Galbraith on Greece

[Woodsman]

Re: This is a Mistery?

...Tsipras' actions are not even a little surprising, neither his resistance, nor his capitulation...

The Greek right should send Tsip a thank you card for doing what they could never, would never do.

The Greek political elites of PASOK and New Democracy would never have dared pilfer pension funds, local government deposits, and university surplus cash, even in the face of default. Their supporters would have hung them from lampposts. Much better to saddle the opposition with these sorts of "inevitabilities".

If they don't, I will. Bought a little odd lot of EEV at the end of April and cashed out Thursday for a tidy little summer bonus thanks to him.

[Woodsman]

Re: Greece / Suicide Rate Surges 35% In 2 Years

Tsipras and the Greeks have been trying to live in a Euro Marxist fantasy land...

Reading your post reminded me of the "Spike and Chester" cartoons of my youth.



Those were great, weren't they?

They reap what they sow by deluding the people into thinking that early pensions, too many useless government workers, and 89% of the population evading taxes will ever work.

One thing is certain, the EU experiment in economic and political unity is dead. It's little more than a currency peg now and will go the way of all such pegs.

Hopefully the rest of Europe will come to their senses and reform their entitlement system.

Hope is not a plan. Ever heard of "extend and pretend?" One political misstep or miscalculation and it's back to Grexit, with the Germans holding the door.

They need to get rid of the excesses of the banksters and start to build real economies based on productive manufacturing and not financial manipulation.

Sure. All they need to do is figure out how an economic reform program for which no Greek government has a political mandate, that has been explicitly rejected in a referendum, and that has been forced through by sheer political blackmail will be made to work.

Goodbye EU, welcome Greater German Co-Prosperity Sphere.

[astonas]

Re: This is a Mistery?

Shockingly Stupid Sequence of Events

I am seldom stunned by political stupidity. In fact, I am surprised when I don't see it.

Yet, I have never witnessed a political reversal so shockingly stupid as we saw tonight from Greek Prime minister Alexis Tsipras.

You can always tell when someone doesn't have the slightest clue about what's going on.

They are shocked (shocked!) by the most obvious and predictable things. Mish is like a baby who thinks a toy vanishes from the world when it's hidden, and is stunned to see it again.

Tsipras' actions are not even a little surprising, neither his resistance, nor his capitulation. The need for Greece to make this into a game of "chicken" (in which they would give way) was set in 2010, when nations, rather than markets, became the overseers of reform. That is what made every meeting into a display of fireworks for the media, in which each side was forced to make a huge show of protecting their voters at home. Greece will probably have to continue to act in exactly the same manner in subsequent rounds, too, until they reject one of Europe's (dramatically fought-over!) unanimous offers.

Alternatively, they could "accept" the offer, but instead of seriously executing on their side of it, delay, and prepare quietly but rapidly for a grexit in a few months, when they can no longer pretend to be cooperating. The lack of preparation for the drachma is really what makes that particularly problematic at this moment (unless that was an uncalled bluff). Once they are in position to implement a sudden switch and devaluation default, they could do a grexit on their own terms, to shed odious debt, regain sovereignty, and eventually return to a market-overseen reform agenda.

Of course, if they'd done all this earlier, they could have avoided the intervening period of looting, too.

Whatever it is that is keeping the Greek public's desire to remain in the EMU so high, it is really expensive. I honestly do not know what that is. Pride? Belief in the European Ideal? I don't think, at this point, that it can be called economic self-interest.

[vt]

Re: Greece / Suicide Rate Surges 35% In 2 Years

Tsipras and the Greeks have been trying to live in a Euro Marxist fantasy land.

They reap what they sow by deluding the people into thinking that early pensions, too many useless government workers, and 89% of the population evading taxes will ever work.

Hopefully the rest of Europe will come to their senses and reform their entitlement system. They need to get rid of the excesses of the banksters and start to build real economies based on productive manufacturing and not financial manipulation.

[gnk]

Re: This is a Mistery?

And what was the alternative? What would anyone here have done differently?

Looks like there was no secret drachma plan after all, so my other theory holds - Tsipras was incompetent as a negotiator, didn't understand what the stakes really were, and was way over his head. Only when faced with the prospect of Greece actually becoming a failed state on the level of a third world country, with no banking system and requiring airlifts of food supplies and medicines, did choose the lesser evil.

Instead of a memorandum, he would be begging the EU for these:

11742771_10155983490675105_2856847225318691490_n.jpg

[santafe2]

Re: This is a Mistery?

I am seldom stunned by political stupidity. In fact, I am surprised when I don't see it.

Yet, I have never witnessed a political reversal so shockingly stupid as we saw tonight from Greek Prime minister Alexis Tsipras.

To your point...

[don]

Re: Greece / Suicide Rate Surges 35% In 2 Years




With the provocative and dramatic Greek "time out" language pulled from the final finmin and summit draft language, the two most humiliating aspects of the latest extend and pretend "deal" for the Greek people will be the return of the Troika's (surely we can call it the Troika again as part of the Greek capitulation) IMF mission to Athens, and the escrowing of some €50 billion in Greek assets in a liquidation fund.

Granted said fund will not be domiciled in Luxembourg as was originally envisioned, but Europe will still have control and first refusal rights over what are technically Greek properties, in the process Athens handing over about 25% of Greek GDP (and sovereignty) over the Brussels.

What are these assets? For the answer we go to the horse's mouth, Jeroen Dijsselbloem, who laid out the holdings of the proposed Greek privatization that would be sold off as follows: "it still is going to be an independent fund, valued at €50 billion which can be airplanes, airports, infrastructure and most certainly banks.”
Bloomberg quotes the Eurogroup finmin president:

They will be brought in with the target to privatize those in the coming years, but we will take our time for that.

We then hope for proceeds of EU50 billion, but that will be clear later.

The banks first have to be refinanced from this aid program, but after that I take it that they’re worth money and then we can sell them.

The proceedings are aimed at lowering Greece’s national debt.

In other words, Greece will be liquidated piecemeal to repay creditors. In even other words, the proceeds from the Third Greek Bailout will not only not reach the Greek people, but Greece will have to sell itself in pieces to top off the creditors' funding needs.

Dijsselbloem concludes: "That is good for Greece, but also good for us. We are in the end the ones from whom the money is borrowed."
It was not exactly clear why this would be good for Greece.

So for all those curious, here are some of the "assets" that already have, or soon will hit Ebay.


The only caveat: when (not if) Greece defaults again, and it is time to collect on Europe's secured DIP loan (which is what the Third bailout really is) collateral because not even the French socialists can push for a fourth bailout, good luck trying to repossess Aegean islands or the Santorini ferry terminal.

Oh, and for those struck by a case of deja vu, the €50 billion privatization "plan" is nothing new: it was first proposed by the IMF in 2011. This is what happened next:


What does the IMF say now about this latest privatization proposal? "Not realistic."

Which may be a problem for Greek banks since as the summit deal envisions, half of the privatization "proceeds" will go to recapitalize Greece's insolvent banks. Proceeds which the IMF projects will be about €2 billion until 2018!

This is a problem because with this implicit admission that the Greek financial sector will effectively never receive the needed funds to remain stable, any ELA increase by the ECB will be promptly used by Greek depositors to yank as much money as they can, awaiting the next weekly dose of monetary generosity from Mario Draghi, as both capital controls and the Greek bank run remain a permanent fixture of Greek daily life.

[gnk]

Re: Greece / Suicide Rate Surges 35% In 2 Years

I'm not feeling relief yet. This thing has to be implemented - does Greece have the political will? Heads are going to roll at Syriza, the extreme elements removed, and Tsipras is going to have to cooperate with the opposition.

And to think, just about two years ago, Tsipras was the leader of a minor party that voted against Memorandum #2 and blasted the establishment parties for passing it.

And now? The strictest memorandum ever, being pushed by Marxists no less!? I guess Tsipras was able to envision what economic collapse would do to Greece and himself.

SYRIZA, welcome to reality.

[GRG55]

Re: Greece / Suicide Rate Surges 35% In 2 Years

- enough time has passed to allow sufficient amounts of Greek debt to be transferred to the public ledger, thus removing most of the consequences of default from the European banking system

- a default was always inevitable; unlike some years ago the consequences for Greece are now much greater...the present government can't be held responsible for that.

- I still see no logical or rational reason for Greece to leave the currency union; if it happens it will be a political mistake rather than a calculated economic decision.

The all night session was worthy of a union labour negotiation; keep everyone up all night until they are so exhausted a deal gets done

Euro zone strikes deal with Greece after all-night struggle

Mon Jul 13, 2015 7:51am EDT

Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros bailout to keep the near-bankrupt country in the single currency.

The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity and could fracture his government and cause an outcry in Greece.

"Clearly the Europe of austerity has won," Greece's Reform Minister George Katrougalos said...

...If the summit had failed, Greece would have been staring into an economic abyss with its shuttered banks on the brink of collapse and the prospect of having to print a parallel currency and in time, exit the European monetary union.

"The agreement was laborious, but it has been concluded. There is no Grexit," European Commission President Jean-Claude Juncker told a news conference after 17 hours of bargaining...

...In almost the only concession after imposing its tough terms on Tsipras, Germany dropped a proposal to make Greece take a "time-out" from the euro zone that many said resembled a forced ejection if it failed to meet the conditions.

Tsipras was subjected to a 17-hour browbeating by leaders furious that he had spurned their previous bailout offer on more favorable terms in June and held a referendum last week to reject it. Only France and Italy worked to try to soften the terms being imposed on Greece...

[gnk]

Re: This is a Mistery?

Varoufakis had been telling Tsipras all along that the world will experience an economic meltdown if the EU did not capitulate to Greek demands.

When the markets yawned after the IMF payment went in arrears, that's when the EU knew it could turn the tables.

Furthermore, the Greek gov was not prepared with a drachma plan, so it would be a greek economic implosion.

That's it really. No tinfoil req'd.

[don]

This is a Mistery?

Shockingly Stupid Sequence of Events

I am seldom stunned by political stupidity. In fact, I am surprised when I don't see it.

Yet, I have never witnessed a political reversal so shockingly stupid as we saw tonight from Greek Prime minister Alexis Tsipras.

For months on end Tsipras claimed he would not accept blackmail by Germany. He rejected Germany's "final offer" in favor of a referendum.

He encouraged Greek citizens to vote "no" to the bailout referendum. Then they did, by an overwhelming majority.

Breathtaking Political Capitulation

Tonight, Tsipras reversed himself 180 degrees, and accepted the newest "final offer" that was far worse than the one he turned down a short while ago.

The deal so harsh that I agreed with Paul Krugman's description of "grotesque".

Specifically, Krugman said of the latest deal "This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for."

Whether or not one believes in the eurozone, and no matter what side one takes in the debate, there is no question regarding Krugman's description.

Creditor Demands

For the complete list of creditor demands, please see Tsipras' Choice: Total Capitulation or Grexit; Text of 4-Page Eurozone Demands.

Germany demanded, amongst many other things, that Greece put up €50 Billion in collateral (no doubt islands and state businesses at bargain basement prices).

The creditor demands remind me of the war reparations at the end of WWI that ultimately collapsed Germany and led to WWII. That may be a bit of an exaggeration, but that is what comes to mind.

ThisIsACoup

Following months of rants against Germany and the Troika, culminating in a referendum in which the Greek people overwhelmingly agreed the deal was a bad one, Tsipras bowed down and accepted a far, far worse deal.

In Critics Flock to Site "ThisIsACoup"; Killing the European Project; Illusions; Who's Going to Pay?, I offered my take on why the eurozone would fail.

I still stand by that analysis. The eurozone remains fatally flawed.

Who's Going to Pay

In spite of this stunningly idiotic reversal, I still maintain that one way or another, Germany will pay a price (by bailout, by default, or by destructive breakup).

Only the timeline and who gets the blame has changed.

Tsipras Trades Royal Flush for Draw at Inside Straight

Tsipras won the game. He had the backing of Greek citizens no matter what he did. The opposition party leader and former prime minister resigned following the "no" vote in the referendum.

Blame for Grexit was squarely in the Germany's hands. And it was even in the best interests of Greece to default.

Tsipras traded all that away for nothing!

Questions

• [*=left]Did the US bribe Tsprias with a secret account worth millions?
  [*=left]Is someone holding his kids hostage?

If one of those (or something similar) does not explain the reversal, then what does?

http://globaleconomicanalysis.blogsp...hOgEE4uf87f.99

[Polish_Silver]

Grexit vs repayment

I suspect Piketty might be asking for something that is already in the works, perhaps even baked into the mysterious "Plan B".

I think Germany will still assist Greece in minimizing the extent of any humanitarian crisis, and that will probably include direct financial transfers or writing off large chunks of remaining debt. The issue from the germanic perspective was never as much about getting their money back as about ensuring that whatever "Europe" it was in (however large or small that winds up being) plays by the rules they see as essential for long-term economic success . . .

Astonas, that makes a lot of sense. However, "playing by the rules" has not been done consistently. Virtually every nation in the EU has violated the budget deficit rules, and the punishments have never been imposed. One also has to wonder how Greece got into the EU in the first place. What has changed to prevent similar future calamities?

The EU needs to have rules which are "self enforcing" that is, not subject to political tampering. If properly structured, market forces would be the enforcement mechanism. I read many times that banks were required to treat all sovereign debt as equal. That is why the banks loaded up on PIG debt---they were legally required to. So the very rules of the EU prevented market forces from imposing restraint on debt levels, and now people are blaming the banks. The banks could have made a stink, but they probably knew they would get bailed out. To me, it's a politically contrived system that is inconsistent with market and behavioral forces.


I watch Deutsche Welt and they interview a Greek merchant, he claims he won't be able to import goods on a Drachma system because the devaluation will be so great. What he should say is that the exchange rate would make the imported goods to costly for Greek salaries. So he is really saying that Greek consumption is being subsidized by the Euro.

[gnk]

Re: Galbraith on Greece

from the above article:

What's at stake?

What is at stake is a rather heroic rebellion by a very beleaguered people against a doctrine which has been destroying their lives — the austerity doctrine and the whole neoliberal project. For the rest of us, what is at stake is whether we have the moral courage and the sense of ethical responsibility to stand up to it.

Now read this: (Somewhere in the middle, is the true story)

Zakynthos, Greece — The Venetians who ruled this island paradise for centuries called it the Flower of the East. Much more recently some Greeks have called it “to nisi ton tiflon,” or “the Island of the Blind.”

This island in the Ionian Sea is famous for its sublime beaches and sparkling turquoise waters. It is also where one of the most brazen scams to plunder Greece’s beleaguered treasury took place.

In a notorious scheme that may provide guidance to eurocrats trying to figure out whether this country deserves another big bailout this Sunday, as many as 700 people of the island’s 35,000 residents falsely claimed that they were blind. They were rewarded with more than 350 euros ($477) a month in compensation.

A leading local politician and an ophthamologist were said to be the ringleaders, although in a lovely twist the medical documents that some of the “blind” provided to the authorities to get their money had been signed by a urologist.

The scheme, which operated for years, was finally shut down in 2011 after one of the “blind” was said to have been caught driving his Porsche. Among the cheats receiving the monthly stipend, which cost the government several million euros a year, were a taxi driver and a hairdresser, according to Greek media reports at the time and many foreign news sources which reported the fraud and others involving entitlements with great enthusiasm.

The epicentres of this trickery were from the hamlets of Kalipodo and Kipseli. The communities are a few minutes drive north of the town of Zakynthos where Russian oligarchs and Hollywood royalty tie up their mega yachts across a promenade that is as pretty as any on the Mediterranean Sea.

When I stopped by Kalipodo a few residents were enjoying the evening air and the buzz of cicadas on the balconies of their pastel-coloured homes, which were secluded in a lush maze of leafy palm trees and bougainvillea. None of them was willing to speak with me. However, a few of their neighbours in Zakynthos were.

“This is a beautiful place and people come from all over to admire it, but every village has its donkeys. I don’t feel guilty,” said Spartakos Delianis, who was a mathematics professor before becoming a restaurateur.

“I know from a good friend of mine who grew up in Canada before returning to Greece that your country was built on the rules of Her Majesty. Every country has its own mentality and it has never been the same as that here. What we have is the mentality that rules are made to be broken.”

To make his point, Delianis pointed at the motor bikes that constantly roared past his seaside restaurant. Although not wearing a helmet carries a mandatory 350 euro fine the law is rarely enforced.

Nobody on Zakynthos wore a helmet because being Greek permits “the freedom to break the law,” Delianis said. “When my son sees that nobody wears a helmet he thinks he, too, doesn’t have to wear one.”
Anastasia Pomoni, who worked at the airport, smiled when asked whether the sobriquet, “Island of the Blind” was deserved.

“I don’t see anything that I can do about this,” she said. “It was a common secret here, but this is not the only place in Greece where this kind of thing goes on. This is a beautiful island where some people tried to earn money too easily. Just look at the voters’s lists. Of 100 names on the list 20 of them are dead and some of them died a long time ago.

“To be honest, with the system we have in Greece, nothing shocks me any more.”

As Delianis bluntly put it, “In Greece the fish stinks from the head.”

The whole debate about Greece and its use of the euro since 2001 would never have arisen if the country had told the truth about its finances from the outset. As it finally admitted to the EU in 2004, it had intentionally cooked its books, underestimating the deficit, specifically so that it would be eligible to join the euro zone gravy train.

Guesses vary about how much money is lost through tax evasion and tax avoidance, with estimates ranging as high as 20 billion euros a year. Proving this with any precision is difficult, but the University of Chicago produced a paper that suggested that since four Greeks in five reported that they owed more than what they earned, but were somehow able to pay their debts off, they were obviously grossly under reporting their real incomes. In what may or may not come as a surprise, the statistics indicated that accountants were found to be the leading offenders.

There are many egregious examples of entitlements gone berserk. One of the better known ones was that until a few years ago about 40,000 unmarried daughters of deceased public service workers received 550 million euros per year. The rule now is that these daughters can no longer receive a share of their late fathers’ pensions after they reach the age of 18. But Greece’s Court of Audit is considering whether sons should be entitled to retroactively claim this bounty because they had been victims of sex discrimination.

“I cannot say this is right,” Anastasia Pomoni said. “There is a sense today that we are bad because we do not pay what we should, but we are not all bad.”

Countering Zakynthos’s reputation as “the Island of the Blind,” she recalled the island’s heroism in successfully hiding every one of its 275 Jews during the Nazi occupation.

Nobody did any jail time for the fraud scheme in Zakynthos. Those who were caught were ordered to repay their ill-gotten gains in installments. According to local police, they are still doing so.

Several islanders reacted with fury when told I was doing a story about how many of them had claimed to be blind. Spartakos Delianis seemed bemused by the enquiries.

“It was a beautiful idea to be in Europe, but we started from a different point than the other countries,” he said. “You judge Greeks from a Canadian point-of-view. But what we have here is an invisible system. You can bang your head against this wall, but you can’t smash it.”

National Post

[KGW]

Re: Galbraith on Greece

His latest thoughts: http://ineteconomics.org/ideas-paper...uropean-elites Again, the U.S. uber alles fails! Yeah, baby!

[don]

Re: The cash fix?

the Austrian Solution?