Europe's Populist Left

[Sheilbh]

That's a tiny snippet of the article much of which I disagree with and as I said I'm not sure about his conclusions here either.

However I agree that Eurozone people aren't thick. They know (and the Greeks know) that the debt isn't going to repaid. It's not economics, but politics and the whole extend-and-pretend charade that Syriza want to end is largely there precisely to maintain control of Greek (and other program countries) policies. Because if the creditor countries are going to pay for it they want to be reasonably in charge of what's happening and to avoid backsliding. (Debtors' prison and peonage comes in here, keeping an economically impossible debt ticking over to maintain control of Greece's policies.)

To get rid of that or change it (in the counter accusations about the statement last night apparently Schaeuble was insisting on 'extend' the program and Varoufakis on 'amend' the program) significantly isn't being rejected because it's a bad economic idea. As I say it's probably the way the creditors would get most of a return on their debt. The objection to it (which is why it would be 'harmful') is that it would allow Syriza to implement their policies, which is precisely why they want it. The debt and political issues are exactly the same. If the debt is reduced in any way then it enables the 'backsliding', if it is maintained then it will preserve the policies of this program and the next one when Greece has to roll-over debts of 160% of GDP.

So my view is that the best economic solution is to negotiate and, as I say, align the interests of both parties so Greece can improve as a going concern and the creditors can get the most of their money. Where we disagree is that I think many of Greece's problems aren't necessarily the ones that the program is trying to 'cure'. I think it's fundamentally a problem of governance. However I get the political concerns and as I've said a few times I'm not sure it would have been plausible with previous Greek governments (though maybe they should've been allowed to default). A large part of the reason I support debt relief here is because I think that Syriza do offer the opportunity for a genuine restructuring of Greek politics and society away from the corrupt, clientist duopoly that's operated since the junta.

I may be wrong and they may end up as corrupt as the rest of them, in which case the worst that happens is that we've maybe pushed the default and Grexit further down the road (I can't imagine Pasok or ND resurrecting enough).

Edit: On the thickness point, I then find Bank of America's Davos Vine page and think we're all doomed anyway

[Tamas]

No, but I think if the rest follows I can see how it could be from the Eurozone perspective.

Ultimately I'd give Syriza bridge financing as much for seeing if they'll actually start to restructure Greek society and politics, as to negotiate. Allow some 'humanitarian' laws but ask them to focus on their plans to destroy the oligarchic, clientilist structure of the economy and politics and to reduce tax evasion. How they perform on that would then influence how seriously the Eurogroup should negotiate.

But that is the thing. They start doing that and they are out of power before you could say "political idealism" :p

[Sheilbh]

No, but I think if the rest follows I can see how it could be from the Eurozone perspective.

Ultimately I'd give Syriza bridge financing as much for seeing if they'll actually start to restructure Greek society and politics, as to negotiate. Allow some 'humanitarian' laws but ask them to focus on their plans to destroy the oligarchic, clientilist structure of the economy and politics and to reduce tax evasion. How they perform on that would then influence how seriously the Eurogroup should negotiate.

But that is the thing. They start doing that and they are out of power before you could say "political idealism" :p

What do you think would happen?

Also the Eurogroup could even say they're giving bridging finance while they reorganise and restructure the troika in line with the ECB's withdrawal due to the likely ECJ ruling which would give even a little bit more cover.

[Zanza]

No but they're not micro-managed as program countries are. What is the point of voting in Greece or Portugal if it makes no difference? Especially if, as is the case in Greece, they vote for a party that is outside the corrupt duopoly that ran up their debts and have, in effect, gone outside the system? The Commission could still set broader fiscal and economic targets that would allow for different emphases within governments and more meaningful elections.

I can agree on not micro-managing these countries. I said so for a long time: a better fiscal position is not worth democracy and sovereignty. But saying that the EU Commission now somehow has a responsibility to make elections meaningful? I don't agree on that. The Greek government has a responsibility to make their elections meaningful by acting as a sovereign nation. With all consequences.

I do think more generally that as with the threats to member states' banks (Ireland, Cyprus, Greece possibly) and the technical governments (Greece, Italy) that there is an issue of democratic legitimacy that needs to be addressed in the Euro over the long run and I think the better way to do it is compromise and alignment of interests between elected governments, rather than coercion.

As I said, I agree on the coercion part. Democratic legitimacy is not something that the EU Commission of all institutions can give. What you propose will only lower the democratic legitimacy of the governments in other member states because the policies you propose are not what people there voted for or want.

[Sheilbh]

Something's moving again by the looks of it.

[The Minsky Moment]

You understand I hope Shelf, that it's always more enjoyable to spend a loan than it is to repay it.

No doubt.
But useful to keep in mind also there are different kinds of loans as well - some loans are akin to vendor financing where the lender is getting something more of the loan than just the payback on the loan terms.  They are getting a sale they otherwise wouldn't have gotten.

[The Minsky Moment]

They don't and it isn't what I meant. I don't think morality should come into it really as I think a large part of why we are where we are is an emphasis on morality tales rather than making things work again and making the Eurozone work.

Just so.
"Morality" says there is an obligation to pay back debts; but there is also the long tradition of the moral economy, and the moral obligation to release long-running debts as reflected in the ancient and oft-renewed tradition of the jubilee.  Playing the morality game leads right down the rabbit hole.

"Moral hazard" is unfortunately named in that sense - as a good homo economicus, one's concern is not that a particular course of action will give rise to incentives to act "badly" in the future, but rather to act in a way that is counterproductive or suboptimal as a matter of welfare outcomes.   Moral hazard is an issue that must be considered, but despite the terminology, it isn't a "moral" issue. 

[MadImmortalMan]

Just so.
"Morality" says there is an obligation to pay back debts; but there is also the long tradition of the moral economy, and the moral obligation to release long-running debts as reflected in the ancient and oft-renewed tradition of the jubilee.  Playing the morality game leads right down the rabbit hole.

History also says that the end result of sovereign debt is always eventually default. Yet buying bonds is usually seen as the safest investment and carries more "moral" value than other investments. And it's usually supported by regulatory advantage. Those investors who lost their money on bonds have also the legal structure to blame and not just their own failure to assess risk. If the law comes from a basis of morality, then maybe we're all to blame for making the rules favor these investments over others.


Also, I'd have probably borrowed a crapload of money when the jubilee was coming up. Just because.

[MadImmortalMan]

And jumping back to the state level, "you should not have given that loan" is not a valid reasoning, since not giving loans would have only hastened this collapse a few decades.

Maybe, but that outcome would have been better for everyone. They could never have dug themselves in so deep.

[frunk]

History also says that the end result of sovereign debt is always eventually default. Yet buying bonds is usually seen as the safest investment and carries more "moral" value than other investments. And it's usually supported by regulatory advantage. Those investors who lost their money on bonds have also the legal structure to blame and not just their own failure to assess risk. If the law comes from a basis of morality, then maybe we're all to blame for making the rules favor these investments over others.


Also, I'd have probably borrowed a crapload of money when the jubilee was coming up. Just because.

Sovereign debt is usually considered safest because during the good times it is the least volatile and during the bad times nothing is safe.

[Sheilbh]

I can agree on not micro-managing these countries. I said so for a long time: a better fiscal position is not worth democracy and sovereignty. But saying that the EU Commission now somehow has a responsibility to make elections meaningful? I don't agree on that. The Greek government has a responsibility to make their elections meaningful by acting as a sovereign nation. With all consequences.

I suppose my point is if the Commission (and ECB and Troika) didn't micro-manage, but the Commission was still setting broader necessary targets and reforms then there's space for a meaningful election. If the policies won't change - as those 40 pages of recommendations in the Portuguese program suggests they won't - then it's basically Kodos or Kang.

As I said, I agree on the coercion part. Democratic legitimacy is not something that the EU Commission of all institutions can give. What you propose will only lower the democratic legitimacy of the governments in other member states because the policies you propose are not what people there voted for or want.

Not really. I mean that's an argument that's ultimately against representative democracy. No-one voted for bank bailouts either - though they were necessary.

The difference with Greece is that the two mainstream parties have been wiped out and Greece has elected a radical alternative in an election that was specifically and solely about the program. I think that has to alter the discussion in the same way as if Germany somehow ended up electing AfD and the Left, or the UK UKIP and the Greens.

Looks a lot more positive. Of course, this is Europe so nothing will actually be decided until 5 in the morning in a Sunday night make-or-break summit. I half suspect they provide really good catering at the Lipsius.

As a Berlin correspondent put it the normal dynamic seems to be playing out. Schaeuble a stickler for rules and process even if it means Grexit while Merkel's more pragmatic and risk averse. Principle and big picture matters most - so if Greece reforms there's space for negotiations. As ever it'll ultimately come down to head of government, not the Eurogroup.

Greece and Germany are Working Towards a Compromise
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by Rebecca ChristieEleni ChrepaBirgit Jennen
7:07 PM WET
February 12, 2015

(Bloomberg) -- Greece and Germany are pursuing a deal on the conditions required to continue the Greek bailout as each side signals a willingness to compromise, according to government officials taking part in the talks.

Germany won't insist that all elements of Greece's current aid program continue, said two officials in Berlin. As long as the program is prolonged, they said, Germany would be open to talking about the size of Greece's budget surplus requirement and conditions to sell off government assets.

For its part, Greece is prepared to commit to a primary budget surplus, as long as it's lower than the current 4 percent of gross domestic product, according to Greek government officials. Prime Minister Alexis Tsipras's coalition also might be willing to compromise on privatizations, one of the officials said. All the officials asked not to be named because the deliberations are private and ongoing.

"Europe -- and this is Europe's success -- is always about finding a compromise," Chancellor Angela Merkel said as she arrived for a summit of European Union leaders in Brussels Thursday. "You make compromises when the advantages outweigh the disadvantages. Germany is ready for that, but you also have to say that Europe's credibility depends on us sticking to the rules and that we deal with each other in a reliable way."

Behind-the-scenes negotiations resumed in Brussels hours after euro-area finance ministers failed to reach a joint conclusion. The Greek side and euro-area experts are due to meet in Brussels tomorrow to discuss the way ahead as they struggle to decide whether to call the arrangement an extension, a new program or a bridge deal, officials said.

Mutually Viable

Greece's willingness to hold to more than two-thirds of its bailout promises shows that Greece is broadly prepared to stick to the program, the German officials said. Improving tax collection and fighting corruption will win German backing, and getting a deal will depend on Greece's overall reform pledges.

"I am very confident that all together we will find the mutually viable solution to heal the wounds of austerity, to tackle humanitarian crisis across the European Union and to bring Europe back to the road of growth and social cohesion," Tsipras told reporters as he arrived for the leaders' talks.

Greek bonds rose Thursday as euro-area ministers held out hope of a bailout compromise, with the yield on three-year notes falling 269 basis points to 18.05 percent. The benchmark Athens Stock Exchange General Index closed 6.7 percent higher at 846.48.

Greece and its partners are seeking a deal on some form of financing that gets them beyond the bailout's expiration at the end of February, keeps banks afloat, pays salaries and puts the euro area's most-indebted nation on a path to longer-term aid. Ultimately, Greece's place in the 19-nation currency union is at stake.

'Creativity' Needed

The respective policy positions suggest a deal is coming into focus after talks in Brussels collapsed early Thursday as ministers failed to agree on the wording of a joint statement. An accord could pave the way for Greece to extend its rescue program and assure its financing by as soon as Monday, when finance chiefs return to Brussels.

Belgian Prime Minister Charles Michel said "creativity" and "determination" will be needed to reach a fresh financial deal between Greece and the rest of the euro area. Michel and Tsipras met Thursday in Brussels, as the Greek premier sought "understanding" for his government's positions.

In a bid to restart work towards a solution, Tsipras also met Thursday with Dutch Finance Minister Jeroen Dijsselbloem, who heads meetings of his euro-region counterparts. The Greek side agreed to let a team of euro-area experts "engage with the Greek authorities to start work on a technical assessment of the common ground" on future financing, Dijsselbloem spokeswoman Simone Boitelle said in an e-mail.

The collegial conversation marked yet another reversal in relations between euro-area officials and Tsipras's government, which won last month's election on a platform of ending austerity and easing Greece's economic hardship.

Bridge Financing

Germany, the biggest country contributor to bailouts, has led calls for Greece to stick to its political promises regardless of any change in government, while France and Italy have been more sympathetic to Greek efforts to secure bridge financing while it works out a longer-term plan.

At Wednesday's finance ministers' meeting, Greece signaled it was prepared to ask for an extension to its aid program as long there were revisions to the specific terms attached, one euro-area official said. This marks a shift from Syriza's public pledges to end the current bailout and pursue only bridge financing agreements.

Greek Finance Minister Yanis Varoufakis, after consulting with Tsipras, balked at a pledge to extend the bailout program without a parallel pledge to amend it, according to euro-area officials. German Finance Minister Wolfgang Schaeuble left the meeting early, after which talks dragged on for hours as debate grew increasing tense, according to participants.

The Brussels summit was the first opportunity for Merkel to meet with Tsipras, who has vowed to free his country from German-led austerity. The two were pictured shaking hands and exchanging pleasantries in English.

[Sheilbh]

End of the EuCo (before midnight too!). But it looks positive despite a ten minute debate of whether or not to talk about Greece at this meeting

Juncker acknowledged 'we have heard the Greek government want to abolish measure because they are antisocial. Indeed they might well be antisocial.' And basically seemed to agree with the Greeks saying that they're looking to replace the objectionable 30% of the program with new measures budgetary and structural.

Tsipras said the 'troika and bailout memorandum as we knew them are gone', but mentioned reforms and said 'we are obliged to preserve European rules*', he didn't explicitly confirm whether there'd be an extension of the program or not. Everyone said how much more work to do and how much needs to be done for Monday but a deal does look more likely.

I do like Tsipras's refreshing honesty answering a question from a Spanish journalist, 'Mr Rajoy was a little uneasy at Council with regard to Greece. He is wrong to externalize domestic political concerns'

I also wonder if there's something refreshing, even for jaded pols and Eurocrats, about dealing with politicians in Tsipras and Varoufakis who come from a party that only got into Parliament in 2009 and that clearly want to actually achieve something rather than just get to the top of the pile.

*Again with the 'rules'. I noticed Sapin and Merkel have talked a lot about 'rules' and I think it's important, because there's a difference between European 'rules' and the details of the program. I think that might be a spot for wiggle room.

Edit: Another Tsipras line 'the troika - this troika with no legitimacy - no longer exists'. The concession seems to have been that it'll be an extension of the program. And Tsipras' view was 'if there's a technical agreement on Monday it means there'll be a political agreement too'.

[citizen k]

[alfred russel]

Among the options in the picture, Greece should go with the ouzo.

[Martinus]

And then there is this: