ECB and Inflation

[citizen k]

Isn't Sheilbn comfy on a beach there right now? Hope he brought enough cash with him.

The capital controls do not affect tourists (they only affect cards issued by Greek banks). So he should be fine.

I heard on bloomberg that cabbies in santorini were getting stiffed because the tourists couldn't get cash out of atms.

[Martinus]

Mono, you are repeating this bullshit again despite this has been explained many times before. Greece now actually has a domestic surplus (thanks to very heavy austerity they implemented) - they *can* pay their civil servants, pensioners etc. What they can't pay is interest on their external debt. And they are perfectly happy to stop doing that without leaving the Euro.

Really?  At least, their banks don't seem to be able to pay their depositors without EU help.

I think capital controls are more about preventing a bank run. No bank in the world would be able to pay all their depositors at once.

[The Brain]

Isn't Sheilbn comfy on a beach there right now? Hope he brought enough cash with him.

The capital controls do not affect tourists (they only affect cards issued by Greek banks). So he should be fine.

I heard on bloomberg that cabbies in santorini were getting stiffed because the tourists couldn't get cash out of atms.

Why would you use cash to pay a cab?

[Monoriu]

Mono, you are repeating this bullshit again despite this has been explained many times before. Greece now actually has a domestic surplus (thanks to very heavy austerity they implemented) - they *can* pay their civil servants, pensioners etc. What they can't pay is interest on their external debt. And they are perfectly happy to stop doing that without leaving the Euro.

Really?  At least, their banks don't seem to be able to pay their depositors without EU help.

I think capital controls are more about preventing a bank run. No bank in the world would be able to pay all their depositors at once.

I think the domestic surplus thing assumes a deal with the EU can be reached.  Absent such a deal and with capital controls in place, the economy will tank.  I find it hard to believe that they can stay in the Euro and refuse to honour their debts at the same time. 

[Martinus]

I don't see the point about getting angry with the Greek people, they are just being Greeks and have, unsurprisingly, failed to make the grade as pretend Germans. I prefer to blame the European elites who foisted this monster on a number of countries who should never have been in the frame for membership.

The EU has been putting the cart before the horse for some time now, hence the failures. We will not become primarily Europeans rather than Germans, French etc by executive fiat; it is a long process which will take decades of mingling. The impatience of the EU elite has set the project back by many years, they seem to have no understanding of human nature or think that it can be legislated away.

Precisely. And Juncker has been a prominent member of these elites for a long time yet he does not come close to acknowledging any political responsibility.

[Crazy_Ivan80]

Greece now actually has a domestic surplus

- Wasn't that like at the start of the year, before the communists made a mess of it and insulted everyone who's been pouring billions into that country of taxevaders.

- The bankrun -more like a bankwalk- has been going on for months now. To the tune of 90 billion euros total iirc.

- agree: the politicians who let in Greece in the euro need to be punished for their stupidity arrogance, incompetence,corruptness,megalomania....

(edit: stupidity was indeed too generous)

[The Brain]

It wasn't stupidity.

Edit: Thank you.

[Martinus]

Greece now actually has a domestic surplus

- Wasn't that like at the start of the year, before the communists made a mess of it and insulted everyone who's been pouring billions into that country of taxevaders.

- The bankrun -more like a bankwalk- has been going on for months now. To the tune of 90 billion euros total iirc.

- agree: the politicians who let in Greece in the euro need to be punished for their stupidity arrogance, incompetence,corruptness,megalomania....

(edit: stupidity was indeed too generous)

Well, you are a Belgian, so you don't get to diss other countries.

[Archy]

We may diss other countries,
because we're experts in all what can go wrong and because we're the first to diss our own country

[jimmy olsen]

The Krug says the Greeks should bolt.

http://www.nytimes.com/2015/06/29/opinion/paul-krugman-greece-over-the-brink.html?ref=opinion&_r=1

Greece Over the Brink

JUNE 29, 2015

It has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.

Leaving a currency union is, however, a much harder and more frightening decision than never entering in the first place, and until now even the Continent's most troubled economies have repeatedly stepped back from the brink. Again and again, governments have submitted to creditors' demands for harsh austerity, while the European Central Bank has managed to contain market panic.

But the situation in Greece has now reached what looks like a point of no return. Banks are temporarily closed and the government has imposed capital controls — limits on the movement of funds out of the country. It seems highly likely that the government will soon have to start paying pensions and wages in scrip, in effect creating a parallel currency. And next week the country will hold a referendum on whether to accept the demands of the "troika" — the institutions representing creditor interests — for yet more austerity.

Greece should vote "no," and the Greek government should be ready, if necessary, to leave the euro.

To understand why I say this, you need to realize that most — not all, but most — of what you've heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes. Government employment has fallen more than 25 percent, and pensions (which were indeed much too generous) have been cut sharply. If you add up all the austerity measures, they have been more than enough to eliminate the original deficit and turn it into a large surplus.

So why didn't this happen? Because the Greek economy collapsed, largely as a result of those very austerity measures, dragging revenues down with it.

And this collapse, in turn, had a lot to do with the euro, which trapped Greece in an economic straitjacket. Cases of successful austerity, in which countries rein in deficits without bringing on a depression, typically involve large currency devaluations that make their exports more competitive. This is what happened, for example, in Canada in the 1990s, and to an important extent it's what happened in Iceland more recently. But Greece, without its own currency, didn't have that option.

So have I just made the case for "Grexit" — Greek exit from the euro? Not necessarily. The problem with Grexit has always been the risk of financial chaos, of a banking system disrupted by panicked withdrawals and of business hobbled both by banking troubles and by uncertainty over the legal status of debts. That's why successive Greek governments have acceded to austerity demands, and why even Syriza, the ruling leftist coalition, was willing to accept the austerity that has already been imposed. All it asked for was, in effect, a standstill on further austerity.

But the troika was having none of it. It's easy to get lost in the details, but the essential point now is that Greece has been presented with a take-it-or-leave-it offer that is effectively indistinguishable from the policies of the past five years.

This is, and presumably was intended to be, an offer Alexis Tsipras, the Greek prime minister, can't accept, because it would destroy his political reason for being. The purpose must therefore be to drive him from office, which will probably happen if Greek voters fear confrontation with the troika enough to vote yes next week.

But they shouldn't, for three reasons. First, we now know that ever-harsher austerity is a dead end: after five years Greece is in worse shape than ever. Second, much and perhaps most of the feared chaos from Grexit has already happened. With banks closed and capital controls imposed, there's not that much more damage to be done.

Finally, acceding to the troika's ultimatum would represent the final abandonment of any pretense of Greek independence. Don't be taken in by claims that troika officials are just technocrats explaining to the ignorant Greeks what must be done. These supposed technocrats are in fact fantasists who have disregarded everything we know about macroeconomics, and have been wrong every step of the way. This isn't about analysis, it's about power — the power of the creditors to pull the plug on the Greek economy, which persists as long as euro exit is considered unthinkable.

So it's time to put an end to this unthinkability. Otherwise Greece will face endless austerity, and a depression with no hint of an end.

[Crazy_Ivan80]

The Krug says the Greeks should bolt.

http://www.nytimes.com/2015/06/29/opinion/paul-krugman-greece-over-the-brink.html?ref=opinion&_r=1

Greece Over the Brink

JUNE 29, 2015

Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes.

Raising taxes in a country where people don't bother to pay taxes...

[Monoriu]

From what I have read, the Greeks have done very little about raising money from privatisation, and they still spend quite a lot on their military. 

[Syt]

Considering that they guard the EU border in an area that is rife with conflict and streams of refugees, defense spending is one of the few things I have a problem with in regards to Greece. That they don't spend it in the most effective way is something else.

[Monoriu]

Considering that they guard the EU border in an area that is rife with conflict and streams of refugees, defense spending is one of the few things I have a problem with in regards to Greece. That they don't spend it in the most effective way is something else.

That's like an impoverished man arguing why he still needs to buy beer.  I mean, if they are in a desperate situation, then they should adopt desperate measures that put stabilising their public finances as top priority, i.e. willing to make the necessary sacrifices.  Instead of saying, oh we can't give up this and that. 

[Martinus]

Considering that they guard the EU border in an area that is rife with conflict and streams of refugees, defense spending is one of the few things I have a problem with in regards to Greece. That they don't spend it in the most effective way is something else.

That's like an impoverished man arguing why he still needs to buy beer.  I mean, if they are in a desperate situation, then they should adopt desperate measures that put stabilising their public finances as top priority, i.e. willing to make the necessary sacrifices.  Instead of saying, oh we can't give up this and that.

Not really, it's more like an impoverished man arguing he needs to buy a new lock and some security cameras. This may seem unnecessary if he lives in a safe, well of neighborhood, but if he lives in the middle of a ghetto, I don't think it would be unreasonable.