Piketty: Germany Has Never Paid Its Debts

[Valmy]

No, the point is the smartest people around should not have failed so miserably in choosing the wars that they did fight.  That's right GWII I am looking at you.

Indeed. We are morons. When I said we are not the smartest guys around I was implying we are very much not the smartest guys around. And even though this has pretty much been true since the second generation took over after the revolution we still somehow ended up in charge of everything. Actually that is probably why 

The British were all: "Ok this sucks who is stupid enough to want to do this job?"

[crazy canuck]

The British were all: "Ok this sucks who is stupid enough to want to do this job?"

[derspiess]

No, the point is the smartest people around should not have failed so miserably in choosing the wars that they did fight.  That's right GWII I am looking at you.

Indeed. We are morons. When I said we are not the smartest guys around I was implying we are very much not the smartest guys around. And even though this has pretty much been true since the second generation took over after the revolution we still somehow ended up in charge of everything. Actually that is probably why 

The British were all: "Ok this sucks who is stupid enough to want to do this job?"

  Stop sucking up to the foreigners.

[Valmy]

  Stop sucking up to the foreigners.

We pretty much don't know shit outside of our borders and we have a hell of a time caring. Having us decide the outcome of shit in Asia and Africa is silly. Yet we have to.

I thought you were on the 'oh how I wish we could just be isolationist again, fuck these clowns' train with Ed.

[Admiral Yi]

Has Greece actually requested a debt write-off?

[citizen k]

Germany concedes Greece needs debt relief; Greek plan awaited
Reuters By John O'Donnell and Angeliki KoutantouBy John O'Donnell and Angeliki Koutantou

FRANKFURT/ATHENS (Reuters) - Germany conceded on Thursday that Greece would need some debt restructuring as part of any new loan program to make its economy viable as the Greek cabinet raced to finalize reform proposals to avert an imminent economic meltdown.

The admission by German Finance Minister Wolfgang Schaeuble came hours before a midnight deadline for Athens to submit a reform plan meant to convince European partners to give it another loan to save it from a possible exit from the euro.

Greece has already had two bailouts worth 240 billion euros from the euro zone and the International Monetary Fund, but its economy has shrunk by a quarter, unemployment is more than 25 percent and one in two young people is out of work.

Schaeuble, who has made no secret of his scepticism about Greece's fitness to remain in the currency area, told a conference in Frankfurt: "Debt sustainability is not feasible without a haircut and I think the IMF is correct in saying that.

But he added: "There cannot be a haircut because it would infringe the system of the European Union."

He offered no solution to the conundrum, which implied that Greece's debt problem might not be soluble within the euro zone.

But he did say there was limited scope for "reprofiling" Greek debt by extending loan maturities, shaving interest rates and lengthening a moratorium on debt service payments.

European Council President Donald Tusk, who will chair an emergency euro zone summit on Sunday to decide Greece's fate, joined growing international calls for Athens to be granted some form of debt relief as part of any new loan deal if Prime Minister Alexis Tsipras finally delivers convincing reforms.

Tsipras chaired a marathon cabinet meeting to finalize a package of tax hikes and pension reforms to send to euro zone authorities in a race to secure agreement at the weekend on a third financial rescue.

The leader of his junior coalition partner, Defense Minister Panos Kammenos, told reporters the Greek proposal had been approved by the cabinet and would be submitted shortly.

Tusk said a realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors.

"Otherwise, we will continue the lethargic dance we have been dancing for the past five months," he said.

Failure to reach a deal on Sunday, including releasing some money to enable Athens to cover debt service over the next few weeks could lead to a collapse of Greek banks next week.

If there is no agreement, all 28 European Union leaders will discuss measures to limit the damage from a Greek collapse, including humanitarian aid, possible border controls and steps to mitigate the impact on neighbors, EU officials said.

DRAGHI DOUBTFUL
Just how uncertain the coming days are was highlighted when

European Central Bank President Mario Draghi voiced highly unusual doubts about the chances of rescuing Greece.

Italian daily Il Sole 24 Ore quoted the ECB chief, under growing fire in Germany for keeping Greek banks afloat, as saying he was not sure a solution would be found for Greece and he did not believe Russia would come to Athens' rescue.

Asked if a deal to save Greece could be wrapped up, Draghi said: "I don't know, this time it's really difficult."

The ECB is keeping shuttered Greek banks afloat with emergency liquidity capped until the weekend.

Even France, Greece's strongest supporter in the euro zone, acknowledged it was working on scenarios for a Greek exit from the currency area if weekend efforts to clinch a deal fail.

Under the agreed timetable, the leftist Greek government, which formally applied on Wednesday for a three-year loan from the European Stability Mechanism bailout fund, has until midnight to present convincing, detailed reform proposals.

Having won a thumping referendum majority to reject the austerity terms of a previous bailout plan, fired his turbulent finance minister and secured support from opposition party leaders, Tsipras is in a stronger position to impose tough measures and face down resistance at home.

But in a sign of the some of the challenges he will face, the leader of the far-left wing of his Syriza party came out to denounce any imposition of harsh measures on Greeks.

"We don't want add to the past two failed bailouts a third bailout of tough austerity which will not give any prospects for the country," Energy Minister Panagiotis Lafazanis said.

According to Athens daily Kathimerini, Greece is planning a reform package worth 12 billion euros over two years, more than previously planned to offset a return to recession after months of difficult negotiations with creditors.

Instead of growing by 0.5 percent this year, months of uncertainty and almost two weeks of capital controls mean "there are estimates of a recession of about 3 percent", Kathimerini said. Greece emerged only last year from a deep recession that shrank its economy by a quarter over six years.

Tougher measures may face resistance from the hard-left wing of Tsipras' Syriza party and from his junior coalition partner, the right-wing nationalist Independent Greeks.

European officials told Reuters on Wednesday that some large Greek banks may have to be shut and taken over by stronger rivals as part of a restructuring of the sector that would follow any bailout of the country.

One official said Greece's four big banks - National Bank of Greece, Eurobank, Piraeus and Alpha Bank - could be reduced to just two, a measure that would doubtless encounter fierce resistance in Athens.

German Bundesbank chief Jens Weidman said capital controls should remain in force in Greece until there was any deal, and that the ECB should not increase its liquidity assistance for Greek banks, without which they may collapse next week.

[The Minsky Moment]

Piketty: Nonsense! This had nothing to do with moral clarity; it was a rational political and economic decision.

That's the key point.  All this talk about morality and obligation and hypocrisy is a waste of breath.  It's silly to put the entire European project at risk and cause over a matter that is virtually immaterial as an economic matter at the European level.

Piketty is also right that historically high indebtedness has been addressed by a combination of primary surplus, moderate inflation and/or some form of reduction/forgiveness.  Greece actually delivered the primary surplus but the problem is that the Euro makes moderate inflation impossible, and for reasons I can't fathom, debt reduction wasn't addressed earlier when it could have made a bigger difference politically.

[derspiess]

  Stop sucking up to the foreigners.

We pretty much don't know shit outside of our borders and we have a hell of a time caring. Having us decide the outcome of shit in Asia and Africa is silly. Yet we have to.

I thought you were on the 'oh how I wish we could just be isolationist again, fuck these clowns' train with Ed.

Sure, but I avoid the sucking up part.

[MadImmortalMan]

His suggestions on how to prevent ahistorically high indebtedness in the future are a bit weak. We need somebody with some real prevention ideas.

[Iormlund]

That's because there's no practical way to do that except federalizing economic policy.

[MadImmortalMan]

That's because there's no practical way to do that except federalizing economic policy.

I don't think so. There are market ways. Like stop using bad debts as good bank collateral. Regulators look at a bank that's loaded to the gills with dodgy bonds on the books and say yeah you're well-capitalized! Derp! Find ways to depress the market appetite for bad bonds. That would be way more effective a deterrent than any federal controls. One way to scare off investors would be to haircut the hell out of all the sovereign debt in Europe. 

[MadImmortalMan]

In other words, the customers should have stopped showing up at Greek bond auctions 100% of GDP ago. Why did they keep coming?

[The Minsky Moment]

We need somebody with some real prevention ideas.

Ban the business cycle
Outlaw depressions.
Mandate we ain't going to make war no more.
Legislate peace on earth and good will towards men.
Defecate rainbows.

[MadImmortalMan]

Shitting rainbows is more rational than buying Greek bonds. 

[Ideologue]

We need somebody with some real prevention ideas.

Ban the business cycle
Outlaw depressions.
Mandate we ain't going to make war no more.
Legislate peace on earth and good will towards men.
Defecate rainbows.

It can be done. Well, not the last one.