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Great Big Fat Greek Expectations
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
From what I read in the press every day, as well as from private communication, a pretty wide divide seems to appear between what many people think the Syriza government in Athens should do, and what they actually can do at this point in time. It should be useful to clarify what this divide consists of, and how it can be breached, if that is at all possible.
In particular, many are of the opinion that Greece cannot escape its suffocating debt issues without leaving the eurozone and going its own way, reintroducing the drachma and defaulting on much of its €240 billion debt. Those who think so may well be right. But right now that is mostly irrelevant. Because Alexis Tsipras and his men and women simply don’t have their voters’ mandate to go down that road. They may at some time in the future, but they don’t today. The expectations are too great, and certainly too immediate.
If Syriza wants to achieve anything, it will need to stick to democratic principals and procedure. Every important decision, and every – even slight – change of course will need to be laid out before either the Syriza fraction in Parliament, the entire parliament, or the Greek population as a whole, to vote on. The government looks to be sticking to this principle as solidly as it seeks to stick to its mandate. None of that grey wiggle room that is so typical in most political systems.
This also makes the task ahead that much harder. Syriza must be seen by its voters as doing what it can to remain in the eurozone, while at the same time negotiating terms with the other members that will allow relief from the relentless -humanitarian – pressures the country has been put under by its previous governments and EU partners.
And while it may well be so that Tsipras and Varoufakis et al have in private long concluded that in the long term attempts to succeed in combining these two goals are doomed to fail, or even that the eurozone as a whole has no future, the fact is that for now some 70% of Greeks reportedly demand that the country remain in the currency union.
There’s a deep underlying historic component to this that needs to be recognized if one is to understand what is happening. Before the EU, and certainly the euro, Greece always felt under threat from the east, a result of centuries of occupations. They had a deep longing to be recognized as a part of Europe, and to feel protected in that sense.
Ambrose Evans-Pritchard summed it up quite nicely in an interview from ‘the lion’s den’ over the weekend:
Humiliated Greece Eyes Byzantine Pivot As Crisis Deepens
“When it comes to the choice, I fear Tsipras will abandon our programme rather than give up the euro,” said one Syriza MP, glancing cautiously around in case anybody was listening as we drank coffee in the “conspiracy” canteen of the Greek parliament.
“The euro is more than just money. It is talismatic for the Greeks. It was only when we joined the euro that we felt truly European. There was always a nagging doubt before,” he said.
“But you can’t fight austerity without confronting the eurozone directly. You have to be willing to leave. It is going to take a long time for the party to accept this bitter reality. I think the euro was a tremendous historic mistake, and the sooner they get rid of it, the better for all the peoples of Europe, but that is not the party view,” he said.
This is what Tsipras faces. There’s an almost schizophrenic attitude even among his own caucus. And there may be plenty voices that say he should at least threaten to leave the eurozone, just to have some leverage in negotiations, but they don’t understand the lay of the land. The European ‘partners’ in the talks know only too well that it would be an empty threat: Greek voters don’t want to leave the eurozone, so threatening to go anyway would only ring hollow.
Tsipras instead must repeat again and again that his goal is to remain in the union, and Greece will do what it can to pay off all its debts. He has no wiggle room on that, not at the moment. If he would want to present his people with the option of leaving the eurozone, it could only be done after very extensive talks in which it becomes ever clearer that the ‘partners’ make it impossible for Greece to achieve that other Syriza commitment, of cutting back austerity measures, within the currency union.
He must at some point be able to turn to his people and say: we’ve done all we could, we’ve even compromised some of your election demands, but Germany etc. just won’t give up. He needs to be able to prove to Greek voters that they can’t have both an end to austerity AND the continued membership of the eurozone.
This will take time, probably lots of it. But it’s the only thing Tsipras, if he means to stick to strict democratic rules – which he’s done thus far -, can do. Claiming today from the outside that he should already have left the eurozone, or at least threatened to do so, is premature at best, and not helpful.
The Syriza MP cited above by Ambrose says it all, really. Some of the MPs are pretty much willing to let go of the euro. But they, too, need to understand that Tsipras can offer that option to the people only after long-drawn-out talks, at the end of which he may be able to say:
“Look, you know what we’ve been discussing with the partners, because we’ve kept you informed every step of the way. It is now clear that if you wish to stay in the eurozone, it will mean austerity, it will mean soupkitchens and no health care and no jobs for your children, for years to come. Do you really want the euro that much? If not, we can go it alone, we have the models ready and we can explain them to you. And it will no doubt be difficult at first, but at least it will be our own difficulties, not those imposed by others.. It’s up to you, the people, to decide.”
For now, those talks haven’t been held. So Tsipras can’t say these things. It will need to be a game of patience. There was never any other way.
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Rather than Greece exiting, maybe Germany should and leave the rest of the liberals to financially cannibalize themselves.
...Greece needs a President....lets send Obama....just change the origin of his foreign student loan applications to Greece.
Nations should secede from world organizations, states should secede from nations, cities and towns should secede from states, and individuals should secede from their cities. Then we can have truly functional voluntary, free society.
I think the press is missing the point here. Greece really cannot leave nor should leave the Euro. If they leave the Euro, it would be a disaster, with financial institutions going bust again, contract curreny denomination nightmares, massive defaults instead of extend and pretend.
But there is a path forward and its fairly obvious but massively ignored by the media. Look where 10 year yields are in Portugal, 1.9%, italy 1.39% (they have debt/Gdp of 137%), Spain 1.36%. So with a restructuring of the debt profile (i.e. lets change the loan maturities so they dont matter) and adjust fiscal surplus to 1.5% and maybe with more integration in the EU, Greece 10 years should be trading at no more than 3.5% today. And If QE kicks in for Greece in any significant way maybe 2.5%
That would reinflate many assets in Greece like its doing to the rest of Europe. Bond prices up massively, Equities, etc.. This reduces risk of more nonperforming loans and is the kind of inflation Greece needs right now.
Seems pretty clear to me that with such a large carrot, Greece will stay and play in the Euro.
BIG FAT JEWISH EXPECTATIONS
there, title fixed.
Now, on to the facts at hand:
1) Usury is unpayable.
2) all peripheral countries will end up leaving due to that fact.
3) those countries will end up printing their own currencies.
4) or they can simply start printing their own Euros.
5) hear the parasites scream hysterically.
Those aren't facts, that's a rant. Good luck with your wishlist.
"If they leave the Euro, it would be a disaster, with financial institutions going bust again, contract curreny denomination nightmares, massive defaults instead of extend and pretend"
to be frank, if this was the whole reasoning (or even a sizable part of it) behind staying in the eurozone... I'd be all for GreXit
further, your "reinflate many assets..." sounds like the same kind of medicine that has been too often prescribed by the usual NeoKeynesian banksters
I'm so sick of those "don't rock the boat!" cries
I agree, and I am not saying that reinflating assets and negative rates are the right thing. However, if you are part of the Euro. And Germany is borrowing 10yrs at 0.30%, France at 0.68% and Italy at 1.39% the right move for Greece is at least benefit from the mayhem and not be penalized with a 10 yr rate at 10% when i could/should be 2.5%.
I am not advocating the policy, but if it is the policy, and they will pay the consequences later, then at least benefit from it now because either way they pay the same outcome.
it's not that the policy is wrong. it's just that the cheapest loans Greece ever got... are those from the eurozone partners. while "the markets" are not willing, period
look again at the numbers. three quarters of that is from the EZ countries, and one quarter from the markets. the first pays no interest until 2023, the second is quoted at a yield around 10%, but that does not mean the Hellenic Republic can issue new bonds at that price, or at least a sufficient amount
meanwhile, this week all drama is around the fairly minor IMF tranche payback. (as ZH noted, among others, the US Taxpayer's principal and interest)
Nature tends to move to a place of maximum disorder.
Welcome to entropy.
"Nations should secede from world organizations, states should secede from nations, cities and towns should secede from states, and individuals should secede from their cities. Then we can have truly functional voluntary, free society...."
... if people want that. And this, in a nutshell, is also the whole thing about this article. Greeks want to keep the EUR, as well as they want to keep the Hellenic Republic
Raul, the author, makes a terrific introduction to his article. Yes, if Syriza wants to keep the faith given to it by the electorate, it has to follow the republic's procedures
But then he quotes AEP. And sorry, AEP is one of those Brits that justs hates the EUR, regardless of any logic or argument. Sometimes he poses as libertarian, sometimes he is quite a good critic of many cronyst situation, but when it's about the EUR, he is just against it, even quoting quite a lot of the Champagne-Socialist "devaluations don't hurt" Neo-Keynesian mantras
what is the purpose of a national currency again? Syriza's Financial Minister of Greece, Yannis Varoufakis, has explained in an interview that if they had found a Drachma, they would be devaluing it by now. And so he also explained that actually Syriza has no intent of introducing a Drachma... for the purpose of having a hard national currency
just as a reminder, a devaluation is nothing else then a very elegant - for those who can protect themselves from it's effects - way to default
and again the number one issue Greece has is how to economize... meaning how to manage to continue to have a balanced budget
the interest on the three quarters of this debt - that in the hands of the other eurozone governments - kicks in the first time in 2023. that's the timeframe to both balance that budget and renegotiate further debt restructurings. oh, and to keep those IMF crazies from asking too much the usual madness in which they excel
Germans want to keep their tax money!
Greece can default on debt and not leave the eurozone.
Access to Western capital markets will then be denied but Greece can (and will have to learn to) live without it.
Iceland did, Greece can.
"live without it" is roughly equivalent, for the Greek state, to "balance the budget"
since staying in good terms with the other EZ members means the same... then the simplest way is to do it and to restructure the debt. which is simply a kind, diplomatic way to default
U Realize Germany is a Socialist nation and has a Triparty system of marriage with Government, unions, and Manufactures.
Germans have lot of lazy workers if you look at it. And they have huge benefits for Employees in terms of paid holidays or vacation.
I won't say if I think the German System is good or bad. It is typical of Europe or North America... but USA doesn't protect workers and doesn't have as large an orientation to Apprenticeships.
Germany does enjoy open borders witch allow Russian and others to come to Germany to work in the Fields growing and harvesting crops. Germany also brought over Turks after WWI and WWII to help rebuild the cities. Germany is not a Utopia, they have huge immigration, huge open borders, huge reliance on "Free (Slave) Trade, and they have Capitalist who prefer to Invest in Eastern Europe or Somewhere Else.
They are leftist swill. It's pretty clear what that means, isn't it? They will say one thing, do another, and gorge themselves at the public trough. They miscalculated the international attention that they would garner...falsley giving hope to billions of people. Hope for a spark. This too was calculated by the evil monsters in TPTB.
Now look what they've done. No one is smiling except them.
they swallowed already...
Greek ForMin says Greece could play the 'bridge' between EU and Russia
There's an idea ! A broke, unstable country with very little in common with either the EU or Russia is going to be mediator. Wow! Give this guy a salary increase.
I'll be the translator and the next meeting between the officials of Poland and Madagascar. That'll go well!
great article. Thanks for the prespective.
The fact the author even had to write that article speaks volumes as to the mental acumen of the average Greek, lack of. Anyone with a brain knows that the bluff was hollow from the start without the will to walk the check. Either suck it up and suck it or walk away and do the Drachma Fandango.
Well phrased!
It is far too early in the game to second guess Syriza's objectives. I do not believe for one second that they would sell out the Greek people. They are far too committed to changing the status quo within the EU, and I believe they will succeed.
That statement is far too optimistic and utterly lacking in the required ZH areas of sarcasm and offensiveness. please hand in your posting card to the nearest usher.
If we don't stop here we wil soon have comments with common sense or even logic. That won't end well!
What happened to all the riots that were supposed to happen. Golden Drool tried to get it started but nada.
I could not disagree more. The election of Syriza was the peoples choice to reneg on the false/fraudelent debt. There are a few issues the conversation ignores.
1) Since Greece joined the EU and converted its debt & liabilities into Euros, the Euro has almost doubled in value. In essense Greek debt has doubled. This makes their debt unservicable.
2) The Greek Bank Liquidity Maneuver: Greek banks are insolvent. To get liquidity a few years ago, they issued debt to themselves. In doing so they created both an asset and liabiity on their balance sheet. They then went to the Papandreou government asking for and receiving a government guarantee on their newly issued debt. The banks then sold the debt to the ECB who gave them cash. Sine the banks cannot repay, this makes bank debt the government's problem. The people should not have to services such debt as they had no say in the matter.
3) There is another issue that just stinks. Mario Draghi (now head of the ECB) was the head of Europe at Goldmans Sachs who peformed a number of financial maneuvers for the Papandreou government to hide debt so Greece could join the EU. Greece entered the EU under fraudlent terms.
To be clear, there were no "democratic" principals that got Greece into this mess. Lawyers, try as they might, cannot veto the laws of economics. Greece does not have the ability to repay and so it must and wiill default. There is no sense in hiding ones head in the sand.
Final point, socialist governments (as all EU governments are) cannot exist without the ability to issue their own currency. This is a key point in Marx's Communist Manifesto. Governments never repay their debts with currency having the same purchasing power they borrowed. Countries traditionally defauted throught inflation and this option has been taken away. (THis is why most of the governments in the EU are bankrupt and will not repay their debts either.) One major problem the cretion of the EU has brought to the for is that there is not a bankruptcy process for governments. Now would be a good time to creat one.
"1) Since Greece joined the EU and converted its debt & liabilities into Euros, the Euro has almost doubled in value. In essense Greek debt has doubled. This makes their debt unservicable."
say that again?
"socialist governments (as all EU governments are) cannot exist without the ability to issue their own currency. This is a key point in Marx's Communist Manifesto"
am I supposed to take this seriously? read again the ZH articles of EZ net debt issuances being too few, this year
Mostly correct article, although I sense an underlying wish that GRExit will occur sooner rather than later, thus increasing the author's net worth directly or indirectly. One major mistake is assuming that Syriza has a plan for exiting the Eurozone. They don't (apart from deputies moving their money abroad, which they've mostly done already). It's throw things at the wall, hoping that something will stick.
It is correct that the Euro has been slowly strangling the Greek Economy, but it is also true that the majority of those who still work here (and thereby pay taxes) have adjusted their activities based on the fact of being in the Eurozone. Leaving the Euro would mean unemployment going from 30% to 60% overnight, and without any resources to fund a transition to a Drachma - Greek economy which has to be very different to a Euro - Greek Economy.
Therefore, it's not as easy a decision as it might seem. The gap between economic theories and actual human economic behavior is rather obvious.
+1 that "underlying wish" is a result of reading AEP (Ambrose Evans-Pritchard)
"The gap between economic theories and actual human economic behavior is rather obvious"
there is a simple reason for that: Austrian School economics... has not had yet anybody looking seriously into the mechanics of the EUR and of currency wars
Something nearly every article on the new Greek government neglects to state: SYRIZA wants to change European policy that attacks countries in the Balkan peninsula and not only. These current policies have contributed to pernicious austerity measures on the working class whilst the elite classes remain untouched by any austerity measure. Regardless where you come from and/or which political party you support, medievil living conditions should not be difficult to say no to in any country it is enforced upon.
What if medieval living conditions are the only thing possible if you don't get into debt AND manage it wisely afterwards (which most governments have failed so far to do). We had Albania, our next door neighbor, which was running like that for more than 30 years. There was extreme poverty for the majority of the people and obscene wealth for the chosen few of the governing party/mafia (interchangeable terms). When they started coming to Greece to find some decent jobs back in the '90s we could not believe the stories they would tell.
Don't rush to easy conclusions
Icelanders have bigger balls than Greeks.
One day Greece and all other countries will have to live within their means and stop relying on borrowed money to create short term economic activity but long term pain.
And I sense this is Greece's predicament, damned if she stays in the Euro and damned if she doesn't. Either way there will be pain and chaos.
Greece's best bet is the hope that the whole world will sooner or later be facing a massive economic and political upheavel where Greece is just part of the general re-set rather than at the forefront of events.
The Euro was made so countries wouldn't live within their means. The Euro is a weapon, a tool in the hands of an élite. They'll all see it plain and clear soon enough. Their leaders know it perfectly, even Tsipras.
This is the reality that Syriza faces...despite being 'given a mandate' by the Greek voters, those voters are themselves unsure of what they want.
Syriza is doing the best they can here. Although the Greeks cry for change, without a consensus, an agreement to DO the things needed, all Syriza CAN do is tread water, and try to limit the damage as best as they can.
The ball is in the hands of the Greek people. They cannot hold Syriza solely responsible if they themselves are unwilling to commit.
“The euro is more than just money. It is talismatic for the Greeks. It was only when we joined the euro that we felt truly European. There was always a nagging doubt before,” he said."...
Oh spare me this maudlin hogwash! Greece has been around for thousands of years. You mean to tell me they only 'discovered their identity' with the advent of the Euro? STFU already!
It's Greeks like THIS that are the real problem...If you don't feel "Greek" enough without the Euro, then fucking LEAVE already.
Syriza need to organise a referendum of the Greek population on the issue of leaving the €zone. If they had a "yes, if necessary" answer to that question, they would have real bargaining power. Until then, it's just pissing in the wind.
Does the world expect anything positive or productive from a collection of disfunctinal, dangerous & delusional marxist visionaries?
They could issue arrest warrants for all the ex government officials, banksters, and GS people who were in on the gang rape of Greece.
The problem would be throwing a relative in jail.
Syriza has no wiggle room in the face of EU intransigence (uncompromising hostility) to its demands for some loosening of the austerity conditions imposed by the Troika. Nor does the Troika have any remedy other than to double down on austerity and extend and pretend.
First, Greece remains pennies away from flat broke. Its banks have funds to pay bank runs only because money continues to be advanced through the EU emergency liquidity facilities. Syriza has had to raid pension reserves to meet a minor IMF payment this week to meet Troika rules and thus keep liquidity flowing to Greek banks and keep the hopes of more extend and pretend money flowing to Greece from the Troika. Without continued extend and pretend money, the Greek government cannot meet payrolls or keep government services like medical care afloat, let alone welfare payments - the government will collapse as an operating entity.
Second, the Troika knows full well that austerity is not helping to resurrect the economies of the PIIGS For all its press releases to the contrary, the Troika knows full well that the whole mess is unsustainable. The Euro end game is now being played out as the ECB eases into full-blown QE. Draghi's bond-buying scheme grants each Euro-zone country a Euro printing press up to whatever amount of bonds the ECB will buy from that country. The limits are rather modest so far, but expect them to rise and be perpetual.
The Troika has no strategy other than extend and pretend. Interest rates must remain extremely low, and have even gone negative. The ailing economies of the PIIGS are being sustained by a drip-feed of more loans to keep the illusion of financial stability alive.
Third. The political upheaval by the Greek taxpayers is just the first. Spain, Portugal, Italy, and France now have strong anti-Euro political movements which threaten to stage government takeovers in the near future as national elections occur. Greece is too impoverished to actually rebel successfully against the Troika. but Italy and France have much bigger economies and much more potential to stage successful demands for changes. In fact, France and Italy are already being granted relief from the limits on budget deficits as a percentage of GDP under EU financial rules.
Now we see the Austrian Federal Government refusing to continue its support for the fraud-riddled mess from the HYPO bank. This puts paid to the notion that senior bank bond-holders are sacrosanct, let alone junior bond-holders or depositors. The biggest guarantors of HYPO debts are an Austrian province and Austria itself. It is mooted that the province will go bankrupt and its guarantee will be subject to a severe haircut.
In other words, Austria just sneaked a sovereign default in by the side door while everyone was occuped in keeping Greece from fomenting a stampede of sovereign defaults by the PIIGS. Draghi, Junckman, LaGarde, and Schnauble are busy pretending that the Austria problem does not exist. I suspect there is frantic activity behind the scenes to find a way to paper over this latest breach in the financial dam. Will the Troika be able to find enough fingers to plug all the leaks?