Europe's Populist Left

[Iormlund]

The fuckers could at least wait until I get my German bank account up and running.

[Sheilbh]

Looks like four month extension agreed. Moscovici tweets 'on avance, on avance, on avance'

[Sheilbh]

Ah... Looks a bit like a four month extension until Monday.

[Valmy]

Those are four very short months indeed.

[Sheilbh]

So far this looks very similar to the Varoufakis letter. Change seems to be in timing.

[Martinus]

Those are four very short months indeed.

[Zanza]

So far this looks very similar to the Varoufakis letter. Change seems to be in timing.

How so? Sounds to me like they just continue the status quo for four months. Which is what Germany wanted.

The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.
In light of these commitments, we welcome that in a number of areas the Greek policy priorities can contribute to a strengthening and better implementation of the current arrangement.
The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions [that's the new name of the Troika].

[Sheilbh]

Lagarde is interesting () she's referred to statement as very dense and very deep and said 'read it very carefully'...

[Zanza]

http://www.economist.com/blogs/buttonwood/2015/02/greece-and-eu

Greece and the EU
More on debt and democracy
Feb 20th 2015, 14:08 BY BUTTONWOOD

THIS could be the day when Greece and the EU do a deal on debt and reform; it could be the day when everything falls apart; or (most likely) it could be the day when agreement is postponed until next week. Hopes have been repeatedly raised, then, dashed - particularly yesterday when Greece appeared to retreat on the semantics by asking for an "extension" of the loan, rather than a completely new deal. There is clearly scope for compromise in terms of allowing Greece to run a much smaller primary surplus (the bigger the surplus, the bigger the fiscal contraction) and by further extending loans; the trickier points to resolve are on the extent of Greek economic reforms. Greece's parliament is due to vote today on a series of social reforms, some of which may not be liked by its EU partners.

The crisis has raised a wide range of issues, from the rights of creditors and debtors, the (in)effectiveness of eurozone austerity, the political impact of the suffering of the Greek population (and its implications for other EU nations), the need to reform Europe's ageing economy (7% of the world's population, 25% of its GDP and 50% of its social costs, as Angela Merkel has remarked), and so on. But the issue that still fascinates this blogger is the relationship between debt and democracy.

When a family or a company borrows money from a bank, the decision-making process is irrelevant to the rights of the parties; no-one can say "Well, the finance director took out that loan, but that's not the responsibility of the rest of the business". When it comes to sovereign nations, we generally regard their international responsibilities as extending beyond the limits of a single administration. Treaties still apply, unless formally revoked; debts must be honoured. The world has made an exception for debts that were incurred by a dictatorship, particularly in cases where leaders clearly siphoned off the proceeds; these are regarded as onerous debts and can be forgiven. This isn't the case with Greece, which has been a democracy since 1974.

In practice, of course, enforcing a claim against a sovereign has always been difficult, as lenders discovered back in the middle ages. Whereas there are courts to settle claims between individuals, companies and banks, there is no established procedure for settling sovereign debts. Since 1945, a country that is struggling to refinance its debts can ask for money from the IMF, but this comes with conditions attached. Such conditions override the wishes of voters.

Countries can simply default on their debts; this may cut them off from international finance for a while but eventually lenders forgive. After all, a country that has written off part of its debts is a better credit risk since its debt service costs have plunged. But there are likely to be short and medium-term costs. Initially, the country will have to balance its books until the lenders recover their courage; when it does return to the markets, its initial borrowing costs will be high.

The Greeks neither want to default, nor to borrow money from the EU on the terms currently on offer (initially they seemed to reject the idea of monitoring their adherence to any changed conditions as well). This is what Syriza had promised voters. As the elected government, Syriza has the right (indeed the duty) to negotiate the best deal for its voters. But by the same token, the governments of other EU nations have the right and responsibility to negotiate the best deal for their voters. These aims may well be in conflict.

Some might say the aims need not be in conflict; an end to austerity and a revived Greek economy would be good for everyone. Perhaps that is true. But it doesn't appear to be what EU voters, particularly in Germany, feel. And if they don't feel that, then there is no democratic argument for the rest of the EU giving in. Instead one has to adopt the argument that German voters are wrong and should be overruled. But that rather negates the argument that the EU-Greek crisis is a negation of democracy.

If the EU were a true nation like the US then these issues could be debated in a national parliament and aid could be sent to Greece rather as fiscal spending is diverted to Louisiana or Mississippi. But that would mean a very real loss of local control for Greek voters, who would have a very small weight in an EU electorate; it would probably mean an EU-wide retirement age, benefits system, tax collection agency and the rest. It would be democratic but not the kind of democracy they might like. True solidarity would mean pooling sovereignty in this way. But it is not just the Greeks who might not like this; the Scottish nearly left the UK last year after 300 years of putting up with a similar arrangement.

[Admiral Yi]

The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.

Translation: "we will default soon."

Can someone explain to me the motivation for parties to these talks not to call a spade a spade?

[citizen k]

Lagarde is interesting ( )

[citizen k]

The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.

Translation: "we will default soon."

Can someone explain to me the motivation for parties to these talks not to call a spade a spade?

Gotta keep those plates spinning.

[mongers]

The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.

Translation: "we will default soon."

Can someone explain to me the motivation for parties to these talks not to call a spade a spade?

Gotta keep those plates spinning.

Greeks are notorious for not stopping airborne plates from breaking.

[Sheilbh]

The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement. The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.
In light of these commitments, we welcome that in a number of areas the Greek policy priorities can contribute to a strengthening and better implementation of the current arrangement.
The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions [that's the new name of the Troika].

I think it depends where you place the emphasis. Key sections of the Varoufakis' letter for comparison:

The new government is committed to a broader and deeper reform process aimed at durably improving growth and employment prospects, achieving debt sustainability and financial stability, enhancing social fairness and mitigating the significant social cost of the ongoing crisis.
...
(a) To agree the mutually acceptable financial and administrative terms the implementation of which, in collaboration with the institutions, will stabilise Greece's fiscal position, attain appropriate primary fiscal surpluses, guarantee debt stability and assist in the attainment of fiscal targets for 2015 that take into account the present economic situation.
(b) To ensure, working closely with our European and international partners, that any new measures be fully funded while refraining from unilateral action that would undermine the fiscal targets, economic recovery and financial stability.
...
(d) To extend the availability of the EFSF bonds held by the HFSF for the duration of the Agreement.
...
With the above in mind, the Greek government expresses its determination to cooperate closely with the European Union's institutions and with the International Monetary Fund in order: (a) to attain fiscal and financial stability and (b) to enable the Greek government to introduce the substantive, far-reaching reforms that are needed to restore the living standards of millions of Greek citizens through sustainable economic growth, gainful employment and social cohesion.

Edit: Incidentally another section of the Eurogroup statement that seems remarkably similar to the Varoufakis letter:

The Greek authorities have expressed their strong commitment to a broader and deeper structural reform process aimed at durably improving growth and employment prospects, ensuring stability and resilience of the financial sector and enhancing social fairness. The authorities commit to implementing long overdue reforms to tackle corruption and tax evasion, and improving the efficiency of the public sector. In this context, the Greek authorities undertake to make best use of the continued provision of technical assistance.

[Sheilbh]

BTW Shelf, it would now appear that your line about Greece not wanting any more money was totally wrong.

No. It's now wrong.

The initial Greek position was that they didn't want anymore money from the institutions beyond €1.9 billion from the ECB which no-one objected to and was something to do with ECB profits on Greek debt. Beyond that they wanted permission under the MoU to issue €8 billion of short term T-Bills which would be bought, presumably by Greek banks who could in turn, if necessary, be recapitalised from the HFSF (which is made up money already disbursed). There's precedent for that, the Eurozone allowed it for the Samaras government in 2012.

Then the Greeks suggested some other ideas of 'bridging finance'.

Both were, however, totally unacceptable for the Eurozone who insisted that the only terms of discussion would be an extension of the current program. That was arguably the first big concession by Syriza.

And I don't see how simply "adjusting the interest payment schedule" gets them to 1.5 primary surplus, unless they are proposing conditional bonds with the possibility of negative interest.  They're only paying 2.04 at the moment.

They are proposing conditional bonds based on nominal GDP.

And given that, how is the Greek proposal reasonable?  We will at some point be giving you a haircut, but in the meantime please lend us some more money, because it will make our voters happy, if only in the short term.

There's two issues and sets of negotiations going on which I think you're confusing here.

The larger one is over their long-term deal. For that I think everyone knows roughly what the big terms will be, but obviously there's lots of detail (lower primary surpluses, amendment of reform program - but it's still there and still monitored, some fudge on the debt that keeps the principal the same but makes point 1 possible). It's under this that Syriza get to make their voters happy.

In December the last government was negotiating for their next tranche of the program. Every other tranche had been for six months and the previous Greek government haggled the Eurozone down to two months (according to Juncker) which basically meant that if they lost Syriza had about a month to negotiate a deal or the program would end and Greece would default. Obviously any negotiation over a long-term deal will take time because the details matter, in the meantime Greece faces a number of repayments or it defaults. Hence its need for some sort of bridging money to repay those loans while negotiations are ongoing.

I also think this is why Scaheuble's comments were an over-reach. I think there's very little appetite for forcing the issue of possible default and Grexit over a short-term loan before a newly elected government's really had the opportunity to haggle.

I think the reason this is four months rather than six is possibly because that is what it probably should've been if the last government hadn't played politics and, possibly because no-one wants to work in August

Then it's not the money that's tight, it's the individual risk that is too high.

The MoU includes limits on the T-Bills program countries can issue. Greece is already maxed out.

Can someone explain to me the motivation for parties to these talks not to call a spade a spade?

Default's unacceptable for everyone and, as Minsky says, in general it's better if debtors and creditors can negotiate a restructuring of the debt that works for them both than unilateral default.