the Prime Minister had an obvious interest in being seen as fighting hard for the best possible deal in Brussels.
But Mr. Delors has said he will withdraw his compromise offer if Mr. Papandreou rejects it and that his next proposal will be less generous to Greece.
Back then, the Greek bluff succeeded:
European leaders resolved a bitter financial dispute with Greece today, paving the way for Spain and Portugal to join the Common Market at the start of next year.
Prime Minister Andreas Papandreou of Greece had threatened to veto an agreement reached this week on Iberian membership unless the other nine members gave Greek farmers $2 billion in special subsidies to help them compete with Spain and Portugal.
But after two days of negotiations at a European Economic Community meeting here, Greece was persuaded to accept about $1.4 billion in new agricultural aid in return for lifting its veto threat.
* * *
After two days of bargaining, the 10 Common Market Governments
agreed on a $4.4 billion package of new subsidies and loans for Greece,
France and Italy. Greece will get about $1.4 billion of this money over
seven years.
Announcing the agreement, Prime Minister Bettino Craxi of Italy, who was the chairman of the conference, said it marked a ''historic moment in Europe's development.''
Jacques Delors, the new president of the Common Market's executive commission, said, ''The family quarrel is over, the family will be enlarged, and we can all now think of the future.''
Oh how wrong he was... but the real question is: can the Greek bluff succeed again tomorrow?
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There's a shipping container full of nail guns headed for Greece to help sort this thing out.
History doesn't repeat, but it gets pirated off the interweb.
$1.4 billion, even in 1985 dollars, was chump change compared to what it's going to cost SOMEONE to get Greece out of this hole.
The obvious solution is default on the debt, stop using euros, and start printing Drachmas at an exchange rate that's about 65% less than what the Drachma-Euro exchange rate was the day the Greeks adopted the Euro.
Bribes and whores are being offered to forestall that, of course...followed by the aforementioned nail guns.
My guess is the bribes and whores will get the job done, like they always seem to do. But hey-- I'm a cynic.
Let's hope they ignore the transitory pleasures and leave the EU and the Euro, then demand full repayment of German WWII debt, then charge 200% more for tourists to come and treat them like second class human beings.
All of the "they're lazy" and "they're dumb" and "they should work harder" talk reminds me of the slurs slung at African Americans in the U.S. post emancipation.
A working citizen anywhere should get 5% on their savings if their mortgage is 5%, otherwise there is no incentive to work hard nor to save.
a working citizen anywhere should get to keep what they earn and spend it on what they want, sorta like the first 200 years of this country.
Won then; lost now.
But then, the world is...
It´s a good thing ZH reminds people what kind of worthless scum those Greeks are. Hey Spaniards and Portugese, always remember what the Greeks tried to do to you.
Says Radio Wolfenstein.
I think this time the Greeks will save us, the people of Europe.
Let the parrots and bankers go down.
Greeks are not worth anything and everyone who puts hope on Greeks or Greece to achieve anything is just a stupid moron. They were a basket case, they are a basket case and they will always be a basket case. And i have have no clue at all why we Europeans don't throw them out already.
papandreou, simitis and the rest of the gang are not Greek.
They are fucking kikes.
Germany paid the WWII debt several times. This has been settled now.
No one is claiming that the Greeks are lazy or whatever. The Greek state is just at best incompetent in collecting taxes. No taxes, no repayment of loans.
I fought the law and the Greeks won.
Here is your hit man...
https://www.youtube.com/watch?v=c-P8F2pNAP4
the nail guns joke is getting old.
Nail Guns are ALWAYS funny. Kind of like a pie-in-the-face!
https://www.youtube.com/watch?v=gsCS519Yqw8
We nail gun joked some people.
......some folks......fify
jesus was nail gunned too.
sorry Jack that shipping container is stuck waiting outside a CA port waiting for a Mexican strike to end.
There can't be two winners in this scenario. Someone is going to pay the bill.
But there can be two losers!
Well, what's the population of Greece? About 11 million people?
THAT'S how many losers there's going to be.
Spread the wealth! Wait, I mean debt.
Either way, Greece will be bankrupt.. Unfortunately , even with new politician in charge, he is clueless what it will take to revive the economy only empty rhetoric and empty promise to the Greece populace at best!
Greece IS Bankrupt, and japan, russia, usa, china, all of south america....well everyone
They could just sell half their land to Macedonia.
What do Greece, Spain, Italy and Portugal have in common? They produce nothing but olive oil, their women have mustaches, and most of the world could care less if they go bankrupt.
women have "moustaches" well a negative that certainly hits the spot on the right occasion
lol
He could have said beards too
feathery....
He could have said FIAT stands for Fix It Again Tony. But I drove the new Fiat 500 and it is no Trabant.
What an idiotic comment... Representative of the level of ZH comments lately.
Such ignorance...
lol
You definitely represent the lowest common denominator here on ZH. I praise you.
Hey man..not cool. The italians don't just make olive oil, they make shitty cars too.
And a lot of fiats...oh, was that a punny joke? lol
At least they could afford trowing good money at broke Chrysler.
I was trowing the river the other day, didn't catch a thing.
I can see you haven´t been to Spain.
The EU will eventually have to assume State debt in a full political/fiscal union if the union is to survive at all. Frau Merkel will just have to bite the bullet and do it.
Jump the Euro.
Arrest Papandreou.
Send his head to Brussels with the original paper work signed by him and Goldman.
The EU is run by idiots. Back then and now. The Euro was invented by politicians, not by economists.
EU was invented by banksters. It was 15 years ago when I heard it first time from a smart guy that regular folks had no idea what the EU project was supposed to become. Of course, I was not getting it at that time, now it's pretty clear even to college students that banksters have put the Europe nations into centralized Brussel's bureaucracy and debt chains.
EU and euro was of course invented by economists, the kind of Rockefellers and Rothschilds with strong support of Royal British filth and stupid corrupt french politicians.
I'd say Greece will win this one because Greece has nothing left to lose. It is a matter of how much the EU can give Greece so that the EU doesn't collapse.
6 points to Greece for a can kicking goal by the EU.
And we should get a nice mega boost in the S&P as Central Banks BTFD to pay for it.
Lot easier to get the money during integration rather than disintegration.
Germany holds all the cards...both Northeast (Ukraine) and Southeast (Greece.)
They'll do what they think will work for Germany best and that will be that.
I will say this has become a wee bit mo costly than the 5 billion Germany said it would cost for them to simply "buy Greece."
This is definitely a Greece/Germany thing tho. The Russians are refighting World War II and France is full on Viva la Heebdo. Can't really say what the US role in all of this even is right now.
Other than Cyprus it sure isn't diplomatic though.
I largely agree with your points. However, it just struck me that the way out of this mess which allows Greece to remain in the EU is to just lengthen the repayment schedule to a much longer time line as well as lowering the monthly payments. This way the debts do not have to be written off and the cash flow for Greece is lightened.
Am I wrong here?
You are partly wrong because almost half the amount of the payments is interest rate. Out of the ~20 bil Greece will have to pay this year over 8 bil is interest rate. You might think that 8bil every year for interest rate is a large amount but the debt really is that high. To make this debt sustainable the interest rate will have to go somewhere near 0% and, even then, they will have to lengthen the payout schedule so it can become sustainable again. Just lengthening the payout schedule without slashing the interest rate, will only mean that the greek gov will need to keep getting loans just to pay the interest rate.
Out of the EURO will be enough!
How about 60,000 year repayment schedule? They should be able to make the minimum payment with some highschool kids lunch money but they will not touch the principle for 59,900 years..??
Tsipras complained two weeks ago that "Germany gave Greece Too Much Money." Socialists must have a new line every week to keep the folks interested. Eg Obama
evolve or die
Visited Aunt "Sister Jean Ann" today (former Catholic Nun), explained the world to her at lunch, her awakening was heartbreaking. She went with Nixon on the China opening. Has been to China as 'local ambassdor" multiple times.
I feel for her, I really do.
We fucked her baby in the ass.
And I just told her we did.
One thing intrigues me. The EU treaty, and the Euro agreements have no clause to define how an 'exit' occurs. That was done deliberately in the first place.
SO, as I understand it, there is no legal way to for Greece to leave or stop using the Euro, an no way to force them out. It appears that they can simply default on their debt(s) and use their Greek central bank to issue sufficient Euros to keep things ticking over locally.
They already print notes, and I am fairly sure they also mint coins - Euros. They could also just nationalise the banks and keep them operating. How can that be prevented in the current legal framework? Ok, the legal framework can be altered ... but doesnt Greece have a veto on those changes? Fun for the politicians !!! They would need to cut off access to SWIFT to stop the greek central bank just printing (electronically) the money they need.
Simple. The ECB cuts off all liquidity provisions for the banks, the EU cuts all subsidies and inflows so necessity pushes them to adopt a local currency. This of course will require capital controls in order to sustain whatever exchange rate it will be supposed to have, which is an EU rules violation. It will also mean that there will be import taxes and duties in place in order to control the outflows further, which is another EU rules violation. It also means that possession ans conversion to foreign currencies will also be banned for private citizens and domestic businesses, another EU rules violation. By this stage EU membership is for all effects and purposes non existent. So when they exit the Euro they will also exit the EU.
Well if Greece really want to screw things up - adopt the Yuan as their national dollar - see what Europe has to say about that - then do a full bye see yah! to Europe.
I can see the Maersk Dollar Store ships redirecting themselves as we speak..
http://www.vanityfair.com/news/2010/10/greeks-bearing-bonds-201010
I recommend this long but well written article in VF. I don't have a personal animus towards Greece. However, it sure does look like they have created this Greek drama all on their own. They have no one in Europe to blame. As a people they have their own mentalities and habits; not the least of which is the laid back mono-format economy that relied almost entirely on tourism. A ruinous choice.
"and during which the fate of Greece - either in or out of the European monetary union"
What total bollocks. They aren't going anywhere.
So, they were given $2B in good faith (well), for their agricultural sector to become competitive. What have they got to show for it? Is Greece some sort of powerhouse when in comes to agricultural production? And while we are on the subsidies issue, how much did Greece get in other form of subsidies and what have they got to show for it? What does Greece produce anyway, and more to the point, what does Greece produce competitively. I think everyone that counts has figured out by now that they have been throwing good money after bad in a bottomless sinkhole.
More evidence that there is nothing new under the sun, and that the South was right!
OT- as of Friday the BATFE is going after green tip.
The biggest problem Tsipras has is that the Greek people like the Euro and don’t want to get out of the monetary union. If they would be more supportive of playing the ‘leave the monetary union’ card Tsipras negotiation position would be strong and simple. Give us what we ask for or:
– We leave the monetary union
– Default on the debts to European banks
– Support the Russian pipeline trough Turkey and Greece
– Give Russia a port
– Make a free tax haven with full anonymity to everyone and every company on the globe
Because the Greek people don’t like to return to the Drachma, and Germany knows that, it makes Tsipras negotiation position very difficult.
You show the way-leave the EURO-New Drachma to EURO 1to1. Debt converted in New Drachma... Devalue the New Drachma by 50%...and be happy again... Greek people can buy EURO or better Swiss Francs, Norwegian Crowns afterwards.
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