QuoteEnter Europe's new populist left movement
The prospect of populist left election victories in Greece and Spain this year is real. So real, in fact, that the survivors of the old, un-populist left from the 20th century have concluded, in advance, that disaster looms.
All across the social media you can, as you search for the words Podemos and Syriza, read as many denunciations from the hard left as you can critiques from the right.
Though insignificant in themselves, the pained outrage of these far-left groups is a signal that something big and real is happening in European politics. To me it looks like a new form of social democracy is being born - and one moulded to a very different set of priorities to those that guided Labour and its socialist variants in the 20th century.
It was the Bloomberg journalist Joe Wiesenthal who invented the term for it: "Tsiglesias" - a portmanteau for the Syriza leader Alexis Tsipras and Podemos leader Pablo Iglesias. But what does Tsiglesias actually stand for? When in office how might it react? And if successful, is it replicable across Europe?
Iglesias's party did not exist 18 months ago; Syriza - a more conventional product of the new left of the 1970s - has evolved both its politics and structure rapidly as the prospect of coming to power looms. But if you look at their respective manifestos, they are moulded around the 2014 Euro election programme of the European left, whose 52-strong group in the European parliament is four members bigger than Ukip's.
Debt restructuring
At the centre of the economic policy is debt restructuring: the proposal that the scale of debt reduction facing most of peripheral Europe is so large that it will suppress growth for a generation. A reversal of austerity, some mild fiscal expansion and the reversal or end of privatisation programmes completes the basic list.
Though this runs at odds with both the principles and rules of the eurozone, almost none of the new-left populist parties wants to leave it. Instead they propose the ECB becomes a true lender of last resort, using quantitative easing to revive consumption and manage debt forgiveness.
The new-left parties, in other words, want Europe to become a Keynesian fiscal union with a high welfare state. It is not the status quo but it is not what the Marxist professors who staff their economics departments dreamed of when they were on the streets in 1968 either.
The apoplectic reaction of free-market commentators to the possibility of a Syriza government in Greece, or a Socialist-Podemos coalition in Spain later this year, poses an interesting question, whose answer could shape politics in Britain just as much as in the Euro periphery.
Is a Keynesian welfare state, committed to public ownership and deficit-financed growth either possible, or permissible, in the European Union?
So far, much of what's driven Euroscepticism has been the desire of conservative voters in various EU countries to take back control of issues important to the right: migration, business regulation, crime, agriculture and foreign policy. There's been barely a glimmer of opposition to the EU project among traditional social democrats.
Taking leads from Greece and Spain
But the electoral logic of Greece and Spain may be about to change that. Within a month, Tsipras stands a 50:50 chance of becoming the Greek prime minister. Though he is ready for a prolonged negotiation with Frankfurt and Washington over debt reduction, he is pledged to cancel the austerity measures imposed by Greece's creditors on day one.
A clash with the ECB, the commission and probably parts of the Greek state are pretty likely thereafter - and the outcome will be watched closely across Europe. Because if basic Keynesianism and an expanded welfare state are not permissible, and if the European institutions are seen actively to collude with attempts to sabotage them, a change of sentiment about the EU on the centre-left might follow.
If you study the programme of the new European left, much of it is not economic. Podemos, which has recruited thousands of young activists from the indignado protest movement of 2011, led its manifesto with demands to repeal anti-protest laws, for abortion rights and for the right of Spanish regions independence.
Syriza's 2012 programme emphasised – as well as anti-austerity policies – demands like drug decriminalisation, de-militarisation of the police, withdrawal from Nato and recognition of Palestine.
The principles that radicalised young people across Europe in 2011-12, and which have continued to guide numerous protest movements since then, are summed up by the oft-repeated phrase: "I don't want to live in an economy".
The one thing Bolshevism had in common with mainstream social democracy was that they were defined by economic programmes. The new populist left has begun from the recognition that - in the highly marketised, globalised and granular economy created in the past 25 years – social justice begins at a small scale and from below.It is as much about restoring the power of agency to deprived and shattered communities, and autonomy to peoples lives, as it is about delivering percentage points against various economic measures.
And the absolute baseline for the youth swarming into the new left parties is that the state must get out and stay out of their private lives.
What about at home?
In Britain - beyond the one-man turbulence that is Russell Brand - the only political force that understood the power of these issues was the Radical Independence Campaign in the Scottish referendum. It promoted the idea that Scotland should become the "warm south of Scandinavia" - and if you think about it, all Podemos and Syriza are really trying to do is bring the Scandinavian model to the Aegean and the Med.
But here's the problem: in a neoliberal world, even the basic welfare state can look revolutionary. Most projections for the survival of free-market capitalism involve the creation of greater inequality, a smaller state sector and a lower-paid workforce.
It is, then, most likely not over some prolonged debt restructure process that a populist left government in Greece or Spain might clash with the Euro authorities and the local elites; rather, on "Scandinavian" issues like police demilitarisation, abortion, the re-regulation of the labour market or an attempt to provide basic humanitarian solutions for illegal migrants clamouring at the borders of both countries.
For more than a decade, radical demonstrators have held up banners saying "Another World Is Possible". This year we might get to see what phase one of that other world looks like. The question it poses for the EU institutions and the elites who run them is existential: is another strategy even tolerable?
The answer will make 2015 a critical year for the wider left in Europe. The whole crisis and decline of European social democracy after 2008 was triggered by the conviction that alternatives to austerity do not exist. For politicians like Ed Miliband, Francois Hollande and for that matter Jim Murphy, it is not the fate of Syriza they should be focused on but the fate of their own sister social-democratic party in Greece, Pasok. It, currently, stands on 4.6 per cent. Two years ago it ruled Greece.
However inexperienced, naive, and lacking in machine-party discipline the new populist left in Europe is, it is setting the agenda.
- See more at: http://blogs.channel4.com/paul-mason-blog/enter-europes-populist-left-movement/2835#sthash.olAVm565.1EV8qpwb.dpuf
I believe there's a party in Portugal which is consciously modelling itself on Podemos. In the UK the Greens are rising in the polls. I'd be amazed if something new doesn't emerge in France from the wreckage of a post-Hollande PS. Maybe Sweden's weird rainbow coalition is the future (hell there's a chance we may end up with a Labour-SNP-Green coalition :bleeding:).
There's always lots of talk about the populist right's challenge to mainstream conservatives, but they seem a lot more secure to me than the European centre left who, as with PASOK v ND or PD v Monti, seem to have little different to offer.
Can't say I blame anyone for voting hard left when nothing seems to work. The problem is that we will see a much more polarised political landscape and probably violence along with it.
Welcome to the 1930s. It's been a while.
Quote from: Norgy on January 04, 2015, 12:29:04 PM
Can't say I blame anyone for voting hard left when nothing seems to work. The problem is that we will see a much more polarised political landscape and probably violence along with it.
This scares me about Greece. Golden Dawn have always said they wanted a Syriza victory. They've got alleged links to the Greek intelligence and police services. And they're a party that openly uses violence as part of their politics. As you say that combination is very 1930s :(
It doesn't make sense for Podemos to join forces with the Socialists. Its strength lies in being so far untainted, outsiders in the established power structures. The leadership understands that, which is why they are pushing to forego local elections (thus remaining "virgins" until the next general election).
Unless they can form government by themselves, Podemos would be best served by having the Socialists join forces with the Populares, further dragging them both down.
Quote from: Sheilbh on January 04, 2015, 12:24:40 PM
Enter Europe's new populist left movement
if you think about it, all Podemos and Syriza are really trying to do is bring the Scandinavian model to the Aegean and the Med.
I know nothing about Yes We Can! but for Syriza this is codswallop. The Scandinavian model is high taxes, high benefits, consensual labor relations, and a Brave New Worldish education system. Syriza wants effortless comfort.
Quote from: Sheilbh on January 04, 2015, 12:24:40 PM
I believe there's a party in Portugal which is consciously modelling itself on Podemos. In the UK the Greens are rising in the polls. I'd be amazed if something new doesn't emerge in France from the wreckage of a post-Hollande PS. Maybe Sweden's weird rainbow coalition is the future (hell there's a chance we may end up with a Labour-SNP-Green coalition :bleeding:).
There's always lots of talk about the populist right's challenge to mainstream conservatives, but they seem a lot more secure to me than the European centre left who, as with PASOK v ND or PD v Monti, seem to have little different to offer.
No Podemos-like yet in Portugal. The local PS has a good shot at winning the elections later this year.
QuoteSyriza's 2012 programme emphasised – as well as anti-austerity policies – demands like drug decriminalisation, de-militarisation of the police, withdrawal from Nato and recognition of Palestine.
They just lost my vote. :mad:
Fucking Putipologists.
I can hope.
I would rather have the sensible left but if there's to be populism so far all I've seen is the hate filled right wing variety. At least with left wing populism people will be angry about actual problems rather than foreigners.
Quote from: Admiral Yi on January 04, 2015, 12:42:47 PM
Quote from: Sheilbh on January 04, 2015, 12:24:40 PM
Enter Europe's new populist left movement
if you think about it, all Podemos and Syriza are really trying to do is bring the Scandinavian model to the Aegean and the Med.
I know nothing about Yes We Can! but for Syriza this is codswallop. The Scandinavian model is high taxes, high benefits, consensual labor relations, and a Brave New Worldish education system. Syriza wants effortless comfort.
Do you base this view on anything in particular or is this just an assertion on your part? I am curious because I do not know enough about Syriza, and the article surely does not support that view.
Quote from: Martinus on January 04, 2015, 02:41:10 PM
Do you base this view on anything in particular or is this just an assertion on your part? I am curious because I do not know enough about Syriza, and the article surely does not support that view.
It's based on public statements from Syriza about raising the minimum wage, increasing public sector employment, etc.
Quote from: Sheilbh on January 04, 2015, 12:33:12 PM
Quote from: Norgy on January 04, 2015, 12:29:04 PM
Can't say I blame anyone for voting hard left when nothing seems to work. The problem is that we will see a much more polarised political landscape and probably violence along with it.
This scares me about Greece. Golden Dawn have always said they wanted a Syriza victory. They've got alleged links to the Greek intelligence and police services. And they're a party that openly uses violence as part of their politics. As you say that combination is very 1930s :(
In Greece, perhaps, but their politics has been pretty scary most of the time. Elsewhere, I doubt it.
Quote from: Admiral Yi on January 04, 2015, 02:42:56 PM
Quote from: Martinus on January 04, 2015, 02:41:10 PM
Do you base this view on anything in particular or is this just an assertion on your part? I am curious because I do not know enough about Syriza, and the article surely does not support that view.
It's based on public statements from Syriza about raising the minimum wage, increasing public sector employment, etc.
Would need to know what these are at the moment.
Quote from: Peter Wiggin on January 04, 2015, 01:01:48 PM
QuoteSyriza's 2012 programme emphasised – as well as anti-austerity policies – demands like drug decriminalisation, de-militarisation of the police, withdrawal from Nato and recognition of Palestine.
They just lost my vote. :mad:
Fucking Putipologists.
I don't think Greece leaving Euro-Atlantic structures would be such a bad thing, to be honest. Leftist social politics aside, they are not an asset to the European economy, have always been too chummy with Russia and are a constant troublemaker with their neighbours. And we could finally call Macedonia its proper name. :P
(I'm talking about them leaving Euro-Atlantic structures and not just NATO, as I don't think European leaders, especially Germany, will tolerate Syriza's politics if they fulfil their election promises).
Quote from: Martinus on January 04, 2015, 02:48:15 PM
Quote from: Admiral Yi on January 04, 2015, 02:42:56 PM
Quote from: Martinus on January 04, 2015, 02:41:10 PM
Do you base this view on anything in particular or is this just an assertion on your part? I am curious because I do not know enough about Syriza, and the article surely does not support that view.
It's based on public statements from Syriza about raising the minimum wage, increasing public sector employment, etc.
Would need to know what these are at the moment.
Doesn't matter, point is they need to pay for it, and Greeks don't pay taxes.
Quote from: Martinus on January 04, 2015, 02:45:22 PM
In Greece, perhaps, but their politics has been pretty scary most of the time. Elsewhere, I doubt it.
Yeah.
The story in the rest of Europe is fragmentation and the hollowing out and subsequent collapse of the mainstream. Which isn't necessarily 1930s but is still pretty grim.
Quote from: Liep on January 04, 2015, 02:51:23 PM
Doesn't matter, point is they need to pay for it, and Greeks don't pay taxes.
In large part because of the patronage politics of PASOK and ND. Even if you don't support Syriza's policies, I think it's inevitable that any change to the corrupt status quo has to come from outside the political groups who built it and benefited from it.
Quote from: Peter Wiggin on January 04, 2015, 01:01:48 PM
QuoteSyriza's 2012 programme emphasised – as well as anti-austerity policies – demands like drug decriminalisation, de-militarisation of the police, withdrawal from Nato and recognition of Palestine.
They just lost my vote. :mad:
Fucking Putipologists.
Breaking military ties with the west (while Turkey maintains them) would not seem to advance the Megali Idea or help them achieve enosis with Cyprus. :hmm:
Quote from: Sheilbh on January 04, 2015, 02:53:26 PM
Quote from: Martinus on January 04, 2015, 02:45:22 PM
In Greece, perhaps, but their politics has been pretty scary most of the time. Elsewhere, I doubt it.
Yeah.
The story in the rest of Europe is fragmentation and the hollowing out and subsequent collapse of the mainstream. Which isn't necessarily 1930s but is still pretty grim.
Personally, I think we will see the Obama effect play out in Europe as well - i.e. the outpouring of idealism / radicalism (depending on your perspective) ending up with the extremes being either compromised by their inability to govern or subsumed into the mainstream. So a bit of turbulence and things getting back to normal in 5-10 years.
Edit: We may see some change at the regulatory level, in the same way pre-war liberals adopted some socialist ideas. E.g. the Tobin tax adopted at the EU level (which would be a good thing).
Quote from: Sheilbh on January 04, 2015, 02:54:59 PM
... Even if you don't support Syriza's policies, I think it's inevitable that any change to the corrupt status quo has to come from outside the political groups who built it and benefited from it.
And the same can be said of Podemos. Their program is downright scary. But they are the only realistic alternative to PP-PSOE, and that's the one thing that matters for most.
Quote from: Martinus on January 04, 2015, 03:01:42 PM
Personally, I think we will see the Obama effect play out in Europe as well - i.e. the outpouring of idealism / radicalism (depending on your perspective) ending up with the extremes being either compromised by their inability to govern or subsumed into the mainstream. So a bit of turbulence and things getting back to normal in 5-10 years.
I'm not sure how that analysis works on Obama.
Of course most of the radicals can choose not to govern, or be subjected to a cordon sanitaire (ie. the Left in Germany) which strengthens them.
Even if they get subsumed into the mainstream that does suggest a significantly more radical politics - see Ed Miliband and David Cameron who are both more worried about losing their core vote than trying to appeal to a majority.
And of course the other issue is that for the countries on the periphery political choice has been bled dry because of the Euro crisis. The choice is who presides over, broadly, identical policies. So long as that lasts then people faced with that farce of a democratic choice will inevitably start to go somewhere else.
Edit: I mean really what's the point of an election if the Central Bank sends this sort of letter:
http://www.ecb.europa.eu/pub/pdf/other/2011-08-05-letter-from-trichet-and-fernandez-ordonez-to-zapateroen.pdf
QuoteAnd the same can be said of Podemos. Their program is downright scary. But they are the only realistic alternative to PP-PSOE, and that's the one thing that matters for most.
Yeah. I think it's easy to say the Greeks are silly to be voting for Syriza but you look at the alternatives and I'd be voting for them. Two or three corrupt parties, Nazis or Stalinists.
Quote from: Admiral Yi on January 04, 2015, 03:28:11 PM
Quote from: Iormlund on January 04, 2015, 03:23:44 PM
Their program is downright scary.
Please elaborate.
It reads like a pamphlet written by a teenager. Full of promises of more money for everyone.
For example, they want to bring retirement age down to 60. That alone would bankrupt Social Security (pensions already make up 40% of the budget).
We tried Socialism in Sweden and it didn't work.
Quote from: Sheilbh on January 04, 2015, 03:33:23 PM
Of course most of the radicals can choose not to govern, or be subjected to a cordon sanitaire (ie. the Left in Germany) which strengthens them.
The Left Party in Germany participates in two state governments at the moment, leading one of them. They aren't isolated on the municipal or state level, it's just that their policies on the federal level are really not compatible with those of the other left parties (Social Democrats, Greens).
Quote from: The Brain on January 04, 2015, 03:50:25 PM
We tried Socialism in Sweden and it didn't work.
When did you stop?
Small less advanced countries get in trouble with debt; effectively cede soveriegnty to bigger wealthier countries and are unhappy.
It isnt a new story.
Quote from: alfred russel on January 04, 2015, 03:54:23 PM
Small less advanced countries get in trouble with debt; effectively cede soveriegnty to bigger wealthier countries and are unhappy.
Spain is hardly a small and less advanced country. Really. Albania might be. Bhutan is. But not Spain.
Quote from: Iormlund on January 04, 2015, 03:41:07 PM
Quote from: Admiral Yi on January 04, 2015, 03:28:11 PM
Quote from: Iormlund on January 04, 2015, 03:23:44 PM
Their program is downright scary.
Please elaborate.
It reads like a pamphlet written by a teenager. Full of promises of more money for everyone.
For example, they want to bring retirement age down to 60. That alone would bankrupt Social Security (pensions already make up 40% of the budget).
If you mean their platform for the european elections they must have realised themselves how much of a pie in the sky it was and backtracked (or refined their plans if you feel generous) to make it more palatable and/or realistic. IIRC Iglesias himself said that he felt comfortable if their updated platform was labeled as a socialdemocrat one.
Quote from: Norgy on January 04, 2015, 03:57:11 PM
Quote from: alfred russel on January 04, 2015, 03:54:23 PM
Small less advanced countries get in trouble with debt; effectively cede soveriegnty to bigger wealthier countries and are unhappy.
Spain is hardly a small and less advanced country. Really. Albania might be. Bhutan is. But not Spain.
I was trying to respond to a previous post commenting about the point of greek elections, but hard to quote on my phone. Agree about spain.
Quote from: Sheilbh on January 04, 2015, 02:54:59 PM
Quote from: Liep on January 04, 2015, 02:51:23 PM
Doesn't matter, point is they need to pay for it, and Greeks don't pay taxes.
In large part because of the patronage politics of PASOK and ND. Even if you don't support Syriza's policies, I think it's inevitable that any change to the corrupt status quo has to come from outside the political groups who built it and benefited from it.
The thing is, of course, that based on my experience of the rest of the wider region, the problems in Greece aren't some short term freak incident: they are hardcoded in society, or has been hard coded in the past decades. Which means two things: you can't expect them to be solved suddenly by a new party out of the blue unless they pull a Pinochet, and more importantly, blatant populism will just repeat past mistakes.
Austerity might have been the wrong answer, but sensless public spending (decreasing of retirement age, etc) is the wrong answer for sure. It is the EXACT THING that put these countries, or at least Greece for sure, into trouble. To keep relying on it is a dangerous illusion.
And yes we are reliving the 30s and seems like making the same mistakes, too.
Sure the advice I gave six years ago turned into a terrible disaster, but still my ideology tells me that the alternative is worse!
Quote from: Razgovory on January 04, 2015, 05:27:44 PM
Sure the advice I gave six years ago turned into a terrible disaster, but still my ideology tells me that the alternative is worse!
By definition it's worse. If you default you get to run a deficit of zero, as opposed to the 4% or whatever your German sugar daddy is willing to finance.
Greece is running a primary surplus now, though.
Quote from: Admiral Yi on January 04, 2015, 05:49:39 PM
Quote from: Razgovory on January 04, 2015, 05:27:44 PM
Sure the advice I gave six years ago turned into a terrible disaster, but still my ideology tells me that the alternative is worse!
By definition it's worse. If you default you get to run a deficit of zero, as opposed to the 4% or whatever your German sugar daddy is willing to finance.
I didn't know we were talking about "default".
Quote from: Razgovory on January 04, 2015, 06:18:42 PM
I didn't know we were talking about "default".
What did you think we were talking about?
Quote from: celedhring on January 04, 2015, 05:53:34 PM
Greece is running a primary surplus now, though.
But austerity isn't going to last.
Quote from: Admiral Yi on January 04, 2015, 06:49:53 PM
Quote from: Razgovory on January 04, 2015, 06:18:42 PM
I didn't know we were talking about "default".
What did you think we were talking about?
Spending vs the Austerity.
Quote from: Razgovory on January 04, 2015, 07:40:47 PM
Spending vs the Austerity.
Where should Greece and friends have gotten the money to spend?
Would I like the Podemos?
Quote from: Ideologue on January 04, 2015, 10:20:18 PM
Would I like the Podemos?
Why not, they have a burning hate of 'The System' just like you. :P
I'm a huge fan of Chomsky. :) Well, his linguistic work. I actually forget what his weirdo politics are, probably not centrally-controlled enough.
Podemos is just a few months old, and to be honest their actual politics are still muddled and confused - which is best for them since any angry Spaniard can then imagine them as the party they'd wish them to be. They talk a lot about street-level democracy but they are big statists in practice - at least going off stuff in their program.
No mention of implementing a surveillance state, though, sorry.
Quote from: Ideologue on January 05, 2015, 06:15:53 AM
I'm a huge fan of Chomsky. :) Well, his linguistic work. I actually forget what his weirdo politics are, probably not centrally-controlled enough.
I like Stone's movies, too. That does not make him any less a political lunatic either.
Quote from: celedhring on January 05, 2015, 06:24:21 AM
Podemos is just a few months old, and to be honest their actual politics are still muddled and confused - which is best for them since any angry Spaniard can then imagine them as the party they'd wish them to be. They talk a lot about street-level democracy but they are big statists in practice - at least going off stuff in their program.
No mention of implementing a surveillance state, though, sorry.
Their Wiki entry mentions something vague about no "intelligence gathering," but I understood that to mean "foreign intelligence gathering."
Mart: I recall Chomsky is left, but the kind of "blah blah rights" left that has important things to say about human freedom, but not a ton about directly increasing human happiness.
Quote from: Admiral Yi on January 04, 2015, 07:49:40 PM
Quote from: Razgovory on January 04, 2015, 07:40:47 PM
Spending vs the Austerity.
Where should Greece and friends have gotten the money to spend?
Presumably the same places where other countries get money. Tamas was talking about the dichotomy of austerity and spending. For some reason you assumed this involved default.
Quote from: Razgovory on January 05, 2015, 09:20:38 AM
Presumably the same places where other countries get money. Tamas was talking about the dichotomy of austerity and spending. For some reason you assumed this involved default.
Most countries get it from the international bond market. Investors were not interested in lending any more money to Greece.
Quote from: Ideologue on January 05, 2015, 07:42:08 AM
Mart: I recall Chomsky is left, but the kind of "blah blah rights" left that has important things to say about human freedom, but not a ton about directly increasing human happiness.
He's a full time Amerikkka basher.
is there a left that isn't populist when push comes to shove?
Quote from: Crazy_Ivan80 on January 05, 2015, 02:18:22 PM
is there a left that isn't populist when push comes to shove?
Uh... yes? Any number of champagne-socialists and vanguardist revolutionaries are not populist at all. You can say many bad things about various Trotskyists, for example, but they're far from populist in spite of what the wish and proclaim.
Quote from: Crazy_Ivan80 on January 05, 2015, 02:18:22 PM
is there a left that isn't populist when push comes to shove?
I would say in order to be truly populist you have to engage in policies that are unsustainable. For example you can't throw borrowed money at your supporters forever, because soon no one will lend to you. You can't price your labor out of the market forever, because soon no one will buy your stuff. You can't steal from the rich forever, because eventually you run out of rich people.
No, takes backs. That doesn't work.
Quote from: Crazy_Ivan80 on January 05, 2015, 02:18:22 PM
is there a left that isn't populist when push comes to shove?
Yeah. To add to Jacob's point there's loads of establishment left parties.
I don't think anyone could reasonably describe Labour or the SPD for example of populism.
Quote from: Admiral Yi on January 05, 2015, 02:24:47 PM
I would say in order to be truly populist you have to engage in policies that are unsustainable. For example you can't throw borrowed money at your supporters forever, because soon no one will lend to you. You can't price your labor out of the market forever, because soon no one will buy your stuff. You can't steal from the rich forever, because eventually you run out of rich people.
My definition of populist is something like "craft your message to appeal to uninformed prejudice, emotions, and shallow understanding of the broad masses." While that often involves spending money irresponsibly, it doesn't inherently mean "stealing from the rich". Populism can be (and often is) based on things other than economics - basically anything where simple "common sense" solutions to complex issues sound appealing to broad swathes of people (f. ex. immigration, drugs, crime & punishment, foreign policy).
On the economic front, while it's definitely true that "more spending on all social goods for justice! Paid for by the rich!" is populist, so is "less taxes on everything, less government!" It's possible to have nuanced positions and principles on changes to social spending and taxation levels in either direction compared to the status quo, and it is possible to be a populist in either direction; it all depends on how you phrase your position and how it plays with the populace.
Yeah. Populism is a style of politics, not an ideology. Alexis Tsipras is a populist, so's Nigel Farage.
More importantly it's a symptom of a diseased body politic - not its cause.
Indeed. Yi's "definition" strikes me as an attempt to definte populism to it only applies to the populists he doesn't like...
The current Tea Party inanity, for example, is certainly populist. A perfect example is the right's current views on immigration. Pure populism of the worst kind, IMO.
Basically, if you're riling up the people (or tapping into pre-existing somewhat incoherent dissatisfaction) and going on about how the system is messed up and these basic, common-sense solutions that you're proposing will make things better you're a populist (if your message resonates with sectors of the populace).
The various anti-EU, anti-immigrant parties that have risen across Europe are populist, for example, and their economic policies don't follow any particularly clear line as far as I can tell (other than generally favouring the interests of the population groups that buy into - or are likely to buy into - the anti-EU or anti-immigrant line).
So when should we expect this barmy army of merry populists to take office?
Quote from: Jacob on January 05, 2015, 02:57:24 PM
Basically, if you're riling up the people (or tapping into pre-existing somewhat incoherent dissatisfaction) and going on about how the system is messed up and these basic, common-sense solutions that you're proposing will make things better you're a populist (if your message resonates with sectors of the populace).
The various anti-EU, anti-immigrant parties that have risen across Europe are populist, for example, and their economic policies don't follow any particularly clear line as far as I can tell (other than generally favouring the interests of the population groups that buy into - or are likely to buy into - the anti-EU or anti-immigrant line).
This broad definition works better for European anti-immigration than it does economic populism. 3rd World fuel subsidies, for example, (the classic case of economic populism) don't need a vague sense of dissatisfaction as a starting point; rather they rely on the fact that voters reward people who give them free stuff.
Also have issues with Shelf's establishment/populist dychotomy. The Mexican PRI was the populist establishment for 50 years.
I posit two types of populism, economic and ethnic, and that they are too different for a single definition to include both (without sweeping in most of politics).
Quote from: Crazy_Ivan80 on January 05, 2015, 02:18:22 PM
is there a left that isn't populist when push comes to shove?
is there a right or any successful party that isn't populist, at all?
The right has made quite a good political fare out of demonising gays, immigrants or sexually active women - that's pure populism.
Quote from: Berkut on January 05, 2015, 02:55:51 PM
Indeed. Yi's "definition" strikes me as an attempt to definte populism to it only applies to the populists he doesn't like...
The current Tea Party inanity, for example, is certainly populist. A perfect example is the right's current views on immigration. Pure populism of the worst kind, IMO.
And I'd add that in my view populism isn't a negative term. In the UK I think Thatcher was a populist politician and so was Tony Blair.
Part of the reason I think UKIP, the SNP and the Greens are rising in the UK is that all of the mainstream parties are too compromised to run a populist campaign. The Lib Dems could've before they entered coalition; Miliband's as populist (and popular) as a seminar on Polanyi; and David Cameron's an establishment man to his very bones.
By contrast Thatcher never stopped being a grocer's daughter from Lincolnshire and Tony Blair was able to method act his man of the people routine.
QuoteAlso have issues with Shelf's establishment/populist dychotomy. The Mexican PRI was the populist establishment for 50 years.
I'd probably limit my analysis to actual democratic countries which Mexico wasn't for most of those 50 years. In unfree countries I agree there's a different dynamic.
I think that populism is more about trying to draw a distinction the common people and the "elites". Pretty much every successful politician in the Democratic West is a populist.
Quote from: Sheilbh on January 05, 2015, 03:25:24 PM
...
And I'd add that in my view populism isn't a negative term. In the UK I think Thatcher was a populist politician and so was Tony Blair
By contrast Thatcher never stopped being a grocer's daughter from Lincolnshire and Tony Blair was able to method act his man of the people routine.
...
Sometimes the mask slipped; chatting with a friend yesterday, he said he met Mrs Thatcher twice, whilst she was opposition leader she had a house nearly opposite his motorcycle shop on/nr the Kings road, he and his friend used to chat with the policeman on outside duty and bring them the occasional cup of tea. He said on a couple of occasions whilst he and a friend were passing the time of day with the copper, she passed them going into the house. The politely said hello etc and on both occasions she completely blank them. I think she was actually rather a snob, you just had to look a little past the veneer.
Well yeah, there was always an element of Hyacinth Bucket about her.
Quote from: Sheilbh on January 05, 2015, 03:44:53 PM
Well yeah, there was always an element of Hyacinth Bucket about her.
Yeah to me it was very obvious, barely concealed, whereas Blair was much more successful with his act.
Quote from: Admiral Yi on January 05, 2015, 03:13:49 PM
This broad definition works better for European anti-immigration than it does economic populism. 3rd World fuel subsidies, for example, (the classic case of economic populism) don't need a vague sense of dissatisfaction as a starting point; rather they rely on the fact that voters reward people who give them free stuff.
Well, yeah, Economic Populism is more specific than Populism. I'd argue it's a subset. But I think my definition holds - Economic Populism relies on simple common sense solutions to a complex issue; fuel subsidies are pretty simple and common sense, and does nothing to address the complexities of the situation.
QuoteAlso have issues with Shelf's establishment/populist dychotomy. The Mexican PRI was the populist establishment for 50 years.
Populists tend to try to hang on to their populist credentials even when they get power; many do so for a while (see the common tactic of incumbents in the US running against "politics as usual" and "Washington insiders").
QuoteI posit two types of populism, economic and ethnic, and that they are too different for a single definition to include both (without sweeping in most of politics).
I remain more comfortable with my taxonomy, where economic populism is a subset of general populism. As Marty notes non-economic populism doesn't have to be ethnic - issues of sexuality can be used as populist fodder, for example. I'd argue that things such as gun control and religious bits like displaying the ten commandments and things surrounding the American flag are used as populist issues as well currently in the US. I'd also argue that the "no new taxes" and "shrink the government" are populist poses in their constituencies as well.
Quote from: Razgovory on January 05, 2015, 03:26:11 PM
I think that populism is more about trying to draw a distinction the common people and the "elites". Pretty much every successful politician in the Democratic West is a populist.
Yes, at least as far as public consumption goes. Give them a smaller audience and a false sense of privacy and you get Romney's 47% or Obama's "clinging to guns and religion".
Quote from: Admiral Yi on January 05, 2015, 03:13:49 PM
I posit two types of populism, economic and ethnic, and that they are too different for a single definition to include both (without sweeping in most of politics).
:hmm:
No, I would disagree. Anti-immigration policies have tended to go hand in hand with low taxes/more public spending. At least in the Nordic countries.
Right-wing or left-wing, populism generally rallies the common man and is all about the common man. It is anti-intellectual, anti-establishment and anti-globalist. It's a nativist return to some past Great Era where everything was allright.
I suspect that Populism has a bad rap here because it's about opposing the elites, and a lot of us here like to think of ourselves as "elite". :lol:
Quote from: Razgovory on January 05, 2015, 04:40:53 PM
I suspect that Populism has a bad rap here because it's about opposing the elites, and a lot of us here like to think of ourselves as "elite". :lol:
I think populism always has an element of opposing the mainstream/establishment - which is in turn represented by the existing elites - and most here probably consider themselves mainstream/centrist/establishment.
Meh, most politicians here who are branded as "populists" earn that title simply by doing things that are perceived as being popular rather than grounded in policy. So, like others have said, populist = successful politician. We have had a few successful politicians who are more policy wonks than "populists" but they are probably the exceptions that prove the rule. The next Federal election in Canada will be interesting as it will involve two policy wonks (on opposite sides of the political spectrum) and a centrist populist.
I really hope one of the two policy wonks wins.
IMO, populism isn't about whether or not you support or disagree with various policy positions, it's about why you support them or not. For example, protectionism. You might have a populist politician who advocates high protective tariffs to protect local jobs while an elitist advocates those policies because they benefit the local factory owners. OTOH, a populist might support free trade because it can mean cheaper consumer goods, while an elitist favors it because abstract economic principles suggest it is the better trading policy.
Quote from: dps on January 05, 2015, 10:05:02 PM
IMO, populism isn't about whether or not you support or disagree with various policy positions, it's about why you support them or not. For example, protectionism. You might have a populist politician who advocates high protective tariffs to protect local jobs while an elitist advocates those policies because they benefit the local factory owners. OTOH, a populist might support free trade because it can mean cheaper consumer goods, while an elitist favors it because abstract economic principles suggest it is the better trading policy.
Yeah, populism is more of a style and a political strategy - it can be applied to any substance (or even without much substance at all).
Quote from: crazy canuck on January 05, 2015, 05:21:50 PM
Meh, most politicians here who are branded as "populists" earn that title simply by doing things that are perceived as being popular rather than grounded in policy. So, like others have said, populist = successful politician. We have had a few successful politicians who are more policy wonks than "populists" but they are probably the exceptions that prove the rule. The next Federal election in Canada will be interesting as it will involve two policy wonks (on opposite sides of the political spectrum) and a centrist populist.
I really hope one of the two policy wonks wins.
I agree that Trudeau is trying to be more populist than Mulcair and Harper, but I don't think he's quite there. He, in my view, aspires to at least the appearance of having a solid wonkish core, even if he isn't convincing you :)
I disagree that "populist = successful politician". I think Harper is very successful, but he's not a populist from my PoV. There are populist elements of the PC, especially some of the Reform people back in the day, but I can't think of any extremely populist (as opposed to popular) politicians in recent times.
To me, one of the core elements of populism is a rejection of the judgement of the experts and the establishment, and I'm not really seeing politicians doing that around here. Even Harper stifling the expression of various public scientists etc is not doing it as a populist - there's no rejection of their insight or authority and appeal to the PoV of "the common person", it's just straight up defunding and muzzling which is different IMO.
I think an overreaching definition of populism is "presenting a simple answer to a complex problem". Populists are useful that way as they force a problem to be discussed (as opposed to ignored) but can be dangerous if the mainstream fails to engage or, worse, tries to outbid populists in the populism game.
UKIP, Syriza and Tea Party are all populist and it is really easy to spot common traits between them, despite what Yi says.
Quote from: Jacob on January 06, 2015, 12:20:04 AM
Quote from: crazy canuck on January 05, 2015, 05:21:50 PM
Meh, most politicians here who are branded as "populists" earn that title simply by doing things that are perceived as being popular rather than grounded in policy. So, like others have said, populist = successful politician. We have had a few successful politicians who are more policy wonks than "populists" but they are probably the exceptions that prove the rule. The next Federal election in Canada will be interesting as it will involve two policy wonks (on opposite sides of the political spectrum) and a centrist populist.
I really hope one of the two policy wonks wins.
I disagree that "populist = successful politician". I think Harper is very successful, but he's not a populist from my PoV. There are populist elements of the PC, especially some of the Reform people back in the day, but I can't think of any extremely populist (as opposed to popular) politicians in recent times.
You missed my meaning. Populists are those that do things that they think will be popular despite what good policy might dictate. Therefore populist tends to equal successful because people tend to vote for politicians who do popular things. However we do have some successful politicians who succeed in spite of the fact they are not popular or populists. No one would ever accuse Harper of being popular in any sense of that word. But he is successful because people tend to look past his unpopularity to the policy wonkiness.
QuoteGreece election: Exit polls suggest Syriza win
Exit polls suggest a historic victory for the anti-austerity Syriza party in Greece's closely fought general election.
One poll suggested Syriza took 35.5% of the votes, and the other suggested it took 39.5%, well ahead of the ruling New Democracy party on 23%-27%.
It is unclear whether Syriza has enough votes to govern the country alone.
Syriza's Alexis Tsipras has pledged to renegotiate Greece's debt arrangement with international creditors.
Far-right Golden Dawn and centrist The River came joint third in both exit polls.
The proportion of votes won by smaller parties will have a large impact on whether Syriza can gain the required 151 parliamentary seats to have an absolute majority.
Let's see what they can do.
What I dislike in some of the narratives on this, especially coming from the European left, is that this is being presented as an opposition between "democratically elected" Syriza and "European elites" (represented by Angela Merkel). Merkel won democratic elections as much as Syriza has, and I presume her insistence on the austerity policy has wide support of her voters. You can argue which side is right and which is wrong, but none is more or less "democratic".
Merkel will probably win in 2017 again. Let's see if Syriza can get reelected once they have to take real responsibility and deliver results.
I just read their 40 point programme.
It's a heady mix of a few good ideas, some terrible ones and a lot of wishful thinking. They should have gone the whole hog and promise extending average lifespan by 50 years, giving everybody a satisfying sex life and developing the cure for cancer. Though, I suppose they had to leave something for the second term.
Syriza is pro gay marriage.
Quote from: Jacob on January 27, 2015, 12:28:26 PM
Syriza is pro gay marriage.
/Marti/ I just read their 40 point programme.
It's a heady mix of
a few good ideas the best ideas I have ever seen,
some terrible ones and a lot of wishful thinking. /Marti/
Marty is only pro-gay marriage if it comes with an ironclad prenup.
Quote from: Peter Wiggin on January 27, 2015, 01:53:29 PM
Marty is only pro-gay marriage if it comes with an ironclad prenup.
So he is a sensible person?
Quote from: Peter Wiggin on January 27, 2015, 01:53:29 PM
Marty is only pro-gay marriage if it comes with an ironclad prenup.
Well I ain't sayin' he's a gold digger
But he ain't messin' with no broke Wiktors
:w00t:
I really hope they manage to pull this off.
Quote from: Sheilbh on January 27, 2015, 02:32:41 PM
:w00t:
I really hope they manage to pull this off.
Indeed.
The young people of that country deserve a chance.
To my mind, what is central to "populism" is that it is based on some version of the wisdom of the common person being superior to the dictates of elites and experts (of whatever stripe).
Supporters of "populists" tend to think of them as standing up for the interests of the majority of the people - the best example of democracy in action.
Opponents of "populists" use the term as a perjorative, meaning essentially pandering to the ignorance of the lowest common denominator, flying in the face of reason and evidence.
Of course it's particularly true with the EU which is an explicitly technocratic body.
What seems more challenging to me in Europe is there's a dual populism. On the one hand there's the campaign against austerity which is aimed at the EU technocrats, on the other there's a populism that those technocrats could probably support for structural reforms of the left.
I've said before but it seems to me impossible to expect any real structural reforms in many of these countries when the only choice is between the parties that created and benefit from the current structures. Syriza will hopefully be able to change that.
The Daily Mash:
QuoteGreeks vote to stop having shit kicked out of them
26-01-15
GREEK voters have defied expectation by choosing not to be beaten like cringing dogs for the next five years.
Offered the choice between another half-decade of soaring unemployment and plummeting household incomes or a bit of a change, the Greek electorate has stunned Europe by making the wrong decision.
The ruling New Democracy party is still wondering how its platform of Endless Suffering For Everyone was defeated by Syriza's competing message of Maybe Not That.
Athens voter Elena Mitropoulos said: "I was going to do the responsible thing and vote for continuing austerity, because I know how important it is not to damage the German economy, but madness overtook me in the polling booth.
"Now we face a future of working hospitals, of recovering industry, of my children not begging for food in the streets. I wish I had not been so rash."
EU technocrat Denys Finch Hatton said: "There is a very real danger that people across Europe, inspired by the Greeks, will no longer choose to be ruled against their best interests by people they never voted for living in massive wealth hundreds of miles away.
"Though we hope they will follow the fine example Scotland set and continue to do just that."
Ouch. Is such sarcasm directed at those who are down for the count really in good taste?
Quote from: Jacob on January 27, 2015, 12:28:26 PM
Syriza is pro gay marriage.
And their coalition partner, the Independent Greeks, are anti-Jewish, anti-immigrant and anti-gay. Besides, I am not willing to vote for a devil only because he supports gay marriage.
Speaking of which, I intend to form a coalition with my cat, so in a democratic vote we can decide not to owe the bank any money on my mortgage any more.
Apparently the exiting Greek government has taken with them, amongst other stuff, every single computer in their offices.
And the password to the WiFi :lol:
Edit: Also all the soap and loo roll.
Austerity to the bitter end. No wonder they fucking lost.
Quote from: The Larch on January 27, 2015, 03:57:26 PM
Apparently the exiting Greek government has taken with them, amongst other stuff, every single computer in their offices.
Wacky idea, but maybe they've got some things to hide from the electorate? :hmm:
In the article I read it it was said that it's some kind of Greek political tradition to completely empty your offices before the newcomer arrives, breaking havoc in paper trails in the process.
greek extreme-left in coalition with nationalists... funny how they have a national-socialist government now
Quote from: Crazy_Ivan80 on January 27, 2015, 04:12:28 PM
greek extreme-left in coalition with nationalists... funny how they have a national-socialist government now
What's even funnier is how the Idiot Left is gushing over this victory.
Quote from: Crazy_Ivan80 on January 27, 2015, 04:12:28 PM
greek extreme-left in coalition with nationalists... funny how they have a national-socialist government now
What could possibly go wrong.
Quote from: CountDeMoney on January 27, 2015, 02:10:54 PM
Quote from: Peter Wiggin on January 27, 2015, 01:53:29 PM
Marty is only pro-gay marriage if it comes with an ironclad prenup.
Well I ain't sayin' he's a gold digger
But he ain't messin' with no broke Wiktors
:lol:
Quote from: The Larch on January 27, 2015, 03:57:26 PM
Apparently the exiting Greek government has taken with them, amongst other stuff, every single computer in their offices.
Reminds me of something that happened years ago in WV, though the motivation in that case was an unusual level of personal animosity for US politics: when Jay Rockefeller was succeeding Arch Moore as governor, when Moore vacated the Governor's Mansion, he (well, probably not Moore personally, but someone on his staff I suppose) loosened every light bulb in the building just enough that it wouldn't come on. And shortened the legs on the desk in the Governor's Office just enough so that the very tall Rockefeller couldn't sit behind it comfortably. Petty and infantile, but still amusing.
Quote from: Sheilbh on January 27, 2015, 02:32:41 PM
:w00t:
I really hope they manage to pull this off.
What would managing to pull this off look like?
I hope they do exactly what they promised to do.
Quote from: Admiral Yi on January 27, 2015, 06:56:38 PM
Quote from: Sheilbh on January 27, 2015, 02:32:41 PM
:w00t:
I really hope they manage to pull this off.
What would managing to pull this off look like?
I hope they do exactly what they promised to do.
"Pulling it off", to me, would be to successfully renegotiate the terms on their debt such that government could move from austerity to stimulus and materially improve the conditions for a number of Greeks.
I believe that's what they campaigned on as well.
Do you hope this happens? Would you like Germany et al to lend Greece more money that will not get paid back?
Wouldn't they be able to pay back the debt if they used the money to kickstart the economy thus increasing revenue?
Won't happen as long as all the liquidity in Europe is actively trying to escape to the US.
Quote from: Admiral Yi on January 27, 2015, 07:13:12 PM
Do you hope this happens? Would you like Germany et al to lend Greece more money that will not get paid back?
I hope it turns out the best possible way for all involved :)
How and what that is likely to happen, I'm not so sure.
Quote from: Razgovory on January 27, 2015, 07:17:58 PM
Wouldn't they be able to pay back the debt if they used the money to kickstart the economy thus increasing revenue?
The bond market doesn't appear to think so.
Quote from: Admiral Yi on January 27, 2015, 07:26:14 PM
Quote from: Razgovory on January 27, 2015, 07:17:58 PM
Wouldn't they be able to pay back the debt if they used the money to kickstart the economy thus increasing revenue?
The bond market doesn't appear to think so.
The Gods have spoken.
Quote from: Admiral Yi on January 27, 2015, 07:26:14 PM
Quote from: Razgovory on January 27, 2015, 07:17:58 PM
Wouldn't they be able to pay back the debt if they used the money to kickstart the economy thus increasing revenue?
The bond market doesn't appear to think so.
What is your wise and eminent suggestion?
Quote from: Admiral Yi on January 27, 2015, 07:45:42 PM
Quote from: Razgovory on January 27, 2015, 07:44:34 PM
What is your wise and eminent suggestion?
Default.
The historical solution. Started by the Greeks themselves 24 centuries ago.
Well that's what Argentina did after its austerity program.
Quote from: Admiral Yi on January 27, 2015, 07:45:42 PM
Quote from: Razgovory on January 27, 2015, 07:44:34 PM
What is your wise and eminent suggestion?
Default.
Default and stay with the Euro, or default and go back to the Drachma?
Quote from: Jacob on January 27, 2015, 07:52:09 PM
Default and stay with the Euro, or default and go back to the Drachma?
I would go with the drachma. The contrasting recoveries of the UK and the US have shown that it is much easier to return to full employment when real wages can be reduced through inflation.
I for one am glad to see the Greeks willing to take charge and control of their own situation, rather than be dictated to by a bunch of snooty Europeans whose loathing for them is exceeded only by the Turks, and who don't even want them in the euro zone in the first place.
Go Greek. Rush Alpha Phi Alpha. Ouzo and date rape for all.
Hopefully they figure out how to collect taxes at some point. That will help.
Quote from: Razgovory on January 27, 2015, 07:48:31 PM
Well that's what Argentina did after its austerity program.
It's what Argentina does every 7 years or so.
Spicey's people are fiscally irresponsible.
Quote from: Admiral Yi on January 27, 2015, 08:05:39 PM
Quote from: Razgovory on January 27, 2015, 07:48:31 PM
Well that's what Argentina did after its austerity program.
It's what Argentina does every 7 years or so.
Market liberalization is a tough road I guess.
Merkel needs to lead a panzer division or three through the Monastir Gap.
Quote from: Razgovory on January 27, 2015, 09:16:29 PM
Market liberalization is a tough road I guess.
You seem to be suggesting, without coming right out and saying it, that liberalization is what caused Argentina's serial defaults.
Quote from: Caliga on January 27, 2015, 09:18:51 PM
Merkel needs to lead a panzer division or three through the Monastir Gap.
They'll just want the Americans to do it.
Quote from: Caliga on January 27, 2015, 09:18:51 PM
Merkel needs to lead a panzer division or three through the Monastir Gap.
Then demand the rights to all the assets in Greece as repayment. The Acropolis, all the power plants, etc :menace:
Quote from: Admiral Yi on January 27, 2015, 06:56:38 PMWhat would managing to pull this off look like?
I hope they do exactly what they promised to do.
The ideal situation would be the orderly break-up of the Euro led by Germany. But no non-Anglo-Saxon seems to think that's a good idea, so it won't happen. The next best scenario would be some situation of the core listening to the periphery and negotiating a solution - we've tried the German approach for five years, I can't think of a measure by which you could say it's worked. What may happen is that Greece is, again, the canary in the coalmine and a failure to negotiate eventually leads to a disorderly break-up.
I agree that I hope they do exactly what they promise to do. I want them to renegotiate their debt with the Eurozone. I want them, as part of that, to start spending some of the primary surplus they now have instead of the Troika insisting on them running a 4.5% primary surplus. And I want them to successfully pull off the destruction of the corrupt, nepotistic, clientilist state that always been the biggest problem for Greece and that neither PASOK nor New Democracy would ever want to challenge, far less damage. If they get rid of the jobs-for-the-boys approach for government procurement for all sorts, but especially the army and the Piraeus, and they manage to sort out tax evasion they'll deserve a lot of credit. If they manage to do that last then that would be as important a structural reform as anything that's been demanded of them over the last few years.
QuoteDo you hope this happens? Would you like Germany et al to lend Greece more money that will not get paid back?
How is a negotiated settlement - which is what Jake, Syriza and I are saying should happen - worse than default which is what you're saying?
And Germany et al is a useful reminder. France and Italy contributed over 50% of the bailout of Greece (which was based on the size of economy within the Eurozone) they should make that worth something. It's beyond hoping for anything from Hollande but Renzi may manage it.
The stock of Greek debt is over 170% of GDP. Even at the low interest rates and with it being a long-term loan it's a fiction if you think that's going to be either repaid or successfully rolled over by Greece before. The bailout was primarily a bailout of European banks exposed to Greece that ran through a clearing house in Athens. As Daniel Davies (who is of the right puts it) it's an accounting fiction (with an element of debt peonage) at this point:
QuoteThe fact is, everyone knows that the total burden of Greek debt is too big to be serviced by the Greek GDP, and that if it isn't written down, then Greece will always be reliant on an increasing stream of official financing to meet its roll-overs. Everyone also knows, although some of them might not be ready to admit it to themselves, that an indefinite commitment to financing the roll-over of an ever increasing debt burden is a fiscal transfer in all but name. The thing is, though, while the Eurosystem bureaucrats know this at least as well as anyone else, they have jobs in which they can't simply bemoan the fact in print, then submit their copy and go off to think about something else.
Don't think of the Greek debt burden, either in cash € terms or as a ratio to GDP, as an economic quantity. It basically isn't an economically meaningful number any more. The purpose of its existence is as a political quantity; it's part of the means by which control is exercised over the Greek budget by the Eurosystem. The regular rituals of renegotiation of the bailout package, financing of debt maturity peaks and so on, are the way in which the solvent Euroland nations exercise the kind of political control that they feel they need to have if they are going to be fiscally responsible for the bills. There's more than a couple of Germans I've spoken to over the last few years who have pointed out that although Germany got massive debt relief in the twentieth century, it got it in the context of an equally massive national admission that the entire political system was rotten and needed to be totally restructured with foreign help; this was also the basis on which the integration of Eastern Germany was managed in the 1990s. Seeing the peripheral Eurozone debt in isolation from the politics of European integration is a sure way to lead yourself up blind alleys.
It is, therefore, totally inimical to the Eurosystem to hold out any hope of the kind of debt writedown that Syriza wants, as opposed to some smaller, cosmetic face value reduction or maturity extension. The entire reason why Syriza wants to get a major up-front reduction in the debt number is to create political space to execute the rest of their program. The debt issue and the political issue are the same issue. Syriza understands this, and so does the Eurosystem. The people who don't understand it are the ones writing editorials in the business press which support the debt reduction but don't think that Syriza should be given carte blanche to do everything it wants.
And I think Geithner's observation was right. There's a lot of the Eurozone response to Greece that was about punishment rather than anything 'rational'. The rational decisions were forced on them early in the morning in Brussels by market - and now, God willing, political - pressure.
QuoteGeithner: I remember coming to the dinner and I'm looking at my Blackberry. It was a fucking disaster in Europe. French bank stocks were down 7 or 8 per cent. That was a big deal. For me it was like, you know, you were having a classic complete carnage because of people [who] were saying: crisis in Greece, who's exposed to Greece?....
I said at that dinner, that meeting, you know, because the Europeans came into that meeting basically saying: "We're going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we're going to crush them," was their basic attitude, all of them....
But the main thing is I remember saying to these guys: "You can put your foot on the neck of those guys if that's what you want to do. But you've got to make sure that you send a countervailing signal of reassurance to Europe and the world that you're going to hold the thing together and not let it go. [You're] going to protect the rest of the place." I just made very clear to them right then. You hear this blood-curdling moral hazard-y stuff from them, and I said: "Well, that's fine. If you want to be tough on them, that's fine, but you have to make sure you counteract that with a bit more credible reassurance that you're going to not allow the crisis to spread beyond Greece and that's going to require, you've got to make sure you're putting enough care and effort into building that capacity to make that commitment credible as you are to teaching the Greeks a lesson...."
Interviewer: I mean was that, did you have this kind of foreboding like: oh my god, these guys are just going to...?
Geithner: Yeah. I had like a definite, and of course I, as I think I've said separately, I completely underweighted the possibility they would flail around for three years. I thought it was just inconceivable to me they would let it get as bad as they ultimately did. But the early premonitions of that were in that initial debate. They were lied to by the Greeks. It was embarrassing to them because the Greeks had ended up like borrowing all this money and they were mad and angry and hey were like: "Definitely get out the bats." They just wanted to take a bat to them. But in taking a bat to them, they were feeding a fire that was in its early stages. There were a lot of dry tinders.
QuoteI for one am glad to see the Greeks willing to take charge and control of their own situation, rather than be dictated to by a bunch of snooty Europeans whose loathing for them is exceeded only by the Turks, and who don't even want them in the euro zone in the first place.
Yep.
It's worth remembering because the IMF and the EU so monumentally fucked up all sorts of economic predictions to do with austerity and the periphery and deflation etc that Greece has gone way, way beyond anything they were asked to do when given the bailout. The effects have been disastrous - ironically given the entire point of internal devaluation their exports are still falling. But how could you not vote for the 'anything else' party when this has happened:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fcdn.static-economist.com%2Fsites%2Fdefault%2Ffiles%2Fimagecache%2Foriginal-size%2Fimages%2F2014%2F12%2Fblogs%2Fgraphic-detail%2F20150103_gdc501_0.png&hash=2a539805a4eb3d4af83d27c4fdee306061569757)
Edit: And the current recovery? Greek real GDP fell by 28% between 2008 and 2013. Since then it's climbed by 2%. I suppose recovery's one word for it.
Quotegreek extreme-left in coalition with nationalists... funny how they have a national-socialist government now
I know. Who amongst us could have guessed that the economics of the 1930s might produce the politics of the 1930s.
Quote from: Sheilbh on January 28, 2015, 02:12:26 AMAnd I want them to successfully pull off the destruction of the corrupt, nepotistic, clientilist state that always been the biggest problem for Greece and that neither PASOK nor New Democracy would ever want to challenge, far less damage. If they get rid of the jobs-for-the-boys approach for government procurement for all sorts, but especially the army and the Piraeus, and they manage to sort out tax evasion they'll deserve a lot of credit. If they manage to do that last then that would be as important a structural reform as anything that's been demanded of them over the last few years.
I predict nothing of the sort will happen.
Quote from: Admiral Yi on January 27, 2015, 07:55:37 PM
Quote from: Jacob on January 27, 2015, 07:52:09 PM
Default and stay with the Euro, or default and go back to the Drachma?
I would go with the drachma. The contrasting recoveries of the UK and the US have shown that it is much easier to return to full employment when real wages can be reduced through inflation.
Could you explain how the contrast has anything to do with national vs. common currency, given that both the UK and the US has a national currency? :huh:
Quote from: Zanza on January 28, 2015, 02:16:21 AM
Quote from: Sheilbh on January 28, 2015, 02:12:26 AMAnd I want them to successfully pull off the destruction of the corrupt, nepotistic, clientilist state that always been the biggest problem for Greece and that neither PASOK nor New Democracy would ever want to challenge, far less damage. If they get rid of the jobs-for-the-boys approach for government procurement for all sorts, but especially the army and the Piraeus, and they manage to sort out tax evasion they'll deserve a lot of credit. If they manage to do that last then that would be as important a structural reform as anything that's been demanded of them over the last few years.
I predict nothing of the sort will happen.
Yeah, I'd rather have Greece effectively ruled by Germany and the Troika than hoping Greeks get their shit together for a change. Doing the same thing over and over again and expecting a different result is the definition of insanity.
Quote from: Martinus on January 28, 2015, 02:19:28 AM
Yeah, I'd rather have Greece effectively ruled by Germany and the Troika than hoping Greeks get their shit together for a change. Doing the same thing over and over again and expecting a different result is the definition of insanity.
But that's precisely what they haven't done. They haven't voted for the parties who as I say created and benefited from that clientilist state. They voted for the party that campaigned against it. Two days before the election their new Finance Minister (who blogs in English here: http://yanisvaroufakis.eu/) and as he put it 'we are going to destroy the Greek oligarchy system.'
My major worry is the threat of political violence in collusion with the Greek state. I believe 40% of Athens cops voted for Golden Dawn and you look at their links to the judiciary and allegedly the intelligence service too and that's scary. I don't think the army's a threat but there's still a deep state in Greece.
QuoteI predict nothing of the sort will happen.
Maybe. But surely it's worth trying rather than just weighing more and more pain onto everyday Greeks.
QuoteCould you explain how the contrast has anything to do with national vs. common currency, given that both the UK and the US has a national currency? :huh:
Monetary policy based on national conditions.
Quote from: Sheilbh on January 28, 2015, 02:12:26 AM
How is a negotiated settlement - which is what Jake, Syriza and I are saying should happen - worse than default which is what you're saying?
It's worse for the creditors who will have to finance Syriza's coming out party. It's great for the people going to the party. With a default, the borrowing game is over. Although they could concievably steal money from Greeks, and call it a loan.
Quote from: Sheilbh on January 28, 2015, 02:32:27 AM
QuoteCould you explain how the contrast has anything to do with national vs. common currency, given that both the UK and the US has a national currency? :huh:
Monetary policy based on national conditions.
No I get it. But both the UK and the US have national monetary policies and national currencies, so how are their cases "contrasting"?
Quote from: Martinus on January 28, 2015, 02:16:32 AM
Could you explain how the contrast has anything to do with national vs. common currency, given that both the UK and the US has a national currency? :huh:
I can't, because it doesn't. It has to do with the higher inflation the UK has been running.
Quote from: Admiral Yi on January 28, 2015, 02:51:35 AM
It's worse for the creditors who will have to finance Syriza's coming out party. It's great for the people going to the party. With a default, the borrowing game is over. Although they could concievably steal money from Greeks, and call it a loan.
Greece has been running a primary surplus for two years.
Quote from: Sheilbh on January 28, 2015, 03:07:31 AM
Greece has been running a primary surplus for two years.
So?
So if they default they won't, presumably, be paying interest any more?
Quote from: Sheilbh on January 28, 2015, 03:15:58 AM
So if they default they won't, presumably, be paying interest any more?
Yes?
How does this nugget relate to what I posted?
They won't be paying interest, or borrowing money any more.
I thought I already said that.
Well you were correct. Is that what you want me to say?
Yi was right!!!!!!
:P
Shelf is giving indications that he thinks Greece's current primary surplus refutes my point. Which it doesn't. I thought you were agreeing with him.
No actually. I think if the Greeks blow up their bond market they might have a terrible time recovering.
Why would they need to borrow money?
Quote from: Sheilbh on January 28, 2015, 04:10:35 AM
Why would they need to borrow money?
Because they don't know how to tax?
Things that baffle me for example are that Poland's GDP per capita is 93% of Greece's GDP per capita, but Poland's minimum wage is only 58% that of Greece - yet Greeks think their minimum wage is way too low and Syriza propose to raise it even further.
Things like this make it hard for me to see Greeks in any other way but as lazy greedy fucks.
A lot of things baffle me as well, like how can governments spend so recklessly, and how come the markets are willing to lend to them year after year.
Quote from: Monoriu on January 28, 2015, 05:13:46 AM
A lot of things baffle me as well, like how can governments spend so recklessly, and how come the markets are willing to lend to them year after year.
Well the markets are not willing to lend to them - that is why they had to be bailed out by the Troika. Before that, I guess those lending to them liked a gamble as the potential return on Greek bonds was very high because they were so shitty.
Syriza has openly said that they do not support the EU policy on Russia sanctions. So we have leftists in Athens who prefer the fascist in Moscow to the technocrats in Brussels.
QuoteGreece's Odd-Couple Only Agrees About Ending Austerity
(Bloomberg) -- The two men disagree on just about everything, except this: for Greece, the time of German-dictated austerity must end.
Alexis Tsipras became prime minister of Greece on Monday by vowing to challenge the budget-cutting policies demanded by the European Union and International Monetary Fund in return for a 240 billion euro ($270 billion) rescue plan.
But his election win on Sunday, though emphatic, left the former communist short of a majority in parliament. To get one, he turned to the religiously inclined conservative party of Panos Kammenos. Their unlikely and potentially fragile coalition underscores how Greeks across the political spectrum have found a common cause after five years of austerity-fueled recession.
Tsipras and Kammenos, who took the post of defense minister, have both vowed to try to write down the country's debt, over the objections of the European Central Bank and IMF.
On most other issues, from foreign affairs to social policy and civil liberties, the two parties are "chalk and cheese," said Yanis Varoufakis, a Syriza lawmaker who was named finance minister.
'Seasoned and Opportunistic'
Greek stocks and bonds tumbled on Tuesday before the cabinet was named. Alpha Bank SA fell as much as 20 percent, while the yield on three-year government bonds surged two percentage points to more than 14 percent.
Syriza won 149 seats in the 300-member parliament. Kammenos's party, Independent Greeks, has 13 lawmakers. Their alliance is based firmly on shared opposition to spending cuts. Beyond that, the leaders' backgrounds and views differ sharply.
Tsipras, 40, is a former member of the Communist Youth. Kammenos, 49, is a religious, conservative economist who, when discussing Greece's German-led paymasters, has evoked his nation's occupation by the Nazis.
The parties have diverging views on taxation, immigration and the role of the church, according to Wolfango Piccoli, managing director at Teneo Intelligence in London.
"It's hard to see how this coalition of strange bedfellows can last long," he said. "Kammenos is a seasoned and opportunistic politician who will not hesitate to leave the coalition whenever it suits him."
Homeland Attacked
Kammenos formed his own group in parliament after being expelled from the New Democracy party by ex-Prime Minister Antonis Samaras for opposing the terms of Greece's bailouts. Last week, Kammenos told party supporters that Europe is governed by "neo-Nazi Germans."
The Syriza-led coalition replaces one led by Samaras since June 2012 that included New Democracy and Pasok, the two parties that have traditionally vied for power in Greece.
Kammenos, an economist by training and a father of five, has been a lawmaker since 1993, according to the parliament website. He served as deputy shipping minister between 2007 and 2009.
Kammenos called those who led Greece into the first bailout in May 2010 "traitors," and said that as a result of the agreement, "our homeland was under attack." He was expelled from New Democracy for opposing the interim government of Lucas Papademos, which arranged the world's biggest debt restructuring and finalized a second rescue in return for more austerity measures.
'German Protectorate'
In 2012, Kammenos announced the establishment of his party in the town of Distomo, the site of Nazi atrocities during World War II.
Tsipras, who has campaigned on a platform of writing down Greece's debt, has been vocal about pursuing Germany for reparations. His first visit as prime minister on Monday was to Kaisariani in Athens, to pay tribute to victims of Nazi occupation.
Independent Greeks, whose lawmakers include former model Elena Kountoura, who was named deputy minister for tourism today, and television actor Pavlos Haikalis, made the demand that Germany pay reparations part of their election campaign in May and June 2012.
In October of the same year, during Chancellor Angela Merkel's visit to Athens, the party called a protest outside the German Embassy, and tried to hand over a petition accusing Merkel of "transforming Greece into a German protectorate."
There's some ideological common ground between the parties, as shown by the past defection of some Independent Greeks lawmakers to join Syriza, said Jens Bastian, an economist and former member of the European Commission's Greek task force. What's more striking about their coalition is the speed with which it was formed, he said.
"What concerns me is that Tsipras did not prefer to talk to other potential coalition partners," Bastian said. "Instead he chose to put a government together as soon as possible."
http://www.bloomberg.com/news/articles/2015-01-26/greece-s-odd-couple-coalition-only-agrees-about-ending-austerity
In other news, Kammenos also said that the Greek debt is a result of international Jewish conspiracy; suports putting the Orthodox Church in charge of the country education system; and wants to kick out immigrants.
I look forward to my "I Told You So" to the Languish Naive Left (tm) in a few months/years just as it happened with Erdogan.
Quote from: Martinus on January 28, 2015, 05:00:04 AM
Things that baffle me for example are that Poland's GDP per capita is 93% of Greece's GDP per capita, but Poland's minimum wage is only 58% that of Greece - yet Greeks think their minimum wage is way too low and Syriza propose to raise it even further.
Things like this make it hard for me to see Greeks in any other way but as lazy greedy fucks.
not to mention the fact that the Left is already shouting that we need to waste more money on Greece because of $olidarity.
I wonder where Greek solidarity was when they were cooking their books, lying to everyone about the state of things in Greece and when they were collectively not paying their taxes and wasting money they basically didn't have.
Quote from: Martinus on January 28, 2015, 05:00:04 AM
Things that baffle me for example are that Poland's GDP per capita is 93% of Greece's GDP per capita, but Poland's minimum wage is only 58% that of Greece - yet Greeks think their minimum wage is way too low and Syriza propose to raise it even further.
You might not be the best-suited to judge whether Poland's minimum wage is too low or not.
Quote from: The Brain on January 28, 2015, 11:47:42 AM
Greeks are incredibly unattractive as a people.
Though as men, they have their fair share of hotties. :)
Quote from: Peter Wiggin on January 28, 2015, 09:35:00 AM
Quote from: Martinus on January 28, 2015, 05:00:04 AM
Things that baffle me for example are that Poland's GDP per capita is 93% of Greece's GDP per capita, but Poland's minimum wage is only 58% that of Greece - yet Greeks think their minimum wage is way too low and Syriza propose to raise it even further.
You might not be the best-suited to judge whether Poland's minimum wage is too low or not.
In fact I was surprised Polish minimum wage is so high. I thought I am earning around 50 times the minimum wage but it seems like it's only around 35 times. :(
Quote from: Sheilbh on January 28, 2015, 04:10:35 AM
Why would they need to borrow money?
They've said they want to renegotiate the bailout to increase deficit spending. That means more borrowing.
Quote from: Martinus on January 28, 2015, 02:19:28 AM
Yeah, I'd rather have Greece effectively ruled by Germany and the Troika than hoping Greeks get their shit together for a change. Doing the same thing over and over again and expecting a different result is the definition of insanity.
Thus the policy of Germany and the Troika is insane.
Quote from: Admiral Yi on January 28, 2015, 03:13:08 AM
Quote from: Sheilbh on January 28, 2015, 03:07:31 AM
Greece has been running a primary surplus for two years.
So?
So it is relevant in respect to this point:
Quote from: Admiral Yi on January 27, 2015, 07:13:12 PM
Do you hope this happens? Would you like Germany et al to lend Greece more money that will not get paid back?
A Greece that runs a primary surplus is a Greece capable of paying off its debts so long as the legacy debt is at manageable levels.
The fact that Greece was able to get to a primary surplus under extremely unfavorable macro conditions also belies the claim that the Greeks as a people are inherently hopeless, shiftless, whatever slur of the day, etc.
Under the circumstances the reform effort was pretty respectable in a short period of time. The wise policy of the EU should have been to reinforce that. The predictable result of not doing that would be to undermine the political elements that were pushing to fix things. And now the policy has reaped what it sowed.
You know that's not true Joan. A Greece with a primary surplus is a country that creeps deeper and deeper into debt every year, the pace determined by the interest rate charged on its borrowing.
The fact that Greece was able to achieve a primary surplus had nothing to do with their inherent fiscal probity and everything to do with the conditions imposed by the lenders, which Greece resisted and reneged on over and over again.
And now Greek voters have spoken, and elected a party who's stated aim is to toss out that primary surplus and amp up deficit spending.
That all being said, I still fail to see the relevance of any of this discussion of Greece's primary surplus to the distinction between default and Syriza's wish to increase its deficit, which was the starting point of the discussion between Shelf and myself.
Quote from: Admiral Yi on January 28, 2015, 05:46:41 PM
And now Greek voters have spoken, and elected a party who's stated aim is to toss out that primary surplus and amp up deficit spending.
I remember when we did that back in 2000.
Except the Greeks didn't backslide they've had to cut far more than any program proposed.
Also SYRIZA don't want deficit spending.
Quote from: Sheilbh on January 28, 2015, 05:58:00 PM
Except the Greeks didn't backslide they've had to cut far more than any program proposed.
They missed target after target.
QuoteAlso SYRIZA don't want deficit spending.
I thought I read every explicitly they want to increase the deficit.
But assuming they don't, how do you expect them to finance their increase in public sector employment.
Quote from: Admiral Yi on January 28, 2015, 05:46:41 PM
You know that's not true Joan. A Greece with a primary surplus is a country that creeps deeper and deeper into debt every year, the pace determined by the interest rate charged on its borrowing.
The fact that Greece was able to achieve a primary surplus had nothing to do with their inherent fiscal probity and everything to do with the conditions imposed by the lenders, which Greece resisted and reneged on over and over again.
???
A country that runs a primary surplus is by definition transferring real resources to creditors on a net basis.
The only way that can occur and yet the country "crawl deeper and deeper into debt" is if the existing stock of debt is unsustainable. Which is what the Troika keeps burying its head in the sand about.
Second, of course achieving the surplus involves fiscal probity. How else could one get to a primary surplus in excess of 3 percent of GDP? The fact that it involves pressure from the EU is not a detracting factor. On the contrary, it shows the Greeks kept their end up, grumbling notwithstanding.
If one puts aside moral hazard considerations for a second, the current situation makes zero sense. Greece is one the poorest countries in the EZ and is deep into an economic depression. Yet it is making net payments to its much more affluent EU partners - payments that are quite significant in size to Greece but totally negligible to the recipients. This makes no freaking sense at all.
To which one could responds - ah, but moral hazard. But that IMO is no longer a serious consideration. No rational country would go through what Greece went through on the theory that after 6 years of horrific abject misery and the eradication of a political class they would finally catch a break.
If the EU were a real political union a la the USA, none of this would be an issue. Instead of being hung out to dry and forced into austerity, money would have been flowing in to Greece automatically, just as, for example, it flowed into Oklahoma during the S&L crisis of 89-91. This crisis is in part an artifact of the jury-rigged institutional construct of the EU and the EZ.
QuoteAnd now Greek voters have spoken, and elected a party who's stated aim is to toss out that primary surplus and amp up deficit spending.
That all being said, I still fail to see the relevance of any of this discussion of Greece's primary surplus to the distinction between default and Syriza's wish to increase its deficit, which was the starting point of the discussion between Shelf and myself.
I can't really speak as to what Syriza intends to do, because it appears to be a grouping of somewhat disparate elements, and those manifestos translated into English are borderline incomprehensible.
What sheilbh was arguing is that their rise to power could be an opportunity to reach a restructuring; part of that deal would presumably involve a continuing commitment to smaller primary surplus or at least a primary balance. That would seem to me a hell of a lot better than either the status quo or default. Whether Syriza will actually agree to such a deal I don't know. It would have been far more advisable to do this a while ago and thus not have to test that proposition.
I don't get the argument that a default is superior. It isn't better for Greece, it isn't better for creditors. The upside eludes me.
I think Yi's looking for a moral fig-leaf to justify him getting some vulture fund Greek debt?
Quote from: The Minsky Moment on January 28, 2015, 06:16:37 PM
???
A country that runs a primary surplus is by definition transferring real resources to creditors on a net basis.
Only if one ignores accruing interest. That's what makes it a primary surplus and not a surplus surplus.
QuoteIf the EU were a real political union a la the USA, none of this would be an issue. Instead of being hung out to dry and forced into austerity, money would have been flowing in to Greece automatically, just as, for example, it flowed into Oklahoma during the S&L crisis of 89-91. This crisis is in part an artifact of the jury-rigged institutional construct of the EU and the EZ.
Detroit? Stockton? NYC? The US taxpayer is most definitely not on the hook for any bad debts piled up by its jurisdictions.
QuoteI don't get the argument that a default is superior. It isn't better for Greece, it isn't better for creditors. The upside eludes me.
The only advantage to paying off ones debts is it entitles one to borrow more. With debt at 170% of GDP, no one will lend to Greece at a reasonable rate anyway. And it would be the work of five generations to pay down the existing debt. So default wipes it all clean. Then in five to seven years they can see if investors think they have learned their lesson.
Quote from: Martinus on January 28, 2015, 05:00:04 AM
Things that baffle me for example are that Poland's GDP per capita is 93% of Greece's GDP per capita, but Poland's minimum wage is only 58% that of Greece - yet Greeks think their minimum wage is way too low and Syriza propose to raise it even further.
I've no idea if it's a good idea or not for Greece but if you've an economy that doesn't have a floating currency and has been stuck with deflation for six years surely wage policy has to play a role? Genuine question (I'm roughly imagining it as being similar to when the UK tried to keep Sterling going, pre-monetarism, and the tools of deflation or inflation were spending, spending cuts, wage growth and wage restraint) :mellow:
Especially as there's the baffling fact that despite increased labour flexibility and a fall of around 15% in unit labour costs (more if you take into account the growth in the Eurozone in general) that Greek exports aren't increasing. The European Commission's study of Greek competitiveness highlighted what it felt were the two biggest (and in my view inter-related problems): institutional weakness and its closed, oligopolistic market.
See also this, though this is far more about more developed economies:
http://www.project-syndicate.org/commentary/global-demand-deficiency-by-adair-turner-2015-01
QuoteIn other news, Kammenos also said that the Greek debt is a result of international Jewish conspiracy; suports putting the Orthodox Church in charge of the country education system; and wants to kick out immigrants.
In 2010 when PASOK needed all the support they could get to support the bailout they brought the Popular Orthodox Rally into the coalition. Their leader Giorgos Katzaferis (better known in Greece by his nickname Katzafuhrer) who blamed the Jews for the economic crisis, Greece's particular crisis and 9/11. The health minister from LAOS owned a small publishing house responsible for works like 'The Jews, The Whole Truth' written by a man who described himself as a 'Nazi, fascist, racist, anti-democrat, anti-Semite.' The health minister in question even used to go on the Greek equivalent of QVC to flog his products.
Of course every single member of the Independent Greeks was previously a member of New Democracy and were a part of that government until a couple of years ago. Kammenos was, for twenty years, a fellow MP with Samaras before founding the new party.
That's not to excuse it, but after five years of working with these parties and governments including them, I'm not sure whether Captain Renault or St Augustine is the more apt analogy for Europe discovering her virtue.
Though on this I loved the Irate Greek's piece on the whys and hows and how awful it is:
https://theirategreek.wordpress.com/2015/01/26/strange-bedfellows/
QuoteSyriza has openly said that they do not support the EU policy on Russia sanctions. So we have leftists in Athens who prefer the fascist in Moscow to the technocrats in Brussels.
The last Greek government openly said they didn't support EU policy on Russia sanctions. The Foreign Minister literally said 'we don't want sanctions'.
There's reasons sensible (Russia was one of the few countries that imported stuff from Greece and supplies around 90% of their gas - annoyingly at a fixed price the last government negotiated last year :bleeding:) and bad (Greco-Russian sympathy, a very anti-West left-wing) for it. Sad truth is Greece has been pro-Russia for about 300 years and I don't see it changing any time soon.
QuoteThey missed target after target.
Yes, but not for want of trying. The targets were as a percent of GDP. The actual economic situation in Greece was worse than was ever predicted and they've got deflation. And the programs consistently underestimated the amount of extra debt the Greeks would need to take on. The Greeks needed to sprint to stand still - and they did. The scale of cuts to public spending - as opposed to just covering interest - they've implemented is more than was ever demanded of them.
It's a bit like the ECB's stress tests that had as an adverse deflationary scenario a rate that's already higher than reality.
QuoteI thought I read every explicitly they want to increase the deficit.
But assuming they don't, how do you expect them to finance their increase in public sector employment.
They've explicitly said they want to run a balanced budget and they will not default or try to renegotiate on their private sector debt.
To continue to roll-over their debt - that no-one thinks is sustainable - they need to run a primary surplus of 4.5% and are almost there. But even then their debt sustainability calculations are based on relatively high nominal GDP growth and a steady 4.5% primary surplus - I can't see the former happening. Without it there needs to be some form of debt relief. They want to renegotiate that debt, which would reduce their interest payments to cover so that primary surplus would just be a surplus.
As Joan says I really don't see the upside for anyone if Greece defaults. Their creditors get nothing instead of something and, at best, the Greeks get to suffer a bit more.
QuoteSecond, of course achieving the surplus involves fiscal probity. How else could one get to a primary surplus in excess of 3 percent of GDP? The fact that it involves pressure from the EU is not a detracting factor. On the contrary, it shows the Greeks kept their end up, grumbling notwithstanding.
And the fact it got to 3% of GDP from -13% of GDP at a time when their economy shrank by a quarter has to be one of the largest, most successful fiscal consolidations on record.
QuoteI can't really speak as to what Syriza intends to do, because it appears to be a grouping of somewhat disparate elements, and those manifestos translated into English are borderline incomprehensible.
Their admirably honest Finance Minister ('this is a poisoned chalice' :lol: more on him here - http://marginalrevolution.com/marginalrevolution/2015/01/yanis-varoufakis.html ) said much the same of Syriza a couple of years ago:
QuoteShould we be afraid of Syriza's 'ultra-leftism'? My answer is a resounding No. I recommend that (even those who have Greek amongst their languages) you do not read their manifesto. It is not worth the paper it is written on. While replete with good intentions, it is hort on detail, full of promises that cannot, and will not be fulfilled (the greatest one is that austerity will be cancelled), a hotchpotch of policies that are neither here nor there. Just ignore it. Syriza is a party that had to progress, within weeks, from a fringe political agglomeration struggling to get into Parliament (at around the 4% mark) to a major party that may have to form government in a few short weeks. It is, in important ways, a 'work in progress'; and so is its unappetising Manifesto. No, the reason it is safe to take a gamble on Syriza is threefold:
First, because it is probably the only party that 'gets it'; that understands (a) that Greece must stay in the Eurozone (despite the latter's obvious failures), and (b) that the Eurozone will not survive unless someone forces Europe to put an immediate halt on this "march off the cliff of competitive austerity".
Secondly, because the small team of political economists that will negotiate on Syriza's behalf are good. moderate people with a decent grasp of the grim reality that Greece and the Eurozone are facing (and, no, I am not part of that team – but I know the ones I am referring to).
Thirdly, because, in any case, a vote for Syriza is not going to establish a purely Syriza government. No party, including Syriza, will be in a position to form a government outright. So, the question is whether Europe is better off with a government in Athens which includes Syriza as a pivot or one which is supported by discredited pro-bailout parties, with Syriza leading from the opposition benches. I have no doubt whatsoever that Europe's interests are best served by the first option.
http://yanisvaroufakis.eu/2012/06/03/why-europe-should-fear-fina-gail-like-reasonableness-much-much-more-than-it-fears-syriza/
QuoteWhat sheilbh was arguing is that their rise to power could be an opportunity to reach a restructuring; part of that deal would presumably involve a continuing commitment to smaller primary surplus or at least a primary balance. That would seem to me a hell of a lot better than either the status quo or default. Whether Syriza will actually agree to such a deal I don't know. It would have been far more advisable to do this a while ago and thus not have to test that proposition.
Yep. And the real potential upside of Syriza, which they may not achieve, is to change Greek political culture. Tsipras isn't the son of a former Prime Minister, he didn't used to board with an opposing parties' leader and they've said they want to destroy the oligarchic economy in Greece that is, in their words, sucking the life out of the rest of Greece. Again, they may fail terribly, but I think they've got a better chance than the two parties that created and were created by that system.
Alan Beattie was good on this:
http://blogs.ft.com/the-world/2015/01/the-greek-economy-the-case-against-structural-reform/
QuoteThat the microeconomic structure of the Greek economy (as opposed to its position in the macroeconomic cycle) is a shambles is not in doubt: closed professions, low labour force participation, a corrupt bureaucracy and a political class that hands out state contracts to a favoured few and fails to collect tax from almost everybody. And unlike, say, Spain or Italy, Greece's inefficiencies are such that some kind of structural change is probably necessary for it to exit crisis mode, let alone show healthier growth in the medium term.
But fixing a chunk of this has nothing to do with deregulation. As part of their plan to target the "oligarchy", Syriza — whose victory on Sunday sparked celebrations (right) — have promised to clamp down on tax avoidance by the rich and clean up the notoriously corrupt public procurement system. Improving tax collection is already a big part of Greece's current agreement with the EU-IMF-ECB troika. If this happens — an "if" roughly the size of Crete, admittedly — it would stand as an excellent example of redistributive left-wing structural reform. To the extent that an economy is rigged to benefit a national elite, as Greece's partly is, a left-wing party may be one of the best hopes of positive change.
As he says it's a big if. They're far more likely to fail than succeed. But as Marti says you can't just keep trying the same thing and expecting a different result. On that criteria the Eurozone, New Democracy and PASOK have failed. It's worth trying something new.
Quote from: Sheilbh on January 28, 2015, 07:16:20 PM
Yes, but not for want of trying. The targets were as a percent of GDP.
Their targets for cutting public sector employment were in people.
QuoteThey've explicitly said they want to run a balanced budget and they will not default or try to renegotiate on their private sector debt.
They want to increase public sector employment and not increase borrowing?? Do you see the contradiction here?
Quote from: Admiral Yi on January 28, 2015, 07:09:25 PM
Quote from: The Minsky Moment on January 28, 2015, 06:16:37 PM
???
A country that runs a primary surplus is by definition transferring real resources to creditors on a net basis.
Only if one ignores accruing interest. That's what makes it a primary surplus and not a surplus surplus.
The payment of interest is a real transfer of resources. There is no contradiction here.
QuoteDetroit? Stockton? NYC? The US taxpayer is most definitely not on the hook for any bad debts piled up by its jurisdictions.
The US taxpayer finances fiscal federalism; if a particular area is depressed, resources will flow automatically via the federal budget. Detroit the city doesn't get its budget fixed but the people in Detroit get unemployment and Medicaid and WIC and so on. The US taxpayer also finances financial resolution - if say all the major banks in Oklahoma and across the Sun Belt get in over the heads, the national government provides the backstop. And if Detroit, or Stockton or any municipality wants to negotiate with its creditors, the Federal government isn't going to dictate conditions by memorandum.
QuoteThe only advantage to paying off ones debts is it entitles one to borrow more. With debt at 170% of GDP, no one will lend to Greece at a reasonable rate anyway. And it would be the work of five generations to pay down the existing debt. So default wipes it all clean. Then in five to seven years they can see if investors think they have learned their lesson.
A negotiated reduction seems to achieve the same result.
Quote from: Admiral Yi on January 28, 2015, 07:31:21 PM
Quote from: Sheilbh on January 28, 2015, 07:16:20 PM
Yes, but not for want of trying. The targets were as a percent of GDP.
Their targets for cutting public sector employment were in people.
QuoteThey've explicitly said they want to run a balanced budget and they will not default or try to renegotiate on their private sector debt.
They want to increase public sector employment and not increase borrowing?? Do you see the contradiction here?
... you're implying that they can't pay for it?
How about if they pay for it by fixing the tax collection system so they actually get the revenue they're supposed to get?
Quote from: The Minsky Moment on January 28, 2015, 07:38:52 PM
The payment of interest is a real transfer of resources. There is no contradiction here.
Greece is aiming for, and presumably not yet attaining, an overall deficit of 4.5% of GDP. Unless Greece's economy is growing by more than 4.5% a year, Greece's debt/GDP will keep getting bigger and bigger and bigger.
QuoteThe US taxpayer finances fiscal federalism; if a particular area is depressed, resources will flow automatically via the federal budget. Detroit the city doesn't get its budget fixed but the people in Detroit get unemployment and Medicaid and WIC and so on. The US taxpayer also finances financial resolution - if say all the major banks in Oklahoma and across the Sun Belt get in over the heads, the national government provides the backstop. And if Detroit, or Stockton or any municipality wants to negotiate with its creditors, the Federal government isn't going to dictate conditions by memorandum.
And Greece's sugar daddy, through the EU, has transferred billions of dollars in equalization blah blah assistance. But we were talking about picking up the tab for Greece's debt, which the US doesn't do.
QuoteA negotiated reduction seems to achieve the same result.
I see the confusion now. A mutually agreed on haircut is just a variation on the theme of default.
Quote from: Jacob on January 28, 2015, 07:42:22 PM
... you're implying that they can't pay for it?
How about if they pay for it by fixing the tax collection system so they actually get the revenue they're supposed to get?
Sure am.
That would be lovely.
After what Sheilbh posted I am convinced we should loot anything that's of value in Greece and give the rest to the Turk.
Quote from: Martinus on January 29, 2015, 03:56:17 PM
After what Sheilbh posted I am convinced we should loot anything that's of value in Greece and give the rest to the Turk.
Yeah. The easiest solution of all would've been if Greece hadn't been in the Eurozone at all. But they're there now and it's not clear they can be forced out in any way, or what the consequences of that would be. So it's time to make the best of it rather than, as Geithner put it, getting out the paddles.
Incidentally apparently the Greek government's initial negotiation suggestion is largely around a moratorium on interest payments until certain level of nominal growth is hit (possibly that suggested in the various program memos) and further extensions of repayment. There's also suggestions they may take on and restructure the (Greek) banks which is something that the EU would quite like.
There seems to be a concerted effort to take the political heat out of this on all sides. Syriza and the (hawkish) Dutch FinMin have both issued very calming statements, the French government also said Europe needed to stop the 'holy war' rhetoric and the (also hawkish) Finns hinted that they might be open to a deal. Lagarde's position was similarly nuanced in the IMF's ongoing long retreat from 2010.
Schaeuble took a different, rather more pessimistic view: 'I'm convinced the real problem with the economy is the human being.' :lol:
Edit: Actually it seems Germany entirely missed the memo on at least pretending to try and work together, Martin Schulz's statement: 'if you go into conflict with the Eurozone, you will lose' :lol:
QuoteI see the confusion now. A mutually agreed on haircut is just a variation on the theme of default.
So we all support the same thing, but you call it a default?
QuoteTheir targets for cutting public sector employment were in people.
What was the target?
Again I've always thought that was a wrong-headed approach in a country with real institutional weakness - see not just tax evasion but the success a very small EU team aiding the Greek state had in raising the take while they were there. It's not necessarily that they've got too many civil servants but that the civil service is in need of reform. That would involve firing people but the focus always should have been on building up Greek institutions and capability not 'cut x number of people' - not least because ND and PASOK went for the easy targets like the famous cleaning ladies of the Finance Ministry (re-hired today).
Quote from: Sheilbh on January 29, 2015, 05:50:18 PM
So we all support the same thing, but you call it a default?
So I don't know, do we?
I was under the impression Syriza was asking for more money.
QuoteWhat was the target?[/quotes]
Beats me. Does it make a difference?
Quote from: Admiral Yi on January 29, 2015, 05:59:29 PM
So I don't know, do we?
I was under the impression Syriza was asking for more money.
They want to renegotiate their debts so they're not paying 4.5% of GDP a year as interest. Either with a debt write-down, some form of forgiveness (they cite the 1953 German debt forgiveness), further extensions or changing them from a loan to a conditional bond based on growth or some combination of the above. They've said they'll run a balanced budget or a smaller primary surplus.
But the money that would've gone on interest could then spent in other, more productive ways.
QuoteBeats me. Does it make a difference?
To judge if they met their targets, yeah.
Quote from: Sheilbh on January 29, 2015, 06:06:44 PM
To judge if they met their targets, yeah.
Right. So I could tell you what the target was, and what they achieved, so you could judge if they met their targets, or I could tell you that I read in the Economist that they failed to meet their targets for cutting public sector jobs, so you could judge if they met their targets.
Of course I'd trust you.
But I'd counter that that is only one part of their targets. I'm not sure it's the most important or the one that had most effect, unlike, say, Greece having cut public spending per capita by over 24% (in the period 2007-2014 so it actually includes two years of massive overspending and even more drastic cuts afterwards) which is more than was ever asked or expected.
And I'd add that it does depend when you look at it. The situation now is different than in 2012 for example - and, for the most part, that change in facts has been reflected in a changed attitude towards Greece.
Quote from: Sheilbh on January 29, 2015, 06:06:44 PM
But the money that would've gone on interest could then spent in other, more productive ways.
Maybe they should thought of that before spending the money which yielded them that interest.
Also, in more general terms, what is most annoying for me in this "new radical European left" is that it is as old as it can be. It is exactly like the old far left, there is nothing new about them, their background, or what they propose, and they have proven to be wrong once already but it seems we are destined to go through the whole thing again including the Russian influence as cherry on top.
We played this game before, in 2012 when the Troika kicked the can down the road - keeping total debt at unsustainable levels while taking out most of the private creditors. Hence my comment to Martinus' insanity line. Virtually all of Greece's debt and thus the right to interest payments is held by EU governmental entities at this point, so it really comes down to how much symbolic blood the rest of the EU wants to wring out of the Greek stone of an economy.
One can quibble about targets (which kept moving) but the Greeks brought public expenditures down at lot and got the budget under control; they did about as much as could reasonably be expected under the circumstances.
At this point either kick them out or write down the debt already. Anything else is just pointless cruelty.
Quote from: Tamas on January 29, 2015, 07:05:26 PM
Maybe they should thought of that before spending the money which yielded them that interest.
Yes and maybe the creditors should have done reasonable calculations about rights of repayment, or insisted on conditions, etc before lending the money.
But no they did zero diligence because they relied on an implicit EZ guarantee, something that the ECB and all the EZ member states were aware was going on and chose not to discourage.
Just like the EZ members happily admitted Greece into monetary union despite its failure to meet the criteria, and despite knowing all the institutional problems the Greeks had. Captain Renaud indeed.
On this particular boulevard, moral hazard is a 2 way street.
Have the Greeks made any effort to repay the loans through the sale of assets? Governments own tons of stuff. Stocks in national companies like power plants, railways, not to mention land, national parks, oceans, islands, the Acropolis, Temple of Zeus, fighter jets, naval ships, tanks, sides arms of chiefs of staff, pipelines, pension funds of civil servants, the parliament building, presidential palace, etc?
They've tried really, really hard, but haven't managed to sell much, if anything.
Did I mention how gosh darn hard they tried?
In other news, German economy is in deflation. Greeks are screwed.
Yes. But it's a fire sale in a depression. The Troika initially thought it would earn €50 billion, then €20 billion over seven years, latest estimates were lower - needless to say the shortfall was made up by public spending cuts.
Ironically the privatisation that would have brought in most money collapsed under EU pressure as it was to Gazprom. Which is fair, but annoying.
I also wonder how many have been clean processes.
Quote from: Martinus on January 30, 2015, 01:31:11 AM
In other news, German economy is in deflation. Greeks are screwed.
Why?
Quote from: Sheilbh on January 30, 2015, 03:53:23 AM
Quote from: Martinus on January 30, 2015, 01:31:11 AM
In other news, German economy is in deflation. Greeks are screwed.
Why?
Germany is the biggest economy in the EZ, so if it gets deflation, the EZ will get deflation. Greeks need a massive inflation to dig themselves out of their hole - having deflation while being near default is suicidal, as it transfers wealth from the borrowers to the lenders (massive inflation is, by the way, how France and the UK got rid of their massive public debt in the first half of the 20th century).
At least that's my "common sense economy" analysis.
Greece has been in deflation for about two years.
Spain and Italy have been for a while too.
Still my point stands. :P
Greed is good. So is deflation :contract:
Quote from: Monoriu on January 30, 2015, 09:33:41 AM
Greed is good. So is deflation :contract:
Greed, maybe. But not deflation, not if you're a creditor, and not really for consumers, either. Deflation means that the on a macro level the economy is contracting, which means standards of living are falling, at least long-term. The most widespread, sustained period of deflation in the 20th century was the Great Depression.
Quote from: dps on January 30, 2015, 10:25:12 AM
Quote from: Monoriu on January 30, 2015, 09:33:41 AM
Greed is good. So is deflation :contract:
Greed, maybe. But not deflation, not if you're a creditor, and not really for consumers, either. Deflation means that the on a macro level the economy is contracting, which means standards of living are falling, at least long-term. The most widespread, sustained period of deflation in the 20th century was the Great Depression.
That's the theory. I actually lived under 5% deflation for a few years, and it was great. Real wages went up, everything got cheaper as each month passed, I bought stocks at low prices. Loved it.
Quote from: Sheilbh on January 30, 2015, 03:52:55 AM
Yes. But it's a fire sale in a depression. The Troika initially thought it would earn €50 billion, then €20 billion over seven years, latest estimates were lower - needless to say the shortfall was made up by public spending cuts.
Ironically the privatisation that would have brought in most money collapsed under EU pressure as it was to Gazprom. Which is fair, but annoying.
Exactly - privatization assumes there is something of value that a buyer will pay for. You sell into the boom not the bust.
Quote from: Monoriu on January 30, 2015, 10:35:00 AM
That's the theory. I actually lived under 5% deflation for a few years, and it was great. Real wages went up, everything got cheaper as each month passed, I bought stocks at low prices. Loved it.
Not so great for the rest of HK though - unemployment went up and real GDP down.
I understand the concept of "public good" is elusive for you. ;)
http://www.reuters.com/article/2015/01/30/greece-politics-idUSA8N0UD01J20150130
QuoteGreece says will not cooperate with troika or seek aid extension
Jan 30 (Reuters) - Greece's government will not cooperate with the EU and IMF mission bankrolling the country and will not seek an extension to the bailout programme, its finance minister said on Friday.
Jeroen Dijsselbloem, head of the euro zone finance ministers' group who is in Athens for talks with the new government, said the two sides would decide what would happen next before the programme ends on Feb. 28.
"This platform enabled us to win the confidence of the Greek people," Finance Minister Yanis Varoufakis told reporters after their meeting. "Our first action as a government will not be to reject the rationale of questioning this programme through a request to extend it."
Varoufakis said he had assured Dijsselbloem that Athens planned to implement reforms to make the economy more competitive and have balanced budgets but that it would not accept a "self-fed crisis" of deflation and non-viable debt.
In turn, Dijsselbloem said he had told the new government to respect the terms of the existing agreement between Greece and the euro zone and warned against taking unilateral steps, saying it was important not to reverse progress made so far.
He said continuing support from Europe depended on Greece respecting its obligations and it was up to to Athens to decide its position before moving forward jointly with the euro zone.
Meanwhile, the Russian finance minister said that if Greece were to seek loans from Russia, they would give the request due consideration.
Open letter from Tsipras to German citizens.
To me it seems pretty sensible, and quite far from the "give us more money" characterization that floats around.
Yi, I'm particularly interested what your take is on this.
QuoteAlexis Tsipras' "open letter" to German citizens published on Jan.13 in Handelsblatt, a leading German language business newspaper
Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds biggotry, nationalism, even violence.
In 2010, the Greek state ceased to be able to service its debt. Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity.
In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the 'extend and pretend' tactic would lead my country to a tragic state. That instead of Greece's stabilization, Europe was creating the circumstances for a self-reinforcing crisis that undermines the foundations of Europe itself.
My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to. Money that would, in any case, neither help the people of Greece (as it was being thrown into the black hole of an unsustainable debt) nor prevent the ballooning of Greek government debt, at great expense to the Greek and German taxpayer.
Indeed, even before a full year had gone by, from 2011 onwards, our predictions were confirmed. The combination of gigantic new loans and stringent government spending cuts that depressed incomes not only failed to rein the debt in but, also, punished the weakest of citizens turning people who had hitherto been living a measured, modest life into paupers and beggars, denying them above all else their dignity. The collapse of incomes pushed thousands of firms into bankruptcy boosting the oligopolistic power of surviving large firms. Thus, prices have been falling but more slowly than wages and salaries, pushing down overall demand for goods and services and crushing nominal incomes while debts continue their inexorable rise. In this setting, the deficit of hope accelerated uncontrollably and, before we knew it, the 'serpent's egg' hatched – the result being neo-Nazis patrolling our neighbourhoods, spreading their message of hatred.
Despite the evident failure of the 'extend and pretend' logic, it is still being implemented to this day. The second Greek 'bailout', enacted in the Spring of 2012, added another huge loan on the weakened shoulders of the Greek taxpayers, "haircut" our social security funds, and financed a ruthless new cleptocracy.
Respected commentators have been referring of recent to Greece's stabilization, even of signs of growth. Alas, 'Greek-covery' is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!
Allow me to submit to you that this sorry attempt to recruit a new version of 'Greek statistics', in order to declare the ongoing Greek crisis over, is an insult to all Europeans who, at long last, deserve the truth about Greece and about Europe. So, let me be frank: Greece's debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding. The insistence in these dead-end policies, and in the denial of simple arithmetic, costs the German taxpayer dearly while, at once, condemning to a proud European nation to permanent indignity. What is even worse: In this manner, before long the Germans turn against the Greeks, the Greeks against the Germans and, unsurprisingly, the European Ideal suffers catastrophic losses.
Germany, and in particular the hard-working German workers, have nothing to fear from a SYRIZA victory. The opposite holds. Our task is not to confront our partners. It is not to secure larger loans or, equivalently, the right to higher deficits. Our target is, rather, the country's stabilization, balanced budgets and, of course, the end of the grand squeeze of the weaker Greek taxpayers in the context of a loan agreement that is simply unenforceable. We are committed to end 'extend and pretend' logic not against German citizens but with a view to the mutual advantages for all Europeans.
Dear readers, I understand that, behind your 'demand' that our government fulfills all of its 'contractual obligations' hides the fear that, if you let us Greeks some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the cleptocracy which today pretends to strive for 'reforms', as long as these 'reforms' do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.
Our task is to bring about a European New Deal within which our people can breathe, create and live in dignity.
A great opportunity for Europe is about to be born in Greece on 25th January. An opportunity Europe can ill afford to miss.
http://syriza.net.gr/index.php/en/pressroom/253-open-letter-to-the-german-readers-that-which-you-were-never-told-about-greece
Quote from: The Minsky Moment on January 30, 2015, 10:51:30 AM
Quote from: Monoriu on January 30, 2015, 10:35:00 AM
That's the theory. I actually lived under 5% deflation for a few years, and it was great. Real wages went up, everything got cheaper as each month passed, I bought stocks at low prices. Loved it.
Not so great for the rest of HK though - unemployment went up and real GDP down.
I understand the concept of "public good" is elusive for you. ;)
He is a civil servant. Is this a rhetorical question?
That being said, the concept that it is great to buy stocks if their prices keep falling and the economy is contracting, is a novel one. :lol:
Perhaps, I could interest you in a new bridge in Warsaw, Mono? It's very broad and not blocked by protesters.
Surely the Troika's already dead following ECJ ruling?
Quote from: Sheilbh on January 30, 2015, 01:52:15 PM
Surely the Troika's already dead following ECJ ruling?
What ruling?
On OMT.
QuoteRespected commentators have been referring of recent to Greece's stabilization, even of signs of growth. Alas, 'Greek-covery' is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!
Sorry, I may be tired/drinking wine but is this right? I thought the GDP growth needs to be adjusted for inflation - so in other words, if there is GDP growth and deflation, it means that the growth is actually higher than the nominal. :huh:
QuoteDear readers, I understand that, behind your 'demand' that our government fulfills all of its 'contractual obligations' hides the fear that, if you let us Greeks some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the cleptocracy which today pretends to strive for 'reforms', as long as these 'reforms' do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.
Didn't SYRIZA split off from PASOK? :hmm:
No.
Why didn't they hand Greece to Stalin?
Quote from: Martinus on January 30, 2015, 02:00:56 PM
QuoteRespected commentators have been referring of recent to Greece's stabilization, even of signs of growth. Alas, 'Greek-covery' is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!
Sorry, I may be tired/drinking wine but is this right? I thought the GDP growth needs to be adjusted for inflation - so in other words, if there is GDP growth and deflation, it means that the growth is actually higher than the nominal. :huh:
GDP can be stated either in real or nominal terms
Nominal GDP = Real GDP + Inflation.
So if there is deflation (inflation<0), then NGDP<RGDP
Assuming the numbers are correct, then Tsirpas' conclusion follows: total income is declining but there is still some real growth because prices are declining even faster.
Anyway, what is important regarding national debts is the nominal GDP figure. Real GDP may be increasing, but if the nominal value is falling, then the debt/GDP figure is still rising.
Bingo,
Payments on debt have to be made in money. They are nominal payments. So declining nominal GDP means those payments are harder to make.
Quote from: Jacob on January 30, 2015, 12:00:17 PM
Yi, I'm particularly interested what your take is on this.
There are some things I agree with, in particular that Greek debt was unsustainable when the program began.
He is in total denial when he says that the bailout imposed terrible austerity on the Greek people. The troika financed deficits that Greece would otherwise have not been able to finance without the bailout. The alternative to the bailout, with its strings attached, was even deeper cuts, those necessary to achieve a balanced budget. When no one will lend you money, that's the only kind of budget you can run.
He is also being a bit disingenuous when he tells Germans that they don't have to worry. If he does what he says he will, either they will get less of their loan back, get less interest on it, or get it back over a longer time.
Quote from: The Minsky Moment on January 30, 2015, 02:27:07 PM
Assuming the numbers are correct, then Tsirpas' conclusion follows: total income is declining but there is still some real growth because prices are declining even faster.
His conclusion, "all that happened is that prices declined faster than nominal national income," is not true. An increase in real GDP, regardless of the inflation/deflation rate, means Greeks produced more in the current period than they did in the last.
On one hand I am frustrated that after Argentina and Greece, governments are still piling up massive debts and deficits.
On the other hand, when I see a new bond pop up with a nice 4-5% yield, issued by some non-African government, I can't stop myself from clicking the buy button.
Quote from: Monoriu on January 30, 2015, 05:34:29 PM
On the other hand, when I see a new bond pop up with a nice 4-5% yield, issued by some non-African government, I can't stop myself from clicking the buy button.
That's still kinda crappy.
Quote from: MadImmortalMan on January 30, 2015, 05:37:36 PM
Quote from: Monoriu on January 30, 2015, 05:34:29 PM
On the other hand, when I see a new bond pop up with a nice 4-5% yield, issued by some non-African government, I can't stop myself from clicking the buy button.
That's still kinda crappy.
I'd love to hear it if you have a better idea :)
Junk bonds are not less risky than stocks and you're not getting nearly the yield to make up for it.
AT&T pays 5.71% right now, and it's a hell of a lot safer than a junk bond. And can be sold on a whim.
Quote from: MadImmortalMan on January 30, 2015, 05:58:41 PM
Junk bonds are not less risky than stocks and you're not getting nearly the yield to make up for it.
AT&T pays 5.71% right now, and it's a hell of a lot safer than a junk bond. And can be sold on a whim.
Just checked it. My US stock trading account is now online after two weeks of battling with the bank. You guys use "ticker symbols", and AT&T is "T", right? We use numbers in HK. AIG is 01299.
There are also Vanguard passive ETFs, right? I'll do it on Monday then. Markets are closed now.
Quote from: Monoriu on January 30, 2015, 06:25:33 PM
You guys use "ticker symbols", and AT&T is "T", right?
Yup.
If you need to look up a ticker, I find the easiest is to go to the company's home page and click on the investor relations tab.
Quote from: Martinus on January 30, 2015, 08:51:39 AM
Still my point stands. :P
Except if Germany were to have some of the problems that the periphery has they may be more open to potential solutions.
But I think there is a strand of German public opinion that's rather Mono-ish. See this interview with Draghi:
QuoteThe question is why you see price stability at 2% inflation at all. 0% would be much better, wouldn't it?
Draghi: The 2% target was decided by the Governing Council in 2003. It would certainly not help confidence if targets were changed when it becomes difficult to meet them! Otherwise, when we had 3% inflation, we could have set 3% as the target. We must be reliable. Inflation has been low for some time now. This is partly due to falling oil prices and corrections of high prices in some countries, but also to weak demand. Core inflation has been around 0.7% for a year.
No major central bank has an objective of 0%. The reason is simple. If one aims at 0%, half the time inflation will be positive and half the time it will be negative. And when inflation is negative and interest rates have fallen to zero, one cannot lower interest rates to bring inflation back to zero.
Do you fear deflation, i.e. declining prices and wages?
Draghi: The risk cannot be ruled out completely, but it is limited. The important thing is what inflation rate people expect over the medium term. Since June, we have seen that these expectations have declined. If inflation remains low for a long time, people might expect prices to fall even further and postpone their spending. We are not there yet. But we need to tackle this risk.
... and the result is grotesque. The central bank fights for more inflation. That's strange for Germans, whose country has suffered two periods of hyperinflation and fears a new currency reform. Do you understand the unease of the people of this country?
Draghi: History shows that falling prices can be as damaging to the prosperity and stability of our countries as high inflation. That is why our mandate is symmetric. And that is why we are now ensuring that the risk of deflation you just asked me about does not materialise. You, as a journalist, also have a duty to explain. Public opinion in Germany is very important for us.
QuoteOn OMT.
I looked this up and I don't think the ECJ have actually ruled yet. But the press release of the Advocate General's opinion had this section:
QuoteAs regards the first question referred for a preliminary ruling, which concerns whether the OMT programme is in reality an economic policy measure rather than a monetary policy measure, the Advocate General takes the view that the objectives of the programme are in principle legitimate and consonant with monetary policy. However, given the significant role which the ECB plays in financial assistance programmes (design, approval and regular monitoring), its actions might in certain circumstances be perceived as being more than mere "support" for economic policy. Thus, in the event of the OMT programme being implemented, the ECB must, if the programme is to retain its character of a monetary policy measure, refrain from any direct involvement in the financial assistance programme that applies to the State concerned.
Which makes it seem like it'd be difficult for the Troika to continue as it currently does - and as Syriza rightly point out it has no legal or institutional basis - if the ECB would want to go forward with OMT. I think the markets would far prefer the OMT to the Troika.
QuoteMeanwhile, the Russian finance minister said that if Greece were to seek loans from Russia, they would give the request due consideration.
That was a worry back before the bailout too. I remember reading many articles that the Russians were prepared to bail the Greeks out (if the Euros didn't) in exchange for naval bases.
In fairness on the Russian sanctions point, their Finance Minister has posted this:
http://yanisvaroufakis.eu/2015/01/29/a-question-of-respect-or-lack-thereof/
And when asked the Greeks did approve extending the sanctions and, apparently, their Foreign Minister told his Euro-colleagues 'I'm not a Russian puppet.'
On the non-cooperation story that is bold. What's clear is that this time it's different. This isn't Papandreou or Berlusconi or Zapatero.
Dijsselbloem had apparently briefed the media that an extension of the programme had been agreed - again it's not entirely clear if that was just the press jumping the gun or the Eurogroup forgetting to check with Greece. But as it turns out they're pretty clear they don't want the next tranche or to extend the current program.
Varoufakis is right that this, ultimately, is their electoral mandate it's what people voted them into office to do and on the first day in office he said he'd started negotiations with Greece's official creditors but would not acknowledge the Troika. But everyone had assumed that the crunch point would come in about June or July, whereas at this could move it forward to February. But the decision in February would be Draghi who I think would be unlikely to pull the plug so early in any stage of negotiations, but if he doesn't then the Troika have set a precedent of accepting this from the Greeks.
For all the talk of cooling things down the meeting doesn't look like it went well:
https://www.youtube.com/watch?v=LPmFHW60Ho8&x-yt-ts=1422579428&x-yt-cl=85114404
The bit of talking at the start of that clip: '...and with this if you want – and according to European Parliament – flimsily-constructed committee we have no aim to cooperate. Thank you.'
On the other hand Varoufakis was on Newsnight earlier and was emphasising that Greece wants a deal. He said Syriza pledge to run a balanced budget and a primary surplus. They want to deal with Greece's partners - the IMF, EU and ECB - but reject the Troika (the sort of WW2 United Nations stance they've adopted and the supervising officials). He added 'we do not want to reverse structural reforms, we want to deepen them and make them more extensive'. The interview starts at around the third minute:
https://www.youtube.com/watch?v=BiIO4YciewU
There were two nice game points made by London City people I saw today. One is this could be a very strong bluff and if you're playing poker with a weak hand as Greece (probably) is, it may be the way to go. The other was this tweet: 'the month ends with me worrying that @yanisvaroufakis is significantly over-estimating his game theory skillz' :lol:
I do wonder if everything will, in the end, turn to Draghi who, so far, has been appropriately silent.
Edit: The Newsnight interview really is great and worth watching - and only ten minutes!
Edit: Also extracts of one of Varoufakis' books have been made into a free e-book:
http://www.amazon.co.uk/Europe-after-Minotaur-Greece-Economy-ebook/dp/B00SV1T1VE/ref=sr_1_1?ie=UTF8&qid=1422527560&sr=8-1&keywords=europe+after+minotaur
Quote from: Admiral Yi on January 30, 2015, 04:26:20 PM
Quote from: Jacob on January 30, 2015, 12:00:17 PM
Yi, I'm particularly interested what your take is on this.
There are some things I agree with, in particular that Greek debt was unsustainable when the program began.
He is in total denial when he says that the bailout imposed terrible austerity on the Greek people. The troika financed deficits that Greece would otherwise have not been able to finance without the bailout. The alternative to the bailout, with its strings attached, was even deeper cuts, those necessary to achieve a balanced budget. When no one will lend you money, that's the only kind of budget you can run.
He is also being a bit disingenuous when he tells Germans that they don't have to worry. If he does what he says he will, either they will get less of their loan back, get less interest on it, or get it back over a longer time.
I think the point (whether right or wrong) is that merely servicing the debt Greece has is such a huge expense, they could use that part of their income to finance any deficit they have. I don't know if that's true but I seem to remember seeing a figure of 1/3 of GDP being used to service the debt. If this is true, then Greece would probably be better off defaulting.
Yes and no Marty. If they didn't get any new money they would by definition be running a balanced budget. No deficit.
Quote from: Admiral Yi on January 31, 2015, 03:12:40 AM
Yes and no Marty. If they didn't get any new money they would by definition be running a balanced budget. No deficit.
Ok maybe I should have said shortfall rather than deficit. My point was that if they default and stop servicing their debt, this alone may give enough money to finance their spending without having to implement severe austerity measures.
It's probably 1/3 of national budget, as 1/3 of GDP would be ridiculous though.
Sheilbh, thanks, that's very informative. It will be really interesting to see how it plays out. The Greek side is not without its rights in this, but any compromise with them would be such a paradigm change for Germans (and, apparently, also Finns, the Dutch and Estonians) that I don't know if they reach any. Most likely outcome will be some sort of kicking the can down the road while allowing the Greek fellow with the name I havent yet memorised to keep his face. At least that's what the Economist sez.
Junk Bond? Is that any of the movies set in E Asia?
Quote from: Martinus on January 31, 2015, 03:16:40 AM
Ok maybe I should have said shortfall rather than deficit. My point was that if they default and stop servicing their debt, this alone may give enough money to finance their spending without having to implement severe austerity measures.
Absolutely. Cut off all debt service and you have a ton of extra money to spend on making your voters happy. That's the great beauty of default.
Quote from: Martinus on January 31, 2015, 03:23:08 AMMost likely outcome will be some sort of kicking the can down the road while allowing the Greek fellow with the name I havent yet memorised to keep his face. At least that's what the Economist sez.
Possibly. Trouble is that's what Varoufakis has largely rejected. They don't want the next tranche of bailout money, they don't want any more 'extending and pretending'. His basic point is that an issue of insolvency has been treated as one of illiquidity.
Slightly mixed messages again today. Martin Schulz met Tsipras yesterday and was reasonably optimistic. But having briefed Merkel last night the German position seems to be publicly very hard-line.
Edit: The amazing, perverse thing is the Germans, according to Der Spiegel, want to give Greece more money (double the normal tranche) for them to keep to the austerity plans and Greece are the country refusing any more money because they can't afford it :lol:
Would it be too bad an example to set to put Greece through some kind of debt-forgiveness program like you'd do for an African country?
It's normally what the IMF do. Default, devaluation, austerity. Greece did that without the default or the devaluation. And of course the bailout money flowed straight back out of the country (only 10% has actually gone to the Greeks). As the IMF minutes noted in May 2010, this 'may be seen not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece's private debt holders' - it may be seen like that because that's what it was.
In 2010 the IMF wanted some form of default - the Europeans didn't because it was their banks that had been lending to the Greeks. Since then the IMf have wanted less austerity and different structural reforms. But the Europeans want to get out the paddles and teach those lazy bastards a lesson.
Quote from: Legbiter on January 31, 2015, 07:18:59 AM
Would it be too bad an example to set to put Greece through some kind of debt-forgiveness program like you'd do for an African country?
I think the main concern with that is that the rest of PIGS would want it too.
Tsipras says Greece will soon reach a deal with the EU creditors and will pay back their IMF and ECB assistance. The Greek Finance Ministry have appointed Lazards as advisers on public debt and fiscal management (they were previously appointed to deal with the Greek private sector haircut).
Quote"My obligation to respect the clear mandate of the Greek people with respect to ending the policies of austerity and returning to a growth agenda, in no way entails that we will not fulfill our loan obligations to the ECB or the IMF," Tsipras said.
...
"We need time to breathe and create our own medium-term recovery program, which amongst other things will incorporate the targets of primary balanced budgets and radical reforms to address the issues of tax evasion, corruption and clientelistic policies," Tsipras said. "I am absolutely confident that we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole."
One of the ECB council members said that they won't extend further lending to Greek banks if a deal isn't reached by the end of February (a consequence of Varoufakis' statement yesterday), but that decision would take a 2/3rds majority, so ultimately it's Draghi's and he, and the IMF, are quiet.
Edit: Another ECB VP popped up to confirm that not extending ELA to Greece's banks is a decision for the governing council which wouldn't predict. As I say I think it's very, very unlikely that the ECB will effectively try and force a newly elected government out of the Euro when there's only been a few weeks for negotiations. My guess is things would have to degenerate massively in the next month for that to happen. If it ever does.
Meanwhile ECB Vice-President Peter Praet has given another interview to a German paper trying to explain Mono-ism away:
QuoteThe ECB is buying government bonds to boost inflation and thereby economic growth. Are low petrol prices bad?
That is a natural argument. When petrol prices are falling, people are happy. However, monetary policy does not focus on individual prices, but rather on the overall price level. On average, prices in the euro area fell by 0.6% in January, and inflation rates will remain negative in the coming months. In Germany, prices fell by 0.5%, year on year, in January. We need to make sure that the euro are does not slip into a self-reinforcing downward spiral of falling prices and wages.
The Bundesbank does not see that as a problem.
If inflation in the euro area were to rise to 4%, everybody would expect the ECB to do something about it. Consequently, the ECB also has to step in when inflation falls to nearly zero. Price stability is threatened from above and below. We have a mandate under European law to maintain price stability. For very good reasons, the Governing Council of the ECB defined price stability many years ago as inflation close to, but below, 2% over the medium term – and it did so with the support of Germany and the Bundesbank.
Why has the ECB set its inflation target at 2%? Stable prices should mean 0% inflation.
With an inflation target of 0%, there would be no buffer. If an economic shock occurs in such cases, you have deflation straight away.
Is that so dangerous? The prices of computers have been falling for years. Surely that is good.
Cheaper computers are a good thing. Deflation means that prices in the economy as a whole are falling steadily. In such a situation, workers' wages are too high in comparison with the overall price level, and collective wage agreements cannot simply be changed. Therefore, production becomes too expensive and businesses stop investing because they assume that demand is falling. It is a vicious circle that leads to sharply declining economic activity and rising unemployment – the Great Depression in the United States in the 1930s has taught us that.
Can the risk of deflation be regarded as real at present?
We are not expecting deflation, but there are risks that need to be addressed. Prevention is better than cure. That is why we had to take action before the damage is done, because the inflation expectations of consumers and businesses are falling. That is dangerous. Also, a period of low inflation that is too prolonged entails significant risks.
People buy what they need, and whatever they can afford. Inflation expectations do not play any role in that.
Oh yes, they do. People are guided by expectations, even though they may not always be aware of it. People have an idea of what their future holds, of what they want, what they will spend and what they earn. They make rough estimates of what they can afford. If these expectations are not fulfilled, they experience a shock. And there was a risk of that occurring in the euro area, because deflation means less growth and lower income.
The ECB is doing all this solely for the benefit of crisis countries, i.e. Italy and co.
No, we work for the euro area as a whole. We have attempted to achieve our goals through low key interest rates, through purchases of covered bonds and through favourable loans to banks. All that has helped, but not to the extent desired, nor did it achieve what was required. That is the reason why we will now start purchasing government bonds. We have to use all instruments of monetary policy to ensure price stability across the euro area.
What makes you so sure?
I do not know what historians will write about the ECB at some time in the future, but every single measure we have taken was taken with due consideration of the risks involved, including the risk entailed if we had not done anything. What is also clear, however, is that the governments must now implement structural reforms.
Why does the ECB not put euro area governments under greater pressure?
This is not our role. If we were to make deals with governments on the basis of the principle that the ECB will do this, if you do that, we would lose our independence through such political give-and-take. And we would lose our credibility.
Couldn't you have put off the purchases of government bonds a little longer?
Some members of the Governing Council are of the opinion that such a measure should only be taken when deflation is a given. Nonetheless, almost all experts believe that it is far more difficult to combat deflation when in the midst of such developments. In that case, the central bank would have to spend many times as much and would still not be sure that deflation will be overcome successfully. That is the risk we wanted to rule out.
:blink:
Thanks for that, Shelf, interesting link. :)
Quote from: The Brain on January 30, 2015, 02:23:12 PM
Why didn't they hand Greece to Stalin?
Several reasons. The British had been seeing themselves as the protectors of the Greeks since the early 19th century, and it was seen as desirable to keep the Soviets out of the Med.
According to Greek TV at the end of that press conference Dijsselbloem whispered 'you just killed the Troika' into Varoufakis' ear and he replied 'wow' :lol:
Apparently the Greek press are also impressed that the Independent Greeks leader - and new Defence Minister - hasn't had a bigoted outburst in his first five days in office :lol:
And something to warm the cockles of Yi's heart:
QuoteNew Finance Minister Says Greece Is Insolvent
The new Finance Minister of Greece has been making waves. In a meeting with Eurogroup chairman Jeroen Dijsselbloem on January 30th he appeared to say that Greece would no longer cooperate with the Troika – the combination of the IMF , European Commission and the ECB that has been running Greece's bailout programme. Dijsselbloem's face was an absolute picture, as FT Alphaville gleefully reported.
Except, of course, that Varoufakis was speaking in Greek, so this isn't what he actually said. And Dijsselbloem, who was listening via a translation service, did not hear what he actually said. Nor did the world's journalists, who by and large also don't speak Greek. Varoufakis (who is bilingual) later said that he perhaps should have made his remarks in English.
Nonetheless, his apparent refusal to deal with the Troika made headline news. The BBC's headline claimed he said "No debt talks with EU-IMF Troika". The FT put up an inflammatory headline saying that Varoufakis was refusing to work with the Troika. But the FT's report explains it differently:
QuoteMr Varoufakis....said Greece "is working from the standpoint of the best possible co-operation with its institutional partners and the International Monetary Fund but not with a [bailout] program that we think is anti-European."
Eh? How is this "refusing to cooperate"? The reporters continue (my emphasis):
QuoteHe also blasted the deeply unpopular bailout monitors from the European Commission, IMF and ECB, also known as "the troika", saying: "We are not going to co-operate with a rottenly constructed committee."
Ah. The problem is what is meant by "the Troika". In an interview with Emily Maitlis on the BBC's Newsnight program later on January 30th, Varoufakis explained (in English) that the Troika has two levels: the institutions themselves, and the "bailout monitors" they have sent to Athens to ensure compliance with program demands. It is these monitors who have been rejected.
So Varoufakis is not refusing to cooperate with the European institutions and the IMF. On the contrary, he says he wants a "rational discussion" with them. He is repudiating the bailout program that they have constructed.
But why is he repudiating the bailout program? Varoufakis gave Maitlis an everyday example to explain his reasoning (my emphasis):
QuoteSuppose a friend of yours were to come to you and say that he or she had difficulty paying the mortgage because of a reduction in their income – they lost their job or something like that. They have a great idea on how to solve this problem: they would get a credit card and draw money from it in order to meet the mortgage payments for the next few months. Would you advise them that they should continue to take these tranches of loans from the credit card in order to deal with what is essentially an insolvency problem?
The new finance minister has admitted that Greece is bankrupt.
Astonishingly, Maitlis completely ignored this. How any decent journalist could let such an opportunity pass is beyond me. It is the heart of the matter.
Everyone knows Greece is insolvent, of course, but no-one has ever stated it officially. The Troika's position is that Greece's problem is a temporary liquidity shortfall: lending it more money so it can meet current debt service obligations is justified because structural reforms will lead to renewed growth and increased income, enabling it to meet its obligations (including those for the new loans) in the future. But Varoufakis disagrees with this interpretation. His view is that while things remain as they are, Greece will never recover. The bailout program locks it into a debt deflationary spiral which simultaneously reduces its income and increases its debt burden. Continuing to accept more loans in order to meet debt service obligations only makes matters worse. What is needed is debt restructuring coupled with measures to restore growth.
It is certainly difficult to see that the bailout program has been successful. Five years on, and despite a private sector debt restructuring, the Greek economy remains deeply depressed. But of course Greece has resisted the structural reforms imposed by the Troika. Some think that if Greece had implemented them more enthusiastically, it might now be in better shape.
Varoufakis made it clear in the Newsnight interview that he is by no means opposed to structural reforms:
QuoteWe do not want to reverse structural reforms. We want to deepen and extend them.
But he is deeply critical of the reforms imposed under the bailout terms, which he says do not address the "malignancies" of the Greek economy. He complains that the privatization program is a fire sale: the proceeds do not go into new investments or tax cuts, but simply go to meet debt service. Selling the family silver simply staves off default for a little longer. It does not restore Greece's income. And nor would decades of cost-cutting and tax raising to put Greece's debt/GDP ratio on a sustainable path. The large primary surpluses forecast by the Troika would squeeze all demand out of the economy. They are almost certainly impossible to achieve, and even if they were achievable, it is questionable whether they would restore the public finances anyway. The prospect of severe austerity for years to come is a serious disincentive to hard work and enterprise, which is what is really needed in Greece. If all your output disappears down the black hole of debt service, why bother?
Varoufakis wants an end to the policies that entrench debt deflation. "The crisis of the last five years has been detrimental to the whole continent", he says. "We want to end this".
He is calling for a New Deal, not only for Greece but for the rest of Europe. Many would echo his sentiment.
Saw this chart which highlight's what seems to be Syriza's approach:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fblogs.piie.com%2Frealtime%2Ffiles%2F2015%2F01%2Fubide20150130-figure2.jpg&hash=85c146d2b592873f9b53c85e7ccc48ea6e296766)
They'll pay back private sector creditors, the IMF and the ECB - that debt is high but sustainable especially if they do as they promise and run a balanced budget/small primary surplus in perpetuity.
But they want some form of renegotiation from the ESM/EFSF (of which they're one of the top half of contributors :lol:) and EU loans. Personally I like the idea of converting those loans into bonds conditional on a certain level of nominal GDP growth.
According to our papers, the harder resistance against the Greek plans amongst EU governments comes mostly from Ireland, Spain and Portugal, in some kind of "If we had to suck it you have to suck it as well" argument.
O follamos todos, o la puta al río.
In related news, I will cease paying taxes in Spain as of this midnight.
As the saying goes, if you can't beat 'em, join 'em. Mutti. :wub:
Quote from: Iormlund on January 31, 2015, 11:52:13 AMAs the saying goes, if you can't beat 'em, join 'em. Mutti. :wub:
:lol: :hug:
Very striking how many positive stories/spins on Greece these past few days have come from Rome. Maybe Renzi sees an opportunity/ally.
Spain doesn't want Tsipras to get his way, since that could mean a Podemos government by the end of the year.
And also because 26 thousand million euros from the different bailouts were ponied up by the Spanish government.
Quote from: Iormlund on January 31, 2015, 11:52:13 AM
In related news, I will cease paying taxes in Spain as of this midnight.
As the saying goes, if you can't beat 'em, join 'em. Mutti. :wub:
Welcome! Where will you go?
Quote from: The Larch on January 31, 2015, 12:58:48 PM
And also because 26 thousand million euros from the different bailouts were ponied up by the Spanish government.
That's like five hundred Eurobucks for every unemployed person. What a theft.
Quote from: Zanza on January 31, 2015, 01:01:29 PM
Quote from: Iormlund on January 31, 2015, 11:52:13 AM
In related news, I will cease paying taxes in Spain as of this midnight.
As the saying goes, if you can't beat 'em, join 'em. Mutti. :wub:
Welcome! Where will you go?
Galt's Gulch.
Quote from: Ideologue on January 31, 2015, 01:02:09 PM
Quote from: The Larch on January 31, 2015, 12:58:48 PM
And also because 26 thousand million euros from the different bailouts were ponied up by the Spanish government.
That's like five hundred Eurobucks for every unemployed person. What a theft.
It's apparently what Spain spends anually on unemployment benefits nowadays, according to our gubmint.
Quote from: Ideologue on January 31, 2015, 01:02:53 PM
Quote from: Zanza on January 31, 2015, 01:01:29 PM
Quote from: Iormlund on January 31, 2015, 11:52:13 AM
In related news, I will cease paying taxes in Spain as of this midnight.
As the saying goes, if you can't beat 'em, join 'em. Mutti. :wub:
Welcome! Where will you go?
Galt's Gulch.
we might get some decent Spanish food now.
Quote from: The Larch on January 31, 2015, 11:36:46 AM
According to our papers, the harder resistance against the Greek plans amongst EU governments comes mostly from Ireland, Spain and Portugal, in some kind of "If we had to suck it you have to suck it as well" argument.
I suspect if you are a government that has accepted austerity, and another government shows there is a better path, that is bad for your re election prospects.
Quote from: Zanza on January 31, 2015, 01:01:29 PM
Welcome! Where will you go?
To the headquarters of my previous employer, in Kassel.
I've stayed there for a couple months already and know both the town and my new colleagues - so I'm not making much of leap. I had something like this in mind when I joined the spanish division and so far the Plan™ is coming together rather nicely ... or at least half of it.
I had some trouble back when I became unemployed, and I thought it was in part because my experience, though extensive, lacked focus. Mostly because for some reason my previous bosses always tended to assign me those tasks that fell outside of the ordinary, which made me well versed in many areas but an expert in none. So when I got a job that promised the opportunity to focus in pure PLC development I was fairly happy. The idea was to use this job to plug said gap and gain a foothold in Germany at the same time. I'm in Germany indeed, but instead of programming, my new bosses have decided there was a good reason for my CV to lack focus. So I've been put in charge of software, robotics and electrical engineering for a project for one of the big auto makers.
I don't think I'll spend much more time in Kassel in any case, at least until summer. I'll probably spend the next few months flying between our client and subcontractors (in Poland and Spain). After that, there is a very juicy project overseas. I might spend anything from a few weeks to a year or so in the Americas in 2016. Or I might use my new and improved language skills, CV and Anmeldung to jump ship to another company in the Fatherland. That really depends on how my work is valued in the coming months.
Quote from: alfred russel on January 31, 2015, 03:12:49 PM
I suspect if you are a government that has accepted austerity, and another government shows there is a better path, that is bad for your re election prospects.
It's more a case of countries which have accepted austerity* being upset by another country being offered free money they were not.
*My inner George Orwell continues to be distressed by the use of "austerity" to describe 6% budget deficits.
Your inner George Orwell should read up on positive feedback loops.
I don't understand.
Quote from: Admiral Yi on January 31, 2015, 04:32:40 PM
I don't understand.
Have a deficit, cut government spending to close the deficit, harm the economy, see tax revenues fall and social spending (unemployment etc) increase, have a bigger deficit, cut government spending to close the bigger deficit, etc.
Sure, but how does that make a 6% deficit "austere?"
Quote from: Admiral Yi on January 31, 2015, 04:59:44 PM
Sure, but how does that make a 6% deficit "austere?"
If you accept that there is a feedback loop, then why would the % of deficit be relevant in determining how austere a budget is? Whether the budget is lavish or austere, it is going to be in deficit.
Quote from: alfred russel on January 31, 2015, 05:11:33 PM
If you accept that there is a feedback loop, then why would the % of deficit be relevant in determining how austere a budget is? Whether the budget is lavish or austere, it is going to be in deficit.
The % is relevant because it shows how much more you are consuming than you are producing.
Quote from: Admiral Yi on January 31, 2015, 05:15:01 PM
Quote from: alfred russel on January 31, 2015, 05:11:33 PM
If you accept that there is a feedback loop, then why would the % of deficit be relevant in determining how austere a budget is? Whether the budget is lavish or austere, it is going to be in deficit.
The % is relevant because it shows how much more you are consuming than you are producing.
If you are caught in the feedback loop Iormlund was discussing, what do you want to see before "austerity" is used to describe government policies?
Quote from: alfred russel on January 31, 2015, 05:20:05 PM
If you are caught in the feedback loop Iormlund was discussing, what do you want to see before "austerity" is used to describe government policies?
"Deficit reduction."
"Slow genocide."
Quote from: Admiral Yi on January 31, 2015, 05:42:42 PM
Quote from: alfred russel on January 31, 2015, 05:20:05 PM
If you are caught in the feedback loop Iormlund was discussing, what do you want to see before "austerity" is used to describe government policies?
"Deficit reduction."
Kinda an easy bar to reach. Spending one dollar less than last year.
Quote from: MadImmortalMan on January 31, 2015, 05:52:53 PM
Kinda an easy bar to reach. Spending one dollar less than last year.
:frusty:
Please see the feedback loop discussion above.
Quote from: Admiral Yi on January 31, 2015, 05:42:42 PM
Quote from: alfred russel on January 31, 2015, 05:20:05 PM
If you are caught in the feedback loop Iormlund was discussing, what do you want to see before "austerity" is used to describe government policies?
"Deficit reduction."
Greece has succeeded under that criteria.
Quote from: alfred russel on January 31, 2015, 05:55:33 PM
Quote from: MadImmortalMan on January 31, 2015, 05:52:53 PM
Kinda an easy bar to reach. Spending one dollar less than last year.
:frusty:
Please see the feedback loop discussion above.
I was talking about Yi's definition. Not sure what you are.
Quote from: MadImmortalMan on January 31, 2015, 05:59:56 PM
Quote from: alfred russel on January 31, 2015, 05:55:33 PM
Quote from: MadImmortalMan on January 31, 2015, 05:52:53 PM
Kinda an easy bar to reach. Spending one dollar less than last year.
:frusty:
Please see the feedback loop discussion above.
I was talking about Yi's definition. Not sure what you are.
A deficit the negative result of the equation revenues less spending.
Cutting spending won't reduce the deficit if the side effect is to reduce revenues by an equal or greater amount.
I know that. Why are you getting your panties tied?
Post edited to show I was responding to Yi in the first place.
Quote from: MadImmortalMan on January 31, 2015, 06:04:17 PM
I know that. Why are you getting your panties tied?
Because I'm an optimist. I've been waiting for the day people would read and reflect on prior posts, and possibly change their point of view. After almost 15 years on these fora, I thought this would be the day.
Oh well. It will probably be tomorrow. :) :P
Don't bet on it.
I'm criticizing Yi's definition of austerity and you jump down my throat. I don't even understand why.
Quote from: MadImmortalMan on January 31, 2015, 06:13:04 PM
Don't bet on it.
I'm criticizing Yi's definition of austerity and you jump down my throat. I don't even understand why.
Not really meaning to jump down anyone's throat.
But the discussion Iormlund initiated as on the problem of feedback loops--you cut spending to reduce a deficit, and then have GDP fall to such an extent that the deficit actually goes up.
In such a case, reducing a deficit isn't simple, and simply spending less won't get it done.
Okay good. Starting over. :P
Yi: I think your definition of austerity is insufficient because it's too simplistic. Just spending one dollar less in deficit than you did last year does not seem to me to be enough to qualify as austerity.
Quote from: alfred russel on January 31, 2015, 05:58:56 PM
Greece has succeeded under that criteria.
Which has nothing to do with whether austerity accurately and objectively describes what these countries are doing.
Quote from: MadImmortalMan on January 31, 2015, 06:30:19 PM
Yi: I think your definition of austerity is insufficient because it's too simplistic. Just spending one dollar less in deficit than you did last year does not seem to me to be enough to qualify as austerity.
I'm not trying to define austerity. I'm pointing out that using austerity to describe fiscal contraction (which is another good one Dorsey) is inaccurate and loaded.
Yi, two questions what is austerity to you and where does the word come from?
aus·ter·i·ty
noun \ȯ-ˈster-ə-tē, -ˈste-rə- also -ˈstir-ə-\
: a simple and plain quality : an austere quality
: a situation in which there is not much money and it is spent only on things that are necessary
Monks live austere lives. Spartans lived austere lives.
And in the context we're discussing?
I ask because from my perspective (and I think the general British one) austerity isn't necessarily a negative word.
A way to punish people for that most egregious of crimes, wasting money!
Quote from: Sheilbh on January 31, 2015, 09:34:33 PM
And in the context we're discussing?
Only spending money on necessities is a good starting point for discussion.
Quote from: Admiral Yi on January 31, 2015, 09:39:42 PMOnly spending money on necessities is a good starting point for discussion.
Okay. I've nothing to add to that, so begin :P
I already did. :)
Okay.
I normally understand that when someone has a good starting point they've something to say.
I still don't understand your view, because you've not expanded it at all, and as I say from my perspective it's not a negative word.
My point is that the words austere and austerity have well-established meanings of frugal, bare-bones expenditure. Because a duke lives less ostentatiously than a king doesn't make his existence austere; in exactly the same way a country running a 6% deficit is not living an austere existence just because they used to run a 9% deficit.
But the duke and the king are different people.
My point is that you talk about it and Orwell as if it's an awful thing. Austerity isn't necessarily a negative word. In the UK it's most associated with post-war austerity which isn't pre-war Orwellian Wigan. Post-war austerity had belt tightening and rationing, but also the creation of the NHS and the modern welfare state. The reason I think it's used a lot in the UK is because David Cameron, before 2010, explicitly invoked that era. He talked about a new 'age of austerity' and that era's ideal that 'we're all in it together'.
I agree that austerity doesn't accurately describe what's happened in Greece. Cuts to public spending of over 25% per capita go way, way beyond the merely austere and into the actively harmful, but there we go.
Edit: Also in a purely linguistic sense I think you're wrong. No-one is talking about an austere existence, but about the process of austerity. There's a difference.
Quote from: Admiral Yi on January 31, 2015, 10:14:35 PM
My point is that the words austere and austerity have well-established meanings of frugal, bare-bones expenditure. Because a duke lives less ostentatiously than a king doesn't make his existence austere; in exactly the same way a country running a 6% deficit is not living an austere existence just because they used to run a 9% deficit.
Whether we are talking about a process or a state, I'm not sure why the word "austerity" shouldn't apply to Greece. They have 20 something% unemployment, a GDP that has plunged since the start of the crisis, and youth unemployment is at epic levels. The country just elected a government titled "the radical left" while at the same time the far right is making gains.
The state has successfully introduced deficit reduction in an environment that has arguably deteriorated to be worse than our great depression, and they don't even get to call it "austerity". :(
I'd like to visit a stable, safe Greece before my legs fall off.
Fix it, you greasy bastards. Chop chop.
Quote from: Ed Anger on January 31, 2015, 10:44:41 PM
I'd like to visit a stable, safe Greece before my legs fall off.
Fix it, you greasy bastards. Chop chop.
Greece is safe now and stable enough. And on sale.
Quote from: Sheilbh on January 31, 2015, 10:20:35 PM
But the duke and the king are different people.
And 2010 and 2015 are two different years. So what?
QuoteMy point is that you talk about it and Orwell as if it's an awful thing. Austerity isn't necessarily a negative word. In the UK it's most associated with post-war austerity which isn't pre-war Orwellian Wigan. Post-war austerity had belt tightening and rationing, but also the creation of the NHS and the modern welfare state. The reason I think it's used a lot in the UK is because David Cameron, before 2010, explicitly invoked that era. He talked about a new 'age of austerity' and that era's ideal that 'we're all in it together'.
You're missing my point. I meant Orwellian in the sense of playing with the meaning of words.
QuoteI agree that austerity doesn't accurately describe what's happened in Greece. Cuts to public spending of over 25% per capita go way, way beyond the merely austere and into the actively harmful, but there we go.
So the only way to escape "austerity" or worse is to put 14% of GDP on the credit card every year?
QuoteEdit: Also in a purely linguistic sense I think you're wrong. No-one is talking about an austere existence, but about the process of austerity. There's a difference.
They come from the same Latin root dude.
Quote from: alfred russel on January 31, 2015, 10:48:01 PM
Quote from: Ed Anger on January 31, 2015, 10:44:41 PM
I'd like to visit a stable, safe Greece before my legs fall off.
Fix it, you greasy bastards. Chop chop.
Greece is safe now and stable enough.
Not to my standards.
Quote from: Admiral Yi on January 31, 2015, 10:48:52 PM
They come from the same Latin root dude.
So do Mortuary and Mortgage. :D
I guess the main problem with doing only what is necessary in this sense is that people can't agree on what's necessary. It would need to be something more...quantifiable.
All austerity or stimulus has a limit to how effective it will be or how much damage it will do. These are feedback loops, not perpetual motion machines. Either way it eventually it hits a wall.
Greece has wiped out the bubble in their GDP now and is one of the fastest growing economies in Europe at the moment. Might be time to loosen up a bit. Who knows.
Quote from: Admiral Yi on January 31, 2015, 10:48:52 PM
So the only way to escape "austerity" or worse is to put 14% of GDP on the credit card every year?
Do you genuinely think that credit card balances are a useful metaphor for understanding national budgets?
Quote from: Sheilbh on January 31, 2015, 10:20:35 PM
But the duke and the king are different people.
My point is that you talk about it and Orwell as if it's an awful thing. Austerity isn't necessarily a negative word. In the UK it's most associated with post-war austerity which isn't pre-war Orwellian Wigan. Post-war austerity had belt tightening and rationing, but also the creation of the NHS and the modern welfare state. The reason I think it's used a lot in the UK is because David Cameron, before 2010, explicitly invoked that era. He talked about a new 'age of austerity' and that era's ideal that 'we're all in it together'.
I agree that austerity doesn't accurately describe what's happened in Greece. Cuts to public spending of over 25% per capita go way, way beyond the merely austere and into the actively harmful, but there we go.
Edit: Also in a purely linguistic sense I think you're wrong. No-one is talking about an austere existence, but about the process of austerity. There's a difference.
But it seems obvious that Greece used to live way beyond their means. In this context the cuts to public expenditure just brought them back to Earth.
Quote from: Jacob on January 31, 2015, 11:16:32 PM
Quote from: Admiral Yi on January 31, 2015, 10:48:52 PM
So the only way to escape "austerity" or worse is to put 14% of GDP on the credit card every year?
Do you genuinely think that credit card balances are a useful metaphor for understanding national budgets?
Yes. Not absolutely perfect, but definitely very useful.
Quote from: Jacob on January 31, 2015, 11:16:32 PM
Quote from: Admiral Yi on January 31, 2015, 10:48:52 PM
So the only way to escape "austerity" or worse is to put 14% of GDP on the credit card every year?
Do you genuinely think that credit card balances are a useful metaphor for understanding national budgets?
It is not that far fetched.
Quote from: Barrister on January 31, 2015, 11:17:58 PM
Yes. Not absolutely perfect, but definitely very useful.
Huh.
I thought pretty much all serious economists dismiss that metaphor as being ignorant and leading to erroneous conclusions.
... but I guess not?
Serious scholars are going to dismiss any analogy or model that regular people understand as overly simplistic. :sleep:
Quote from: Barrister on January 31, 2015, 11:17:58 PM
Quote from: Jacob on January 31, 2015, 11:16:32 PM
Quote from: Admiral Yi on January 31, 2015, 10:48:52 PM
So the only way to escape "austerity" or worse is to put 14% of GDP on the credit card every year?
Do you genuinely think that credit card balances are a useful metaphor for understanding national budgets?
Yes. Not absolutely perfect, but definitely very useful.
It was my impress that it was the opposite, as it gives misleading impressions.
Quote from: Peter Wiggin on January 31, 2015, 11:53:27 PM
Serious scholars are going to dismiss any analogy or model that regular people understand as overly simplistic. :sleep:
It's more the "erroneous conclusions" bit that I'm concerned about.
Quote from: Jacob on January 31, 2015, 11:50:10 PM
Quote from: Barrister on January 31, 2015, 11:17:58 PM
Yes. Not absolutely perfect, but definitely very useful.
Huh.
I thought pretty much all serious economists dismiss that metaphor as being ignorant and leading to erroneous conclusions.
... but I guess not?
Their reasoning is?
Quote from: Monoriu on February 01, 2015, 12:20:35 AM
Quote from: Jacob on January 31, 2015, 11:50:10 PM
Quote from: Barrister on January 31, 2015, 11:17:58 PM
Yes. Not absolutely perfect, but definitely very useful.
Huh.
I thought pretty much all serious economists dismiss that metaphor as being ignorant and leading to erroneous conclusions.
... but I guess not?
Their reasoning is?
The the word "debt" is only real commonality. Governments don't generate revenue in the same way that most people do nor do most people print their own money. Government also owes debt to itself and it's own people, very few people in the world owe credit card debt to credit card companies they own a significant stake in and while debt is almost always bad for individuals it is not that way for governments.
Quote from: Admiral Yi on January 31, 2015, 10:14:35 PM
My point is that the words austere and austerity have well-established meanings of frugal, bare-bones expenditure. Because a duke lives less ostentatiously than a king doesn't make his existence austere; in exactly the same way a country running a 6% deficit is not living an austere existence just because they used to run a 9% deficit.
But how is the percentage of deficit in any way relevant to whether one is pursuing an austere policy? You yourself say in the first part of that paragraph that austerity relies on objective, rather than subjective criteria.
So, if you earn $20k per annum and you spend $30k per annum on a very small flat with only sub-standard amenities, cheap food and a medical treatment for your kid, surely you are living an austere life, despite running a 50% deficit, right? Conversely, if you earn $500k per annum, and you manage to save $200k you are most likely not living an austere lifestyle.
So why then go to say in the second part of your post that 6% deficit is by definition not austere. Wouldn't it depend on what your cost structure is?
Quote from: Monoriu on February 01, 2015, 12:20:35 AM
Quote from: Jacob on January 31, 2015, 11:50:10 PM
Quote from: Barrister on January 31, 2015, 11:17:58 PM
Yes. Not absolutely perfect, but definitely very useful.
Huh.
I thought pretty much all serious economists dismiss that metaphor as being ignorant and leading to erroneous conclusions.
... but I guess not?
Their reasoning is?
What Raz said.
Also, governments can print money.
Generally, the kind of things governments can do that make the analogy fall short are considered highly undesirable. Printing the debt away, for instance, causes hyper-inflation.
Perhaps the best move would be the one that people would choose in the credit card scenario- just stop paying.
Quote from: Peter Wiggin on February 01, 2015, 01:48:16 AM
Generally, the kind of things governments can do that make the analogy fall short are considered highly undesirable. Printing the debt away, for instance, causes hyper-inflation.
I'm no economist, but I thought things like reducing debt through (non-hyper-)inflation was not a bad thing, and basically just a fact.
I don't think quantitative easing, as recently practiced by the US, Japan, and now by the ECB have led to hyper-inflation either?
QuotePerhaps the best move would be the one that people would choose in the credit card scenario- just stop paying.
What makes you say that's the best move?
Quote from: Peter Wiggin on February 01, 2015, 01:48:16 AM
Generally, the kind of things governments can do that make the analogy fall short are considered highly undesirable. Printing the debt away, for instance, causes hyper-inflation.
Perhaps the best move would be the one that people would choose in the credit card scenario- just stop paying.
The problem is a the very nature of the debt is different due the different nature of a person and a government. A valid question would be what good is the credit card analogy in the first place?
Because I gather from Sheilbh that cutting their spending has wrecked their economy and from Yi that their debt continues to grow. Barring intervention from a rich benefactor(this does not mean new loans), bankruptcy seems to be the only way out.
Quote from: Razgovory on February 01, 2015, 12:50:44 AM
Quote from: Monoriu on February 01, 2015, 12:20:35 AM
Quote from: Jacob on January 31, 2015, 11:50:10 PM
Quote from: Barrister on January 31, 2015, 11:17:58 PM
Yes. Not absolutely perfect, but definitely very useful.
Huh.
I thought pretty much all serious economists dismiss that metaphor as being ignorant and leading to erroneous conclusions.
... but I guess not?
Their reasoning is?
The the word "debt" is only real commonality. Governments don't generate revenue in the same way that most people do nor do most people print their own money. Government also owes debt to itself and it's own people, very few people in the world owe credit card debt to credit card companies they own a significant stake in and while debt is almost always bad for individuals it is not that way for governments.
Surely taking on too much debt is bad for both governments and individuals, as the Greek case shows?
Quote from: Razgovory on February 01, 2015, 02:06:13 AM
The problem is a the very nature of the debt is different due the different nature of a person and a government.
There are differences, but the nature is the same. Both involve paying more later to use money now.
Quote from: Razgovory on February 01, 2015, 02:06:13 AMA valid question would be what good is the credit card analogy in the first place?
Yeah. Maybe if instead of one credit card, you have millions. And every time you spend, the credit card companies choose to fund the purchase or not. So if you stop paying your credit card bills, then eventually lots of them will stop accepting to fund you, or will charge you a higher interest rate. And if you default, all your credit cards get canceled. :P
Quote from: Jacob on February 01, 2015, 01:58:56 AM
I'm no economist, but I thought things like reducing debt through (non-hyper-)inflation was not a bad thing, and basically just a fact.
It is a bad thing. Bond investors care about the real return, which is the nominal yield minus inflation. If inflation goes up, they'll demand a higher nominal return, everything else being equal.
And they'll charge an inflation risk premium, because your monetary policy will now be viewed as unpredictable.
So it's bad if you're taking on new debt in an inflationary environment--you'll have to pay higher interest. And hopefully not rolling over old bonds at the new rates. Because: face value. :ph34r:
Quote from: Peter Wiggin on February 01, 2015, 02:10:53 AM
Because I gather from Sheilbh that cutting their spending has wrecked their economy and from Yi that their debt continues to grow. Barring intervention from a rich benefactor(this does not mean new loans), bankruptcy seems to be the only way out.
Jacob is right though - as I said before, non-hyper inflation is how Western governments got rid of their WWI debt and it was considered pretty desirable.
Quote from: Martinus on February 01, 2015, 02:54:19 AM
Jacob is right though - as I said before, non-hyper inflation is how Western governments got rid of their WWI debt and it was considered pretty desirable.
They could print.
Quote from: Admiral Yi on February 01, 2015, 02:45:37 AM
Quote from: Jacob on February 01, 2015, 01:58:56 AM
I'm no economist, but I thought things like reducing debt through (non-hyper-)inflation was not a bad thing, and basically just a fact.
It is a bad thing. Bond investors care about the real return, which is the nominal yield minus inflation. If inflation goes up, they'll demand a higher nominal return, everything else being equal.
And they'll charge an inflation risk premium, because your monetary policy will now be viewed as unpredictable.
If your economy is doing well and you are solvent, the spread between inflation and bond return should not be high or can even be negative.
Quote from: MadImmortalMan on February 01, 2015, 02:54:53 AM
Quote from: Martinus on February 01, 2015, 02:54:19 AM
Jacob is right though - as I said before, non-hyper inflation is how Western governments got rid of their WWI debt and it was considered pretty desirable.
They could print.
Well, ECB will print now. Anyway, I thought we were discussing theory, not the specific Greek case. I think most people agree that having monetary union but not fiscal union was not a great idea in retrospect. We are all disputing Yi's and Mono's silly claims.
Anyway, I think it is important to say that not all debt is alike. Good public debt is money owned by the state to its people - in the form of bonds etc. - as it allows people to lend their excess capital to the government, generating growth at both ends of the equation. On the other hand, if most of public debt is foreign-owned, this tends to siphon the national growth to whoever holds it. And the lower the national growth, the worse the local economy, and the more expensive the debt becomes - leading to a vicious cycle.
Quote from: Martinus on February 01, 2015, 02:57:13 AM
If your economy is doing well and you are solvent, the spread between inflation and bond return should not be high or can even be negative.
Irrelevant to the present discussion. We're not talking about the real return here, we're talking about the effect of inflation on nominal yields.
But a lot of people are happy to invest in bonds that are safe even if the net yield (ie adjusted for inflation) is below 0. US treasury bonds are like that, for example.
Quote from: Martinus on February 01, 2015, 03:08:43 AM
But a lot of people are happy to invest in bonds that are safe even if the net yield (ie adjusted for inflation) is below 0. US treasury bonds are like that, for example.
Sure, and they might even be willing to do the same if US inflation picked up. But I absolutely guarantee you that if US inflation ticked up to 5% folks would no longer be willing to accept 2 and change yield.
The increased yields apply to only new bonds though, not to the old portfolio.
That is correct. So what do you do when you've inflated away your old bonds, and they come due?
You repay them at a significant discount. Or refinance them at a devalued principal.
Money wants to be free.
Quote from: Martinus on February 01, 2015, 04:47:56 AM
You repay them at a significant discount. Or refinance them at a devalued principal.
You refinance them at a higher interest rate.
Quote from: Admiral Yi on February 01, 2015, 08:05:06 AM
Quote from: Martinus on February 01, 2015, 04:47:56 AM
You repay them at a significant discount. Or refinance them at a devalued principal.
You refinance them at a higher interest rate.
But the principal is worth less, so hopefully you are still ahead.
And I am not saying you run high inflation infinitely. You run high inflation during the period you have higher income, to be able to repay the debt at a decreasing cost - once you reach desirable debt levels, you contain inflation to bring interest rates down.
You don't just turn off inflation like a water faucet. It took the US a prolonged period of high real interest rates, and a significant recession, to kill inflationary expectations in 81.
Quote from: MadImmortalMan on February 01, 2015, 02:39:29 AM
Quote from: Razgovory on February 01, 2015, 02:06:13 AMA valid question would be what good is the credit card analogy in the first place?
Yeah. Maybe if instead of one credit card, you have millions. And every time you spend, the credit card companies choose to fund the purchase or not. So if you stop paying your credit card bills, then eventually lots of them will stop accepting to fund you, or will charge you a higher interest rate. And if you default, all your credit cards get canceled. :P
Also, you can kill some of the people who own the credit companies in certain situations.
Don't forget guys, that in the current environment the bonds with the most buying interest are the short-term ones. So the debts are rolling over much faster than normal and the percentage of every country's debt that is in short term bonds is getting bigger all the time. That can be a time bomb if there's an interest rate spike significant enough to really mess up the government's balance sheet.
In that situation, not only do you get the pain to the little guy that high inflation brings, but you also don't get the benefit to the government that you normally would because the percentage of their debt rolling into higher interest would cancel out the benefit of inflation.
I think what the attempt here is to keep interest rates low enough until some moderate inflation does come, and then hold it there long enough. Honestly, I think they are too low. It's in the government's best interest for people to want to buy the 30 year treasuries instead of the two year.
Varoufakis' tour of the Finance Ministries of Europe kicked off with France today. The French ruled out a debt writedown but were otherwise generally supportive and mentioned a 'new contract' and seemed open to ending the Troika supervisors (which is, apparently, what the Greeks mean when they refer to 'the Troika'). But generally Varoufakis continued to be quite categorical in his statements, and Sapin didn't really seem that put off by them. It looks like France could be a moderate supporter of a deal (I imagine Italy will be the other most supportive state).
Edit: One other interesting line. Greece is preparing its offer with Lazard 'the French government have offered their assistance'.
Obama also weighed in for the Greeks. It won't matter except that combined with the very different language coming out of the IMF it means there may be a shift there. But the Europeans ignored Geithner and Obama before - they were right then too. Juncker has also said that there needs to be an alternative to the Troika supervisors.
The perverse situation of Greece not wanting any more money and her creditors trying to force it on her continues. Varoufakis used the rather vivid metaphor of Greece behaving like a hollow-eyed addict waiting for their next tranche of European money and that it was time for Greece to go 'cold turkey'. He continued to say that EU taxpayers have paid too much for a program that isn't and can't work.
Varoufakis' strategy is apparently to start negotiations and lay out their position over the next month or so but thinks there should be a deal by May. There was possibly a veiled threat in his comment that it would be sensible to have something in place by their big redemption in June. This assumes (I think correctly) that the ECB will continue to offer ELA to Greece's banks in February. Basically negotiations until May, no new tranches, no Troika supervision and the ECB maintains liquidity of Greek banks.
One other interesting thing is that I think in some of his language about the Euro he's almost quoting and probably definitely referring to this section of a speech Draghi gave in Helsinki last year - and again the only person who could possibly force Greece out of the Euro is Draghi:
QuoteThis means that such shocks have to be preempted to the extent possible through sound economic policies. It also means that when shocks do occur – as they inevitably will – adjustment has to take place through other channels. And crucially, those channels have to be at least as effective as if countries were not part of monetary union. Members have to be better off inside than they would be outside.
The reason for this is as follows: if there are parts of the euro area that are worse off inside the Union, doubts may grow about whether they might ultimately have to leave. And if one country can potentially leave the monetary union, then this creates a replicable precedent for all countries. This in turn would undermine the fungibility of money, as bank deposits and other financial contracts in any country would bear a redenomination risk.
This is not theory: we all have seen first-hand, and at considerable costs in terms of welfare and employment, how fears about euro exit and redenomination have fragmented our economies.
So it should be clear that the success of monetary union anywhere depends on its success everywhere. The euro is – and has to be – irrevocable in all its member states, not just because the Treaties say so, but because without this there cannot be a truly single money.
Meanwhile a German paper said Greece should stop using the comparison of the 1953 London conference cancelling Germany's debts because, unlike those debts, Greece's are self-imposed. They issued a correction a short while later :lol:
Also of interest there's strong rumours that they're about to re-appoint a Greek computer programmer who was hired by the Greek revenue agency in 2011 to develop programs that monitor both evasion and collection. He was fired after about six months last time :lol:
And this piece on the previous head of revenue:
QuoteDeath threats forced me to quit my job, says Greece's top tax man
Tax boss who targeted rich and well-connected 'warned his legs would be broken'
It was when he received threats that his legs would be smashed that Harry Theoharis really knew he was making enemies.
Just months into his job as head of Greece's tax collection agency, it became clear he was stirring a hornet's nest with his efforts to crack down on the country's endemic tax evasion, which robs Athens of hundreds of millions of pounds a year.
"My office was getting phone calls saying 'tell him it would only cost 5,000 euros to break his legs'," he told The Sunday Telegraph last week. "I received threatening letters too. I had to have a police escort - I still do."
Angered by the threats, but also beset by intense political pressure not to go after the well-connected, Mr Theoharis resigned from his job as Greece's Secretary General for Public Revenue last June, just 17 months into what should have been a five-year term.
To make matters worse, the British-educated ex-Lehman Brothers man had been put in the job specifically to act as a "new broom", tasked by Greece's EU troika creditors with collecting the massive £35bn owed in unpaid taxes.
Last week, he won a seat in parliament for the centrist ToPotami party, in the same snap general elections that brought the new, radical leftist Syriza party to power on its anti-austerity ticket. But as Syriza's leader, Alexis Tsipras, vows to renegotiate Greece's £180bn troika bail out, Mr Theoharis's own experience offers a cautionary tale. Greece will never balance its books, he warns, as long as tax collectors like him come under political pressure.
"They wanted me to be lenient," he said. "I resisted it up to a point but then I had to leave. I think Tsipras is honest and determined. But he downplays the risks of what is at stake. He underestimates the complexity that lies ahead. It's a minefield."
The combination of his experiences in the tax office, and his new role as a member of parliament, gives Mr Theoharis a unique insight into Greece's chronic problems and the massive challenges facing Mr Tsipras, its ex-Communist prime minister.
Mr Tsipras's party, Syriza, fell just two seats shy of winning an outright majority and so entered an alliance with the Independent Greeks, a right-wing, anti-immigration party, in order to form a government.
The only glue holding them together is their shared determination to renegotiate the repayment of the loans from the troika, which consists of the European Union, the European Central Bank and International Monetary Fund.
With EU leaders insisting that a write-off of the debt is out of the question, the stage is set for months of gruelling negotiations. Mr Theoharis, whose ToPotami party is in opposition to the odd-couple coalition, thinks Syriza is woefully unprepared for what lies ahead.
"They will go head-on with the EU and the IMF, but after a point you cannot bluff," he said. "It's not poker. You are playing with people's lives. The question is, can he hold his party together and can he save face with the voters?"
Mr Tsipras finds himself stuck between the extravagant promises he made to voters about cancelling great swathes of the debt, and the EU's insistence that Greece has had quite enough money already.
The 40-year-old prime minister has pledged to crack down on tax evasion and avoidance - a demand also of the troika - but the challenges are huge, as Mr Theoharis knows all too well.
When appointed in 2013, the former IT expert embarked on a radical programme of reform - computerising antiquated tax records, changing what he calls "lackadaisical attitudes" among staff and getting rid of those promoted because of political connections.
The ultimate objective was to bring in more revenue, in a country where dodging taxes is "part of the DNA". The habit first began as an act of patriotic resistance against Ottoman rule, but the incompetence of successive Greek governments over the generations has given many Greeks an excuse to continue the tradition.
"I tried to wrestle the agency away from politics, " said Mr Theoharis, who studied tudied software technology at London's Imperial College. "But everything is political in Greece. We sit in coffee shops and argue about everything."
At first, Mr Theoharis's efforts at tax collection went according to plan. He operated a Twitter account via which he dispensed tax advice, and even went on Greek television chat shows to preach the cause of "compliance".
To rectify the idea that only "little people" pay up, the tax service also stepped up campaigns targeting big companies and wealthy individuals, armed with a law under which anyone suspected of dodging more than €10,000 in taxes can be put in jail pending charges.
But while that yielded a number of high-profile scalps, including former government ministers, Mr Theoharis said that the government of Antonis Samaras, the leader of the conservative New Democracy party, started pushing him to adopt what he diplomatically calls "a more populist stance".
In practice, that meant going easy on politically sensitive targets such as friends and benefactors of the party. "It was a case of 'don't do this, don't do that'," he said. He threw his hat into the ring just two weeks before the elections, and became one of 17 MPs that ToPotami now has in parliament.
He readily admits that he encountered hostility from some people as he campaigned, and that not everyone was enthusiastic about the idea of electing their former tax tsar to parliament.
But others were impressed by his efforts to reform one of the more Byzantine pillars of the Greek state.
"I had focused on reforming the agency in an honest way and that got results. In Greece, doing simple things like that makes you a hero. And people could see that I had been treated unfairly."
Bringing in more money from tax collection will have to be a priority of the new government if it is to drag the country out of a six-year recession that has seen the economy contract by a quarter and unemployment hit 26 per cent.
The IMF said in a recent report that wealthy Greeks, along with self-employed professionals such as doctors, dentists and lawyers, continue to evade taxes "on an astonishing scale".
As for the new government, Mr Theoharis says it is vital that it tone down its anti-bailout rhetoric, moderate its demands, and come to a compromise with the EU and IMF.
"Everyone wants to put the crisis behind them. And our European partners don't want to talk about Greece anymore."
The line about that making you a hero in Greece reminds me of what Varoufakis said in his Newsnight interview about taking on the oligopoly and deepening structural reforms. What they want to do are really very basic things that are the norm in most states and really the sort of thing bourgeois parties like ND and PASOK should have done. It's still a massive if but if they pull this off (and are allowed to) it'll be the most important structural reform possible.
And Syriza continue to make PR adjustments to government, that they want to do things differently than the old Greek parties. Varoufakis is flying economy round Europe, they're going to sell off most of the Ministerial BMWs and Mercs, they've dismantled the barricades around Parliament and, for the first time in ages, there was a protest which was policed by non-armed, non-riot police.
If things continue as they seem to be I'm beginning to suspect they may end up losing their hard-left supporters but end up winning a lot of centrist, middle class votes instead.
How is their military spending? I read somewhere that Greece has one of the highest military spending levels (as a percentage of GDP) among NATO countries, due to the conflict with Turkey over Cyprus.
Well their GDP went down by 25% so I'd guess if they kept military spending the same the percentage would go way up.
They've cut it by about 20% during the crisis I believe, but it's still one of the highest levels in the EU.
That seems unlikely to change given that the far-right populists got the Defence Ministry.
Quote from: Sheilbh on February 01, 2015, 08:53:42 PM
They've cut it by about 20% during the crisis I believe, but it's still one of the highest levels in the EU.
That seems unlikely to change given that the far-right populists got the Defence Ministry.
That doesn't really count as "they've done everything they can" in my books.
They also had to replace the very old A-7 fighters.
Quote from: Monoriu on February 01, 2015, 08:55:06 PM
Quote from: Sheilbh on February 01, 2015, 08:53:42 PM
They've cut it by about 20% during the crisis I believe, but it's still one of the highest levels in the EU.
That seems unlikely to change given that the far-right populists got the Defence Ministry.
That doesn't really count as "they've done everything they can" in my books.
No one cares what's in your book :(
Quote from: Jacob on February 01, 2015, 10:06:06 PM
Quote from: Monoriu on February 01, 2015, 08:55:06 PM
Quote from: Sheilbh on February 01, 2015, 08:53:42 PM
They've cut it by about 20% during the crisis I believe, but it's still one of the highest levels in the EU.
That seems unlikely to change given that the far-right populists got the Defence Ministry.
That doesn't really count as "they've done everything they can" in my books.
No one cares what's in your book :(
It's a small book, a pocket-book.
Price? 2 cents.
Quote from: Ed Anger on February 01, 2015, 10:43:09 PM
Price? 2 cents.
Huh? There is no way I'll pay 2 cents for a pocket book. I use stationary supplies from hotels that I stayed in. Just to make sure they don't go to waste, of course. I also have other...sources.
You remind me of people that make their own soap.
I'm not sure that the book of someone who makes risky mainland investments and steals office supplies from the government is necessarily what the Greeks should be following, however frugal he may be :P
Quote from: Ed Anger on February 01, 2015, 10:48:41 PM
You remind me of people that make their own soap.
All of my soap bars come from hotels :contract:
Quote from: Jacob on February 01, 2015, 10:06:06 PM
No one cares what's in your book :(
It's mostly sketches from an anime he's developing, about a HK government clerk who secretly wishes he could be an accountant in Canada. There's a dozen hot girls who flirt with him regularly. Also, he can fly.
Quote from: Sheilbh on February 01, 2015, 07:30:05 PM
If things continue as they seem to be I'm beginning to suspect they may end up losing their hard-left supporters but end up winning a lot of centrist, middle class votes instead.
Yeah, they have been behaving very sensibly so far. The drug junkie metaphor was one I thought of myself before, so given my track record with analogies, I am not sure if it works. :P
Quote from: Monoriu on February 01, 2015, 10:55:13 PM
Quote from: Ed Anger on February 01, 2015, 10:48:41 PM
You remind me of people that make their own soap.
All of my soap bars come from hotels :contract:
So on top of other evidence that you are a horrible human being, you are also a thief? Nice. :P
By the way, it seems yellow umbrella protests are coming back.
Mono's Horror: "I Have Cheap Gas But I Can't Drive" coming back to the street near you. :yeah:
Quote from: Peter Wiggin on February 01, 2015, 10:57:25 PM
Quote from: Jacob on February 01, 2015, 10:06:06 PM
No one cares what's in your book :(
Also, he can fly.
But the only way he uses his superpower is to avoid road blocks on his way to the office.
Quote from: Martinus on February 02, 2015, 01:29:43 AM
Quote from: Monoriu on February 01, 2015, 10:55:13 PM
Quote from: Ed Anger on February 01, 2015, 10:48:41 PM
You remind me of people that make their own soap.
All of my soap bars come from hotels :contract:
So on top of other evidence that you are a horrible human being, you are also a thief? Nice. :P
By the way, it seems yellow umbrella protests are coming back.
Mono's Horror: "I Have Cheap Gas But I Can't Drive" coming back to the street near you. :yeah:
Well, the soap is free, but unless he travels a lot he probably smells funny. If he's collecting the liquid soap in the mens room at his office he's probably okay. Smell wise. If he does that he's probably nuts.
Quote from: Martinus on February 02, 2015, 01:31:43 AM
But the only way he uses his superpower is to avoid road blocks on his way to the office.
Nonsense, think of all the money he can save.
Quote from: Martinus on February 02, 2015, 01:29:43 AM
Quote from: Monoriu on February 01, 2015, 10:55:13 PM
Quote from: Ed Anger on February 01, 2015, 10:48:41 PM
You remind me of people that make their own soap.
All of my soap bars come from hotels :contract:
So on top of other evidence that you are a horrible human being, you are also a thief? Nice. :P
By the way, it seems yellow umbrella protests are coming back.
Mono's Horror: "I Have Cheap Gas But I Can't Drive" coming back to the street near you. :yeah:
There was a march yesterday, and that was an annual ritual. The turnout was around 10,000, which was a record low in recent years. Nothing happened. No occupations, no arrests, no fights. It was over in a few hours.
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fi62.photobucket.com%2Falbums%2Fh101%2FMonoriu%2Flycn0201008_20150202_L_zpskwo0j4dj.jpg&hash=923886b5e767cc4dd4a269acc8b03759a4f59e2d) (http://s62.photobucket.com/user/Monoriu/media/lycn0201008_20150202_L_zpskwo0j4dj.jpg.html)
The organiser originally expected 50,000 people (they needed to state the number of participants in the protest permit, which they obtained legally). The protest leaders had to explain all day to the media why the turnout was so low.
QuoteHong Kong democracy movement back on road, but turnout down
But low turnout for march taken as a sign some want more radical action
PUBLISHED : Sunday, 01 February, 2015, 2:39pm
UPDATED : Monday, 02 February, 2015, 8:44am
Tony Cheung, Phila Siu, Ernest Kao and Samuel Chan
Hong Kong democracy movement back on road, but turnout down
Thousands of pro-democracy campaigners unfurled yellow umbrellas for yesterday's march - but many stayed away. Photo: Felix Wong
Turnout for the first major pro-democracy march of the post-Occupy era fell well short of expectations yesterday - but organisers rejected suggestions people were growing less determined about the fight for democracy.
Rather it was a sign Hongkongers no longer had faith in "conventional ways" of protesting, Civil Human Rights Front convenor Daisy Chan Sin-ying said. She said more "alternative" forms of civil disobedience could emerge unless the government heeded public opinion on "genuine democracy".
The front put turnout for the march from Victoria Park in Causeway Bay to Central at 13,000. Independent academics put the turnout at 11,000 to 12,000, while police said 6,600 left the park, with a peak turnout of 8,800. Chan had expected 50,000 people to show up. About 30,000 turned out for the New Year's Day march last year, the front said.
The march was pushed back to coincide with a consultation on reform, which pan-democrats are boycotting as the government refuses to budge from Beijing's limits on nominations for the 2017 chief executive election.
Police opened four lanes, one more than usual, outside the Sogo department store, in an apparent effort to avoid the location from turning into a bottleneck. Photo: Tony Cheung
"This [turnout] only shows that Hongkongers are no longer satisfied with conventional ways of protest," Chan said. "If people are tired of marches, it's not the front which is in trouble but the government."
Chinese University political scientist Ivan Choy Chi-keung also said the turnout could be a sign the protest was "too moderate" for supporters fired up by the 79-day Occupy street blockades.
"They may also need more time to rest [after Occupy] ... or do not feel the urgency to take to the streets again," Choy said.
Protesters hold a head banner that appeals for "genuine universal suffrage" as they march from Victoria Park. Photo: Felix Wong
Occupy co-founder Benny Tai Yiu-ting agreed supporters might need some "rest" after the street protests, but said "it doesn't mean they are no longer fighting for democracy".
Tai led the march with his two co-founders Dr Chan Kin-man and Reverend Chu Yiu-ming, veteran Democrat Martin Lee Chu-ming and Daisy Chan. As the crowd waved yellow umbrellas and other Occupy symbols, the five held a banner which read: "Reject fake democracy; we want real universal suffrage."
A policeman directs pedestrians as demonstrators shout slogans before the march. Photo: AFP
About 2,000 police lined the route and stopped at least three groups from setting up stalls.
Mother-of-one Carol Leung, 34, said she marched because "I am afraid that Hong Kong will become like [mainland] China".
14-year-old Gabriel Lam designed a "North Korean" Hong Kong flag. Photo: Tony CheungGabriel Lam, 14, carried a Hong Kong/North Korea flag he had designed. "Hong Kong is becoming more and more like North Korea, because the democracy that officials talk about seems fake," he said, adding the hermit state gave people votes but no choice of candidates.
Some Occupy veterans said they chose not to march as they doubted its effectiveness. In response, a government spokesman urged citizens "to adopt an accommodating, rational and pragmatic approach" to forge consensus on political reform.
In Tai Po, meanwhile, there were clashes between democracy supporters and a group staging a pro-police protest. Police threatened to use pepper spray and issued warning notices telling the crowd to disperse. A 13-year-old boy and two men, aged 22 and 39, were arrested.
Sense of futility on sidelines of rally
Financial researcher Eric Fok had his hands in his pockets as he stood outside the Hong Kong Central Library, watching the thousands of protesters streaming onto Causeway Road from Victoria Park.
"I support them at heart. I support the umbrella movement," said Fok, who is in his 40s.
"But I am busy today, and the government won't listen to you no matter what you do."
Fok was one of the many Hongkongers standing on the sidelines of yesterday's rally who support the democracy cause but did not take part, partly because they doubt the government would ever listen.
Others said that as the Occupy movement, which shook Hong Kong for 79 days, had failed to force the government to offer genuine universal suffrage, rallies like the one yesterday would hardly do so.
Yellow umbrellas from Hong Kong's Occupy Movement are passed out to marchers. Photo: Felix Wong
The Facebook page of the rally organiser, the Civil Human Rights Front, was flooded with comments saying protests would not work. Others wrote that they were disappointed the front did not organise a rally on New Year's Day, like it had been doing for years.
Those who took part in the rally yesterday had a more optimistic view.
"It is a continuation of the Occupy spirit. We want to choose our own chief executive. We do not want to choose from several rotten oranges," said 67-year-old Ng Yin-fai.
"Uncle Wong", a 91-year-old retired farmer who was always seen at the Occupy protest site, was also at the rally.
"I will keep coming to fight for democracy. As long as I can walk I will be here," said Wong, who was considered a symbol of the Occupy movement.
Retailers remain divided about whether such protests can ever be an effective force for change.
"Many people have become antagonistic towards protests," said Alan Yu King-bun, a manager at Ko Lai Tong, a Korean snack shop on Yee Wo Street.
For more than six years, Jason Pang, the owner of luggage store the P&L Company on nearby Causeway Road, has put up with large rallies passing by his store.
"They have an objective, so even if it did affect our business a bit, we still accept it," Pang said. He added that many people were frustrated with the government, including small-business owners like himself.
"The government must look out for all strata of society, not just their rich friends," Pan said.
This article appeared in the South China Morning Post print edition as Democracy campaign back on road
Britain's more or less echoed Obama the stand-off's dangerous for everyone, both sides need to compromise and be reasonable. The IMF's always been the most dove-ish of the Troika. My guess is that it'll get even more so now.
Now Varoufakis is off to the City where, no doubt, he'll tell everyone that they're totally committed to paying back private sector creditors in full.
It is amazing how much sympathy there is for the Greeks in the Anglo-Saxon media. When Marti mentioned naive lefties earlier I did think it doesn't seem to be a left-right thing so much as Anglo-Saxon/Euro. Even very right-wing commentators who think we need to cut spending a lot more and that Europe needs far, far more supply-side reforms broadly take the view, to quote Jeremy Warner - right-wing, of the Telegraph, 'we are all Syriza supporters now' :lol:
Having said that many of them still expect them to fail, so... Warner also says this:
QuoteMr Varoufakis is said to be an expert on game theory. I guess it is in the nature of playing a good game that you must keep your opponents guessing to the last. Mr Varoufakis has no option but to play hardball. Brinkmanship was always going to be the substantive part of his negotiating strategy. But what's going on at the moment is just chaotic nonsense. It's impossible to know what Mr Varoufakis wants. Far from making progress, what Syriza is actually doing right now is leading Greece over the cliff. How does the Greek government propose to pay its bills once the money runs out? If the ECB doesn't do it first, the Bundesbank will surely move shortly to block the Target 2 transfers currently necessary to fund capital flight from the Greek banking system.
The reality is that Syriza is not just playing a dangerous game, it is playing no game at all likely to produce anything other than abject disaster. I had high hopes of Mr Varoufakis, but am fast losing my faith. Capital controls and limits on cash withdrawals from Greek banks can be only weeks, if not days away.
Edit: On the other hand I'm alarmed at how the media have twice whipped up a storm about the Greek government in the last few days that seem to have been based on a mistranslation/misunderstanding of what was said. It's standard to an extent but it does seem important to try for clarity in this sort of situation.
Edit: Actually a lot of the best pieces I've read have come from the right. I think it's because the left is a combination of too excited, trying to draw lessons for Ed Miliband and then too depressed on the realisation that Ed Miliband is Ed Miliband :(
Quote from: Sheilbh on February 02, 2015, 08:03:05 AM
Edit: On the other hand I'm alarmed at how the media have twice whipped up a storm about the Greek government in the last few days that seem to have been based on a mistranslation/misunderstanding of what was said. It's standard to an extent but it does seem important to try for clarity in this sort of situation.
Brits mistranslating Greek has a long-standing tradition in the Western civilisation. I mean, just look at the King James's Bible.
:o Woe unto you scribe and pharisee!
Quote from: Sheilbh on February 02, 2015, 08:03:05 AM
It is amazing how much sympathy there is for the Greeks in the Anglo-Saxon media. When Marti mentioned naive lefties earlier I did think it doesn't seem to be a left-right thing so much as Anglo-Saxon/Euro. Even very right-wing commentators who think we need to cut spending a lot more and that Europe needs far, far more supply-side reforms broadly take the view, to quote Jeremy Warner - right-wing, of the Telegraph, 'we are all Syriza supporters now' :lol:
That's because the Euro position (or rather the German position) is so unreasonable that both Keynes AND Freidman would be spinning in their graves at what's happened there in the last 3-4 years.
The HK/Chinese media is more sympathetic to the Germans. Not repaying your creditors and spending too much are no-nos.
Quote from: Monoriu on February 02, 2015, 08:58:04 AM
The HK/Chinese media is more sympathetic to the Germans. Not repaying your creditors and spending too much are no-nos.
Well in England credit cards are a big thing and I get a letter(!) every month letting me know I could do credit transfer and get 0% interest on it, so it would seem that owing your soul to a bank because you couldn't stop spending may sound familiar to some Brits. :P
Quote from: Monoriu on February 02, 2015, 08:58:04 AM
The HK/Chinese media is more sympathetic to the Germans. Not repaying your creditors and spending too much are no-nos.
I wonder if there's something to do with certain monetary/economic crises.
In my opinion to an extent the Euro-crisis is a microcosm of the global financial crisis with Germany playing the role of the developing world/China in building up savings and reserves that then sloshed around the rest of Europe looking for a return and badly assessing risk. The Euro still hugely structurally flawed which exacerbates problems, but I think a lot of it was to do with capital imbalances.
My understanding is that East Asia and the developing world largely started developing those reserves and causing those imbalances as a very sensible response to the problems in the 90s. And it is striking how much of Germany's policies (especially on banking) seem very informed by a particular reading of the 20s and 30s.
Quote from: Monoriu on February 02, 2015, 08:58:04 AM
The HK/Chinese media is more sympathetic to the Germans. Not repaying your creditors and spending too much are no-nos.
Imagine that.
Quote from: CountDeMoney on February 02, 2015, 09:34:34 AM
Quote from: Monoriu on February 02, 2015, 08:58:04 AM
The HK/Chinese media is more sympathetic to the Germans. Not repaying your creditors and spending too much are no-nos.
Imagine that.
Yeah. The biggest creditor on the planet is concerned about people repaying their debt. Stop the presses. :P
On the issues of the Troika and the dove-ish IMF I thought this, on their Ireland report was intersting:
QuoteTHE IMF'S LAMENT FOR IRELAND
Add to Reading ListPosted by Frances Coppola on Feb 1st 2015,
The IMF has just produced a review of the Irish financial crisis and subsequent IMF/EU programme which concludes that the Irish financial crisis was badly handled by all parties, and especially by the institutions involved – the so-called Troika, made up of the European Commission, the ECB, and the IMF itself.
The IMF paints a picture of a Troika divided against itself and failing to understand the consequences of its decisions. It observes that the EU was more concerned about systemic overspill than about the consequences for Ireland of having to shoulder the entire burden of bailouts:
...the Fund's objectives (focused on supporting its member country) may not necessarily always be aligned with those of the EC and ECB (generally focused more on EU and euro area wide concerns). An example here may be the bail in of senior unsecured bondholders, where European institutions focused on wider area concerns even if this resulted in a higher public debt burden for Ireland.
The IMF now believes that creditors should have shared the losses, and Ireland's Eurozone partners should have taken more responsibility for limiting systemic consequences. Senior unsecured bondholders should have been bailed in and insolvent banks should have been wound up, not bailed out.
The IMF is also severely critical of late and inadequate action by EU monetary authorities:
The Board noted that provision by the ECB of liquidity support was essential. But the issue went well beyond liquidity support for Ireland itself: it is difficult to see that the program, even if fully implemented by the Irish authorities, could have succeeded without further actions to stabilize the euro area and address tail risks. Such risks became increasingly apparent in the first half of the program period, as the euro area crisis intensified. In particular, absent euro area wide actions, there was little prospect of stabilizing Irish banks and establishing a sustainable funding base...and of securing public debt sustainability and regaining market access at sustainable rates.... For example, in mid-2012 Irish bond spreads, while coming off their highs in early 2011, remained still about 200 basis points above the levels required to secure debt sustainability.
The accompanying charts make it very clear that the IMF believes the ECB should have acted far sooner to stabilise the bond market. OMT worked, but it was far too late:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fcdn.pieria.co.uk%2Fnew_live%2Fdnr%2Fcustom%2F1499.jpg&hash=ba8ce251187d0aa7add0e852c709bcc562920d54)
It is a tragedy that this is the verdict of hindsight, not a decision of foresight.
But the real tragedy for Ireland is of much longer standing. And to be fair, it is beyond the remit of the IMF's report - though it is evident from the IMF's analysis.
We often hear it said that Greece should never have joined the Euro. But no-one to my knowledge has ever said that Ireland's joining was a mistake. Yet it was. For Ireland, Euro membership was an unmitigated disaster, right from the start.
As the IMF explains, prior to joining the Euro, Ireland was a success story:
Ireland had a long history of exceptionally strong performance. Real GDP growth averaged around 5 percent and employment increased strongly for several decades prior to 2000, as the economy benefited from a successful integration into the world economy. Supported by high inflows of foreign direct investment (FDI) attracted by a competitive and business friendly environment, exports reached more than 100 percent of GDP and their structure changed towards high-value added products (IT, services, pharmaceuticals). Economic growth was accompanied by a marked decline in the public debt ratio, which fell in the three decades prior to the millennium from 110 (one of the highest among advanced countries at the time) to under 25 percent of GDP.
Then it joined the Euro. And its competitiveness promptly fell off a cliff. These charts show how as its GDP rose, giving the illusion of a booming economy, its exports collapsed:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fcdn.pieria.co.uk%2Fnew_live%2Fdnr%2Fcustom%2F1500.jpg&hash=f5c3f5e95049bc1a8992585609a90f08600396b0)
The IMF explains why this happened:
Following euro entry, Irish interest rates fell markedly and, with some lag, the economy experienced a major boom in domestic demand. This was supported by a large credit expansion and a property price driven wealth effect. Rising wages and prices depressed Ireland's competitiveness (total factor productivity turned negative), leading the current account from balance in 2000 into deficits (-6 percent of GDP in 2008).
There is no doubt whatsoever that the sudden reversal in Ireland's fortunes was due to the Euro. All the hard work and enterprise of the Irish people over the preceding decades was destroyed by a disastrous decision to join a fatally flawed monetary union. THAT is the Irish tragedy.
But it didn't end there. The grey shaded areas in the above charts show the period of the IMF/EU programme. And it is clear to see why it was necessary. The collapse of GDP in 2007-8 is all too evident. But what these charts don't show is the role of banks in progressively wrecking Ireland's export-led economy – banks that were then bailed out by the Irish people whose prosperity they had destroyed. These charts show how, driven by volatile wholesale funding flows, credit growth expanded in the early 2000s then collapsed abruptly when the wholesale funding flows reversed, giving way to credit contraction (deleveraging) from 2008 onwards:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fcdn.pieria.co.uk%2Fnew_live%2Fdnr%2Fcustom%2F1501.jpg&hash=7a5892362e7e4939fdfb96551cf3d2122a69cd78)
Had the banks remained solvent, even though suffering severe liquidity problems, the story of Ireland might have been different. But they were bust. One after another, Ireland's banks collapsed and were bailed out by the Irish sovereign at the behest of the EU. The consequences for Ireland's fiscal finances were disastrous:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fcdn.pieria.co.uk%2Fnew_live%2Fdnr%2Fcustom%2F1502.jpg&hash=389abf68b9f180eb4be0a5f88ce2f2db09483006)
For comparison, note that prior to the banking collapse in 2008 Ireland was running a primary fiscal surplus and had historically low debt/gdp of 25%. The large primary deficit that built up from 2008 onwards was entirely due to severe recession, as the IMF explains:
Real GNP contracted by 9½ percent in 2008–10 (GDP by 9 percent), led by a 41 percent collapse in investment, in particular in construction. The economic downturn and falling property prices resulted in a surge of payment defaults, rising bank losses, and growing difficulties for banks to secure wholesale funding.
Measures taken by the Irish authorities to contain the deficit only made matters worse:
The original 2008 budget had been expansionary, but amid collapsing revenues and the rising cost of supporting the financial sector, consolidation measures of 6.2 percent of GDP were implemented between 2008 and 2010. These included reductions in the public sector wage bill, cuts in capital expenditures, cuts and other restrictions on social welfare benefits, as well as revenue measures. In this period, expenditures in nominal terms shrank by over €5 billion. However, revenues continued to decline even faster, and the deficit (excluding financial sector support) reached 13.3 percent of GDP in 2010. Public debt jumped from 25 percent prior to the crisis to close to 100 percent of GDP in 2010. Overall, Ireland's fiscal position turned out to be much weaker than suggested by earlier headline balances of close to zero or positive and low public debt.
Yet despite the evidence that Ireland was never fiscally irresponsible, and the further (damning) evidence that Ireland's loss of competitiveness and associated credit bubble were due to its membership of the Euro, during the EU/IMF programme persistent accusations of fecklessness and profligacy were levelled at the Irish government and Irish citizens. This editorial from the UK's Independent newspaper is typical of the misinformation prevalent at the time:
The Irish plight is relatively straightforward: the government behaved fecklessly and now the country is broke....
The only feckless thing the Irish government did was to bail out its banks. Apart, that is, from the decision by another government, nearly a decade before, to join the Euro.
It is too late to reverse that decision now: leaving the Euro would simply inflict more pain on the long-suffering Irish people. It is essential, therefore, that the EU authorities learn the lessons that the IMF has identified. And it is also essential that Eurozone member states take on board the need for shared responsibility. Without commitment to sharing pain as well as gain, it is hard to see how the Eurozone would survive another crisis.
Ireland suffered for her own banks, Greece for European ones. It's absurd. The scary/sad thing is the Eurozone still hasn't really broken the link between sovereigns and banks which is alarming (and the mechanism for driving Greece out, if necessary).
As we all know, from Languish to life, it's always fuck the Irish.
Quote from: Sheilbh on February 02, 2015, 10:45:15 AM
Ireland suffered for her own banks, Greece for European ones.
Utter codswallop. Ireland did suffer for her own banks; Greece suffered for spending more than it could repay.
Quote from: Admiral Yi on February 02, 2015, 10:56:18 AM
Utter codswallop. Ireland did suffer for her own banks; Greece suffered for spending more than it could repay.
Greece was the middle man between European governments and their banks. It would have been far more honest for them to default, Germany and France to bailout their own banks and there to have been European/IMF support for a reforming Greek government that can't devalue but that has defaulted.
I imagine they would have got more assistance than the €27 billion they've received in the last 5 years.
Both countries have gone through this because of the Eurozone's structural flaws. It was an attempt to end the risk of contagion that failed for two years until OMT was announced, which these countries are still paying for.
Quote from: Sheilbh on February 02, 2015, 11:00:43 AM
Greece was the middle man between European governments and their banks. It would have been far more honest for them to default, Germany and France to bailout their own banks and there to have been European/IMF support for a reforming Greek government that can't devalue but that has defaulted.
I agree with this. However, this does not mean Greece suffered for German and French banks. Greece did not suffer because they got bailed out; they suffered because lenders were no longer willing to finance their deficits because they had borrowed too much.
I'm becoming more and more convinced that Poland probably did the right thing about cooling off its interest in joining the Eurozone asap. At least if we are hit by a crisis like that of Ireland (which we still may, given that the growth is bound to stop some day), we can quickly devalue zloty.
Quote from: Admiral Yi on February 02, 2015, 11:04:49 AM
Quote from: Sheilbh on February 02, 2015, 11:00:43 AM
Greece was the middle man between European governments and their banks. It would have been far more honest for them to default, Germany and France to bailout their own banks and there to have been European/IMF support for a reforming Greek government that can't devalue but that has defaulted.
I agree with this. However, this does not mean Greece suffered for German and French banks. Greece did not suffer because they got bailed out; they suffered because lenders were no longer willing to finance their deficits because they had borrowed too much.
German and French banks lent money to Greece beyond the point when they should have had. In a professional banking system, both the lender and the borrower should suffer the consequences of their irresponsible decisions. Instead, Greece was effectively forced by the Troika to take on loans needed to, effectively bail out German and French banks, that would have failed if Greece declared default back in 2008.
So yes, Greece was sacrificed at the altar of keeping German and French banks solvent.
The only thing Greece is doing now is refusing to accept being sacrificed again on the same terms (and, admittedly, with much less risk for German and French banks).
What does "effectively forced" mean? Does it mean you'd like to make it sound really bad, but know it's not true?
Quote from: Sheilbh on February 02, 2015, 11:00:43 AM
Quote from: Admiral Yi on February 02, 2015, 10:56:18 AM
Utter codswallop. Ireland did suffer for her own banks; Greece suffered for spending more than it could repay.
Greece was the middle man between European governments and their banks. It would have been far more honest for them to default, Germany and France to bailout their own banks and there to have been European/IMF support for a reforming Greek government that can't devalue but that has defaulted.
That would have, also, be subject to a much greater scrutiny based on state aid rules. So you can say that Germany and France fucked Greece up not to have to play by the rules everybody else in the EU does.
Quote from: Admiral Yi on February 02, 2015, 11:04:49 AM
I agree with this. However, this does not mean Greece suffered for German and French banks. Greece did not suffer because they got bailed out; they suffered because lenders were no longer willing to finance their deficits because they had borrowed too much.
Yes, except I think the structural issues mattered most at the time. Greece shouldn't have been let in to begin with and the Eurozone shouldn't have really gone ahead without a way of allowing a state to default, or a lender of last resort, or some form of banking union. Those considerations forced the issue of a bailout because the risk of Greece defaulting was too large for the Eurozone.
Greece needed debt relief or a default in 2010 - and the leaked minutes of the IMF show that they knew that. To buy the Eurozone time that couldn't happen so they were given more and more debt, a minimal amount of which was spent in Greece.
I think had they defaulted and had an IMF program the suffering would have been far, far less profound. I can't, but can you think of any other IMF programs that after five years have debt over 175% of GDP and have seen the economy shrink by more than a quarter? I mean if that sort of thing was how the IMF worked the Naomi Kleins of this world would have a point.
Quote from: Martinus on February 02, 2015, 11:07:46 AM
I'm becoming more and more convinced that Poland probably did the right thing about cooling off its interest in joining the Eurozone asap. At least if we are hit by a crisis like that of Ireland (which we still may, given that the growth is bound to stop some day), we can quickly devalue zloty.
I think was Martin Wolf who said that joining the Eurozone in its current structure is the second worst monetary decision most of these economies can make. The first is forcing Greece out of the Eurozone and dealing with disorderly collapse :lol:
But yeah I think it would be insane to join until the rest of the structure is there. As I say there's still no real banking union for example.
QuoteWhat does "effectively forced" mean? Does it mean you'd like to make it sound really bad, but know it's not true?
It is true though. The Irish and the Greek government came under immense pressure within the EU to accept a bailout. When the Greek PM suggested holding a referendum on bail out (or default effectively) the EU leaders called the President and other parties in Greece and asked them to hobble together a government of technocrats.
QuoteThat would have, also, be subject to a much greater scrutiny based on state aid rules. So you can say that Germany and France fucked Greece up not to have to play by the rules everybody else in the EU does.
How so?
Edit: Incidentally Marti I've got forum whiplash your opinion's changed so quickly :P
Quote from: Sheilbh on February 02, 2015, 11:15:17 AM
Yes, except I think the structural issues mattered most at the time. Greece shouldn't have been let in to begin with and the Eurozone shouldn't have really gone ahead without a way of allowing a state to default, or a lender of last resort, or some form of banking union. Those considerations forced the issue of a bailout because the risk of Greece defaulting was too large for the Eurozone.
Greece needed debt relief or a default in 2010 - and the leaked minutes of the IMF show that they knew that. To buy the Eurozone time that couldn't happen so they were given more and more debt, a minimal amount of which was spent in Greece.
I think had they defaulted and had an IMF program the suffering would have been far, far less profound. I can't, but can you think of any other IMF programs that after five years have debt over 175% of GDP and have seen the economy shrink by more than a quarter? I mean if that sort of thing was how the IMF worked the Naomi Kleins of this world would have a point.
Yes as in your line about Greek suffering was codswallop, or a different yes?
I'm unaware of any IMF program that generated the kinds of results as we're seeing in Greece, in part at least because your typical developing market IMF client doesn't have the ability to reach 120% debt to start with. But there are a lot of smart cookies at the Fund who can do basic math, and who I'm sure knew that injecting fresh loans on top of 120% was not sustainable.
Which, since we're on the subject anyway, is a good chance for me to remind you and and others of something I've been saying all along: debt levels matter.
Quote from: Admiral Yi on February 02, 2015, 11:26:36 AM
Yes as in your line about Greek suffering was codswallop, or a different yes?
Yes as in Greek suffering was also because they were spending too much.
QuoteBut there are a lot of smart cookies at the Fund who can do basic math, and who I'm sure knew that injecting fresh loans on top of 120% was not sustainable.
And yet they get every sum wrong in every prediction they make in Greece. You might almost think it was a load of bollocks to justify the Fund in joining a politically motivated save the Euro project rather than anything to do with Greece.
QuoteWhich, since we're on the subject anyway, is a good chance for me to remind you and and others of something I've been saying all along: debt levels matter.
Debt sustainability matters.
Quote from: Sheilbh on February 02, 2015, 11:19:52 AM
It is true though. The Irish and the Greek government came under immense pressure within the EU to accept a bailout. When the Greek PM suggested holding a referendum on bail out (or default effectively) the EU leaders called the President and other parties in Greece and asked them to hobble together a government of technocrats.
Well, I guess if they got an actual call, like on the phone, then they really had no choice.
Quote from: Sheilbh on February 02, 2015, 09:11:40 AM
And it is striking how much of Germany's policies (especially on banking) seem very informed by a particular reading of the 20s and 30s.
That's putting it generously. At least as filtered through the A-S press the view seems to be that Nazis rose to power in 1923. Bruening, or at least Brueningism, enjoys a present day rehabilitation.
Quote from: Sheilbh on February 02, 2015, 11:19:52 AM
Quote from: Martinus on February 02, 2015, 11:07:46 AM
I'm becoming more and more convinced that Poland probably did the right thing about cooling off its interest in joining the Eurozone asap. At least if we are hit by a crisis like that of Ireland (which we still may, given that the growth is bound to stop some day), we can quickly devalue zloty.
I think was Martin Wolf who said that joining the Eurozone in its current structure is the second worst monetary decision most of these economies can make. The first is forcing Greece out of the Eurozone and dealing with disorderly collapse :lol:
But yeah I think it would be insane to join until the rest of the structure is there. As I say there's still no real banking union for example.
QuoteWhat does "effectively forced" mean? Does it mean you'd like to make it sound really bad, but know it's not true?
It is true though. The Irish and the Greek government came under immense pressure within the EU to accept a bailout. When the Greek PM suggested holding a referendum on bail out (or default effectively) the EU leaders called the President and other parties in Greece and asked them to hobble together a government of technocrats.
QuoteThat would have, also, be subject to a much greater scrutiny based on state aid rules. So you can say that Germany and France fucked Greece up not to have to play by the rules everybody else in the EU does.
How so?
Edit: Incidentally Marti I've got forum whiplash your opinion's changed so quickly :P
I'm a flighty bitch. :P
But under the EU state aid rules, any aid given by a government to an enterprise must be approved by the European Commission. Obviously, this does not apply to aid given by a government to another government.
Quote from: Admiral Yi on February 02, 2015, 12:11:29 PM
Quote from: Sheilbh on February 02, 2015, 11:19:52 AM
It is true though. The Irish and the Greek government came under immense pressure within the EU to accept a bailout. When the Greek PM suggested holding a referendum on bail out (or default effectively) the EU leaders called the President and other parties in Greece and asked them to hobble together a government of technocrats.
Well, I guess if they got an actual call, like on the phone, then they really had no choice.
Yi believes that every decision is taken in an entirely unfettered fashion by a whole rational individual enjoying absolute freedom.
Quote from: Sheilbh on February 02, 2015, 11:19:52 AM
It is true though. The Irish and the Greek government came under immense pressure within the EU to accept a bailout. When the Greek PM suggested holding a referendum on bail out (or default effectively) the EU leaders called the President and other parties in Greece and asked them to hobble together a government of technocrats.
Greece has been a sovereign nation throughout this whole mess and had ample opportunity to go a different route if they had thought that was better for them. I don't buy that any Greek politician had the interests of German or French banks in mind. Immense pressure alone cannot explain the policy accepted by Greece's politicians. They must have been convinced this is in their best interest as well.
I said it three years ago and will say it again: They should have defaulted. Unilaterally if necessary.
Well, as sovereign as any Eurozone state is...
Quote from: Razgovory on February 02, 2015, 02:52:08 PM
Well, as sovereign as any Eurozone state is...
According to the narrative, everybody but the silly Germans always knew that austerity wouldn't work. That would presumably include the Greek politicians. Yet "immense pressure" somehow made them sacrifice their countrymen on the altar of French and German bank stability despite them supposedly knowing that it wouldn't work. Were they really this powerless? If so, why? What mechanism of the EU or Eurozone takes away so much sovereignty from the member states that they would ever be forced to go through what Greece went through against their better knowledge? I am not aware of any such mechanism. The EU must be the weakest federal government anywhere - which happens to be part of the problem. If there is no such mechanism either the Greek politicians are all traitors or they seriously believed what they did was the best out of many bad alternatives.
Quote from: Martinus on February 02, 2015, 02:33:02 PM
Yi believes that every decision is taken in an entirely unfettered fashion by a whole rational individual enjoying absolute freedom.
:lol:
One would think, that after 10 years of posting on Languish, and 5 years of posting on Paradox, that you would have been disabused of the brain dead notion that this kind of "no such thing exists" straw man is an effective argument, or any kind of argument. But no, just like a finely crafted Polish clock you trot it out for virtually any debate.
lol, Polish clock
Quote from: Zanza on February 02, 2015, 03:02:55 PM
Quote from: Razgovory on February 02, 2015, 02:52:08 PM
Well, as sovereign as any Eurozone state is...
According to the narrative, everybody but the silly Germans always knew that austerity wouldn't work. That would presumably include the Greek politicians. Yet "immense pressure" somehow made them sacrifice their countrymen on the altar of French and German bank stability despite them supposedly knowing that it wouldn't work. Were they really this powerless? If so, why? What mechanism of the EU or Eurozone takes away so much sovereignty from the member states that they would ever be forced to go through what Greece went through against their better knowledge? I am not aware of any such mechanism. The EU must be the weakest federal government anywhere - which happens to be part of the problem. If there is no such mechanism either the Greek politicians are all traitors or they seriously believed what they did was the best out of many bad alternatives.
They can't print their own money.
Quote from: Zanza on February 02, 2015, 02:43:25 PM
Greece has been a sovereign nation throughout this whole mess and had ample opportunity to go a different route if they had thought that was better for them. I don't buy that any Greek politician had the interests of German or French banks in mind. Immense pressure alone cannot explain the policy accepted by Greece's politicians. They must have been convinced this is in their best interest as well.
I said it three years ago and will say it again: They should have defaulted. Unilaterally if necessary.
I agree it wasn't keeping French and German banks in mind that caused the bailouts - but they were the beneficiaries. It wasn't even their interests that Eurozone leaders had in mind. The issues - which are still fundamentally unresolved - arose from an incomplete currency union. One that is still at risk of contagion, that still hasn't broken the link between sovereigns and banks and still doesn't have a proper lender of last resort - politically it's more under threat than ever, I can't think of a country without rising opposition to the Eurozone and what it's come to mean. The ECB has managed to calm this down - except for the political issue, the civil revolt across Europe - but that's being questioned and isn't enough on its own.
Immense pressure was placed on Greek and Irish politicians. I know Yi dismisses it as a call but I think it is uncomfortable from a European perspective to see leaders working with the leader of the opposition and head of state of another country to unseat a constitutionally appointed Prime Minister and it's happened twice.
The rhetoric of Europe in those two years was entirely based on 'there is no alternative'. When Papandreou said he was going to go for a referendum Paris and Berlin explicitly said the choice would be between bail out or leaving the Euro. Even now I probably agree with Martin Wolf on a local scale that joining the Euro's the second worse decision Greek leaders could make, leaving it is probably the worst.
I was wrong three years ago, but I think they need a negotiated default now.
Incidentally how much of the hard-line from Germany is to do with some local elections I think you've got coming up in February and a desire to keep AfD well away from success in them? I find Schaeuble's over the Troika inspections oddly categorical for example given that they have no legal standing and are under immense doubt after Advocate General's opinion (Juncker had already admitted they couldn't continue if that opinion was followed).
Apparently the Eurogroup have run out of patience with Djisselbloem after his day in Athens. He's cocked up a few times before and, from what I can see, isn't seen as the sharpest. So the EcoFin of the Eurogroup will be represented by Juncker at the next stage of negotiations (which seems a bit dodgy to me, I know he previously chaired it so knows it better than anyone but he is now Commission President).
Varoufakis' interview with the FT (shamelessly stolen :Embarrass:):
QuoteGreece finance minister unveils plan to end debt stand-off
Tony Barber in London
Greece's radical new government unveiled proposals on Monday for ending the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds, running a permanent budget surplus and targeting wealthy tax-evaders.
Yanis Varoufakis, the new finance minister, outlined the plan in the wake of a dramatic week in which the government's first moves rattled its eurozone partners and rekindled fears about the country's chances of staying in the currency union.
After meeting Mr Varoufakis in London, George Osborne, the UK chancellor of the exchequer, described the stand-off between Greece and the eurozone as the "greatest risk to the global economy".
Attempting to sound an emollient note, Mr Varoufakis told the Financial Times the government would no longer call for a headline write-off of Greece's €315bn foreign debt. Rather it would request a "menu of debt swaps" to ease the burden, including two types of new bonds.
The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed "perpetual bonds", would replace European Central Bank-owned Greek bonds.
He said his proposal for a debt swap would be a form of "smart debt engineering" that would avoid the need to use a term such as a debt "haircut", politically unacceptable in Germany and other creditor countries because it sounds to taxpayers like an outright loss.
But there is still deep scepticism in many European capitals, in particular Berlin, about the new government's brinkmanship and its calls for an end to austerity policies.
"What I'll say to our partners is that we are putting together a combination of a primary budget surplus and a reform agenda," Mr Varoufakis, a leftwing academic economist and prolific blogger, said. "I'll say, 'Help us to reform our country and give us some fiscal space to do this, otherwise we shall continue to suffocate and become a deformed rather than a reformed Greece'."
His visit to London was part of a tour of European capitals aimed at building support for a new approach to the Greek debt crisis. After their meeting Mr Osborne urged him "to act responsibly", adding that it was also important that the eurozone had a better plan for jobs and growth.
"It is a rising threat to the British economy. And we have got to make sure that in Europe as in Britain, we choose competence over chaos," he said.
Mr Varoufakis said the government would maintain a primary budget surplus — after interest payments — of 1 to 1.5 per cent of gross domestic product, even if this meant Syriza, the leftwing party that dominates the ruling coalition, would not fulfil all the public spending promises on which it was elected.
Mr Varoufakis also said the government would target wealthy Greeks who had not paid their fair share of taxes during the nation's six-year economic slump. "We want to prioritise going for the head of the fish, then go down to the tail," he said.
The minister anticipated difficulties in clamping down effectively on tax evasion and "rent-seeking behaviour" among Greece's business oligarchs and other wealthy people, but vowed: "We will not cease until we succeed. If we are snuffed out by the vested interests, it will be our honour to have fallen in fighting the good fight."
Asked if he thought Greece's eurozone partners were right to be concerned about the government's plan to rehire thousands of public-sector workers, Mr Varoufakis said: "If you look at what has happened over the past five years, there has been a massive reduction in the public sector. The problem is that it's not efficient — it's a kind of Public Enemy Number One, the Greek bureaucracy."
Syriza's election victory had created an opportunity "to strike at the cosy relationship between vested interests in the public sector and vested interests in the private sector that act as a drag on creativity, competitiveness, liberty and democracy," he said.
The government planned to present its proposals in detailed form to its European partners before the end of February.
"Whatever our partners think about our being from the radical left, we're serious about reform, serious about being good Europeans and serious about listening. The only thing we shall not retreat from is our view that the current unenforceable programme [agreed with our creditors] needs to be rethought from scratch," he said.
Mr Varoufakis was on the second leg of a European tour that started in Paris at the weekend and is aimed at winning support for a renegotiation of the €245bn bailout programme that began in 2010 with emergency help from the EU and International Monetary Fund.
The minister said Greece hoped to secure a four-month "bridging programme", to stretch from now until June 1, under which the ECB would promise to keep Greece's financial system afloat by continuing to supply liquidity on favourable terms.
Rather than ask for €7bn in aid that was to have been paid to Greece last year if it had met fiscal policy and structural reform conditions set by its creditors, the government would request only €1.9bn — equivalent, Mr Varoufakis said, to the profits earned by the ECB from its purchases of Greek government bonds after the 2010 rescue.
"Our mandate gives us a right to do one little thing — to have a few short weeks to propose our own ideas to the ECB, the eurozone partners and the IMF," the minister said. "The notion that previous Greek governments signed on the dotted line on programmes that haven't worked, and that we should be obliged to just follow that line unswervingly, is a challenge to democracy.
"We have the disadvantage of being inexperienced. We are also a broad church," he added, referring to the fact that Syriza rules in coalition with a junior rightwing partner. "But we have the advantage that we have not sold our soul to the devil yet, and we do not plan to. Syriza is the only party that's never been funded by the oligarchs."
Edit: Incidentally the BofE did some research on GDP-linked bonds here - they concluded that countries in currency unions may be among those that benefit the most:
http://www.bankofengland.co.uk/research/Pages/workingpapers/2014/wp484.aspx1
Quote from: Martinus on February 02, 2015, 02:31:56 PM
But under the EU state aid rules, any aid given by a government to an enterprise must be approved by the European Commission. Obviously, this does not apply to aid given by a government to another government.
The treaties also prohibited bail outs of sovereigns. I think they got around that by using an exception for emergency aid that was meant to be used during, say, a natural disaster :lol:
And given that Ireland was able to bail out their banks without any Euro-opposition I don't think it would be a major issue.
Quote from: Razgovory on February 02, 2015, 04:09:12 PM
They can't print their own money.
Yes, they can. They can just not print Euros.
Recall that last time around Italy, Spain, Portugal were wobbling and the belief was that Greece would be just the first pin to fall. So as sheilbh says contagion. There was huge pressure not from the EU qua EU but in the form of intergovernmental pressure. It's easy to second guess the Greek decision-making then but really they faced no good options.
The only question that matters now though is what now?
What now is Fakis puts a debt foregiveness number on the table and tells what he's willing to do in return.
Quote from: Admiral Yi on February 02, 2015, 04:54:32 PM
What now is Fakis puts a debt foregiveness number on the table and tells what he's willing to do in return.
QuoteMr Varoufakis said the government would maintain a primary budget surplus — after interest payments — of 1 to 1.5 per cent of gross domestic product, even if this meant Syriza, the leftwing party that dominates the ruling coalition, would not fulfil all the public spending promises on which it was elected.
'We want to entrench and deepen structural reforms.'
Personally, I would like to issue some perpetual bonds. Maybe a hundred billion should be enough.
Quote from: Sheilbh on February 02, 2015, 04:22:26 PMImmense pressure was placed on Greek and Irish politicians.
What exactly did they threaten them with? As you wise Anglosaxons with perfect foresight and probably everybody except a few dumb Northern Europeans knew even back then, Greece would suffer atrociously from the prescribed austerity. How much worse could any other policy have been? Where the Greeks just as dumb as the Northern Europeans not to see it?
QuoteThe rhetoric of Europe in those two years was entirely based on 'there is no alternative'. When Papandreou said he was going to go for a referendum Paris and Berlin explicitly said the choice would be between bail out or leaving the Euro.
That is literally an alternative. Not a good one of course, but worse than the failed German-Troika policy? And suggesting there were other alternatives that were just not offered disregards the immense pressure that Sarkozy and Merkel were under during that time. I know Merkel is perceived as the all-powerful politician that can single-handed decide the fate of Europe, but she is not and certainly wasn't back then.
QuoteEven now I probably agree with Martin Wolf on a local scale that joining the Euro's the second worse decision Greek leaders could make, leaving it is probably the worst.
Worse than what they have now? How so?
QuoteIncidentally how much of the hard-line from Germany is to do with some local elections I think you've got coming up in February and a desire to keep AfD well away from success in them?
My impression is that Germans don't give a shit about this anymore. AfD seems to be more about being anti-islamist these days than about anti-Euro.
Quote from: Sheilbh on February 02, 2015, 04:57:22 PM
'We want to entrench and deepen structural reforms.'
Well, that can't be very hard considering their progress so far.
Quote from: The Minsky Moment on February 02, 2015, 04:51:24 PM
Recall that last time around Italy, Spain, Portugal were wobbling and the belief was that Greece would be just the first pin to fall. So as sheilbh says contagion. There was huge pressure not from the EU qua EU but in the form of intergovernmental pressure. It's easy to second guess the Greek decision-making then but really they faced no good options.
Of course they didn't have good options, but did they pick the one they picked out of concern about contagion or French and German banks or because they figured it was the best for Greece?
Quote from: Sheilbh on February 02, 2015, 04:57:22 PM
'We want to entrench and deepen structural reforms.'
"We are deeply committed to improvement."
Quote from: Zanza on February 02, 2015, 05:00:01 PM
Quote from: Sheilbh on February 02, 2015, 04:57:22 PM
'We want to entrench and deepen structural reforms.'
Well, that can't be very hard considering their progress so far.
At some point, someone is actually going to get their legs broken.
Just read on Spiegel that the Greek debt that is due in the next weeks is either to IMF (which is not too bad) or very short-term t-bills. The latter will be very hard to refinance apparently as private lenders are not interested at this time. That means Greece would run out of money at the end of March...
The money they borrowed from EFSF or ECB is apparently interest free for the next few years.
Quote from: Zanza on February 02, 2015, 04:58:54 PMWhat exactly did they threaten them with? As you wise Anglosaxons with perfect foresight and probably everybody except a few dumb Northern Europeans knew even back then, Greece would suffer atrociously from the prescribed austerity. How much worse could any other policy have been? Where the Greeks just as dumb as the Northern Europeans not to see it?
The point is people didn't realise how dreadful the situation would be in Greece - living standards down 40%, economy down 25%, per capita public spending down by more than that. As the IMF have admitted they fucked up on the fiscal multiplier. But that just means the situation's changed and so should the policies.
As Geithner said there was an element of wanting to 'get the paddles out' when it came to Greece (I think he's discussing 2011/12 so after the program had already started and wasn't working) rather than approaching the situation rationally.
And in terms of how much worse any other policy could have been, at that point until Draghi's 'whatever it takes' speech there would have been contagion unless the ECB intervened massively. I think there probably would have been a disorderly breakup of the Eurozone as a whole. So European capital controls, devaluation and inflation of the South, probably an inflated currency and recession of the North. Defaults which would have led to banking crises across the continent. I think it would've been ugly.
QuoteThat is literally an alternative. Not a good one of course, but worse than the failed German-Troika policy? And suggesting there were other alternatives that were just not offered disregards the immense pressure that Sarkozy and Merkel were under during that time. I know Merkel is perceived as the all-powerful politician that can single-handed decide the fate of Europe, but she is not and certainly wasn't back then.
I think the other alternatives were trying to offer more support to reformist governments, as Varoufakis now says a bit of fiscal space to support the reform process. I don't think that was ever an option in Greece because I think Greece's biggest problem was endemic in their state and Syriza offer the first opportunity of changing that. But the Eurozone have burned through pliable, cooperative Prime Ministers who've received very little support for their reforms and very little offer of fiscal space - that the IMF within Troika thinks they need.
I absolutely get that Sarko and Merkel were under immense pressure and as I say about the whole Germany believes a Grexit is manageable, I can't think of a German statement on Eurozone policy over the last five years that hasn't, ultimately been abandoned under that pressure. But I think that partly her leadership style is to blame. The same cycle happened of categorical German statements of opposition to x, followed by mounting market pressure on the weakest sovereign, then the next weakest until at four in the morning in Brussels everyone agrees to y which is half-way to x. The markets calmed down for a day or two then the cycle began again. I've said before I think this is partly a product of what seems like Merkel's consensual style and I think it would have been better had she got ahead of public opinion and tried to lead it rather than 'three years of flailing about'. We ended up with bailouts, OMT, QE and the start of a banking union anyway it would have been better had those been constructed under less pressure.
I think the France was also a big issue in achieving that and Sarko failed there.
And obviously on both sides they were facing what they thought of as the abyss: disorderly break-up of the Eurozone. That's enough to get Merkel to resile from her various opposition to things and for the Greeks to agree to the Troika program. Personally I'm not convinced that abyss has gone away.
QuoteWorse than what they have now? How so?
Do you mean break up then or now?
Quote from: Zanza on February 02, 2015, 05:00:01 PM
Quote from: Sheilbh on February 02, 2015, 04:57:22 PM
'We want to entrench and deepen structural reforms.'
Well, that can't be very hard considering their progress so far.
Sure. The problem of Greece is endemic to the system and now there's a party that isn't part of that system in charge.
But it's not as if being a poster-child for reform gets you any more space. Portugal and Ireland have hardly been given the help (in the latter the leading party in the polls is now Sinn Fein and the three parties who've formed every government since the civil war are polling at under 50%) - Renzi is a committed reformer so there should be support, a little fiscal space, a little loosening of monetary policy (which is happening at last but is probably too little too late on its own).
Quote"We are deeply committed to improvement."
How many parties of the 'radical left' have you heard talking about structural reform like that?
Quote from: Zanza on February 02, 2015, 04:44:51 PM
Quote from: Razgovory on February 02, 2015, 04:09:12 PM
They can't print their own money.
Yes, they can. They can just not print Euros.
Which country is gong to let them print their money?
Quote from: Sheilbh on February 02, 2015, 05:20:33 PM
How many parties of the 'radical left' have you heard talking about structural reform like that?
None. However, that is not a specific proposal.
Interesting point from Paul Mason Channel 4's Economics Editor who is probably the journalist closest to Varoufakis. He's just said that this morning he felt extremely sceptical but now thinks Greece is very close to a deal on ELA and debt.
Edit: And, Yi:
QuoteThe government planned to present its proposals in detailed form to its European partners before the end of February.
Quote from: Sheilbh on February 02, 2015, 07:15:27 PM
Interesting point from Paul Mason Channel 4's Economics Editor who is probably the journalist closest to Varoufakis. He's just said that this morning he felt extremely sceptical but now thinks Greece is very close to a deal on ELA and debt.
Edit: And, Yi:
QuoteThe government planned to present its proposals in detailed form to its European partners before the end of February.
Weren't you criticising him for being a closet Marxist a while back? :P
Quote from: Admiral Yi on February 02, 2015, 04:54:32 PM
What now is Fakis puts a debt foregiveness number on the table and tells what he's willing to do in return.
See - we're arguing about nothing. :)
Quote from: Zanza on February 02, 2015, 04:44:51 PM
Quote from: Razgovory on February 02, 2015, 04:09:12 PM
They can't print their own money.
Yes, they can. They can just not print Euros.
Now you are just being dumb. And you are one of the more rational posters here usually. So I can't imagine how stupid the views of an "average German voter" on this must be. No wonder Angela is acting so irrationally.
Incidentally, speaking of tax evasion, it beats me why the rest of the EU is tolerating the existence of tax havens like Cyprus or Malta within its borders.
Effectively - and I am talking from experience, having advised on various Cypriot or Maltese structures - these jurisdictions allow anyone to set up a group structure allowing one, under certain conditions, to pay no capital gains tax or (sometimes) also no income tax anywhere in Europe - and because these countries are EU members, vehicles created in Cyprus and Malta have unrestricted access to all EU markets under freedom of establishment principle.
Without them (and to the lesser extent, Luxembourg), I don't think the likes of Amazon and Apple would be able to pay, say, no taxes in the UK.
Quote from: mongers on February 02, 2015, 09:52:28 PM
Weren't you criticising him for being a closet Marxist a while back? :P
I don't think so. I don't think he's closeted I always thought he was a Trot and proud, and I've always liked him. Though I think his style suits Channel 4 better than Newsnight.
QuoteIncidentally, speaking of tax evasion, it beats me why the rest of the EU is tolerating the existence of tax havens like Cyprus or Malta within its borders.
If only someone had told the Greeks they could make a legitimate industry out of it. I mean they're amateurs doing it for love compared, say, Juncker's 20 years as Finance Minister.
It looks like the Troika is over. The ECB is considering leaving in line with the ECJ opinion and Juncker's suggesting something more 'democratically based and accountable'. I think when the minutes are released and memoirs are written there'll be an interesting story in the well-meaning politicisation of the ECB. Hopefully it's over now, Draghi keeps on emphasising that the ECB's job is monetary policy and if the Advocate General's opinion is followed then that line will be drawn more clearly.
Incidentally ECB meets on Wednesday to decide whether to extend ELA to Greece. I think they will. I think some members of the ECB board have been sounding off but it just seems incredibly unlikely that they'll choose to take this massive (political) decision now.
Interestingly one of the Bank of England committee members is being asked about all this in Parliament now:
Quote"My expectation is that Greece and the euro zone members and the IMF will work together for an agreement,"
"We have heard some language in the last day or two that suggests a little bit of progress, a little bit of give."
...
"It looks to me to be unsustainable," Taylor told Britain's parliament when asked about Greece's debt.
"If the creditor nations really do believe they are going to get their money back, we are in an even worse situation than I think we are," Taylor told parliament's Treasury Select Committee.
One of the "tragedies of the European situation" was that Germany was split between being pro-European at all times, and the need for monetary and financial rigour at all times, Taylor said.
"When these come into conflict, the easiest way to resolve it is to claim that monetary and financial rigour is pro-European," Taylor said.
"This conflict needs to be laid bare ... and one just hopes that Germany will come to a coherent solution and I am sure they will," Taylor, a former senior banker, added.
Meanwhile Varoufakis is off to Rome and, after addressing the Cypriot Parliament (mostly on the division of Cyprus, not the economy), Tsipras is joining him. Renzi and Tsipras together at last, as in every Euro-lefties dream :w00t:
Quoteone of the Bank of England committee members is being asked about all this in Parliament now
Incidentally, what's the point of this? It's not like he can give them anything but the non-answers he actually has.
Quote from: Martinus on February 03, 2015, 07:34:58 AM
Incidentally, what's the point of this? It's not like he can give them anything but the non-answers he actually has.
I don't think this "if the creditor nations really do believe they are going to get their money back, we are in an even worse situation than I think we are" is a non-answer.
I'm pretty cynical about Syrzia's ability to deliver what its voters want but it has to be said they are making a good fist of the negotiations.
Letting Greece be destroyed is important, to encourage the others. From the ashes maybe something can be built. Or not. It's not like I give a fuck.
Well, admittedly, it's not like everything about Greece that is worth saving is not already safely stored in the British Museum...
And if they want that back they'll have to drag it from my cold, dead hands.
Quote from: Sheilbh on February 03, 2015, 07:31:00 AM
Quote from: mongers on February 02, 2015, 09:52:28 PM
Weren't you criticising him for being a closet Marxist a while back? :P
I don't think so. I don't think he's closeted I always thought he was a Trot and proud, and I've always liked him. Though I think his style suits Channel 4 better than Newsnight.
Oops my bad. :blush:
You're right, he fits in better with Channel 4.
Not sure how good a fit Fiasal Islam with the SkyNews agenda, he was rather good as 4's economic correspondent.
Is Italy the only country in the world where it's okay for politicians to check their phone during a press conference?
All the evidence so far from what's happened since the Greek election seems to suggest that it's Merkel & Germany that are being populist rather than Syriza.
Quote from: Sheilbh on February 02, 2015, 05:17:20 PMAnd in terms of how much worse any other policy could have been, at that point until Draghi's 'whatever it takes' speech there would have been contagion unless the ECB intervened massively.
So your argument is that Merkel didn't have alternatives, only Draghi had? :hmm:
QuoteI think the other alternatives were trying to offer more support to reformist governments, as Varoufakis now says a bit of fiscal space to support the reform process. I don't think that was ever an option in Greece because I think Greece's biggest problem was endemic in their state and Syriza offer the first opportunity of changing that.
So not an alternative back then?
Quotethen the next weakest until at four in the morning in Brussels everyone agrees to y which is half-way to x.
It's called negotiations and compromise or short politics. What exactly is surprising about this? Germany has interests and thinks its interests are best served this way. I know you disagree about that, but your opinion is meaningless to how Germany sets its policy.
QuoteWe ended up with bailouts, OMT, QE and the start of a banking union anyway it would have been better had those been constructed under less pressure.
Of course, but all of them less extreme than some people demanded. You may now say that's why they worked less than they could have, but first that's just conjecture and second, giving up too much under pressure for short term gains is something you might regret down the line as well. Germany should not and could not agree to sign away fiscal sovereignty to the degree that some of the discussed policies demanded.
Quote from: Sheilbh on February 02, 2015, 05:20:33 PM
Quote from: Zanza on February 02, 2015, 05:00:01 PM
Quote from: Sheilbh on February 02, 2015, 04:57:22 PM
'We want to entrench and deepen structural reforms.'
Well, that can't be very hard considering their progress so far.
Sure. The problem of Greece is endemic to the system and now there's a party that isn't part of that system in charge.
And their first "reforms" were to reinstate some of the old rules...
QuoteQuote"We are deeply committed to improvement."
How many parties of the 'radical left' have you heard talking about structural reform like that?
Maybe I am wrong, but all parties on the radical left talk about structural reforms. The more radical the party, the more radical the structural reform they have in mind usually. I am sure that KKE in Greece had even more "structural reforms" in mind than Syriza.
Quote from: PJL on February 03, 2015, 01:16:14 PM
All the evidence so far from what's happened since the Greek election seems to suggest that it's Merkel & Germany that are being populist rather than Syriza.
Wouldn't that require Merkel's policies to be popular in Germany? :huh:
Quote from: Zanza on February 03, 2015, 01:39:05 PM
Wouldn't that require Merkel's policies to be popular in Germany? :huh:
Aren't they?
What is the popular sentiment in Germany on the subject, in your estimation?
"Work will make you debt-free."
Quote from: Ideologue on February 03, 2015, 02:35:04 PM
"Work will make you debt-free."
:D
Edit: Asshole. I preferred this more before the edit. :P
I thought it was funnier as a pun, and I didn't know how to say "debt" in German.
I'll return to this thread tomorrow. But shit kicking off :o
From the twitter account of the ECB's head of comms it looks like they did not expect that to be the interpretation in the media :lol:
Quote from: Ideologue on February 03, 2015, 02:37:21 PM
I thought it was funnier as a pun, and I didn't know how to say "debt" in German.
Schuld. It's a also a synonym of guilt in German. Make of that what you will.
Talk about language shaping our perception.
I bet "debt" is synonymous with "gift" in Greek. :P
The character for debt in Chinese is written as a combination of two other characters - human, and responsibility. So debt is one's responsibility.
Apparently, it's "chreos". Which definitely sounds nicer than "Schuld" but then this is probably true for every single word in Greek compared to German. And is also apparently an expensive car brand. Make of it what you will. :P
Incidentally, the word used in Greek version of the Lord's prayer, "and forgive us our sins/debts/fault" is entirely different so none of these silly German guilttripping there. :P
I wish we had a Greek poster. Wasn't there one on Paradox?
Quote from: Monoriu on February 05, 2015, 02:53:39 AM
The character for debt in Chinese is written as a combination of two other characters - human, and responsibility. So debt is one's responsibility.
The Polish word is "dlug" which has no direct correlation to any other word except perhaps "dlugi" which means "long". :hmm:
The words for "responsibility" ("odpowiedzialnosc"), "obligation" ("obowiazek"), and "guilt" ("wina") are different. That being said, the word used to mean "owe" is the same as "guilty". Guess we are this strange German-Slavic hybrid as with most things.
Quote from: Sheilbh on February 04, 2015, 07:54:42 PM
I'll return to this thread tomorrow. But shit kicking off :o
From the twitter account of the ECB's head of comms it looks like they did not expect that to be the interpretation in the media :lol:
You mean this:
Quote5 February 2015 Last updated at 04:07 GMT Share this pageEmail
Print Share this page
ShareFacebookTwitter.European Central Bank toughens its stance on Greece
The European Central Bank (ECB) has toughened its stance with Greece by restricting financing to the country's banks.
In a statement, the central bank said it would no longer accept Greek government bonds as collateral for lending money to commercial banks.
The move makes access to cash more expensive for Greece's banks.
The ECB said the suspension came as it could not assume a "successful" deal on Greece's €240bn (£179bn) bailout.
The newly-elected Greek government is in talks with international creditors over the terms of its bailout, which it thinks are too harsh.
The Greek finance ministry said the ECB's decision, which is due to come into effect on 11 February, would have "no adverse impact" on the country's financial industry.
It said the sector was "fully protected" with other options still available.
'Get a deal'
Banks can still access funding through the Emergency Liquidity Assistance (ELA) programme, run by Greece's central bank, and at a much higher cost to the banks.
According to the Greek newspaper Kathimerini, the interest rate is 1.55%, compared with 0.05% on regular ECB financing.
Earlier on Wednesday, Greek Finance Minister Yanis Varoufakis, met the ECB's president Mario Draghi to discuss the country's bailout.
Analysts said the ECB statement was a sign the meeting had not been a success.
"This is clearly the ECB signalling to the Greek government: You're going to have to talk to [international lenders] the troika and get a deal,'' Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics told the Associated Press.
"Otherwise, really bad things are going to happen.''
The euro fell sharply against the dollar on the news, dropping more than a cent to $1.1331.
Mr Varoufakis is due to meet his German counterpart, Wolfgang Schaeuble, on Thursday, one of the toughest critics of the new Greek government.
The Interplanetary Guild has spoken. The spice must flow. Greece has to submit or be destroyed. :P
I'm not aware of the Latin "debitum", from where the word is derived for most Latin languages and English, having any ulterior meaning besides owing something. But I may be wrong.
Quote from: Jacob on February 03, 2015, 02:29:53 PM
Quote from: Zanza on February 03, 2015, 01:39:05 PM
Wouldn't that require Merkel's policies to be popular in Germany? :huh:
Aren't they?
What is the popular sentiment in Germany on the subject, in your estimation?
These days, people probably don't care. A few years ago, the populist policy would have been Grexit.
Quote from: Martinus on February 05, 2015, 04:13:35 AM
You mean this:
Yep. One interesting comment was from the Greek team. They can't work out who it's meant to be putting pressure on, Greece or Germany.
Edit: Also Greco-German Finance Ministers meet. They disagreed over whether they'd even agreed to disagree :lol:
http://www.theguardian.com/commentisfree/2015/feb/05/germany-not-big-bad-boss-europe-economies
QuoteGermany isn't the big bad boss of Europe
The idea that the country has an iron grip over southern European economies is too often used as a convenient excuse for others not getting their house in order
For once, politicians in France, demonstrators in Spain and newspaper columnists in Britain all agree: Europe has become a German colony. German dominance, based on economic overachievement, means the rest of the continent now lives under the yoke of Teutonic austerity politics. In this view, Syriza's win in the Greek elections is less the product of decades of domestic political failure than a rebellious act of defiance against a sinister oppressor.
No wonder, then, that some commentators have tried to pre-emptively defend the new Greek government against the inevitable attack by Angela Merkel, the "most monstrous western European leader of this generation". The Telegraph's Charles Moore saw Syriza as the "logical, desperate response" to a situation that is "more like a colonial than a democratic one", and even the Guardian's Europe editor wrote that Syriza's win "underlines public rejection of the policies prescribed mainly if not exclusively by Berlin in recent years". It may sound more like Star Wars than political analysis, but the idea that Merkel is somehow controlling the leaders of the other 27 EU member states is now common currency.
[...]
It makes you wonder how German rule over Europe is actually supposed to work. Do the other European leaders have a black, red and gold-coloured telephone on their desks with a direct line to Merkel's office? Are they steered to a pro-austerity course via mind control? Because it certainly doesn't happen through the EU institutions. It has been shown again and again that the European parliament is a truly transnational institution [...]
In the council of ministers, where national interests naturally play a much bigger role, German delegates aren't calling the shots either. According to Jonathan Golub, a political scientist at the University of Reading, large member states like "France, Germany and Italy do particularly badly" in influencing the bargaining process in the council, whereas small states like Luxembourg and Austria punch above their weight.
Even at the highest level of European politics, Germany has not always been very successful in pushing through its agenda. Merkel has suffered defeat in key decisions during the euro crisis: in 2012, for example, she was forced to agree to the European Central Bank directly buying government bonds of crisis-hit states. This time, the constitutional court threw its weight behind the German government and challenged the legality of these so-called outright monetary transactions (OMT). It referred the case to the European court of justice, but this seems unlikely to be successful after one of the advocates general at the ECJ already declared the measure compatible with EU law.
To criticise the German-bashing bandwagon is not about painting the country as a victim. It's about whether you believe that lazy cliches distort rather than help us understand the real nature of the political crisis at the heart of Europe. Blaming an evil German empire can be a convenient excuse for democratically elected southern European governments who don't want to take the flak for unpopular decisions at home. It also deflects attention from other austerity hardliners such as Finland or the Netherlands. It suggests that there is an easy solution to the Greek sovereign debt crisis, when the reality is far more complex.
Quote from: Zanza on February 05, 2015, 01:04:03 PM
http://www.theguardian.com/commentisfree/2015/feb/05/germany-not-big-bad-boss-europe-economies
QuoteIt suggests that there is an easy solution to the Greek sovereign debt crisis, when the reality is far more complex.
But this is one of instances where a seemingly complex problem does have an easy solution:
Step 1: determine a payment stream (primary surplus) that is sustainable and macroeconomically feasible.
Step 2: restructure the existing obligations such that they require the payment of the stream in Step 1.
And guess what? This is exactly what Syriza's finance minster is proposing.
It's certainly easy from Greece's point of view.
Quote from: Admiral Yi on February 05, 2015, 01:55:29 PM
It's certainly easy from Greece's point of view.
From whose point of view is that not easy?
There are virtually no non-official creditors left. The size of the payment stream the institutional creditors receive is of no economic relevance.
The only difficulty is the domestic politics of the EU states. That I agree is a big problem.
Argument that the ECB move is not a big deal: https://medium.com/bull-market/so-what-did-ecb-just-do-to-greece-eb61322286fa
QuoteSo the Governing Council have decided they can't now "assume a successful conclusion of the programme review." Who knows what they were assuming before? But it should be very clear now that this isn't about hard-and-fast rules. The Governing Council has explicitly made this decision based on their feelings and hunches about how negotiations are going.
At least, unlike in its previous "Fight Club" days, the ECB now admits that ELA is available and will step in to take the place of the regular Eurosystem lending that has been revoked. So there are no immediate implications for liquidity provision to the Greek banks. The ECB is flexing its muscles, letting everyone know that are very close to pulling liquidity from Greece but no funds have been withdrawn yet.
Simplifies Maters
On the positive side, this decision simplifies matters to their essence. As in Ireland and Cypus previously, whether the Greek banks can keep operating depends on the ECB's discretionary decision on whether to keep approving ELA. And, as with those previous cases, the ECB has decided what it wants in return for ELA and is determined to get its way.
This decision saves us weeks of more under-informed articles about "rules" and "waivers" and will help people understand what's going on: The ECB will pull funding from Greece's banks until, well, until they get whatever it is they want—most likely a sufficiently strong indication that substantive negotiations likely to succeed are underway. My current working assumption is that Syriza will meet that condition in the coming weeks and the banks will continue to receive ELA.
Zanza, I agree that it's not about the "big bad Germans."
Quote from: The Minsky Moment on February 05, 2015, 01:59:14 PM
From whose point of view is that not easy?
There are virtually no non-official creditors left. The size of the payment stream the institutional creditors receive is of no economic relevance.
The only difficulty is the domestic politics of the EU states. That I agree is a big problem.
It's perhaps most difficult for the next fiscal cripple that needs a bailout.
It's somewhat difficult for the program countries that don't get the same sweet deal.
I think there are also legal issues with the ECB writing off loans.
Quote from: The Minsky Moment on February 05, 2015, 01:43:54 PM
But this is one of instances where a seemingly complex problem does have an easy solution:
Step 1: determine a payment stream (primary surplus) that is sustainable and macroeconomically feasible.
Step 2: restructure the existing obligations such that they require the payment of the stream in Step 1.
And guess what? This is exactly what Syriza's finance minster is proposing.
Yes. But this is not something that any German politician can affect at this time as the debt in question is to IMF, ECB or private investors. This is not about the debt held by other Eurozone governments. Which brings us back to the article and the misleading focus on Merkel.
EDIT: Actually, they pay about 1% of GDP in interest for the massive EFSF loans, but their total wealth transfor for foreign loans is about 4.5%. So the problem they have with foreign debt is not with the biggest share, but with other holders such as IMF, ECB or private actors.
Quote from: Admiral Yi on February 05, 2015, 02:07:05 PM
Quote from: The Minsky Moment on February 05, 2015, 01:59:14 PM
From whose point of view is that not easy?
There are virtually no non-official creditors left. The size of the payment stream the institutional creditors receive is of no economic relevance.
The only difficulty is the domestic politics of the EU states. That I agree is a big problem.
It's perhaps most difficult for the next fiscal cripple that needs a bailout.
It's somewhat difficult for the program countries that don't get the same sweet deal.
I think there are also legal issues with the ECB writing off loans.
What's so sweet a deal about figuring out what's sustainable and then restructuring to match that?
Isn't that how this sort of thing is supposed to work?
Quote from: Jacob on February 05, 2015, 02:19:02 PM
What's so sweet a deal about figuring out what's sustainable and then restructuring to match that?
Isn't that how this sort of thing is supposed to work?
It's a sweet deal because it means paying back less you borrowed, or a lower interest rate than others are getting, or at no interest. That's a better deal than Ireland, Portugal, and Spain got.
Quote from: Admiral Yi on February 05, 2015, 02:25:39 PM
It's a sweet deal because it means paying back less you borrowed, or a lower interest rate than others are getting, or at no interest. That's a better deal than Ireland, Portugal, and Spain got.
That doesn't matter now as Greece has clearly gotten an extremely poor deal and the only thing that should matter now is what works short and long term to make their situation better.
Quote from: Zanza on February 05, 2015, 02:38:45 PM
Quote from: Admiral Yi on February 05, 2015, 02:25:39 PM
It's a sweet deal because it means paying back less you borrowed, or a lower interest rate than others are getting, or at no interest. That's a better deal than Ireland, Portugal, and Spain got.
That doesn't matter now as Greece has clearly gotten an extremely poor deal and the only thing that should matter now is what works short and long term to make their situation better.
I don't think you can say it doesn't matter.
The EU can get away with restructuring Greece's debt. But if the other PIIGS want in on that action you have a serious problem.
This one is for you, Sheilbh. :bowler:
http://www.economist.com/blogs/buttonwood/2015/01/euro-crisis
QuoteThe euro crisis
Don't Let's Be Beastly to the Germans
THERE is a lot of criticism of the German government in the press at the moment, particularly in Britain. A Guardian columnist described Angela Merkel as "the most monstrous Western European leader of this generation" which rather takes the breath away when coming from a liberal newspaper. Merkel has called on voters to beware the anti-immigrant movement Pegida; Syriza, which the same columnist praises as "the politics of hope" has gone into coalition with an anti-immigrant and anti-semitic nationalist party.
Greece's new prime minister is fighting for a debt write-off and an end to austerity for his people, who have endured a huge fall in GDP and a 25% unemployment rate. And fair enough; the Greek population has suffered a lot. But a new opinion poll shows that 43% of Germans don't want Merkel to offer debt relief to Greece as opposed to 16% who do. So Ms Merkel is not supposed to represent her electorate while Mr Tsipras is?
Germans were told that sacrificing the deutschmark for the euro would involve safeguards, with an ECB based in Frankfurt, strict rules about which countries would join the euro and explicit bans on bailouts for struggling countries. But the rules were eased to let too many countries in, the ECB is now run by an Italian who is creating money and vast amounts has spent buying the bonds of struggling European governments and banks; the German taxpayer will probably end up paying the bill. The Greeks asked for debt forgiveness; they have already had it and their remaining official debt has a 16-year maturity and an average coupon of 2.4%. They would not get those terms anywhere else. Meanwhile, German voters, who went through a painful period of restructuring in the early 2000s to make their economies competitive, are told that such policies are inappropriate when applied elsewhere. They have gone along with all these things without swinging to the far left and right as many voters in other parts of Europe have done.
Now of course, there are legitimate issues for criticism. Further Greek debt write-offs are required; the Greeks should not be asked to aim for such a large primary surplus; and Germany, which now has a budget surplus, could deliver a fiscal stimulus to help its neighbours.
But if I were a German, I would find it hard to be lectured about communal togetherness by Britain, a country which stands aloof from all federalising measures and might be leaving the EU in 2017. Germany contributes €29 billion to the EU budget (and €16 billion net); the UK complains bitterly about its net €11 billion payment. The German net contribution to the budget is twice that of France, although their GDP per head numbers are virtually identical.
If it is such a good deal to lend money to the Greek government without conditions, why doesn't Britain do so? The German government is not in that much better a financial position than the UK; its gross debt-to-GDP ratio is 82% as opposed to Britain's 90%. We could borrow money at our 1.4% rate (on 10-year gilts) and lend the money to Greece at 2% and make a profit (we did something similar for Ireland). Of course, it's fantasy; any party that proposed such an idea would be slaughtered in the polls. Why waste money on the Greeks, the papers would say, when we need to spend it at home? But when the Germans think along similar lines, they are monsters. Humbug.
Quote from: Barrister on February 05, 2015, 02:40:41 PM
Quote from: Zanza on February 05, 2015, 02:38:45 PM
Quote from: Admiral Yi on February 05, 2015, 02:25:39 PM
It's a sweet deal because it means paying back less you borrowed, or a lower interest rate than others are getting, or at no interest. That's a better deal than Ireland, Portugal, and Spain got.
That doesn't matter now as Greece has clearly gotten an extremely poor deal and the only thing that should matter now is what works short and long term to make their situation better.
I don't think you can say it doesn't matter.
The EU can get away with restructuring Greece's debt. But if the other PIIGS want in on that action you have a serious problem.
The idea is to restructure Greek debt so that becomes comparable to that of the other four countries - high, but manageable and probably sustainable.
Ireland cut a deal with the ECB to redenominate billions of promissory notes . . .
There were different circumstances and facts for every country effected by the 08 collapse. It doesn't make sense to say that every country and every situation should be addressed in the precisely identical manner.
Other than the domestic politics, how exactly is Spain or Ireland harmed by a deal on Greek debt?
Quote from: The Minsky Moment on February 05, 2015, 03:23:20 PM
Other than the domestic politics, how exactly is Spain or Ireland harmed by a deal on Greek debt?
The same way I'm harmed if Obama gives you $1,000,000 and gives me a coupon for $5 off my next purchase at Radio Shack.
Heard on NPR that some Kraut or another said debt reduction "is not on the table."
Quote from: Admiral Yi on February 05, 2015, 04:10:39 PM
The same way I'm harmed if Obama gives you $1,000,000 and gives me a coupon for $5 off my next purchase at Radio Shack.
You better use that soon.
Quote from: MadImmortalMan on February 05, 2015, 04:13:03 PM
Quote from: Admiral Yi on February 05, 2015, 04:10:39 PM
The same way I'm harmed if Obama gives you $1,000,000 and gives me a coupon for $5 off my next purchase at Radio Shack.
You better use that soon.
Heard a rumor Amazon might buy Radio Shack. Thanks Bezos. :rolleyes:
Quote from: Admiral Yi on February 05, 2015, 04:10:39 PM
Quote from: The Minsky Moment on February 05, 2015, 03:23:20 PM
Other than the domestic politics, how exactly is Spain or Ireland harmed by a deal on Greek debt?
The same way I'm harmed if Obama gives you $1,000,000 and gives me a coupon for $5 off my next purchase at Radio Shack.
Heard on NPR that some Kraut or another said debt reduction "is not on the table."
So not harmed at all?
Quote from: Razgovory on February 05, 2015, 04:25:04 PM
So not harmed at all?
Would Greece have been harmed if Germany had offered loans to Ireland but told Greece to fuck off?
Quote from: Admiral Yi on February 05, 2015, 04:32:03 PM
Quote from: Razgovory on February 05, 2015, 04:25:04 PM
So not harmed at all?
Would Greece have been harmed if Germany had offered loans to Ireland but told Greece to fuck off?
Only if you believe that giving bailout loans is a fundamental right. I could be convinced, but it seems contrary to you political ideology that states are required to offer the same exact loans to everyone including other countries. Also, they got that coupon from Radio Shack, so at least there is something.
Quote from: Admiral Yi on February 05, 2015, 04:32:03 PM
Quote from: Razgovory on February 05, 2015, 04:25:04 PM
So not harmed at all?
Would Greece have been harmed if Germany had offered loans to Ireland but told Greece to fuck off?
Yeah possibly, but the thing that would have harmed Greece in your scenario is being told to fuck off, independently of anything that happened between Ireland and Germany.
Quote from: Admiral Yi on February 05, 2015, 04:10:39 PM
Quote from: The Minsky Moment on February 05, 2015, 03:23:20 PM
Other than the domestic politics, how exactly is Spain or Ireland harmed by a deal on Greek debt?
The same way I'm harmed if Obama gives you $1,000,000 and gives me a coupon for $5 off my next purchase at Radio Shack.
Let's make it more pertinent, and say they are harmed in the same way that non-farmer X is harmed because Farmer Y gets a bag full of CAP money.
Except that in the case of CAP the source of the money is EU taxpayers so there is some real harm, whereas here we are just talking about accounting entries made in cross-border central banking accounts with no real economic effect.
Quote from: Zanza on February 03, 2015, 01:33:20 PM
So your argument is that Merkel didn't have alternatives, only Draghi had? :hmm:
Yes. However I think Draghi and Trichet's room for manoeuvre was very limited above all because of German opposition to any hint of expansionary monetary policy - see the Bundesbank taking the ECB to court over OMT. But ultimately my view is that if the Euro survives Draghi's head deserves to go on its notes.
Bailouts and fiscal pacts were never the answer and they still aren't. I think the biggest problems of the Eurozone are to do with construction and monetary policy and were treated politically, even by the ECB. The one area I think there really did need to be political change was banking union and I think that's insufficient.
And I don't think Merkel had any alternatives to the policies she was ultimately forced to concede which is why, in my opinion, it would have been better not to start from total opposition and then have a last minute construction but, as I say, try to get ahead of the crisis.
QuoteSo not an alternative back then?
Possibly not in Greece. Definitely, at varying times, been an alternative in Ireland, Portugal and Italy though. Sadly no thought was given for that so Eurogroup meetings in a couple of years could include not just Syriza but Podemos and Sinn Fein.
QuoteIt's called negotiations and compromise or short politics. What exactly is surprising about this? Germany has interests and thinks its interests are best served this way. I know you disagree about that, but your opinion is meaningless to how Germany sets its policy.
I don't think most negotiations end with a total u-turn, unless your initial position is simply unreasonable. It ends with as you say a compromise. I don't see how going from opposing bailouts to a €500 billion bailout fund is a compromise or negotiations. It's a failure.
QuoteOf course, but all of them less extreme than some people demanded. You may now say that's why they worked less than they could have, but first that's just conjecture and second, giving up too much under pressure for short term gains is something you might regret down the line as well. Germany should not and could not agree to sign away fiscal sovereignty to the degree that some of the discussed policies demanded.
That's not true. The UK and the US have all of those monetary policies that have been suggested for the Euro and had less austerity. Their economies are growing faster than anywhere in the Eurozone, their deficits are falling (the US dramatically, the UK less so) and their debt/GDP has or is peaking. It's not conjecture to say that those policies worked while policies of fiscal consolidation, private sector deleveraging and tight monetary policy have led to a depression (in Greece), deflation in 11 of the 17 member states and increasing debt across the Eurozone.
QuoteAnd their first "reforms" were to reinstate some of the old rules...
The point they've made, which is accurate, is that the problems in Greece are to do with the corruption of the state and the economy. Rather than tackling those issues the reform program has been quibbling about Sunday opening hours. Rather than tackling the oligarchs who don't pay their taxes and benefit from fire sale privatisations and rigged public sector procurement, they've focused on everyday people. They've also said they agree with 60-70% of the already implemented reforms and they will not carry out all of their manifesto if it means breaching whatever 'small' primary surplus they agree to run.
The Commission has noted that the reason why Greek exports are still falling despite the cut in labour unit costs is because the issues with Greece's trade was to do with institutional capacity and governance.
QuoteMaybe I am wrong, but all parties on the radical left talk about structural reforms. The more radical the party, the more radical the structural reform they have in mind usually. I am sure that KKE in Greece had even more "structural reforms" in mind than Syriza.
They don't in my experience. 'Structural reform' means the Washington consensus/neo-liberalism/IMF/World Bank etc. It's a phrase the left don't use ever. As Alan Beattie pointed out there's more to them than that.
QuoteIt's a sweet deal because it means paying back less you borrowed, or a lower interest rate than others are getting, or at no interest. That's a better deal than Ireland, Portugal, and Spain got.
Yeah. In my view there needs to be a general conference on these issues of debt within the Eurozone. As I say I think it is in the interests of creditor countries to try and help and support the mainstream, reformist ministries in Ireland, Portugal and Spain rather than ending up negotiating with their respective populist parties. Similarly I think Renzi should really be given fiscal space as the first reformist Prime Minister Italy's had since Cavour. Having said that my understanding is that all of those countries should benefit more from QE than Greece would be likely to, but they still need more for growth. And politically Italy's the most worrying from a European perspective because support for the Euro is now around 40% in Italy.
Having said that, none of those countries are in as bad a situation as Greece and ultimately none of those governments really have the mandate to challenge the program that the Greeks do. The others don't have 175% debt-GDP, they've not had deflation for two years, or just experienced their first quarter of growth since 2009.
QuoteThis one is for you, Sheilbh. :bowler:
:lol: It's entirely true - including the bit about Greeks requiring a debt write-off :P
Personally I'd entirely support totally writing off our contribution to the Irish bailout. And of course the ultimate reason is that we don't share a currency union with them. We didn't make the decision to share a central bank and a currency with the rest of Europe (for which Europe should be very thankful as with our combination of bad banks and Euroscepticism we'd have blown the whole thing apart in high dudgeon - another example of Gordon Brown saving the world).
In a way we've probably been beneficiaries of the Greek bailout as our banks loaned as much to the Greeks as the Germans did. But while we've an interest in seeing the Eurozone survive and prosper, it's less existential for us if you'd tried to force them out in 2012, or now. For Germany it's still a very big gamble.
QuoteHeard on NPR that some Kraut or another said debt reduction "is not on the table."
Varoufakis has already taken it off the table. They're not seeking another haircut.
A few interesting things today. I read one ECB official said they think they need new elections - every Greek journalist in response said Syriza would increase their vote and there were big pro-government protests across Greece today. Paul Mason, who's very close to Syriza has reported that if the alternative is enforcing the program the government would rather resign.
Lots of the reaction is the UK is continued shock at how political and uncommunicative the ECB is :lol:
This interpretation by Krugman's done the rounds a fair bit I think, especially as Varoufakis had six months earlier said if threatened with this by the ECB he'd say 'go ahead':
QuoteA Dance With Draghi
EmailShareTweet
Update: Frances Coppola has the same take, with much more detail.
Family stuff, which leaves me with almost no time for posting just as stuff goes semi-crazy in the Greek drama. But a quick note.
What happened was that the ECB declared that it will no longer accept Greek government bonds as collateral when lending to Greek banks. The initial reaction of some observers was that this was the end, that the ECB was pulling the plug arbitrarily and abruptly.
But even before I had a chance to look at the details, I assumed that must be wrong. You can say many things about Mario Draghi; it's quite possible that he will fail to save the euro, and quite possible that he is making big mistakes; but stupid and crude is not his style. Sure enough, this is a much subtler action that the first headlines suggested. This funding channel is one that Greek banks no longer use very much, and it's not necessarily to keep them afloat; they can continue to borrow indirectly via the Greek central bank. So this is not a crisis-provoking event.
What's the point, then? Well, it's posturing and signaling. But to whom, and to what end?
Maybe it's an effort to push the Greeks into reaching a deal, but my guess — and it's only that — is that it's actually aimed more at the Germans than at the Greeks. On one side, it's the ECB making tough noises, which might keep Germany off their backs for a little while. On the other, it's a wake-up call: dear Chancellor Merkel, we are *this* close to watching a Greek banking collapse and euro exit, and are you really sure you want to go down this route? Really, really?
So this wasn't brinksmanship; it was sort of pre-brinksmanship, a warning shot to all sides about what will happen next.
Does Draghi know what he's doing? Of course not — nobody in this situation knows what he or she is doing, because it's structurally a mess. But don't panic — yet.
The sense I get is that the options are narrowing to either a default or a negotiated deal - which is a difficult binary for most European leaders. It's tough to sell your position as saving taxpayer money if you've just lost the entire loan. If there's default then it'll almost certainly lead to banking crisis and Grexit - though interestingly apparently Italian government lawyers have said a country can run a dual currency (which is interesting in itself) and stay in the Eurozone, based on their interpretations of the treaties.
Quote from: The Minsky Moment on February 05, 2015, 06:48:46 PM
Let's make it more pertinent, and say they are harmed in the same way that non-farmer X is harmed because Farmer Y gets a bag full of CAP money.
We could make it even more pertinent still and say they are harmed in the way that a person who owes his annual salary in back taxes is given 5 years to pay it back while the person who owes double his salary in taxes is given 5 years to pay it back and has half of it forgiven. It creates perverse future incentives. It penalizes relative prudence.
QuoteExcept that in the case of CAP the source of the money is EU taxpayers so there is some real harm, whereas here we are just talking about accounting entries made in cross-border central banking accounts with no real economic effect.
The ECB and IMF money are accounting entries which have the effect, like any central bank transaction, of increasing or decreasing the money supply, which has real economic effects.
The EU money, unless I'm mistaken, is a charge on the member treasuries, and thus an obligation on taxpayers.
An interesting, novel and
long take on the Eurozone crisis:
http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-1871-73/
Pithily summed up with charts by the FT Alphaville people:
QuoteMichael Pettis explains the euro crisis (and a lot of other things, too)
Matthew C Klein | Feb 06 08:30 | 23 comments | Share
This is literally the best analysis of the euro area's problems we've ever read. You should take the time to closely read the whole thing yourself. We'll wait.
Now that you're back, we thought we could add some value by highlighting and expanding on what we believe to be Pettis's most important insights.
First, the relevant units within the euro area aren't countries but economic sectors. For all of the suffering that has occurred in places such as Spain, Ireland, and Greece, we shouldn't forget that German workers have suffered from stagnant wages and decaying infrastructure.
One of the worst costs — for Germany — has been the lack productivity growth. For all the talk of Teutonic competitiveness, German labour productivity has grown at the meagre pace of just 0.6 per cent per year, on average, since 1998. Output per hour worked is actually lower now than it was in 2007. For perspective, this track record is worse than that of practically every other rich country — including Greece and Spain!
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fftalphaville.ft.com%2Ffiles%2F2015%2F02%2FOECD-avg-labor-prod-growth-1998-20141-590x258.png&hash=b89c1abb5142dc609f766b4c7c89a102a2d087ec)
(Source: Organisation for Economic Co-operation and Development, author's calculations)
The right distinction, therefore, isn't between countries but between classes (emphasis ours):
QuoteIt was not the German people who lent money to the Spanish people. The policies implemented by Berlin that resulted in the huge swing in Germany's current account from deficit in the 1990s to surplus in the 2000s were imposed at a cost to German workers, and have been at least partly responsible for Germany's extremely low productivity growth — most of Germany's growth before the crisis can be explained by the change in its current account — rather than by rising productivity.
Moreover because German capital flows to Spain ensured that Spanish inflation exceeded German inflation, lending rates that may have been "reasonable" in Germany were extremely low in Spain, perhaps even negative in real terms. With German, Spanish, and other banks offering nearly unlimited amounts of extremely cheap credit to all takers in Spain, the fact that some of these borrowers were terribly irresponsible was not a Spanish "choice."
I am hesitant to introduce what may seem like class warfare, but if you separate those who benefitted the most from European policies before the crisis from those who befitted the least, and are now expected to pay the bulk of the adjustment costs, rather than posit a conflict between Germans and Spaniards, it might be far more accurate to posit a conflict between the business and financial elite on one side (along with EU officials) and workers and middle class savers on the other. This is a conflict among economic groups, in other words, and not a national conflict, although it is increasingly hard to prevent it from becoming a national conflict.
Ironically, the biggest political beneficiaries of the crisis (so far) haven't been pan-European socialists, but nationalist movements of both the right and left.
Second, when it comes to big flows of capital across borders, it's usually better to give than to receive. The basic problem is that huge inflows of money are almost never matched by commensurate increases in the number of profitable investment projects, so a ton of money gets wasted on boondoggles, usually related to real estate. That ends up boosting wages without increasing productivity. That lowers competitiveness and worsens the trade balance, which makes it harder to service foreign debts even as the obligations pile up.
(Borrowing in a currency you can print is helpful but it doesn't prevent a lot of resources getting misallocated and a lot of people ending up with excessive debt burdens.)
It's easiest to see how this all adds up in the case of Spain. According to Eurostat, a whopping 20 per cent of all the jobs created in Spain from 1998 through 2007 were construction jobs, even though construction accounted for a little less than 10 per cent of total employment in 1998. The result was zero growth in labour productivity in that period. (The building industry is notorious for its falling productivity, as Cardiff has noted.)
Now look at what happened to Spain's capital imports, as shown by comparing its current account balance to global GDP:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fftalphaville.ft.com%2Ffiles%2F2015%2F02%2FSpain-current-account-as-a-share-of-world-GDP-590x270.png&hash=faf3351a052641264e7f8565f379989f4552a41a)
(Source: International Monetary Fund World Economic Outlook database on GDP and current account balances, author's calculations)
At the height of the bubble, Spain — a mid-sized economy in Europe that was home to only about 45 million people — was importing more capital than every other country in the world except for the United States. Also note that Greece — a country of just 11 million people — was the fifth-most dependent on foreign creditors:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fftalphaville.ft.com%2Ffiles%2F2015%2F02%2FBiggest-current-account-deficits-2007-590x271.png&hash=f964170a2e4d5c76184cb46b31bb94477076def1)
In addition to reducing productivity, the lending that enabled the Spanish construction boom also led to a lot of overbuilding. The subsequent cutbacks to deal with the inventory overhang have crushed employment and GDP. Had it not been for those cutbacks, Spain's economy would actually have done pretty well. Via JPMorgan:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fftalphaville.ft.com%2Ffiles%2F2015%2F02%2FSpanish-GDP-ex-construction.png&hash=8f8ebfd15afa2af09c7f387932d50c037c18014e)
Pettis illustrates this brilliantly by looking at what happened to the German economy after it received reparation payments from France following the Franco-Prussian war:
QuoteFrom 1871 to 1873 huge amounts of capital flowed from France to Germany. The inflow of course drove the obverse current account deficits for Germany, and Germany's manufacturing sector struggled somewhat as an increasing share of rising domestic demand was supplied by French, British and American manufacturers.
But there was a lot more to it than mild unpleasantness for the tradable goods sector. The overall impact in Germany was very negative. In fact economists have long argued that the German economy was badly affected by the indemnity payment both because of its impact on the terms of trade, which undermined German's manufacturing industry, and its role in setting off the speculative stock market bubble of 1871-73, which among other things unleashed an unproductive investment boom and a surge in debt.
The party ended with the start of the Long Depression in 1873. As boom turned to bust, views on the merits of reparations changed:
QuoteWithin a few years of the beginning of the crisis attitudes towards the French indemnity had shifted dramatically, with economists and politicians throughout Germany and the world blaming it for the country's economic collapse. In fact so badly was Germany affected by the indemnity inflows that it was widely believed at the time, especially in France, that Berlin was seriously contemplating their full return. The great beneficiary of French "largesse" turned out not to have benefitted any more than Spain had benefitted from German largesse 135 years later.
Third, it makes no sense to blame the recipients of the capital inflows for causing the crisis. If enough money is sloshing around willing to invest in any stupid idea, you shouldn't be too surprised that a lot of stupid ideas get funded. When, for example, Wolfgang Schaeuble, Germany's finance minister, says:
QuoteThe reasons for Greece's problems can be attributable only to Greece and not to actors outside the country, and certainly not in Germany.
As he did during the press conference following his meeting with Yanis Varoufakis, his Greek counterpart, we have to remember that Schaeuble is talking nonsense. It's logically impossible for excess borrowing to occur unless there is someone sufficiently reckless (or stupid) to provide the financing.
The problem with Schaeuble's assignment of blame is that it prevents optimal solutions that are best for the majority of Europeans, Greek, Spanish, and German alike. Pettis:
QuoteAn awful lot of Europeans have understood the crisis primarily in terms of differences in national character, economic virtue, and as a moral struggle between prudence and irresponsibility. This interpretation is intuitively appealing but it is almost wholly incorrect, and because the cost of saving Europe is debt forgiveness, and Europe must decide if this is a cost worth paying (I think it is), to the extent that the European crisis is seen as a struggle between the prudent countries and the irresponsible countries, it is extremely unlikely that Europeans will be willing to pay the cost.
In fact, Pettis thinks that, if anything, it was net lenders in Germany and the Netherlands who were responsible for what happened, rather than borrowers in Ireland or Greece or Spain:
QuoteIt would be an astonishing coincidence that so many countries decided to embark on consumption sprees at exactly the same time. It would be even more remarkable, had they done so, that they could have all sucked money out of a reluctant Germany while driving interest rates down. It is very hard to believe, in other words, that the enormous shift in the internal European balance of payments was driven by anything other than a domestic shift in the German economy that suddenly saw total savings soar relative to total investment.
That shift, in turn, is connected to anaemic wage growth and even weaker domestic consumption in Germany.
Fourth, it matters how your obligations are structured. Many smart people, most notably Daniel Davies, have argued that the headline numbers surrounding Greece's public debt burden are irrelevant to understanding the situation in Greece. As Davies puts it:
QuoteThe total figure for "Greece's Debt Burden" is an economically meaningless number. Everyone knows it is going to be restructured at some politically convenient time in the future; it simply can't be paid back, and so it simply won't be. So increasing the size of the debt outstanding by 2.5 now just means that you increase the size of the writeoff in the year two-thousand-and-something by the same amount. Concentrate on the flows and only on the flows — the stocks are no longer a useful quantity to think about.
But the focus on flows misses the impact of the structure of the debt stock on the incentives of private sector lenders and producers, writes Pettis (our emphasis):
QuoteThe face value and structure of outstanding debt matters, and for more than cosmetic reasons. They determine to a significant extent how producers, workers, policymakers, savers and creditors, alter their behavior in ways that either revive growth sharply or slowly bleed away value.
Incentives must be correctly aligned, in other words, so that it is in the best interest of stakeholders collectively to maximize value (this rather obvious point is almost never implemented because economists have difficulty in conceptualizing and modelling reflexive behavior in dynamic systems).
Rather than let economists work out the arithmetic of the restructuring based on linear estimates of highly uncertain future cashflows, whose values are themselves affected by the way debt payments are indexed to these cashflows, Greece and her creditors may want to unleash a couple of options experts onto the repayment formulas and allow them to calculate how volatility affects the value of these payments and what impact this might have on incentives and economic behavior.[/b[]
This is why Pettis thinks Varoufakis's plan to swap existing Greek debts for obligations indexed to GDP is a good idea that ought to be expanded to other countries, including Spain and Italy. The appeal of these GDP-indexed obligations is that they give creditors an incentive to support investments in future growth.
That's very different from the current setup, where the Troika has every incentive to tie its funding to the willingness to implement austerity programmes. Even if those programmes boosted productivity in the long term by shifting resources away from the state, the behaviour demanded by the euro area's official sector creditors exacerbates the cyclical weakness.
The good news, though, is that a different liability structure that encourages additional investment could instantly lead to stronger growth given the reforms that have already occurred. Moreover, a large-scale restructuring should encourage lots of new investment even if it also wipes out many existing creditors, at least if they are done soon. As Pettis puts it:
QuoteThere is overwhelming evidence — the US during the 19th Century most obviously — that trade and investment flow to countries with good future prospects, and not to countries with good track records. The main investment Spain is likely to see over the next few years is foreign purchases of existing apartments along the country's beautiful beaches.
Once its growth prospects improve, however, with among other things a manageable debt burden, foreign businesses and investors will fall over each other to regain the Spanish market regardless of its debt repayment history. This is one of those things about which the historical track record is quite unambiguous.
That leads to the fifth point: euro area officials are running out of time. Patience may be a virtue in some situations, but not when it comes to crisis resolution and debt restructuring. That's especially true when you appreciate the difference between "financial crises that occur within a globalization cycle and those that end a globalization cycle."
The past few years have been a golden opportunity for even the dodgiest borrowers to raise capital at low spreads, because the rich world (where most foreign investment comes from) has been awash in savings searching for a decent return. Under current conditions, there would be plenty of investors eager to jump in and finance investment in Greece, Spain, Ireland, etc if they dramatically restructured their debts. Just think of all the "dry powder" burning holes in the pockets of the private equity firms (and their LPs!), or the bond investors searching, but not finding, decent rates of return in their home country. After all, if Ecuador can do it...
Pettis reminds us that it's always been this way. Germany was surprised at how easy it was for France to raise the money necessary to pay its 1871 reparations — a bill worth more than 20 per cent of France's annual GDP. In fact, "the French indemnity actually increased global liquidity by expanding the global supply of highly liquid 'money-like' assets."
The Weimar government also had an easy time securing credit from American and other lenders to cover its own reparations half a century later once hyperinflation had wiped out its domestic debts.
But sometimes the timing is rough. The boom in lending to Latin America funded by petrodollars in the 1970s had a very unhappy ending because the 1980s were a period of relatively high rates in America and Europe, not to mention lower commodity prices. The combination was a disaster for the debtors who had borrowed in dollars.
We at Alphaville have no insight into the future of monetary policy or global liquidity here or in Europe. But we wouldn't be surprised if it turned out that the optimal window for restructuring, even if you leave aside the political implications of persistently high unemployment, could soon close. Something for the can-kicking eurocrats to keep in mind.
Finally — and you should have figured this one out by now — nothing about the euro crisis is particularly new. All of this has happened before and all of it will (probably) happen again. There isn't any need to understand radical new financial products or technological innovations or world-historical changes in politics to figure out why everything blew up. Historical literacy and/or a decent model of capital flows in a fixed exchange-rate system would have been more than sufficient.
In fact, one of our favourite books about finance and economics — Pettis's The Volatility Machine — has basically everything you need to know about the euro crisis even though it was written before the euro had even launched. (The appendix on the relationship between option pricing and credit risk is worth the price of admission alone, in our view.)
No wonder he writes in his latest article that "the current European crisis is boringly similar to nearly every currency and sovereign debt crisis in modern history."
Also interesting to note that there's been opinion polling in France, 82% support Greek debt restructuring. Is this Hollande's moment? :o :lol:
Edit: Also Zanza, that first chart is possibly what I meant when, in another thread, I said Germany's productivity gains had been made by cutting wages rather than increasing labour productivity.
Quote from: Admiral Yi on February 05, 2015, 08:58:18 PM
We could make it even more pertinent still and say they are harmed in the way that a person who owes his annual salary in back taxes is given 5 years to pay it back while the person who owes double his salary in taxes is given 5 years to pay it back and has half of it forgiven.
I believe tax settlements are case-by-case and differ depending on exact circumstances.
QuoteIt creates perverse future incentives. It penalizes relative prudence.
That's the only argument to make here I think. But it doesn't convince. Because no one rational would look at what Greece went through since 2008 and say: let's choose that path.
QuoteThe ECB and IMF money are accounting entries which have the effect, like any central bank transaction, of increasing or decreasing the money supply, which has real economic effects.
We are talking about a swing of about a billion or two per year of payments. Too small to have monetary impacts and easily offset by other operations.
QuoteThe EU money, unless I'm mistaken, is a charge on the member treasuries, and thus an obligation on taxpayers.
I think it is part in the national central banks and part at the ECB itself, but not held directly by the governments.
Quote from: The Minsky Moment on February 06, 2015, 12:07:58 PM
That's the only argument to make here I think. But it doesn't convince. Because no one rational would look at what Greece went through since 2008 and say: let's choose that path.
The problem with this line of reasoning is the assumption that creditors will put your future Greece on that 2008 path. Why would they install a program that has been thoroughly discredited?
Quote from: Admiral Yi on February 06, 2015, 02:28:35 PM
Quote from: The Minsky Moment on February 06, 2015, 12:07:58 PM
That's the only argument to make here I think. But it doesn't convince. Because no one rational would look at what Greece went through since 2008 and say: let's choose that path.
The problem with this line of reasoning is the assumption that creditors will put your future Greece on that 2008 path. Why would they install a program that has been thoroughly discredited?
Well, if they don't there won't be a perverse incentive since future Greece won't end up in this kind of situation.
Quote from: Jacob on February 06, 2015, 02:55:55 PM
Well, if they don't there won't be a perverse incentive since future Greece won't end up in this kind of situation.
What will prevent countries from amassing debt to an unsustainable level?
Or more importantly I guess, what will prevent countries that have already received bailout loans from reaching unsustainable debt levels?
Quote from: Admiral Yi on February 06, 2015, 03:09:04 PM
Quote from: Jacob on February 06, 2015, 02:55:55 PM
Well, if they don't there won't be a perverse incentive since future Greece won't end up in this kind of situation.
What will prevent countries from amassing debt to an unsustainable level?
That what Greece has been through up until this point is immensely undesirable, notwithstanding whatever happens from here on out. So even if Greece gets oodles of cash now, there is no perverse incentive because getting to this point well and truly sucks.
I thought that was Minsky's point?
Quote from: Admiral Yi on February 06, 2015, 03:20:38 PM
Or more importantly I guess, what will prevent countries that have already received bailout loans from reaching unsustainable debt levels?
If they've received bailout loans haven't they already reached unsustainable debt levels?
Quote from: frunk on February 06, 2015, 03:22:37 PM
If they've received bailout loans haven't they already reached unsustainable debt levels?
Not necessarily. Ireland, for example, sustained their debt level so well they've already repaid their bailout money (I think). At the very least they've re-entered the bond market.
It also depends on the interest rate charged. Others have said that Spanish and Italian debt is sustainable at current (incredibly low) rates, but become unsustainable if rates reach 4% or so.
Quote from: Jacob on February 06, 2015, 03:22:00 PM
That what Greece has been through up until this point is immensely undesirable, notwithstanding whatever happens from here on out. So even if Greece gets oodles of cash now, there is no perverse incentive because getting to this point well and truly sucks.
I thought that was Minsky's point?
There are different ways to get to Greece's current level of indebtedness. You can throw a party on your credit card, or your economy can collapse. Joan was talking about the 2nd.
Quote from: Admiral Yi on February 06, 2015, 03:37:59 PM
There are different ways to get to Greece's current level of indebtedness. You can throw a party on your credit card, or your economy can collapse. Joan was talking about the 2nd.
I'm not following. Why is that significant?
Quote from: Jacob on February 06, 2015, 03:39:07 PM
I'm not following. Why is that significant?
Because large numbers of well-intentioned people (see for example Shelf's numerous posts about granting "more fiscal space") think that countries like Spain and Italy *should* be running larger deficits, thereby increasing their indebtedness and thereby creeping closer to unsustainability.
Quote from: Admiral Yi on February 06, 2015, 03:43:39 PM
Quote from: Jacob on February 06, 2015, 03:39:07 PM
I'm not following. Why is that significant?
Because large numbers of well-intentioned people (see for example Shelf's numerous posts about granting "more fiscal space") think that countries like Spain and Italy *should* be running larger deficits, thereby increasing their indebtedness and thereby creeping closer to unsustainability.
And you're saying they're more likely to get their way, if less-than-savage conditions are imposed on a country like Greece who is in a crappy position due to a collapsed economy?
Quote from: Admiral Yi on February 06, 2015, 03:33:54 PM
Not necessarily. Ireland, for example, sustained their debt level so well they've already repaid their bailout money (I think). At the very least they've re-entered the bond market.
It also depends on the interest rate charged. Others have said that Spanish and Italian debt is sustainable at current (incredibly low) rates, but become unsustainable if rates reach 4% or so.
I'm assuming they got the bailout loans because they had reached unsustainable levels of debt without it. If they could have recovered without the loans then why would they get them?
Quote from: Jacob on February 06, 2015, 03:50:33 PM
And you're saying they're more likely to get their way, if less-than-savage conditions are imposed on a country like Greece who is in a crappy position due to a collapsed economy?
I'm saying they are facing perverse incentives if they think that loans may be forgiven if they reach an unsustainable level, but they will have to pay back full value if they manage to hold their debt level down.
Quote from: frunk on February 06, 2015, 03:52:23 PM
I'm assuming they got the bailout loans because they had reached unsustainable levels of debt without it. If they could have recovered without the loans then why would they get them?
At the time they received the bailouts the bond market was not interested in lending to them.
The whole Greek crisis got me thinking whether we should re-evaluate our moral attitudes towards money lending and borrowing.
In the past it used to be that the lender would lend money to the borrower and then, pretty much, left the borrower to his own devices - only to show up when the debt was due. In that, it was a fairly reasonable to expect the borrow to pay up as agreed, as that was the lender's only security. So it is only the borrower who would bear the "moral" liability for not paying the debt.
Since then lenders have become much more actively involved in the borrowers' operations, businesses and lives - in a sense become more like shareholders. Doesn't it, therefore, make sense that they are treated more like shareholders - i.e. sharing the risk of the business of the borrower going badly? In that, a loan becomes less like a debt and more like a joint investment of the lender and the borrower. So, if a lender lends money to someone who ends up unable to pay, he (absent fraud or negligence on the part of the borrower) just made a bad investment - and should bear the consequences.
Quote from: Martinus on February 06, 2015, 03:57:04 PM
Since then lenders have become much more actively involved in the borrowers' operations, businesses and lives - in a sense become more like shareholders. Doesn't it, therefore, make sense that they are treated more like shareholders - i.e. sharing the risk of the business of the borrower going badly? In that, a loan becomes less like a debt and more like a joint investment of the lender and the borrower. So, if a lender lends money to someone who ends up unable to pay, he just made a bad investment - and should bear the consequences.
Isn't that kind of how it already goes? The old saying is if you owe the bank a little bit of money they own you, but if you owe the bank a lot of money you own them.
Quote from: Martinus on February 06, 2015, 03:57:04 PM
Since then lenders have become much more actively involved in the borrowers' operations, businesses and lives - in a sense become more like shareholders. Doesn't it, therefore, make sense that they are treated more like shareholders - i.e. sharing the risk of the business of the borrower going badly? In that, a loan becomes less like a debt and more like a joint investment of the lender and the borrower. So, if a lender lends money to someone who ends up unable to pay, he just made a bad investment - and should bear the consequences.
Shareholders get decision-making authority. Not easy to do that with a sovereign.
Quote from: Valmy on February 06, 2015, 04:00:27 PM
Quote from: Martinus on February 06, 2015, 03:57:04 PM
Since then lenders have become much more actively involved in the borrowers' operations, businesses and lives - in a sense become more like shareholders. Doesn't it, therefore, make sense that they are treated more like shareholders - i.e. sharing the risk of the business of the borrower going badly? In that, a loan becomes less like a debt and more like a joint investment of the lender and the borrower. So, if a lender lends money to someone who ends up unable to pay, he just made a bad investment - and should bear the consequences.
Isn't that kind of how it already goes? The old saying is if you owe the bank a little bit of money they own you, but if you owe the bank a lot of money you own them.
Well yes but there still is this sort of moral attitude which states that if a borrower is unable to repay the loan, he is in the wrong. But if a company goes bust and its shareholders lose money as a result, noone is saying the company (assuming there was no fraud or gross negligence involved) committed a moral wrong.
Quote from: Admiral Yi on February 06, 2015, 04:00:38 PM
Quote from: Martinus on February 06, 2015, 03:57:04 PM
Since then lenders have become much more actively involved in the borrowers' operations, businesses and lives - in a sense become more like shareholders. Doesn't it, therefore, make sense that they are treated more like shareholders - i.e. sharing the risk of the business of the borrower going badly? In that, a loan becomes less like a debt and more like a joint investment of the lender and the borrower. So, if a lender lends money to someone who ends up unable to pay, he just made a bad investment - and should bear the consequences.
Shareholders get decision-making authority. Not easy to do that with a sovereign.
That is my point - in fact lenders these days hold a lot of decision-making authority. Even with a sovereign - which is the reason why Troika is so hated.
If Greece was loaned money with no conditions, and did not repay it, then you could argue they are in the wrong. But since Greece was loaned money under conditions of austerity - and these conditions prevented it from repaying the money - then the lenders who made a bad investment should be equally to blame.
Quote from: Martinus on February 06, 2015, 04:02:10 PM
Well yes but there still is this sort of moral attitude which states that if a borrower is unable to repay the loan, he is in the wrong. But if a company goes bust and its shareholders lose money as a result, noone is saying the company (assuming there was no fraud or gross negligence involved) committed a moral wrong.
I guess I don't get the distinction between going bankrupt and going bust. If you are going to claim one is ok and the other isn't please explain. I have never heard when a company goes bust and cannot pay its creditors they committed a moral wrong, well ok I do here that in some situations like with Enron.
But we are not talking about companies we are talking about sovereign states. Having shareholders seems very dangerous politically.
Quote from: Martinus on February 06, 2015, 04:03:10 PM
then the lenders who made a bad investment should be equally to blame.
Pretty sure investors and fund managers who make bad investments do receive plenty of blame.
QuoteThat is my point - in fact lenders these days hold a lot of decision-making authority. Even with a sovereign - which is the reason why Troika is so hated.
So we should make it so they own the country even when the country can finance the debt? Make a bad situation worse?
Quote from: Martinus on February 06, 2015, 04:03:10 PM
That is my point - in fact lenders these days hold a lot of decision-making authority. Even with a sovereign - which is the reason why Troika is so hated.
If Greece was loaned money with no conditions, and did not repay it, then you could argue they are in the wrong. But since Greece was loaned money under conditions of austerity - and these conditions prevented it from repaying the money - then the lenders who made a bad investment should be equally to blame.
Let's get something straight. The Greek economy would not be rolling along blissfully in the absence of Troika-imposed austerity. In 2010 Greece had a debt/GDP of around 120% and was running an annual deficit of 14% of GDP. They then revealed that their books were cooked and the bond market said no fucking way I'm going to lend to these guys. Eliminating a deficit of 14% overnight was going to be "austere" and was going to cause economic collapse regardless. The Troika softened and delayed that collapse by allowing Greece to finance deficits that they otherwise would have been unable to.
I am thinking more about general attitude towards lending than this specific case.
Consider this.
The shareholder is the least protected "creditor" of the company. He only gets paid if the company generates profit. The price for this is the fact that he has the biggest influence on decision making.
The bank is one of the best protected creditors. If the borrower company goes bust, bank debts are usually rank very high in the hierarchy - normally after employee wages and taxes.
Now, over the last decades, bank loan market moves towards much great control of lenders over borrowers - to the point that lenders have often control comparable to shareholders. But they continue to enjoy much better protections.
Now, the Troika is comparable in that it imposed conditions on Greek government that are comparable to those that can be made usually only by "shareholders" - i.e. the people of Greece. But they insist that their debt should get priority over debts Greece has towards its own people.
The Troika did not lend Greece money based on the profit motive Marty.
I was reading about one of the Syriza MPs, he's 91 years old!
But not just any old pensioner, in 1941 he and a friend climbed to the top of the Acropolis and tore down the Nazi flag that had flown there since the German invasion a month early. That took some courage. :cool:
Almost the first act of resistance and despite being eventually captured, tortured, scheduled for execution, he managed to escape, get recaptured, and all sorts of other nr death experiences, both survived the war, the subsequent civil war and live or are still living a long life.
Quote from: Admiral Yi on February 06, 2015, 03:56:18 PM
Quote from: frunk on February 06, 2015, 03:52:23 PM
I'm assuming they got the bailout loans because they had reached unsustainable levels of debt without it. If they could have recovered without the loans then why would they get them?
At the time they received the bailouts the bond market was not interested in lending to them.
Isn't that when a debt is unsustainable, when no one will lend you money? Any debt is sustainable if there's always someone willing to lend you money.
Quote from: Admiral Yi on February 06, 2015, 03:43:39 PMBecause large numbers of well-intentioned people (see for example Shelf's numerous posts about granting "more fiscal space") think that countries like Spain and Italy *should* be running larger deficits, thereby increasing their indebtedness and thereby creeping closer to unsustainability.
Not necessarily. There isn't a magical number that is suddenly unsustainable, there's a range of factors. I think the biggest problem Spain and Italy have in terms of their debt is deflation. Their relatively small deficits are very much secondary.
In terms of fiscal space I think these are ultimately political judgements and if Europe wants to avoid dealing with Tsipras, Iglesias, Adams and Grillo then they should maybe start supporting Samaras, Rajoy, Kenny and Renzi. If your policies lead to a collapse in social provision by the state, a severe recession and increasing debt I have limited pity for crying about how unfair it is to creditors.
Edit: Also the ECB (p. 33 onwards) seems rather comfortable with fiscal space, despite the fiscal pact of a few years ago:
http://www.ecb.europa.eu/pub/pdf/ecbu/eb201501.en.pdf
QuoteNow, the Troika is comparable in that it imposed conditions on Greek government that are comparable to those that can be made usually only by "shareholders" - i.e. the people of Greece. But they insist that their debt should get priority over debts Greece has towards its own people.
I think this is a fundamental issue of running a currency union of however many sovereign states and it's difficult to get right. There was a wonderful moment of disagreement on the Commission today when in separate conversations with the press the Finnish Commissioner (and VP) said basically we don't change our policies on the basis of elections and the French Commission Pierre Moscovici (a Blairite effectively) said what is the point of elections in the EU if there can't be choices.
I think it's an unresolved issue.
For myself I disagree on the moral hazard point. I think we've moved on from the 19th century, debtors' prison version of solely blaming the debtor. If creditors were stupid enough to not do their due diligence and lend to a reckless debtor then they deserve losses - and I think this is now the EU position with bail-ins.
Quote from: Admiral Yi on February 06, 2015, 04:16:51 PM
Let's get something straight. The Greek economy would not be rolling along blissfully in the absence of Troika-imposed austerity. In 2010 Greece had a debt/GDP of around 120% and was running an annual deficit of 14% of GDP. They then revealed that their books were cooked and the bond market said no fucking way I'm going to lend to these guys. Eliminating a deficit of 14% overnight was going to be "austere" and was going to cause economic collapse regardless. The Troika softened and delayed that collapse by allowing Greece to finance deficits that they otherwise would have been unable to.
Their primary deficit was a little lower than that. And only 11% of the bailout (around €27 billion) was spent in Greece as opposed to returning to their creditors.
I think had they followed the normal IMF route of default, but no devaluation because they're in the Euro and support while they reform and cut their budget it would've been less difficult than the past 6 years.
Edit: However that does ignore the effect of contagion which would've been an issue in 2009-10. There could very well have been the disorderly collapse of the Eurozone.
Edit: Also from the tweeters I follow who are market people there seems to be very high confidence that there will be a deal.
Quote from: Martinus on February 06, 2015, 04:18:29 PM
I am thinking more about general attitude towards lending than this specific case.
Consider this.
The shareholder is the least protected "creditor" of the company. He only gets paid if the company generates profit. The price for this is the fact that he has the biggest influence on decision making.
The bank is one of the best protected creditors. If the borrower company goes bust, bank debts are usually rank very high in the hierarchy - normally after employee wages and taxes.
Now, over the last decades, bank loan market moves towards much great control of lenders over borrowers - to the point that lenders have often control comparable to shareholders. But they continue to enjoy much better protections.
Now, the Troika is comparable in that it imposed conditions on Greek government that are comparable to those that can be made usually only by "shareholders" - i.e. the people of Greece. But they insist that their debt should get priority over debts Greece has towards its own people.
Martinus, I'm lost as to where you are going with this. In the examples you give of private companies, the "protections" of the debt holders are basically a preference to receive assets when the company is liquidated. Greece isn't going to be liquidated.
The power the troika has over greece has very little to do with debt agreements or other legal arrangements. It comes from the fact that Greece needs to borrow, and the troika is the only plausible source of funds at the moment.
Yes over reforms. Over fiscal policy to an extent but there is also the fiscal pact which is now part of EU law and why countries that aren't lending from the Troika are also having to cut their budgets far faster than they need to - such as the Netherlands, France and Italy.
Quote from: Sheilbh on February 06, 2015, 06:33:57 PM
Not necessarily. There isn't a magical number that is suddenly unsustainable, there's a range of factors. I think the biggest problem Spain and Italy have in terms of their debt is deflation. Their relatively small deficits are very much secondary.
I believe Italy's debt/GDP is around 120%, i.e. around where Greece was when they went in the shitter. Spain's was small, something like 40%, but that was before the bank recapitalization and not including provincial debt, which I believe Madrid legally guarantees.
QuoteIn terms of fiscal space I think these are ultimately political judgements and if Europe wants to avoid dealing with Tsipras, Iglesias, Adams and Grillo then they should maybe start supporting Samaras, Rajoy, Kenny and Renzi. If your policies lead to a collapse in social provision by the state, a severe recession and increasing debt I have limited pity for crying about how unfair it is to creditors.
I'm unaware of anyone crying for creditors. I did point out that Souvlaki's claim that Germans had nothing to worry about was untrue. That's not crying.
Calling it fiscal space instead of increased deficits doesn't change the basic math of increasing debt/GDP.
Quote from: Sheilbh on February 06, 2015, 06:39:59 PM
Their primary deficit was a little lower than that. And only 11% of the bailout (around €27 billion) was spent in Greece as opposed to returning to their creditors.
So what and so what? This doesn't change anything that I wrote.
QuoteI think had they followed the normal IMF route of default, but no devaluation because they're in the Euro and support while they reform and cut their budget it would've been less difficult than the past 6 years.
Default is not the "normal IMF route." I have never heard of a single case of the IMF suggesting that a program country default, and it has certainly never been included as a formal program condition. As far as I am aware not a single program country from the Asian crisis of 98 defaulted/renegotiated.
Quote from: Admiral Yi on February 06, 2015, 07:00:01 PM
I believe Italy's debt/GDP is around 120%, i.e. around where Greece was when they went in the shitter.
Possibly even higher. Italy also has the world's third biggest bond market (after the US and Japan) and is running a substantial primary surplus, they should need minimal borrowing and their debt has very long maturities for the Eurozone.
Their big problem is the effect of deflation and recession on their debt, which means that despite increasing their primary surplus ever year their debt-to-GDP is really escalating. It's also worth remembering that from every analysis I've read Italy is the country that would benefit most from leaving the Euro, support for the Euro is now polling at 40% and several opposition parties are calling for a referendum on staying in the Euro. Those are also considerations in terms of fiscal space. They should, I believe, also benefit quite a lot from QE.
QuoteSpain's was small, something like 40%, but that was before the bank recapitalization and not including provincial debt, which I believe Madrid legally guarantees.
It was about 35%. With regional and banking debt they're still only at about 95% now.
QuoteI'm unaware of anyone crying for creditors. I did point out that Souvlaki's claim that Germans had nothing to worry about was untrue. That's not crying.
How so?
Also I think the Germans, Dutch and Finnish governments are the ones doing the crying, not you.
QuoteCalling it fiscal space instead of increased deficits doesn't change the basic math of increasing debt/GDP.
By fiscal space I don't necessarily mean increasing spending, I think the consolidation required under the Fiscal Pact should be loosened in light of the economic situation and the levels of reforms undertaken. That ECB paper agrees and says it's legally allowed and is judged by the Commission.
More generally, politically and this is all politics not economics now, the creditor governments should do more to support pliable debtors if they want to avoid a situation like Greece or, the nightmare, Italy.
Quote from: Admiral Yi on February 06, 2015, 07:04:47 PM
So what and so what? This doesn't change anything that I wrote.
So I think the impact of cutting their budget by 9% - excluding their default - would've been less than the current 6 years of recession, 2 years of deflation, collapse of living standards by 40% and primary public spending cuts of well over a quarter per capita.
QuoteDefault is not the "normal IMF route." I have never heard of a single case of the IMF suggesting that a program country default, and it has certainly never been included as a formal program condition. As far as I am aware not a single program country from the Asian crisis of 98 defaulted/renegotiated.
I always thought the IMF insisted on default and devaluation before they got involved?
Quote from: Sheilbh on February 06, 2015, 07:12:13 PM
By fiscal space I don't necessarily mean increasing spending, I think the consolidation required under the Fiscal Pact should be loosened in light of the economic situation and the levels of reforms undertaken. That ECB paper agrees and says it's legally allowed and is judged by the Commission.
OK, I get the semantic nuance now. Fiscal space means they can keep on running their current deficits (Spain's was 6% last time I checked) and they don't have to meet fiscal targets.
Doesn't change anything I wrote. Each year of 6% deficits means one year closer to unsustainability.
Quote from: Sheilbh on February 06, 2015, 07:15:27 PM
So I think the impact of cutting their budget by 9% - excluding their default - would've been less than the current 6 years of recession, 2 years of deflation, collapse of living standards by 40% and primary public spending cuts of well over a quarter per capita.
Please explain why you think this.
QuoteI always thought the IMF insisted on default and devaluation before they got involved?
Definitely not on default. Floating a fixed exchange rate or a managed peg is often (always?) a condition, and devaluation always follows a float.
Quote from: Admiral Yi on February 06, 2015, 07:22:18 PM
Doesn't change anything I wrote. Each year of 6% deficits means one year closer to unsustainability.
Then why are they still paying so little on their debt?
QuotePlease explain why you think this.
Why don't you think it? I'm not sure what to say.
QuoteDefinitely not on default. Floating a fixed exchange rate or a managed peg is often (always?) a condition, and devaluation always follows a float.
Okay. Do you think that, given the IMF always cares about debt sustainability, that had they been interested in Greece rather than the banks (as in their minutes of May 2010) and devaluation wasn't on offer that default would've been an option for them?
Quote from: Sheilbh on February 06, 2015, 07:34:10 PM
Then why are they still paying so little on their debt?
I think financial repression is playing a big role. Banks have increased capital requirements, and sovereigns, by law, get counted at par in capital. Any borrowing from the discount window also has to be collateralized with sovereigns.
Not sure that explains it all though. It's a bit of a mystery, frankly. Would you lend Spain money at 2%? I woudn't.
QuoteWhy don't you think it? I'm not sure what to say.
The anti-austerity argument runs that decreasing spending created the collapse. Yet the bailout allowed Greece to spend money it otherwise would not have been able to. Greece didn't achieve primary surplus right away as far as I'm aware. Thus the bailout mitigated the collapse.
QuoteOkay. Do you think that, given the IMF always cares about debt sustainability, that had they been interested in Greece rather than the banks (as in their minutes of May 2010) and devaluation wasn't on offer that default would've been an option for them?
Greece is a sovereign. Default has always been and will always be an option.
Quote from: Admiral Yi on February 06, 2015, 07:47:22 PMI think financial repression is playing a big role. Banks have increased capital requirements, and sovereigns, by law, get counted at par in capital. Any borrowing from the discount window also has to be collateralized with sovereigns.
I'm not sure about the legal point. The ECB decides what it accepts as collateral and what it doesn't - see the decision to not accept Greek government debt as collateral earlier in the week (though even before then it was only accepted at 60% of value).
QuoteNot sure that explains it all though. It's a bit of a mystery, frankly. Would you lend Spain money at 2%? I woudn't.
My theory is that debt isn't the issue. It's always been about the structural problems of the Eurozone that are ultimately monetary not political. The key shift was after Draghi's speech:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fwww.spi.sanlam.co.uk%2Ffiles%2F8213%2F6802%2F4300%2Fchart_1_spain.jpg&hash=dcc0e819f2577ace6ef2d2663b006cebc9603bf4)
It's worth remembering that he didn't plan to say 'whatever it takes'. That was ad-libbed after he'd had a meeting with bankers in London and was surprised and alarmed at their views on the collapse of the Euro.
QuoteThe anti-austerity argument runs that decreasing spending created the collapse. Yet the bailout allowed Greece to spend money it otherwise would not have been able to. Greece didn't achieve primary surplus right away as far as I'm aware. Thus the bailout mitigated the collapse.
No. They went from around 9% to 4% primary deficit in the first year. It took them two years to start running a primary surplus.
My view is that the bailout was always founded on false premises. The basis of all of its projections were wrong and woefully optimistic - hence the IMF's subsequent mea culpa over the fiscal multiplier. It consistently overestimated economic growth and inflation, which meant it consistently overestimated debt sustainability. Because of that and because of the very high primary surplus required (4.5% indefinitely) I think it's dragged the crisis on for these six years.
I think they would've been better off defaulting, but I'm not sure and I also don't know if they'd have been better off staying in or leaving the Euro. Now I think they'd definitely be better off defaulting, should probably stay in the Euro but not necessarily fear leaving.
My legal point was about capital requirements.
How does your theory account for current Greek yields of 14%?
I agree that early default would have been preferable. However, that doesn't impact my statement that the bailout mitigated, instead of caused, the collapse.
Quote from: Admiral Yi on February 06, 2015, 08:11:29 PM
My legal point was about capital requirements.
Sorry I misunderstood I thought you were saying sovereign debt, by law, gets counted. Which in the Eurozone it doesn't. The ECB and EBA determine that.
QuoteHow does your theory account for current Greek yields of 14%?
Doubts over whether Greece is going to stay in the Eurozone. They were at around 5% about six months ago. Would you lend to the Greeks at that rate?
QuoteI agree that early default would have been preferable. However, that doesn't impact my statement that the bailout mitigated, instead of caused, the collapse.
Mitigated for the first couple of years, but then prolonged and exacerbated it for the next 4.
Quote from: Sheilbh on February 06, 2015, 08:21:02 PM
Sorry I misunderstood I thought you were saying sovereign debt, by law, gets counted. Which in the Eurozone it doesn't. The ECB and EBA determine that.
What's an EBA? You're saying the ECB and [unknown acronym] decide whether a given sovereign counts in capital? OK. Didn't know that.
QuoteMitigated for the first couple of years, but then prolonged and exacerbated it for the next 4.
Fair enough. Which is the same effect more fiscal space would have. ;)
Quote from: Admiral Yi on February 06, 2015, 08:24:47 PMWhat's an EBA? You're saying the ECB and [unknown acronym] decide whether a given sovereign counts in capital? OK. Didn't know that.
European Banking Authority.
Edit: Although apparently they don't. It's just an ECB job. The EBA get involved with stress tests etc.
Yep. So Greek debt, for example, was discounted to 60% of face value for capital requirements.
QuoteFair enough. Which is the same effect more fiscal space would have. ;)
It mitigates it for longer :P
Obviously that alone isn't enough. They need everything possible to stimulate demand, but it's a start and the least reformist leaders should get. Berlusconi I'm inclined to agree should be forced to cut and reform.
I thought the ECB was accepting Greek sovereigns at 60% for purposes of collateral, not capital. Not terribly important either way.
Quote from: Martinus on February 06, 2015, 03:57:04 PM
The whole Greek crisis got me thinking whether we should re-evaluate our moral attitudes towards money lending and borrowing.
Greece has gone bankrupt five times since 1820, was prevented of going bankrupt after WW2 thanks to the Marshall Plan (apparently) and again (but maybe not for much longer) by the money that was thrown at it by the Troika.
If there is one thing anyone should have learnt is Greece is not worth anyones money.
Hey Yi, do you think you could recap what your point is on all this? What exactly is your beef?
I could.
Make 'em beg. Then don't deliver.
It's really fucking confusing when three people have the same avatar.
Quote from: Razgovory on February 08, 2015, 12:06:08 AM
It's really fucking confusing when three people have the same avatar.
So confusing you don't realize it's at least 4.
Tsipras addressing the Greek Parliament. The laddy's not for turning.
Edit: Again I love that the current position is that the Greeks are broadly saying 'no we don't want anymore money, you've given us too much' and the rest of Europe is saying 'you have to take our money' :lol:
Looking over what's been said this is a bit of a 'kick us out the Euro' speech. The alternatives have narrowed to concessions and a deal or Greek default and (probably) Grexit.
So the question for creditors is how much they lose.
Didn't he just say "Greece needs a loan", though? At least so that on BBC.
Quote from: Razgovory on February 08, 2015, 12:06:08 AM
It's really fucking confusing when three people have the same avatar.
Agreed.
Quote from: Sheilbh on February 08, 2015, 02:08:36 PM
Tsipras addressing the Greek Parliament. The laddy's not for turning.
Edit: Again I love that the current position is that the Greeks are broadly saying 'no we don't want anymore money, you've given us too much' and the rest of Europe is saying 'you have to take our money' :lol:
It would be even more ironic if Greece weren't asking for money in the form of a write off as opposed to a new lending tranche.
Quote from: Martinus on February 08, 2015, 02:22:53 PM
Didn't he just say "Greece needs a loan", though? At least so that on BBC.
Yeah, which is a concession of sorts.
Basically the Eurogroup have offered them €7 billion (or even up to €20 billion) under the old program if they extend that during the negotiation period. The Greeks say they won't and can't under their mandate, but as negotiations are likely to last until May/June (as both sides concede) they'll go bust without a bridging loan of €1.9 billion which they'll accept on new conditions. Though I think there's some ECB alternative too.
The problem was ultimately caused by the last government as Tsipras pointed out. In December the Eurozone wanted to give Greece enough money to get to June/July. The Samaras government rejected that and insisted on only taking two months worth to fuck with a new (Syriza) government/threaten the electorate by giving them a very short space in which to reach any deal.
Quote from: Admiral Yi on February 08, 2015, 02:32:14 PM
It would be even more ironic if Greece weren't asking for money in the form of a write off as opposed to a new lending tranche.
Again, they don't want a write off.
Quote from: Sheilbh on February 08, 2015, 02:33:48 PM
Again, they don't want a write off.
Have they said so explicitly?
They're talking about a balanced budget, which means something has to give somewhere. Haircut, interest moritorium, something.
Quote from: Admiral Yi on February 08, 2015, 02:37:45 PM
Have they said so explicitly?
Yes. Repeatedly.
Their proposal is to reissue the loans from the Eurozone as conditional bonds tied to NGDP. They'd also like to turn their ECB debts into consols. Neither would touch the principal and the former neatly aligns the interests of creditor and debtor which is normally a good thing.
QuoteThey're talking about a balanced budget, which means something has to give somewhere. Haircut, interest moritorium, something.
They're talking about running a primary surplus into perpetuity, 'Greece will never present a budget deficit again. Never, never, never!'
I thought Greece did not can the idea of the international debt conference, though so it seems like they are expecting a haircut/write-off at some point in future, but with all the PIGS being treated equally.
Quote from: Martinus on February 08, 2015, 02:43:09 PM
I thought Greece did not can the idea of the international debt conference, though so it seems like they are expecting a haircut/write-off at some point in future, but with all the PIGS being treated equally.
They do want one. But my understanding is their big proposal is still conditional bonds because a debt 'haircut' is politically toxic for creditor countries (with the exception of the French at least) but somehow less toxic than a default.
Quote from: Sheilbh on February 08, 2015, 02:42:18 PM
Their proposal is to reissue the loans from the Eurozone as conditional bonds tied to NGDP.
On the market?
(What does the N stand for?)
QuoteThey're talking about running a primary surplus into perpetuity, 'Greece will never present a budget deficit again. Never, never, never!'
A primary surplus is still a deficit.
Quote from: Admiral Yi on February 08, 2015, 02:46:01 PM
On the market?
By the Eurogroup.
Quote(What does the N stand for?)
Nominal.
QuoteA primary surplus is still a deficit.
Yep. It's also all the program currently calls for (at the rate of 4.5% of GDP in perpetuity).
Quote from: Sheilbh on February 08, 2015, 02:51:48 PM
Yep. It's also all the program currently calls for (at the rate of 4.5% of GDP in perpetuity).
So it's not true when they say they will balance their budget.
Also as long as they're running an overall deficit greater than their growth rate their debt/GDP ratio will continue to climb.
One person's interpretation of the speech: 'is there a deal to be had? No. Fuck it we'll go out in style' :lol:
Looks like we might be about to see if the Euro can survive if it's no longer irreversible, or will it just be ERM III :o
Quote from: Admiral Yi on February 08, 2015, 02:57:52 PM
So it's not true when they say they will balance their budget.
In the same way that it's untrue to say that anyone expects Greece to balance their budget.
QuoteAlso as long as they're running an overall deficit greater than their growth rate their debt/GDP ratio will continue to climb.
Inflation and growth matter hence tying interest to NGDP. The 4.5% that the Troika want is based on what's needed for sustainability based on current projections of inflation and growth. It could be over-optimistic (though I think the IMF's projections have become more serious as time's gone on).
If the Euro cannot survive one member country becoming insolvent and exiting out, it doesn't sound like a very stable idea to have begun with.
Also important Tsipras got a very warm standing ovation from MPs and everyone would expect them to win even more seats if there's a new election so that won't solve problems as, say, the ECB have allegedly thought about.
Basically the question now is, does Europe have a plan B?
Quote from: Sheilbh on February 08, 2015, 03:04:26 PM
In the same way that it's untrue to say that anyone expects Greece to balance their budget.
In a different way, since this follows from their own statements.
Quote from: Sheilbh on February 08, 2015, 03:07:21 PM
Also important Tsipras got a very warm standing ovation from MPs and everyone would expect them to win even more seats if there's a new election so that won't solve problems as, say, the ECB have allegedly thought about.
Basically the question now is, does Europe have a plan B?
Zyklon.
QuoteEurope's Populist Left
Good riddance.
Interesting. Almost everyone on my twitter is now assuming Grexit - people are talking mechanics of capital controls and overstamping.
Still a few who think there'll be a deal.
Quote from: Sheilbh on February 08, 2015, 06:43:41 PM
Interesting. Almost everyone on my twitter is now assuming Grexit - people are talking mechanics of capital controls and overstamping.
Still a few who think there'll be a deal.
What just happened?
Quote from: Sheilbh on February 08, 2015, 03:07:21 PM
Also important Tsipras got a very warm standing ovation from MPs and everyone would expect them to win even more seats if there's a new election so that won't solve problems as, say, the ECB have allegedly thought about.
Well, it would be a very incompetent politician who would lose votes 2 weeks after winning an election.
Now, let's see how these people feel about Syriza a year or two on.
Quote from: The Brain on February 08, 2015, 03:25:28 PM
Quote from: Sheilbh on February 08, 2015, 03:07:21 PM
Also important Tsipras got a very warm standing ovation from MPs and everyone would expect them to win even more seats if there's a new election so that won't solve problems as, say, the ECB have allegedly thought about.
Basically the question now is, does Europe have a plan B?
Zyklon.
I actually laughed out loud. :lmfao:
Tsipras is sounding more and more like Arafat: one message for the domestic audience and a different one for the international.
I predict this will end very badly for Greece.
Quote from: Jacob on February 09, 2015, 12:25:48 AM
What just happened?
The new Greek government was sworn in so Tsipras presented their program to Parliament. But now all the cabinet ministers do it leading to a confidence vote.
The Tsipras speech referred almost every sentence to popular and national sovereignty and independence. Saying the government's only commitment was to the people and the national interest - they will respect every one of their pre-election commitments - as it's a democratic obligation. He argued that the last government was a democratic, economic and moral failure and that he wanted to re-establish confidence in democratic and parliamentary institutions (this morning the Syriza speaker has already been telling people off for not turning up to important debates - on day 2 - she's also said she won't allow 'omnibus' bills of multiple laws anymore etc).
He said he's very confident that negotiations will succeed because they have right on their side. As I mentioned earlier he accused the Samaras government of rejecting a payment in December that would last Greece six months - as the Eurogroup wanted - and instead requesting one that would last two months precisely to make the position of any new government very difficult. The last government have tried to set us up to fail. Then he moved onto the crisis and said it was never Greek it was European and the solution isn't Greece but Europe. They're willing to pay their debts but creditors must negotiate with them for that to happen. But what is non-negotiable is popular sovereignty and the result of the election. They have no mandate to agree to the old Memorandum of Understanding and it would be wrong to agree to a mistake. Therefore Greece doesn't want to extend the program. However they would like bridge financing until June so negotiations can begin. Europe won't make the same mistake again of humiliating and beggaring Greece and the government has a plan that can be implemented.
The first priority is to end the social crisis so the most vulnerable households are able to get their basic needs like food and electricity. They will also re-recruit unjustly dismissed public employees (such as the cleaning ladies of the finance ministry), at no cost because the previous government was already planning to hire more public sector employees, so they're just changing who'll get hired. He talked about reform of the health service and said Greece can no longer be called a civilised country while it has thousands going hungry with insufficient food.
They're going to streamline public administration and remove Ministerial privileges. Wants to improve operations of the government - apparently he was listing specific incidences of what looks like corruption that they've already seen from previous ND and PASOK governments. And he wants to reform public service and take on bureaucracy 'public service is not asking people for a piece of paper from another part of the government'. His government is determined to end corruption and tax evasion - the first step will be cooperating with partners with the various HSBC leaks (the Lagarde list etc), second they'll abolish the immunity for corruption and tax evasion investigations currently enjoyed by members of the privatisation fund and third there'll be a parliamentary inquiry into the causes for further recommendations.
From the Swissleaks last night:
(https://pbs.twimg.com/media/B9WhMdiCMAAZyHt.png)
They'll re-establish the state broadcaster and in future private TV channels will have to win their frequency in an open auction - this was one that really excited the Greeks I was following as declaring war on the oligarchs, I dread to think how they used to do thinks if this is novel. They want to redefine the relationship between police and citizen, so the police's main job is to protect civilians from crime. They're going to introduce a law immediately for the naturalisation of immigrant children born in Greece.
They want a fairer tax system. They're going to increase the personal allowance to €12 000 (:blink:) and abolish the deadly unpopular property tax in 2015, though he called on all citizens to pay their 2014 bill as a contribution to the national effort. It'll be replaced with a tax on higher value properties. The system also needs to be made to work better I think he mentioned that citizens already owe €72 billion to the taxman which is indicative of its failures.
Moving onto labour rights they need to move from 'medieval conditions'. The minimum wage will be restored to €751 (from €500) gradually until 2016. They will limit mass firings again and re-write the laws around collective bargaining with the advice and support of the ILO. There will be no more foreclosure of people's main residence (probably for the best in a country where 40% of loans are non-performing). They will re-establish the welfare state starting with health and social insurance systems. And for pensioners who receive a pension of below €700, they will re-introduce the 13th month. Interestingly at this point he mentioned exploitation of natural resources and setting up a separate fund for pensions and social insurance from natural resources.
They support private investment but will end the fire sale of state assets. They won't continue the previous government's policy of selling assets for pennies. The message here was a bit more nuanced though it seemed to be 'we're not selling out, but we're still selling'.
The rest I suspect was stuff the Independent Greeks got - Greece supports Cyprus (and Cyprus supports Greece), he restated the position on Macedonia name business (:bleeding:) and said Greece had a historical duty to request repayment of their WW2 forced loans to Germany.
It's now day two of the government presenting its plans to Parliament.
The Deputy Finance Minister has basically accused the last government of fudging the figures and says there's only a primary surplus of €2.9 billion, not around €5 billion as had been suggested. They want to introduce software throughout the department to better manage both spending and revenue which will both have targets that will be continuously monitored. They are also going to reform public sector pay scales. They're going to introduce new oversight of municipalities and if local governments refuse to monitor spending and introduce anti-corruption measures they'll be cut off. They're going to cut down on waste (apparently the Dep FinMin had some examples) and smuggling to avoid excise tasks especially of fuel and cigarettes. 7 Ministries will be involved in this bit. They're also going to pay more attention to island links which is, apparently, a big issue.
The Justice Minister announced that the government will introduce a law allowing gay couples to legally register co-habitation which will guarantee equal rights :w00t:
Varoufakis was broadly more of the same. Greece has been bankrupt since 2010, the biggest threat to competitiveness is deflation, the ECB has lost control of monetary policy etc. But re-stated that they'll keep 60-70% of the current reforms. He also said they're planning deep reform and have asked the OECD to help design and monitor those reforms. The OECD delegation arrives tomorrow.
Edit: Still worth remembering how successful the program's been in the past:
(https://pbs.twimg.com/media/B9VteufIIAAiGI4.png)
(https://pbs.twimg.com/media/B9VuWkYIUAAWT-M.png)
(https://pbs.twimg.com/media/B9VxqqNIYAMNI8o.png)
And investment down by two thirds.
We're actually in a worse position than the historical trend here:
(https://pbs.twimg.com/media/B9WV6HvIYAEO0-s.png)
Quote from: Admiral Yi on February 09, 2015, 08:49:32 AM
I predict this will end very badly for Greece.
It offends you on a personal level that Greece itself just can't be repossessed, doesn't it. Things would be better if the EU could just haul away the Parthenon as security interest.
Quote from: CountDeMoney on February 09, 2015, 10:42:53 AM
Quote from: Admiral Yi on February 09, 2015, 08:49:32 AM
I predict this will end very badly for Greece.
It offends you on a personal level that Greece itself just can't be repossessed, doesn't it. Things would be better if the EU could just haul away the Parthenon as security interest.
Actually, it would be. They don't deserve their own history.
Quote from: derspiess on February 09, 2015, 10:47:45 AM
Quote from: CountDeMoney on February 09, 2015, 10:42:53 AM
Quote from: Admiral Yi on February 09, 2015, 08:49:32 AM
I predict this will end very badly for Greece.
It offends you on a personal level that Greece itself just can't be repossessed, doesn't it. Things would be better if the EU could just haul away the Parthenon as security interest.
Actually, it would be. They don't deserve their own history.
<_<
I used to agree. I've been won over. I'm now positively Byronic in my philhellenism :wub:
Edit: Also Varoufakis yesterday announced the bankruptcy of Italy. The Italian Finance Minister was, as you'd expect, livid.
An interesting side note the Greeks appointed Lazard who are now advising them on fiscal management and public debt (they were previously appointed during the private sector haircut). Apparently EU officials are very annoyed at these advisers and their advice.
Quote from: Sheilbh on February 09, 2015, 10:19:29 AMSaying the government's only commitment was to the people and the national interest - they will respect every one of their pre-election commitments - as it's a democratic obligation.
Why would anybody even waste time negotiating with him then if the concept of external obligations doesn't even exist for this Greek government? :huh:
QuoteHe said he's very confident that negotiations will succeed because they have right on their side.
:lol:
QuoteThen he moved onto the crisis and said it was never Greek it was European and the solution isn't Greece but Europe. They're willing to pay their debts but creditors must negotiate with them for that to happen.
About what when he says they don't accept foreign obligations?
QuoteTherefore Greece doesn't want to extend the program. However they would like bridge financing until June so negotiations can begin. Europe won't make the same mistake again of humiliating and beggaring Greece and the government has a plan that can be implemented.
That's rather optimistic.
QuoteThe first priority is to end the social crisis so the most vulnerable households are able to get their basic needs like food and electricity. They will also re-recruit unjustly dismissed public employees (such as the cleaning ladies of the finance ministry), at no cost because the previous government was already planning to hire more public sector employees, so they're just changing who'll get hired. He talked about reform of the health service and said Greece can no longer be called a civilised country while it has thousands going hungry with insufficient food.
He is right about that. Greece is still a wealthy country and there is no need for this suffering. However, that is a domestic distribution problem, not something where anybody but the Greeks can fix anything.
QuoteThey want a fairer tax system. They're going to increase the personal allowance to €12 000 (:blink:) and abolish the deadly unpopular property tax in 2015, though he called on all citizens to pay their 2014 bill as a contribution to the national effort. It'll be replaced with a tax on higher value properties. The system also needs to be made to work better I think he mentioned that citizens already owe €72 billion to the taxman which is indicative of its failures.
Hmm, so because tax revenues are lower than they should be, they just abolish the tax that isn't paid? I wouldn't expect a positive effect on tax revenue from that.
I think the most likely scenario at this point is that negotiations go nowhere. Greece will then unilaterally (with a wink from the rest of the EU) default in a couple of months to lessen its debtload. Unilateral so that the other EU leaders can point their fingers at them and tell their electorates that the evil Greeks didn't pay and alas their money is gone. To limit fallout from this default, Greece will be allowed to stay in the Euro nevertheless.
Quote from: Sheilbh on February 09, 2015, 10:53:32 AM
Quote from: derspiess on February 09, 2015, 10:47:45 AM
Actually, it would be. They don't deserve their own history.
<_<
I used to agree. I've been won over. I'm now positively Byronic in my philhellenism :wub:
derweiß only thinks that because, like other greasy eggplant Mediterranean types, they're just too close to being black.
Interesting. Tsipras and Varoufakis are to present an intermediate four year plan of reforms at tomorrows Eurogroup meeting. Varoufakis is apparently going to propose alternate measures for the 30% of reforms that Syriza disagree with.
Tsipras is still positive and optimistic. The Austrians seem to be the most pro-Greek from the public statements after meetings. And private the Commission, IMF and ECB are briefing that the government's being very cooperative. Also from twitter it looks like market analysts are moving back to thinking there's a deal - Deutsche Bank have just released a paper saying they still think a 'balanced' deal is the most likely .
I could be wrong but I think something's on the move.
Two possible thoughts. One Syriza have already said they won't be able to fulfill all their pre-election promises if they can't afford them. Very, very few of their proposals so far necessarily involve increasing public spending and people are prepared that they may renege on some. Two by making it an issue of 'popular sovereignty' and national pride I think Tsipras has made his position easier. If he can sell a deal as Greece dealing with equals rather than receiving instructions from 12 year old Troika officials he can probably compromise a fair bit. It's a little bit Thatcher.
QuoteWhy would anybody even waste time negotiating with him then if the concept of external obligations doesn't even exist for this Greek government? :huh:
As Pierre Moscovici put it, if elections don't change anything then what's the point?
Quote from: Zanza on February 09, 2015, 11:02:38 AMTo limit fallout from this default, Greece will be allowed to stay in the Euro nevertheless.
Yeah. I do struggle with Grexit because it's a decision that can only be made by Draghi. I'm not convinced that he'd get rid of the irreversibility of the Euro or that he'd make that big a political choice without extraordinary circumstances. I get why and how it might happen. I'm just really not sure that the ECB would do it.
And we already have a precedent of a Euro member with capital controls in Cyprus.
QuoteVery, very few of their proposals so far necessarily involve increasing public spending and people are prepared that they may renege on some.
Most of the policies you outlined above necessitate public spending. Who else will be paying for more state employees, higher pensions or better healthcare? :huh:
Quote from: Sheilbh on February 09, 2015, 11:13:39 AMQuoteWhy would anybody even waste time negotiating with him then if the concept of external obligations doesn't even exist for this Greek government? :huh:
As Pierre Moscovici put it, if elections don't change anything then what's the point?
You can win an election and still acknowledge the fact that you have both domestic and foreign obligations.
Quote from: Zanza on February 09, 2015, 10:59:42 AM
Hmm, so because tax revenues are lower than they should be, they just abolish the tax that isn't paid? I wouldn't expect a positive effect on tax revenue from that.
The property tax is paid. It's the one that's hated because the government collect it through the electricity companies. So if you don't pay, you get cut off.
Frankly it sounds like tax farming to me, but there you go. I'm sure it was a good idea on the Troika's powerpoint.
A couple of journalists have noted how upbeat all the Greek government are sounding today. They're now starting to say maybe they know something we don't :mellow:
Some are even betting that there'll be no formal deal immediately but the two sides are now moving a little closer.
QuoteHe is right about that. Greece is still a wealthy country and there is no need for this suffering. However, that is a domestic distribution problem, not something where anybody but the Greeks can fix anything.
They're not that wealthy. Poorer than all of Western Europe and increasing parts of Eastern Europe.
Quote from: Sheilbh on February 09, 2015, 11:15:19 AM
Quote from: Zanza on February 09, 2015, 11:02:38 AMTo limit fallout from this default, Greece will be allowed to stay in the Euro nevertheless.
Yeah. I do struggle with Grexit because it's a decision that can only be made by Draghi. I'm not convinced that he'd get rid of the irreversibility of the Euro or that he'd make that big a political choice without extraordinary circumstances. I get why and how it might happen. I'm just really not sure that the ECB would do it.
And we already have a precedent of a Euro member with capital controls in Cyprus.
There is nothing the EU or ECB or Greece could gain from a Grexit. So why should it happen?
However, a lot of parties can benefit from a debt reduction. Tsripas could show that he is a strong politician and acts in the Greek sovereign interest by defaulting on their obligations. The other EU politicians wouldn't have to sell this to their electorates. The parties that lose money are all far away from private citizens and fairly abstract. No one gives a shit about the balance sheet of the ECB or EFSF or whatever.
Quote from: Sheilbh on February 09, 2015, 11:25:24 AM
They're not that wealthy. Poorer than all of Western Europe and increasing parts of Eastern Europe.
They are definitely wealthy enough to provide food to all Greeks. If they can't do that, it's a domestic distribution problem.
Quote from: Zanza on February 09, 2015, 11:16:26 AM
QuoteVery, very few of their proposals so far necessarily involve increasing public spending and people are prepared that they may renege on some.
Most of the policies you outlined above necessitate public spending. Who else will be paying for more state employees, higher pensions or better healthcare? :huh:
The previous government had already agreed to increase state employment this year. Instead of new hires they're going to re-hire those unfairly/unjustly fired - so the costs already covered.
There'll be a thirteenth month for pensioners on a pension of less than €700. I don't know how many that is but I'd be surprised if it's an enormous amount that's involved.
The new health insurance plan is one that interests me because he explicitly linked it (and social insurance) with natural resource exploitation. And one word he didn't mention last night was Skouries (http://en.wikipedia.org/wiki/Skouries_mine). I wonder if they're maybe planning to use revenue from natural resources, like that directly into social insurance funds rather than general revenue.
Quote from: Zanza on February 09, 2015, 11:23:25 AM
Quote from: Sheilbh on February 09, 2015, 11:13:39 AMQuoteWhy would anybody even waste time negotiating with him then if the concept of external obligations doesn't even exist for this Greek government? :huh:
As Pierre Moscovici put it, if elections don't change anything then what's the point?
You can win an election and still acknowledge the fact that you have both domestic and foreign obligations.
If your domestic and foreign obligations cover all of fiscal, labour and economic policy, what can you change?
It seems to me that the SNP in Holyrood have more room for manoeuvre than a new Greek government.
QuoteThere is nothing the EU or ECB or Greece could gain from a Grexit. So why should it happen?
I think the worry that this would happen again. Is a Eurozone that's moved to de facto fiscal transfers better than Grexit?
QuoteHowever, a lot of parties can benefit from a debt reduction. Tsripas could show that he is a strong politician and acts in the Greek sovereign interest by defaulting on their obligations. The other EU politicians wouldn't have to sell this to their electorates. The parties that lose money are all far away from private citizens and fairly abstract. No one gives a shit about the balance sheet of the ECB or EFSF or whatever.
So why not negotiate a deal and get something back?
QuoteThey are definitely wealthy enough to provide food to all Greeks. If they can't do that, it's a domestic distribution problem.
Not least that the entire weight of austerity has been placed on the shoulder of normal Greeks. Not those who evade their taxes and benefit from the corruption. As I say if they really do successfully take them on and succeed in even half their measures, that's a great result for Greece and Europe.
Quote from: Sheilbh on February 09, 2015, 11:13:39 AM
As Pierre Moscovici put it, if elections don't change anything then what's the point?
Freedom should not equal solipsism. Past choices limit our future choices.
Quote from: Sheilbh on February 09, 2015, 11:25:24 AM
They're not that wealthy. Poorer than all of Western Europe and increasing parts of Eastern Europe.
Their GDP per capita is comparable with that of Poland. Their minimum wage (which they still want to increase) is 150% that of Poland.
Quote from: Sheilbh on February 09, 2015, 11:13:39 AM
As Pierre Moscovici put it, if elections don't change anything then what's the point?
Moscovici :x A PS apparatchik sent to Brussels to do less damage there, only good for a having a wive younger than Ed's "woman" (30 years less than Mosco). :perv:
Is there anyone in the PS you don't dislike?
Valls? Lang? :wub:
Quote from: Sheilbh on February 09, 2015, 12:01:13 PM
Is there anyone in the PS you don't dislike?
Valls? Lang? :wub:
Valls? :x He's just a cheap imitation of Sarkozy, but a PS version. He's also a history graduate who claims there is apartheid in France...
Lang? Out of the game, same goes for Rocard, the latter being as decent as you can hope for the PS.
Quote from: Martinus on February 09, 2015, 11:54:13 AM
Their GDP per capita is comparable with that of Poland. Their minimum wage (which they still want to increase) is 150% that of Poland.
$400/month sounds awfully low.
Quote from: Peter Wiggin on February 09, 2015, 12:12:23 PM
Quote from: Martinus on February 09, 2015, 11:54:13 AM
Their GDP per capita is comparable with that of Poland. Their minimum wage (which they still want to increase) is 150% that of Poland.
$400/month sounds awfully low.
And yet we have people (like Tamas's idol) who argue this is too high and should be done away with. :D
Quote from: Peter Wiggin on February 09, 2015, 12:12:23 PM
Quote from: Martinus on February 09, 2015, 11:54:13 AM
Their GDP per capita is comparable with that of Poland. Their minimum wage (which they still want to increase) is 150% that of Poland.
$400/month sounds awfully low.
Poland is probably low because minimum wages are a bit "sticky" and Poland is catching up to Western Europe so fast. Also, Poland is having success with neo liberal economics, but Greece not so much.
I just went to check Marty's numbers--I doubted he was correct on the Greece/Poland comparison. It turns out Poland is actually ahead of Greece on the PPP standard, but well behind Greece on the nominal standard. Which is an interesting highlight--even in this time of severe crisis for Greece, it is the country with the overvalued currency.
Man, a common market and currency, what a great idea that was...
Quote from: alfred russel on February 09, 2015, 12:35:20 PM
I just went to check Marty's numbers--I doubted he was correct on the Greece/Poland comparison. It turns out Poland is actually ahead of Greece on the PPP standard, but well behind Greece on the nominal standard. Which is an interesting highlight--even in this time of severe crisis for Greece, it is the country with the overvalued currency.
That's kind of grim. The economy's shrunk by a quarter and their currency is still overvalued :ph34r: :blink:
Quote from: Berkut on February 09, 2015, 12:40:54 PM
Man, a common market and currency, what a great idea that was...
A common market wasn't a terrible idea. The currency thing was though.
Quote from: Sheilbh on February 09, 2015, 11:34:15 AM
Quote from: Zanza on February 09, 2015, 11:23:25 AM
Quote from: Sheilbh on February 09, 2015, 11:13:39 AMQuoteWhy would anybody even waste time negotiating with him then if the concept of external obligations doesn't even exist for this Greek government? :huh:
As Pierre Moscovici put it, if elections don't change anything then what's the point?
You can win an election and still acknowledge the fact that you have both domestic and foreign obligations.
If your domestic and foreign obligations cover all of fiscal, labour and economic policy, what can you change?
Do they really? How specific are the policies "dictated" by the Troika? Anyway, my issue with the statement is not that they change policy or that they feel an obligation towards the voter and national interest. My issue with the statement is the word "only". A responsible government should try to have a balanced approach, never ignoring certain factions.
QuoteI think the worry that this would happen again. Is a Eurozone that's moved to de facto fiscal transfers better than Grexit?
Greece is hardly the shining beacon that other countries would want to emulate. Why would there be worries that there could be a repeat? The sheer shittiness of Greece's current situation should be motivation enough for all other governments never to go down that road.
QuoteQuoteHowever, a lot of parties can benefit from a debt reduction. Tsripas could show that he is a strong politician and acts in the Greek sovereign interest by defaulting on their obligations. The other EU politicians wouldn't have to sell this to their electorates. The parties that lose money are all far away from private citizens and fairly abstract. No one gives a shit about the balance sheet of the ECB or EFSF or whatever.
So why not negotiate a deal and get something back?
Everybody already gets what they want out of the scenario that I outlined. Negotiations won't achieve a better result. The only risk is that the financial markets might overreact to a Greek default, but that as long as they mainly default on debt held by IMF, ECB et al., that shouldn't be a major issue.
QuoteNot least that the entire weight of austerity has been placed on the shoulder of normal Greeks. Not those who evade their taxes and benefit from the corruption. As I say if they really do successfully take them on and succeed in even half their measures, that's a great result for Greece and Europe.
I wish them all the best for that. But that's really something they need to get in order. No one but the Greeks themselves will make them a country of taxpayers and enact policies to redistribute the considerable wealth the Greeks have.
Quote from: alfred russel on February 09, 2015, 12:35:20 PM
Poland is probably low because minimum wages are a bit "sticky" and Poland is catching up to Western Europe so fast. Also, Poland is having success with neo liberal economics, but Greece not so much.
Did Greece actually try neo-liberal economics?
QuoteI just went to check Marty's numbers--I doubted he was correct on the Greece/Poland comparison. It turns out Poland is actually ahead of Greece on the PPP standard, but well behind Greece on the nominal standard. Which is an interesting highlight--even in this time of severe crisis for Greece, it is the country with the overvalued currency.
The figures I find show Greece with a higher nominal and PPP per capita GDP than Poland. I looked at World Bank and CIA.
Quote from: Zanza on February 09, 2015, 01:51:53 PM
Greece is hardly the shining beacon that other countries would want to emulate. Why would there be worries that there could be a repeat? The sheer shittiness of Greece's current situation should be motivation enough for all other governments never to go down that road.
I disagree. Lets summarize two options as a) austerity, and b) compassionate debt forgiveness & aid.
If the experience of Greece ends up being made to suffer under a) for 6 years or so, and then blossoming under b) if it gets tried, I agree no one will want to go through what Greece has gone through and if they believe they will have to will be significantly deterred.
But, why would anyone think they would have to go down door a) for 6 years? Experience would have shown it doesn't work, while door b) does. A country could reasonably suspect the policy response will be straight to door b) next time.
Quote from: Sheilbh on February 09, 2015, 12:43:02 PM
Quote from: alfred russel on February 09, 2015, 12:35:20 PM
I just went to check Marty's numbers--I doubted he was correct on the Greece/Poland comparison. It turns out Poland is actually ahead of Greece on the PPP standard, but well behind Greece on the nominal standard. Which is an interesting highlight--even in this time of severe crisis for Greece, it is the country with the overvalued currency.
That's kind of grim. The economy's shrunk by a quarter and their currency is still overvalued :ph34r: :blink:
According to the CIA factbook, Greece's nominal GDP is slightly less than its PPP GDP, whereas Poland has a huge gap between the two. Doesn't that mean that Poland's currency is undervalued and not Greece's currency overvalued? This would be supported e.g. by the Economist's BigMac Index, which puts the Euro undervaluation at 11%, Zloty undervaluation at 48%.
Quote from: Zanza on February 09, 2015, 01:58:41 PM
Did Greece actually try neo-liberal economics?
The same way they try everything else, sure. :)
Quote
The figures I find show Greece with a higher nominal and PPP per capita GDP than Poland. I looked at World Bank and CIA.
I went to wikipedia, which on further examination shows 2015 projections for Poland and 2014 for Greece. So that is probably the difference. I think the raw numbers are telling, would you agree?
Poland (2015 estimate):
PPP: $25,703
Nominal: $15,406
Greece (2014):
PPP: $24,574
Nominal: $22,594
Quote from: alfred russel on February 09, 2015, 12:35:20 PM
Quote from: Peter Wiggin on February 09, 2015, 12:12:23 PM
Quote from: Martinus on February 09, 2015, 11:54:13 AM
Their GDP per capita is comparable with that of Poland. Their minimum wage (which they still want to increase) is 150% that of Poland.
$400/month sounds awfully low.
Poland is probably low because minimum wages are a bit "sticky" and Poland is catching up to Western Europe so fast. Also, Poland is having success with neo liberal economics, but Greece not so much.
I just went to check Marty's numbers--I doubted he was correct on the Greece/Poland comparison. It turns out Poland is actually ahead of Greece on the PPP standard, but well behind Greece on the nominal standard. Which is an interesting highlight--even in this time of severe crisis for Greece, it is the country with the overvalued currency.
Well, zloty has fell substantially against euro over the last 6 months or so, so that could explain it.
Quote from: Zanza on February 09, 2015, 02:03:06 PM
Quote from: Sheilbh on February 09, 2015, 12:43:02 PM
Quote from: alfred russel on February 09, 2015, 12:35:20 PM
I just went to check Marty's numbers--I doubted he was correct on the Greece/Poland comparison. It turns out Poland is actually ahead of Greece on the PPP standard, but well behind Greece on the nominal standard. Which is an interesting highlight--even in this time of severe crisis for Greece, it is the country with the overvalued currency.
That's kind of grim. The economy's shrunk by a quarter and their currency is still overvalued :ph34r: :blink:
According to the CIA factbook, Greece's nominal GDP is slightly less than its PPP GDP, whereas Poland has a huge gap between the two. Doesn't that mean that Poland's currency is undervalued and not Greece's currency overvalued? This would be supported e.g. by the Economist's BigMac Index, which puts the Euro undervaluation at 11%, Zloty undervaluation at 48%.
Yeah, zloty is substantially undervalued. This is the same phenomenon as the one that caused US bonds to get cheaper as US economy got worse - so conversely, the better Poles are doing, the more zlotys they spend to buy dollars and euros.
Keeping the zloty undervalued is good for your exports, though. Isn't it?
The NOK is, as far as I can tell, now at a low compared to euros and dollars. Which is actually good news, due to our export industry's importance.
And sort of bad for me as a consumer.
So that is why I get dollar Polack cookie packages at Big Lots. THANKS ZLOTY.
Quote from: Norgy on February 09, 2015, 03:07:41 PM
Keeping the zloty undervalued is good for your exports, though. Isn't it?
Yes, as long as you don't plan vacation abroad or shop at amazon, it is pretty sweet. Not to mention, helps work migration too, as people who save even some euro/pound abroad can really send a lot of moolah home.
I wonder when our sweet ride ends, but Poland has been doing pretty great over the last decade.
My impression is that Poland's sweet rides usually end due to foreign invasion. :P
Well, one area where it sucks is legal services in a big law firm, as we charge our clients in euro, so it is hard to stay competitive. But when we get British, French or German clients, we are still very cheap compared to our colleagues in London, Paris or Frankfurt (the partner rate at a magic circle law firm in Warsaw is EUR 500-550, which is much less than that of Western Europe; mine is 475).
Quote from: Tonitrus on February 09, 2015, 03:24:00 PM
My impression is that Poland's sweet rides usually end due to foreign invasion. :P
Yeah. :P
That being said, we are now 26 years with no foreign invasion/occupation/dominance and counting. Maybe this time, we'll be lucky etc. ;)
Quote from: Martinus on February 09, 2015, 03:25:39 PM
Quote from: Tonitrus on February 09, 2015, 03:24:00 PM
My impression is that Poland's sweet rides usually end due to foreign invasion. :P
Yeah. :P
That being said, we are now 26 years with no foreign invasion/occupation/dominance and counting. Maybe this time, we'll be lucky etc. ;)
At least now you can be reasonably sure you will not be invaded from the west or the south.
Yeah, so you can run somewhere. :P
Speaking of which, my mother wants me to buy a flat in Brussels. :hmm:
Quote from: Martinus on February 09, 2015, 03:22:11 PM
Quote from: Norgy on February 09, 2015, 03:07:41 PM
Keeping the zloty undervalued is good for your exports, though. Isn't it?
Yes, as long as you don't plan vacation abroad or shop at amazon, it is pretty sweet. Not to mention, helps work migration too, as people who save even some euro/pound abroad can really send a lot of moolah home.
I wonder when our sweet ride ends, but Poland has been doing pretty great over the last decade.
It was my understanding that Poland, Czechia, Slovakia, Hungary and the Baltic states were the big winners in the post Soviet world. It's interesting that the countries that a strong German element in their history did best.
Quote from: Razgovory on February 09, 2015, 03:33:57 PM
Quote from: Martinus on February 09, 2015, 03:22:11 PM
Quote from: Norgy on February 09, 2015, 03:07:41 PM
Keeping the zloty undervalued is good for your exports, though. Isn't it?
Yes, as long as you don't plan vacation abroad or shop at amazon, it is pretty sweet. Not to mention, helps work migration too, as people who save even some euro/pound abroad can really send a lot of moolah home.
I wonder when our sweet ride ends, but Poland has been doing pretty great over the last decade.
It was my understanding that Poland, Czechia, Slovakia, Hungary and the Baltic states were the big winners in the post Soviet world. It's interesting that the countries that a strong German element in their history did best.
That's actually very hit and miss. Hungary, for example, is a total mess. Baltic states are a mixed story too - during the crisis, I think Lithuanian economy shrank by one third. Slovakia is also not doing that well.
If I were to name the winners, I would say Poland, Czech Republic and Estonia.
And I wouldn't exactly say Poland had a "strong German element" in its history either. Unless you mean organising an ethnic cleansing of Germans and then moving into their homes. :unsure:
Quote from: Martinus on February 09, 2015, 03:28:25 PM
Speaking of which, my mother wants me to buy a flat in Brussels. :hmm:
Lucky you. Mine wants me to marry. :yucky:
Quote from: Norgy on February 09, 2015, 03:52:33 PM
Quote from: Martinus on February 09, 2015, 03:28:25 PM
Speaking of which, my mother wants me to buy a flat in Brussels. :hmm:
Lucky you. Mine wants me to marry. :yucky:
Mine is extremely sceptical about my boyfriend. The feeling is mutual.
I tried to make them like each other but I gave up as it usually ended up with me yelling at both of them.
Quote from: Martinus on February 09, 2015, 03:25:39 PM
That being said, we are now 26 years with no foreign invasion/occupation/dominance and counting.
I thought you were in the EU? :huh:
Quote from: Martinus on February 09, 2015, 03:28:25 PM
Speaking of which, my mother wants me to buy a flat in Brussels. :hmm:
far too expensive in all likelyhood. About anywhere that is not Brussels is gonna be cheaper (and better to live).
deciding factor then becomes how you want to face traffic to get into the brussels caliphate.
http://www.standaard.be/berekenen/huizenprijzen (the map is from august last year)
Quote from: Crazy_Ivan80 on February 10, 2015, 03:48:41 AM
Quote from: Martinus on February 09, 2015, 03:28:25 PM
Speaking of which, my mother wants me to buy a flat in Brussels. :hmm:
far too expensive in all likelyhood. About anywhere that is not Brussels is gonna be cheaper (and better to live).
deciding factor then becomes how you want to face traffic to get into the brussels caliphate.
http://www.standaard.be/berekenen/huizenprijzen (the map is from august last year)
I checked out prices in Brussels recently and they were comparable to Warsaw. :unsure:
Is there anywhere in Europe north of France that doesn't have inflated house prices?
The prices in Oslo are just eye-watering. If I'd held on to that small condo I owned there until last year, I'd easily have 2 million NOK. Of course, I wouldn't have anywhere to live now.
I can only imagine Brussels being in a housing bubble or boom as well, with gazillions of bland Eurocrats living in minimalistic design apartments.
Quote from: Martinus on February 09, 2015, 03:25:39 PM
Quote from: Tonitrus on February 09, 2015, 03:24:00 PM
My impression is that Poland's sweet rides usually end due to foreign invasion. :P
Yeah. :P
That being said, we are now 26 years with no foreign invasion/occupation/dominance and counting. Maybe this time, we'll be lucky etc. ;)
Must be a Polish record, surely.
FWIW, we are now 34 years without a coup or authoritarian government of some kind, also a record.
Quote from: Norgy on February 10, 2015, 03:53:37 AM
Is there anywhere in Europe north of France that doesn't have inflated house prices?
The prices in Oslo are just eye-watering. If I'd held on to that small condo I owned there until last year, I'd easily have 2 million NOK. Of course, I wouldn't have anywhere to live now.
I can only imagine Brussels being in a housing bubble or boom as well, with gazillions of bland Eurocrats living in minimalistic design apartments.
It is still much cheaper than Paris, or at least it was when I lived there in 2007.
Quote from: Zanza on February 09, 2015, 11:16:26 AM
QuoteVery, very few of their proposals so far necessarily involve increasing public spending and people are prepared that they may renege on some.
Most of the policies you outlined above necessitate public spending. Who else will be paying for more state employees, higher pensions or better healthcare? :huh:
The Germans. :huh:
Quote from: Martinus on February 10, 2015, 03:57:40 AM
Quote from: Norgy on February 10, 2015, 03:53:37 AM
Is there anywhere in Europe north of France that doesn't have inflated house prices?
The prices in Oslo are just eye-watering. If I'd held on to that small condo I owned there until last year, I'd easily have 2 million NOK. Of course, I wouldn't have anywhere to live now.
I can only imagine Brussels being in a housing bubble or boom as well, with gazillions of bland Eurocrats living in minimalistic design apartments.
It is still much cheaper than Paris, or at least it was when I lived there in 2007.
Not very difficult. :lol:
Only London and the capital of the Norwegian petro-cod-monarchy are more expensive than Paris in Europe.
Quote from: celedhring on February 10, 2015, 03:56:32 AM
FWIW, we are now 34 years without a coup or authoritarian government of some kind, also a record.
Was it in 1982 or 1981 that some bloke from the armed forces or guardia civil or whatever was waving a gun around in parliament, proclaiming a coup? That ended, well, not so well.
Quote from: Duque de Bragança on February 10, 2015, 04:55:22 AM
Only London and the capital of the Norwegian petro-cod-monarchy are more expensive than Paris in Europe.
Stavanger, the petro-capital, became pretty expensive too. Think the prices are falling now, due to a recession in the oil business. The low prices mean that less offshore platforms are actually worth the cost.
Quote from: Norgy on February 10, 2015, 04:55:56 AM
Quote from: celedhring on February 10, 2015, 03:56:32 AM
FWIW, we are now 34 years without a coup or authoritarian government of some kind, also a record.
Was it in 1982 or 1981 that some bloke from the armed forces or guardia civil or whatever was waving a gun around in parliament, proclaiming a coup? That ended, well, not so well.
1981, hence 34 years coup-free.
That coup didn't amount to much, fortunately. They surrendered a few hours later when it became obvious that most of the army wasn't supporting it. FWIW it cemented the king's popularity after he appeared on the telly condemning the coup, when the outcome was still uncertain.
I like Juan Carlos. Well, as much as you can like a monarch.
He's been good for Spain, for the most part. If you disregard some strange behaviour and financial irregularities in the royal family.
Can you really count that session as a coup? It was more like a very melodramatic and amateurish attempt.
It was more than that; there were tanks on the streets of Valencia and an attempt to take other strategic points of Madrid (like the state television). It was fortunately incompetent, but not a joke.
Lovingly, the Reagan administration was one of the few Western democracies that didn't condemn the coup.
Quote from: Martinus on February 10, 2015, 03:52:24 AM
Quote from: Crazy_Ivan80 on February 10, 2015, 03:48:41 AM
Quote from: Martinus on February 09, 2015, 03:28:25 PM
Speaking of which, my mother wants me to buy a flat in Brussels. :hmm:
far too expensive in all likelyhood. About anywhere that is not Brussels is gonna be cheaper (and better to live).
deciding factor then becomes how you want to face traffic to get into the brussels caliphate.
http://www.standaard.be/berekenen/huizenprijzen (the map is from august last year)
I checked out prices in Brussels recently and they were comparable to Warsaw. :unsure:
flats are about the only thing that are normally priced in Brussels when compared to flanders (everything is cheaper in wallonia but that's because it's an empty economic wasteland ripe for colonisation :p). Don't know what you're getting for the price in Brussels though. Some might be good, a lot seems to be in a state that's less than that. And depending on where you are in Brussel-19 much of it is filled with muslims.
And Warsaw seems like a very expensive place then.
@Norgy: many of the EUcrats and other expats live outside of Brussel, often in "De Vlaamse Rand" (the flemish communities around Brussel)
Quote from: celedhring on February 10, 2015, 05:48:29 AM
It was more than that; there were tanks on the streets of Valencia and an attempt to take other strategic points of Madrid (like the state television). It was fortunately incompetent, but not a joke.
Lovingly, the Reagan administration was one of the few Western democracies that didn't condemn the coup.
Didn't know that. I learnt something today as well. :)
Reagan probably thought the PSOE were actual socialists.
Quote from: celedhring on February 10, 2015, 05:01:05 AM
Quote from: Norgy on February 10, 2015, 04:55:56 AM
Quote from: celedhring on February 10, 2015, 03:56:32 AM
FWIW, we are now 34 years without a coup or authoritarian government of some kind, also a record.
Was it in 1982 or 1981 that some bloke from the armed forces or guardia civil or whatever was waving a gun around in parliament, proclaiming a coup? That ended, well, not so well.
1981, hence 34 years coup-free.
That coup didn't amount to much, fortunately. They surrendered a few hours later when it became obvious that most of the army wasn't supporting it. FWIW it cemented the king's popularity after he appeared on the telly condemning the coup, when the outcome was still uncertain.
Only if you don't buy into the "he was actually behind it all and used it as a way to prop up the monarchy" conspiracy theory. :ph34r:
Quote from: The Larch on February 10, 2015, 07:26:40 AM
Only if you don't buy into the "he was actually behind it all and used it as a way to prop up the monarchy" conspiracy theory. :ph34r:
My wife doesn't quite go that far but becomes splenetic about the way that credit is given to him, which she thinks wholly undeserved.
Quote from: Gups on February 10, 2015, 07:41:12 AM
Quote from: The Larch on February 10, 2015, 07:26:40 AM
Only if you don't buy into the "he was actually behind it all and used it as a way to prop up the monarchy" conspiracy theory. :ph34r:
My wife doesn't quite go that far but becomes splenetic about the way that credit is given to him, which she thinks wholly undeserved.
Well, Spanish media always used to bend over backwards to gush praise on him about that, so it's only normal that there's a certain amount of backlash.
Quote from: Martinus on February 09, 2015, 03:50:16 PM
Quote from: Razgovory on February 09, 2015, 03:33:57 PM
Quote from: Martinus on February 09, 2015, 03:22:11 PM
Quote from: Norgy on February 09, 2015, 03:07:41 PM
Keeping the zloty undervalued is good for your exports, though. Isn't it?
Yes, as long as you don't plan vacation abroad or shop at amazon, it is pretty sweet. Not to mention, helps work migration too, as people who save even some euro/pound abroad can really send a lot of moolah home.
I wonder when our sweet ride ends, but Poland has been doing pretty great over the last decade.
It was my understanding that Poland, Czechia, Slovakia, Hungary and the Baltic states were the big winners in the post Soviet world. It's interesting that the countries that a strong German element in their history did best.
That's actually very hit and miss. Hungary, for example, is a total mess. Baltic states are a mixed story too - during the crisis, I think Lithuanian economy shrank by one third. Slovakia is also not doing that well.
If I were to name the winners, I would say Poland, Czech Republic and Estonia.
And I wouldn't exactly say Poland had a "strong German element" in its history either. Unless you mean organising an ethnic cleansing of Germans and then moving into their homes. :unsure:
It's my understanding that modern Poland encompass a large amount of land that was part of Prussia. Is this true or not? Hungary still has a higher standard of living then a lot of it's neighbors Romanian, Ukraine, Serbia. All the states I mentioned are on the upper tier of economies in the Post-Soviet World.
Yes, but that's what I meant by ethnic cleansing - most of the areas that used to be Prussia were only recovered after WW2 - and they were settled with Poles from Ukraine, Lithuania etc. after local Germans were resettled to Germany.
Quote from: Martinus on February 10, 2015, 03:19:45 PM
Yes, but that's what I meant by ethnic cleansing - most of the areas that used to be Prussia were only recovered after WW2 - and they were settled with Poles from Ukraine, Lithuania etc. after local Germans were resettled to Germany.
A big portion of Poland was ruled by Germans and Austrians for quite a while.
There are few areas of Europe where the Germans didn't have some sort of "drang nach".
Nowadays they just bring bloody huge bath towels or RVs rather than swords and the Bible, though.
Things are looking bad again.
China and Russia are hovering.
One potential bit of wiggle room the Greeks don't mind calling bridging finance a 'technical extension' of the program.
Quote from: Sheilbh on February 11, 2015, 09:56:22 AM
Things are looking bad again.
China and Russia are hovering.
One potential bit of wiggle room the Greeks don't mind calling bridging finance a 'technical extension' of the program.
What do you mean by hovering?
Quote from: Sheilbh on February 11, 2015, 09:56:22 AM
One potential bit of wiggle room the Greeks don't mind calling bridging finance a 'technical extension' of the program.
So your killer line about the troika insisting Greece take more money and Greece refusing is not quite as deadly as previously.
Quote from: Zanza on February 09, 2015, 01:51:53 PM
Do they really? How specific are the policies "dictated" by the Troika? Anyway, my issue with the statement is not that they change policy or that they feel an obligation towards the voter and national interest. My issue with the statement is the word "only". A responsible government should try to have a balanced approach, never ignoring certain factions.
They are pretty specific. Here's the Portuguese program, with specific policy objectives from around page 55 on:
http://ec.europa.eu/economy_finance/publications/occasional_paper/2011/pdf/ocp79_en.pdf
And there's the famous Trichet letter to Zapatero, in which a central banker (a central banker!) outlines specific labour market reforms the Spanish government should pass.
I'm not sure what you mean about never ignoring certain factions. I think the problem is that one government does not have a mandate to bind every future government on entire tranches of economic and domestic policy. That's illegitimate and undemocratic.
QuoteGreece is hardly the shining beacon that other countries would want to emulate. Why would there be worries that there could be a repeat? The sheer shittiness of Greece's current situation should be motivation enough for all other governments never to go down that road.
Well as I say Podemos are leading the polls in Spain with another new party in fourth place but rising, Sinn Fein are polling as the largest party in Ireland. There's every chance from Italy that Europe will have to deal with a far more Eurosceptic leader than Renzi.
Yes, Greece is in a particularly dreadful position. But I think it'd be naive to expect this sort-of civil revolt of the periphery to stop there and, from a German perspective, giving in to Syriza would encourage everyone else.
QuoteEverybody already gets what they want out of the scenario that I outlined. Negotiations won't achieve a better result. The only risk is that the financial markets might overreact to a Greek default, but that as long as they mainly default on debt held by IMF, ECB et al., that shouldn't be a major issue.
I don't think markets would overreact to a default. If Greece stays in the Euro they should be fine if not while the risk of contagion is low now (especially compared with 2012) I don't think it's gone away. There'll be a sort of political contagion of several rather fraught elections coming up and if the Euro is reversible then I'd guess countries are more open to attack and speculation.
Also in the scenario you outlined Eurozone partners and the EFSF don't get any money back. In the one Varoufakis has proposed, they do.
Incidentally and this is unrelated apparently a lot of funds are making big bets against Spain. I'm not sure why but I assume they think there's something unconvincing in the economic figures.
Quote
I wish them all the best for that. But that's really something they need to get in order. No one but the Greeks themselves will make them a country of taxpayers and enact policies to redistribute the considerable wealth the Greeks have.
Absolutely. According to the World Bank and Transparency International Greece has a lower level of quality institutions than Bulgaria :blink:
Quote from: Admiral Yi on February 11, 2015, 10:15:24 AMSo your killer line about the troika insisting Greece take more money and Greece refusing is not quite as deadly as previously.
Not really. The Greeks still don't want to draw any more money from the Troika. But they're willing to describe their bridge money proposals as a 'technical extension' of the program rather than bridge finance to a new position.
Quote from: Sheilbh on February 11, 2015, 10:21:31 AM
Not really. The Greeks still don't want to draw any more money from the Troika. But they're willing to describe their bridge money proposals as a 'technical extension' of the program rather than bridge finance to a new position.
How would bridge financing not be more money? :huh:
Quote from: Sheilbh on February 11, 2015, 10:19:34 AM
Absolutely. According to the World Bank and Transparency International Greece has a lower level of quality institutions than Bulgaria :blink:
Maybe Bulgaria has really good institutions ;)
One other thought Gurria of the OECD seemed to endorse the Greek position (he said it had produced low growth, high unemployment, rising inequality and a loss of trust) when he and his team arrived to help work on the reform proposals. I wonder if he had any interesting advice given that he was the finance minister who restructured Mexico's foreign debt in the late nineties.
Quote from: Admiral Yi on February 11, 2015, 10:23:40 AM
Quote from: Sheilbh on February 11, 2015, 10:21:31 AM
Not really. The Greeks still don't want to draw any more money from the Troika. But they're willing to describe their bridge money proposals as a 'technical extension' of the program rather than bridge finance to a new position.
How would bridge financing not be more money? :huh:
They want €1.9 billion of profits the Eurosystem makes of Greek debts and to issue €8 billion of short-term T-bills.
Quote from: Sheilbh on February 11, 2015, 10:29:26 AM
They want €1.9 billion of profits the Eurosystem makes of Greek debts and to issue €8 billion of short-term T-bills.
How would 8 billion euros of short-term Gree-bills not be new money?
It wouldn't be new money from the EFSF, Eurozone partners or ECB - the Troika.
I see. So they're going to launch 8 billion euros in short term paper with the secondary market trading their existing debt at 14%.
Quote from: Monoriu on February 11, 2015, 10:24:32 AM
Quote from: Sheilbh on February 11, 2015, 10:19:34 AM
Absolutely. According to the World Bank and Transparency International Greece has a lower level of quality institutions than Bulgaria :blink:
Maybe Bulgaria has really good institutions ;)
:lol:
Weirdly the Greek government and banks apparently have a lot of investments in Bulgaria. The economies are a lot closer than you would've guessed.
Moscovici talking pure sense again 'we're not here to talk technicalities, we're here to talk politics.'
Quote from: Admiral Yi on February 11, 2015, 10:41:12 AM
I see. So they're going to launch 8 billion euros in short term paper with the secondary market trading their existing debt at 14%.
Brits have a historic soft spot for Greece I guess. Sheilbh is pretty much obligated to take their side.
Quote from: Sheilbh on February 11, 2015, 10:53:57 AM
Weirdly the Greek government and banks apparently have a lot of investments in Bulgaria. The economies are a lot closer than you would've guessed.
Wouldn't they logically be very close being neighbors and all? I mean even if they weren't both in the EU (and why they are both in the EU is a puzzler to me).
Quote from: Tamas on February 11, 2015, 11:08:05 AM
Brits have a historic soft spot for Greece I guess. Sheilbh is pretty much obligated to take their side.
No we don't :blink:
Though, historically, we probably bear more than our fair share of fucking Greece up in the 20th century, but what can you do.
Cyprus and Malta, yes. They're wonderful.
I'm taking their side because I think it's the sensible, pragmatic one to take.
The issue as I see it is not whether you are for or against Greece, but rather whether you acknowledge or ignore the contradictions in Syrizana's statements.
Quote from: Sheilbh on February 11, 2015, 10:53:57 AM
Quote from: Monoriu on February 11, 2015, 10:24:32 AM
Quote from: Sheilbh on February 11, 2015, 10:19:34 AM
Absolutely. According to the World Bank and Transparency International Greece has a lower level of quality institutions than Bulgaria :blink:
Maybe Bulgaria has really good institutions ;)
:lol:
Weirdly the Greek government and banks apparently have a lot of investments in Bulgaria. The economies are a lot closer than you would've guessed.
Why would that be weird? I would have thought capital going between two neighboring EU countries, where one of them is (still) significantly richer than the other to be pretty much de rigeur. It's like being surprised by German investments in Poland or Scandinavian investments in Estonia. :P
Quote from: Valmy on February 11, 2015, 11:11:50 AM
Quote from: Sheilbh on February 11, 2015, 10:53:57 AM
Weirdly the Greek government and banks apparently have a lot of investments in Bulgaria. The economies are a lot closer than you would've guessed.
Wouldn't they logically be very close being neighbors and all? I mean even if they weren't both in the EU (and why they are both in the EU is a puzzler to me).
Because we needed someone to be worse than Italy and Poland, respectively. :P
Plus Greece and Bulgaria have a lot in common culturally, both building their cultural identity around pretending they are not Turks. :P
Emphasised by a shared love of Mother Russia.
Quote from: Sheilbh on February 11, 2015, 11:36:59 AM
Emphasised by a shared love of Mother Russia.
Well, that doesn't come from nowhere. For the last few centuries Russia pursued the policy of supporting Orthodox countries in Europe - so I suppose this now pays off.
Quote from: Martinus on February 11, 2015, 11:27:35 AM
Quote from: Valmy on February 11, 2015, 11:11:50 AM
Quote from: Sheilbh on February 11, 2015, 10:53:57 AM
Weirdly the Greek government and banks apparently have a lot of investments in Bulgaria. The economies are a lot closer than you would've guessed.
Wouldn't they logically be very close being neighbors and all? I mean even if they weren't both in the EU (and why they are both in the EU is a puzzler to me).
Because we needed someone to be worse than Italy and Poland, respectively. :P
Old joke in Spain is that Greece is there to make us look good in European stats.
Quote from: Admiral Yi on February 11, 2015, 11:18:13 AM
The issue as I see it is not whether you are for or against Greece, but rather whether you acknowledge or ignore the contradictions in Syrizana's statements.
It may be objectionable but not contradictory.
What Syriza wants is a write down of the debt. They don't really care how exactly is done or what terms are used to describe it. But their position is - write down or do the economically equivalent and we will not need (or want) to take new money.
But Troika does not agree, at least not yet. They are negotiating. But while they negotiate time passes, and as time passes payments come due. So as long as Syriza isn't getting its write down it has to roll over somehow and that means new money has to come in.
So Shelf got it wrong about Syriza not looking for a write down. That makes a lot more sense.
Quote from: Sheilbh on February 11, 2015, 11:14:35 AM
Though, historically, we probably bear more than our fair share of fucking Greece up in the 20th century, but what can you do.
To be fair it was not like Greece exited the 19th century in great shape either.
It's really been downhill since the 4th century BC.
Quote from: Admiral Yi on February 11, 2015, 12:37:35 PM
So Shelf got it wrong about Syriza not looking for a write down. That makes a lot more sense.
They don't want one in the plans they've released so far. I'd be amazed if anyone brought it up again because it's toxic for other Eurozone countries. Just like Schaeuble, with the grace of a hippo, isn't talking about the Troika.
More positive than negative signs as the meeting begins. But nothing will be agreed tonight.
Meanwhile large pro-government protests across Greece many banners referring to a poem from the war of independence 'beseiged but free'.
Apparently the best case scenario for tonight is that all parties have a mutual understanding of the preparation for the next meeting - so it should be short no actualy money being divvied up tonight.
Meanwhile Lagarde (:wub:) is looking wonderful in fashion solidarity with Greece:
(https://pbs.twimg.com/media/B9layuaCYAAMuzJ.jpg)
Edit: In general I think the hardline looks a little more isolated now. The Commission and the French (and the Irish and Austrians) were prepared for some form of bridging finance both said it 'needed' to happen. Moscovici has said Greece's place is in the Euro, governments need room for manoeuvre after elections and we should take account of results 'otherwise what is the point of voting in the European Union?' No deal today but Greeks will present their case and there needs to be a deal on Monday 'a huge amount of pragmatism and good will required on all sides'.
Lagarde had a good meeting with Varoufakis 'they are competent, intelligent people who have reflected on their affairs and we must listen' (worth remembering the Fund's Europe head has already said Greek debt should be cut in half and the US, UK and others who are broadly supportive of the Greeks also have shares).
Schaeuble's comments were a little off-key - if they want to leave the program 'that's it, it's over' and I think other partners told him that the troika is dead given his line 'the Greek program will continue to be run by the troika, which apparently we can't call the troika anymore' :bleeding: :lol:
I simply adore this picture. The body language between Lagarde, Varoufakis and these two suited guys (the one on the left and the one in the back) is simply precious. It tells more than a thousand well crafted press releases. :lol:
Quote from: Martinus on February 11, 2015, 03:05:30 PM
I simply adore this picture. The body language between Lagarde, Varoufakis and these two suited guys (the one on the left and the one in the back) is simply precious. It tells more than a thousand well crafted press releases. :lol:
I was thinking the same. It's probably the reason that particular shot was chosen. :P
Guy on the left demonstrates the problem with Euro slim-cut suit hegemony -- it's not for everyone.
Quote from: MadImmortalMan on February 11, 2015, 03:13:47 PM
Quote from: Martinus on February 11, 2015, 03:05:30 PM
I simply adore this picture. The body language between Lagarde, Varoufakis and these two suited guys (the one on the left and the one in the back) is simply precious. It tells more than a thousand well crafted press releases. :lol:
I was thinking the same. It's probably the reason that particular shot was chosen. :P
Varoufakis positively looks like a cat that has just eaten a canary. In fact swallowed it, whole, beak and feathers. :D
Quote from: Capetan Mihali on February 11, 2015, 03:14:47 PM
Guy on the left demonstrates the problem with Euro slim-cut suit hegemony -- it's not for everyone.
Shush you. :P
Speaking of which, it looks like Lagarde has got a bunch of Affinity points in Supremacy. :nerd:
Greece has until Monday to decide if they want to extend the program. There are no other choices - latest news.
Well the initial market spike we got earlier is fading away.
It's gonna be like last time I guess. Rumor in the morning, Germany squashes it in the afternoon. Up, down, up, down. Rinse, repeat.
Yeah, ultimately any decision is above the pay grade of this Eurogroup meeting.
Quote from: Sheilbh on February 11, 2015, 12:48:43 PM
Quote from: Admiral Yi on February 11, 2015, 12:37:35 PM
So Shelf got it wrong about Syriza not looking for a write down. That makes a lot more sense.
They don't want one in the plans they've released so far.
Sure it's there; they just changed the words used to describe it.
Because
Quotebecause it's toxic for other Eurozone countries
So you can't call it what it really is.
Obfuscation and fudge! Europe!
As a reminder of Greece's Greeceness, at the confidence vote the KKE leader spent a lot of time damming 'you Keynesian capitalists' :lol:
Of Lagarde Varoufakis photos, I also enjoyed this one where they're either discussing GDP-linked bonds or about to reform the band:
(https://pbs.twimg.com/media/B9laQ9JIgAAYbr-.jpg)
Djisselbloem gave the most awkward of Eurogroup press conferences so far. From Djisselbloem a one minute statement followed by seven minutes of questions with the same answer: no joint conclusions, no plans under discussion. They've made progress, but not enough to agree joint conclusions. Ended the press conference very early. Monday's meeting is the more important one - and, as ever, this is ultimately above their paygrade and will be decided by heads of government - so it may well go to the next Eurogroup meeting. As Moscovici said this is politics not technicalities, so work can't really begin on technical details if there's still no political deal.
The big question is whether the ECB will continue to behave as a central bank, or will, again, become a political actor and force a run on Greece's banks.
Apparently Schaeuble had already left the meeting believing a statement had been agreed when the Greeks, having communicated with Athens, spoke again and effectively vetoed it. There's a European Council meeting tomorrow so there maybe more news from that as Athens vetoed so it's over to Tsipras.
Varoufakis said there were good discussions and it was 'fascinating'. There was never meant to be a deal today. Greece never requested an extension of the bailout and he didn't hear any threats from other members. Many concessions needed to reach a deal but Greece would never stay in the current program because it's been 'catastrophic'. The Telegraph correspondent asked Varoufakis if failure to produce the traditional bullshit statement of Euro-meetings was progress, Varoufakis replied 'well in a sense you are right' :lol:
A big issue seems to be the difference, linguistically, between a 'bridge' and an 'extension' as the Luxembourg FinMin was briefing that the Eurogroup should consider Greek proposals as the current program does allow for 'flexibility'. It has to be said this is the sort of stuff that drive British Eurosceptics mad :lol:
As Peter Spiegel of the FT has put it expectations of tonight were low and they've still managed to miss them.
And a reminder of the various types of official exposure to Greek debt within the Eurogroup:
(https://pbs.twimg.com/media/B9mj8OfIEAA0fcw.jpg)
Edit: There's a fair amount of pushback on the line that there are Greek splits and that they rejected the final statement. Moscovici again talking more sense and the Lithuanian FinMin (seen as a problem) said he thought it impossible for Greece to leave the Euro. In general still a mess though.
Edit: I also feel really sorry for Brussels Correspondents as a rule :(
Edit: The allegedly agreed statement:
QuoteThe (almost) agreed eurogroup statement on Greece
Peter Spiegel | Feb 12 01:14 | Comment | Share
Wednesday night's breakdown in talks between Greece and the other 18 eurozone finance ministers happened at such the last minute that many of the participants in the eurogroup meeting – including Wolfgang Schäuble, the powerful German finance minster – didn't even know it had happened, since they had already left the building.
According to several officials involved in the talks, Yanis Varoufakis, the Greek finance minister, had agreed to a joint statement with his colleagues, a statement that was even signed off by Greece's deputy prime minister, Yannis Dragasakis, who was also in Brussels for the gathering.
Once agreed, the eurogroup meeting broke up and Schäuble and several of his colleagues headed out the door. But officials said Varoufakis put in one last call back to Athens to inform them what he had just agreed to – and government officials vetoed the statement.
We at Brussels Blog got our hands on the statement and have posted it below. In many senses, it has a little bit for everyone. For eurozone officials, who were pushing Athens hard to request an extension of the current €172bn bailout, which expires at the end of the month, it leaves open the option to "explore the possibilities of extending" the programme.
For Varoufakis, there's even the word "bridge" mentioned in the final paragraph – though not in the sense the Greek minister probably wanted, which is as part of a bridge financing deal.
But the joint statement was not to be. It remains yet another artifact of the long-running Greek drama:
QuoteToday the Eurogroup took stock of the current situation in Greece and the state of the current adjustment programme. In this context, the Eurogroup has engaged in an intensive dialogue with the new Greek authorities.
The Greek authorities have expressed their commitment to a broader and stronger reform process aimed at durably improving growth prospects. At the same time, the Greek authorities reiterated their unequivocal commitment to the financial obligations to all their creditors.
On this basis, we will now start technical work on the further assessment of Greece's reform plans. The Greek authorities have agreed to work closely and constructively with the institutions to explore the possibilities for extending and successfully concluding the present programme taking into account the new government's plans.
If this is successful this will bridge the time for the Greek authorities and the Eurogroup to work on possible new contractual arrangements. We will continue our discussions at our next meeting on Monday 16 February.
And Varoufakis response on Twitter:
Quote@SpiegelPeter @ftbrussels Might I suggest that you refrain from dubious claims based on even more dubious leaks? It's rather unseemly
He's got a point. From the beginning of this whole thing years ago it's been nothing but constant dubious leaks at every single stage. I'm pretty convinced at this point that people are making money off of it somehow. Like a buy-leak-sell operation of some sort.
The Fed is pretty careful about what it says, but Europe just whips the markets around with reckless abandon.
Welcome to a currency union of 19 countries with 19 different domestic audiences and sets of interests. And a Commission. And a leaky central bank... :lol:
A currency union of countries beginning with the letter 'm' is more of an optimal currency union than the Eurozone.
Edit: Incidentally not seen the French FinMin's comments before the meeting but this strikes me as interesting 'You know the two principles. First, respect the Greek vote. Second, respect the rules that bind all of us.'
I prefer a currency union of all the countries on Earth. The World's central bank will appear to be an omni-present council of vagueness appointed by the UN, but is actually an AI that resides on the back of the moon and is designed with instruction to reach zero global inflation.
You're boring the shit out of us, mono. :(
Quote from: Capetan Mihali on February 12, 2015, 12:58:09 AM
You're boring the shit out of us, mono. :(
He is helping me get in my next article for
Black Helicopter Watch Magazine.
I'm titling it, "Chinese Government Official States Preference for Global Currency Union".
Quote from: Monoriu on February 11, 2015, 09:35:06 PM
I prefer a currency union of all the countries on Earth. The World's central bank will appear to be an omni-present council of vagueness appointed by the UN, but is actually an AI that resides on the back of the moon and is designed with instruction to reach zero global inflation.
Must have catapults that shoot big rocks onto the Earth when 60% debt to GDP is reached. :P
So apparently that leaked statement was never agreed to by all parties. Another was but Varoufakis and his deputies were negative on it and Tsipras also vetoed.
Edit: Actually other statement may not have been agreed.
A line from the Economist 'officials say that the ministers' next meeting, on Monday, will be Greece's last chance to yield to their demands.' Yay democracy.
Quote from: Sheilbh on February 12, 2015, 07:13:07 AM
So apparently that leaked statement was never agreed to by all parties. Another was but Varoufakis and his deputies were negative on it and Tsipras also vetoed.
A line from the Economist 'officials say that the ministers' next meeting, on Monday, will be Greece's last chance to yield to their demands.' Yay democracy.
At least that is good against moral hazard. If you loan money, pay it back. If you don't, suffer the consequences.
Quote from: Tamas on February 12, 2015, 07:14:28 AM
At least that is good against moral hazard. If you loan money, pay it back. If you don't, suffer the consequences.
Since the abolition of debtors' prisons, moral hazard cuts both ways. When a country of 11 million people and a GDP of €175 billion ends up with a debt of around €320 billion I'd suggest there's two sides that have made mistakes.
So far Greek money outflows have been far smaller than people had worried. Which is good.
People still seem reasonably optimistic about a deal though. I found this chart of one stat interesting, of just how tepid Europe's 'recovery' has been:
(https://pbs.twimg.com/media/B9othB5IgAE8MDA.jpg)
Quote from: Sheilbh on February 12, 2015, 07:27:36 AM
Since the abolition of debtors' prisons, moral hazard cuts both ways. When a country of 11 million people and a GDP of €175 billion ends up with a debt of around €320 billion I'd suggest there's two sides that have made mistakes
It's really not that different than the foreclosure crisis in the US a few years ago. Turns out that making loans to people who aren't going to be able to pay them back isn't all that smart.
Quote from: alfred russel on February 12, 2015, 01:02:07 AM
Quote from: Capetan Mihali on February 12, 2015, 12:58:09 AM
You're boring the shit out of us, mono. :(
He is helping me get in my next article for Black Helicopter Watch Magazine.
I'm titling it, "Chinese Government Official States Preference for Global Currency Union".
I wish I'd said that.
I prefer "High-ranking Chinese Government Official..."
Quote from: Sheilbh on February 12, 2015, 07:13:07 AM
A line from the Economist 'officials say that the ministers' next meeting, on Monday, will be Greece's last chance to yield to their demands.' Yay democracy.
The other ministers are just as democratically legitimated as the Greeks. Or is there some rule that whoever had the last election somehow has priority in negotiations?
Quote from: Sheilbh on February 12, 2015, 07:27:36 AM
Since the abolition of debtors' prisons, moral hazard cuts both ways. When a country of 11 million people and a GDP of €175 billion ends up with a debt of around €320 billion I'd suggest there's two sides that have made mistakes.
Yeah, but that doesn't put one side under obligation to keep lending money to the other.
In the days of the debtors prisons, the Great Powers would be sending fleets to Athens to secure their country's interests.
And if that mindset becomes institutionalized it certainly won't help the next time Merkele is asked to drag her constituents kicking and screaming to a bailout.
You understand I hope Shelf, that it's always more enjoyable to spend a loan than it is to repay it.
Quote from: alfred russel on February 12, 2015, 08:37:56 AM
Yeah, but that doesn't put one side under obligation to keep lending money to the other.
Sure but no-one (aside from the creditors) really wants that.
QuoteIn the days of the debtors prisons, the Great Powers would be sending fleets to Athens to secure their country's interests.
We've moved on. Nowadays we just have to orchestrate a run on the banks.
QuoteAnd if that mindset becomes institutionalized it certainly won't help the next time Merkele is asked to drag her constituents kicking and screaming to a bailout.
What mindset do you mean?
QuoteYou understand I hope Shelf, that it's always more enjoyable to spend a loan than it is to repay it.
Sure. But if you're a creditor whose lent so much on such terms that there's no chance of them repaying it then you've made as much, if not more of a mistake, as the debtor.
Quote from: Sheilbh on February 12, 2015, 08:54:29 AM
What mindset do you mean?
The mindset that the creditor of a failed program country has a moral obligation to forgive the loans.
Quote from: Sheilbh on February 12, 2015, 08:54:29 AM
Sure. But if you're a creditor whose lent so much on such terms that there's no chance of them repaying it then you've made as much, if not more of a mistake, as the debtor.
You and Marty both made this point and I guess I don't understand why it is significant. So what? Is this not self evident?
I think Shelf's subtext is that the creditors have a moral obligation to forgive their loans, and Greece should not feel ashamed for defaulting.
At least that's how I'm reading it.
Quote from: Admiral Yi on February 12, 2015, 09:01:14 AM
The mindset that the creditor of a failed program country has a moral obligation to forgive the loans.
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. Some stuff has been done on that (banking union, OMT, QE), though it's all qualified and still pretty problematic.
Just that moral hazard cuts both ways and, since the 19th century, it isn't just the debtor who 'suffers the consequences'. And of course modern approaches are far better at paying back distressed loans than debtors' prisons ever were. Hopefully if Europe moves beyond its 'get out the bats' mindset they'll produce a deal that is better for Greece and better for her creditors.
ECB held a teleconference on Greece and the EuCo's getting started. Greece will only be discussed on the sidelines. Merkel said there's a deal to be done, always willing to show solidarity as long as the rules are followed. As with Sapin I think 'the rules' bit is interesting and may offer wiggle room.
QuoteThe other ministers are just as democratically legitimated as the Greeks. Or is there some rule that whoever had the last election somehow has priority in negotiations?
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. The reason the three historic parties of government in Ireland are now together polling at lower than 50% is in part because there's not really any difference between Fianna Fail or Fine Gael-Labour.
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.
Quote from: Admiral Yi on February 12, 2015, 09:13:04 AM
I think Shelf's subtext is that the creditors have a moral obligation to forgive their loans, and Greece should not feel ashamed for defaulting.
At least that's how I'm reading it.
That's how I am reading it, and that is appaling.
This is what Sheilbh is saying on a personal level:
A dirtbag bohemian guy approaches me asking me to lend him some money on some pretty sweet terms.
I give it to him, he spends it all very carelessly, and when he declares himself unable to pay me back, somehow I have the obligation to let it go because I was an idiot to loan to him?!!
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.
Quote from: Sheilbh on February 12, 2015, 09:19:09 AM
Just that moral hazard cuts both ways
what do you mean by this?
Quote from: Sheilbh on February 12, 2015, 09:19:09 AM
Quote from: Admiral Yi on February 12, 2015, 09:01:14 AM
The mindset that the creditor of a failed program country has a moral obligation to forgive the loans.
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. Some stuff has been done on that (banking union, OMT, QE), though it's all qualified and still pretty problematic.
No, absolutely not.
This isn't an isolated incident in a lab.
This is about what happens, when one country pisses away the creditors money and then have the audicity to play the blame game. Europe's interest is to make this an impossible route for the future, even if it means royally screwing the Greek common man over. Because it is not the EU, which has screwed them over, it is their own governments, and their own blindness caused by too much bling.
Quote from: Sheilbh on February 12, 2015, 09:19:09 AM
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.
Negotiations between nations without sticks and carrots? Tough since most diplomats regard their job as getting the best deal possible for their nation. How exactly do you get a diplomat to agree to something lesser without sticks and carrots? Appealing to them to trust that everybody else has their best interests at heart?
Quote from: Admiral Yi on February 12, 2015, 09:22:37 AM
what do you mean by this?
If creditors don't do due diligence and lend to uncreditworthy individuals, and then take a loss - that's not just the debtors fault. Both sides suffer the consequences through a loss and a bankruptcy. That's a better reflection of moral hazard than debt peonage.
I think it also leads to better results for everyone if creditors do due diligence, debtors are at risk from bankruptcy or winding up and if both sides work together to align their interests and try and maximise the return for the creditors while keeping the debtor a going concern. It's normally better to try and reach some sort of mutual agreement like that than just liquidating bad debts. That may not be morally perfect (though I do think it's better than debtors' prison) but it is more sensible and pragmatic.
Of course there's times when you have to ignore it - the financial crisis would have been far worse if the UK and US had behaved like Europe and knowing what they know now, I think most American policymakers would've not let Lehman's fail.
Quote from: Sheilbh on February 12, 2015, 09:35:41 AM
If creditors don't do due diligence and lend to uncreditworthy individuals, and then take a loss - that's not just the debtors fault. Both sides suffer the consequences through a loss and a bankruptcy. That's a better reflection of moral hazard than debt peonage.
What does debt peonage have to do with anything?
Quote from: Tamas on February 12, 2015, 09:24:54 AM
This isn't an isolated incident in a lab.
This is about what happens, when one country pisses away the creditors money and then have the audicity to play the blame game. Europe's interest is to make this an impossible route for the future, even if it means royally screwing the Greek common man over. Because it is not the EU, which has screwed them over, it is their own governments, and their own blindness caused by too much bling.
But you're the one treating it like an isolated incident in a lab and trying to build this ideal, morally coherent rationalist system. I'm saying let's do what works. And I don't think the blame game has anything to do with it - though I saw far more about the feckless Irish, lazy Greeks and corrupt Italians than any other sort of blaming.
Have a look at that Michael Pettis piece I posted above and the one from the IMF about Ireland. As I've said before I think Europe is something of a microcosm of the global financial crisis (Germany as the developing world, the periphery as the US), one of the core problems was capital imbalances which is why simultaneously there were numerous credit booms within the Eurozone. It wasn't always their own governments - Ireland and Spain had debt under 40% and weren't running deficits - or always their own people - Greece has one of the lowest rates of personal borrowing in the EU - but conditions within the Eurozone that created a glut of cheap credit. Which the Eurozone institutionally couldn't deal with and the consequences of which the Eurozone institutionally couldn't deal with. Some money went on useful things, other money was wasted. Greece is, as ever, an extreme case and probably the most blameworthy - or her governments were.
Leading from that a large part of the solution has to be European. There is no German or Irish answer to this crisis which is why the best steps forward have been those which are European - banking union, OMT, QE. However all of those are still somewhat problematic as each of them I believe operates through the national central banks so while they're good in principle I'm not convinced that they're moving away from a fragmentation of the Eurozone which is a real problem.
I'm not sure quite what you want to make impossible? In my view the thing you should probably try and make impossible is leaving the Eurozone.
QuoteNegotiations between nations without sticks and carrots? Tough since most diplomats regard their job as getting the best deal possible for their nation. How exactly do you get a diplomat to agree to something lesser without sticks and carrots? Appealing to them to trust that everybody else has their best interests at heart?
It's not about negotiations or sticks and carrots. Having the Central Bank threaten to cause a run on your nation's banks isn't diplomats with sticks and carrots. Neither's getting a democratically constituted government dismissed to form a technocratic government. As I say both may be justified, but I think these are dodgy waters for Europe to be getting into.
Quote from: Admiral Yi on February 12, 2015, 09:50:43 AM
What does debt peonage have to do with anything?
The same as my debtors' prison references.
Quote from: Sheilbh on February 12, 2015, 09:55:21 AM
The same as my debtors' prison references.
Which is what? Neither debt peonage or debtors' prison have the slightest relevance to Greece.
Quote from: Admiral Yi on February 12, 2015, 09:56:51 AM
Quote from: Sheilbh on February 12, 2015, 09:55:21 AM
The same as my debtors' prison references.
Which is what? Neither debt peonage or debtors' prison have the slightest relevance to Greece.
Remember my starting position on Greece's debt is roughly this by Daniel Davies - though I normally disagree with him and I'm not sure on his conclusions:
QuoteThe fact is, everyone knows that the total burden of Greek debt is too big to be serviced by the Greek GDP, and that if it isn't written down, then Greece will always be reliant on an increasing stream of official financing to meet its roll-overs. Everyone also knows, although some of them might not be ready to admit it to themselves, that an indefinite commitment to financing the roll-over of an ever increasing debt burden is a fiscal transfer in all but name.
Don't think of the Greek debt burden, either in cash € terms or as a ratio to GDP, as an economic quantity. It basically isn't an economically meaningful number any more. The purpose of its existence is as a political quantity; it's part of the means by which control is exercised over the Greek budget by the Eurosystem. The regular rituals of renegotiation of the bailout package, financing of debt maturity peaks and so on, are the way in which the solvent Euroland nations exercise the kind of political control that they feel they need to have if they are going to be fiscally responsible for the bills.
It is, therefore, totally inimical to the Eurosystem to hold out any hope of the kind of debt writedown that Syriza wants, as opposed to some smaller, cosmetic face value reduction or maturity extension.
http://crookedtimber.org/2015/01/25/greek-games-and-scenarios/
You think it is harmful to hold out hope of a debt write down? :huh:
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.
Shelf, you've lost me.
You posted an article that you said encapsulated your views and explained the relevance of debt peonage, but then you say you disagree with the author's bottom line and it has nothing to do with debt peonage.
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 :bleeding:
Quote from: Sheilbh on February 12, 2015, 10:20:36 AM
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
Quote from: Tamas on February 12, 2015, 11:06:22 AM
Quote from: Sheilbh on February 12, 2015, 10:20:36 AM
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.
Quote from: Sheilbh on February 12, 2015, 09:19:09 AM
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.
QuoteI 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.
Something's moving again by the looks of it.
Quote from: Admiral Yi on February 12, 2015, 08:42:10 AM
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.
Quote from: Sheilbh on February 12, 2015, 09:19:09 AM
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.
Quote from: The Minsky Moment on February 12, 2015, 03:31:36 PM
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.
Quote from: Tamas on February 12, 2015, 09:21:41 AM
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.
Quote from: MadImmortalMan on February 12, 2015, 04:08:26 PM
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.
Quote from: Zanza on February 12, 2015, 12:54:59 PMI 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.
QuoteAs 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.
QuoteGreece and Germany are Working Towards a Compromise
Don't Miss Out — Follow us on: Facebook Twitter Instagram Youtube
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.
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 :lol:
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' :lol:
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'.
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fstreettalklive.com%2Fimages%2F1dailyxchange%2Fmisc%2FGreece-Exit.jpg&hash=2c341a1d0bbf904b0f00838b275f3ba2d3c6077a)
Among the options in the picture, Greece should go with the ouzo.
And then there is this:
(https://fbcdn-sphotos-g-a.akamaihd.net/hphotos-ak-xpa1/v/t1.0-9/10993479_10153071935489060_4826256803212015545_n.png?oh=addfa42e5c3d1c2ca3205aa1af65b8c0&oe=55582B48&__gda__=1431384926_f0b21a404cde6b8648f61ff1623a4ce6)
Tsipras going to announce Dmitris Avramopoulos as candidate for President. Former ND Minister from the liberal wing of the party, currently Commissioner. Nice way of showing national unity/statesmanship and getting to appoint a SYRIZA Commissioner.
Apparently weekend technical talks went badly. Big differences.
But today's not really considered a hard deadline and there were a few good signs. I think a setting out the stalls phase really.
The groundhog sees his shadow, signifying six more months of Eurozone market-jacking.
Well that went well.
My bet at the minute: capital controls and the program ends on the 28th of Feb as scheduled with no replacement. Followed by negotiations and insanely the Eurogroup did leave themselves open to a third bailout - because that's what everyone needs :lol:
But there's still hints that there is a deal.
(Edit: In fact, maddeningly, everyone could probably write out roughly what a likely deal would look like we just have to have this absurd playing to the base ('as long as the Greece government doesn't want a program I don't have to think about options')).
QuoteThe groundhog sees his shadow, signifying six more months of Eurozone market-jacking.
This still seems reasonably accurate:
QuoteI completely underweighted the possibility they would flail around for three years. I thought it was just inconceivable to me they would let it get as bad as they ultimately did. But the early premonitions of that were in that initial debate. They were lied to by the Greeks. It was embarrassing to them because the Greeks had ended up like borrowing all this money and they were mad and angry and hey were like: "Definitely get out the bats." They just wanted to take a bat to them. But in taking a bat to them, they were feeding a fire that was in its early stages. There were a lot of dry tinders.
Edit: Both sides saying 'there is no plan B'.
So we're heading towards the "crappy deal at 5 am in a hotel in Brussels right before the deadline" scenario?
Quote from: celedhring on February 16, 2015, 04:06:40 PM
So we're heading towards the "crappy deal at 5 am in a hotel in Brussels right before the deadline" scenario?
Was there ever any doubt that's where it would end up? :lol:
After all, the best decisions are made when you're sleep-deprived and emotional. It's why Monnet designed it like this.
From the internet:
Quote from: https://twitter.com/evgenymorozovEurope's actual recovery plan for Greece:
Step 1) Bring Varoufakis to Che Guevara's level of fame
Step 2) Have them sell t-shirts
Quote from: Sheilbh on February 16, 2015, 04:11:30 PM
Quote from: celedhring on February 16, 2015, 04:06:40 PM
So we're heading towards the "crappy deal at 5 am in a hotel in Brussels right before the deadline" scenario?
Was there ever any doubt that's where it would end up? :lol:
After all, the best decisions are made when you're sleep-deprived and emotional. It's why Monnet designed it like this.
Sounds a lot like the Belgian decission System.
The new anti-corruption minister:
QuoteINSIGHT-PM Tsipras declares war at home on Greece's 'oligarchs'
Tue, Feb 17 13:00 PM GMT
By Stephen Grey
ATHENS, Feb 17 (Reuters) - Greece's new anti-corruption minister is not a politician, but he is in tune with the new crusading mood.
International attention on Greece since the Syriza party took over has focused on the leftist government's fight against an austerity package imposed from abroad.
But Panagiotis Nikoloudis, 65, a supreme court prosecutor and specialist on economic crime, is spearheading another battle declared by Syriza: this one on the home front, against some of the wealthy businessmen who dominate Greek political and economic life.
Speaking to parliament last week, Nikoloudis denounced an elite that included a "handful of families who think that the state and public service exists to service their own interests."
Such businessmen influence politicians and state officials or abuse their control of the media to unfairly win state contracts, change regulations to their advantage or escape prosecution for illegal conduct, critics say.
Prime Minister Alex Tsipras has announced radical measures aimed at what he calls the "oligarchs", including re-licensing private TV channels, ending "crony" bank loans for the well-connected, exercising the state's voting rights in the case of majority shareholdings of private banks, unwinding some key privatisations and aggressive tax audits of those with offshore bank accounts.
"We have made the decision to clash with a regime of political and economic power that plunged our country into the crisis and is responsible of Greece's depreciation on an international level," Tsipras told parliament last week.
Finance Minister Yanis Varoufakis has been equally blunt, declaring that his government will "destroy the oligarchy" in order to increase tax revenues, open markets and spur economic growth.
So far, no-one has been named in the crackdown, and few of Greece's top entrepreneurs have commented publicly.
But deals under scrutiny include the privatisation of the national lottery and planned sell-off of state shares in major ports.
Energy Minister and Syriza party member Panagiotis Lafazanis told parliament last week the government would seek the cancellation of the "scandalous purchase" of the old Athens airport, Hellenikon, by Lamda Development, a company controlled by the family of Greece's richest businessman, Spiros Latsis.
Latsis has not been personally criticised by Syriza.
Lamda responded with a statement last week lamenting "the discouraging message to the long-term private international investors that our country desperately needs."
Asked by Reuters to comment further, Latsis did not respond.
Businessman Yannis Vardinoyannis, whose family has interests in oil refining, shipping and the media, said in a statement to Reuters that Tsipras had a "valid point" in attacking "a certain regime that has played a significant role in influencing in a negative and corrupt way Greece's business environment", and that tackling corrupt practices would be good for economic growth and business confidence.
He also noted that "owning and operating a globally successful organization does not classify you as an 'oligarch'".
"We have faith in our new Government and I personally welcome this type of approach where fair play, the law and regulations will prevail," he said.
NOT JUST TARGETING THE RICH
Syriza under Tsipras has long been critical of how a handful of Greek families play a dominant role and enjoy political patronage in key sectors of the economy.
But some critics say the Syriza government should make a clearer separation in its public rhetoric between its drive against illegal activity like corruption and tax evasion and its wider political agenda to curb the power of the rich, which could scare away investors and spur capital flight.
Nikoloudis told Reuters in an interview he was not accusing the wealthy in general.
"I would be crazy to think like that," he said.
He is still waiting to be given a new office, staff or a budget. But, speaking at his old office, he said previous investigations into oil smuggling, banking fraud and tax evasion had identified perpetrators who were wealthy businessmen with political patrons.
"So I don't attack the rich, but the people I've found committing crime just happen to be rich," he said.
As a non-political outsider with a clean record, Nikoloudis is a popular appointment among Greeks who believe corruption is deeply embedded in society. He has a reputation for action, and says the financial intelligence unit, which he led until now, developed a system of audits that identified over 20,000 people whose assets do not match their tax declarations.
George Sourlas, a senior official at the justice ministry and a former conservative MP and deputy speaker of the parliament, said he "had to admit" the anti-corruption measures put forward by Tsipras were "very impressive so far."
Sourlas praised Tsipras's promise to curb oil smuggling, a racket in which un-taxed fuel for export or commercial shipping is diverted and sold instead for domestic consumption, evading sales tax due. Previous governments have been aware of the racket for years but did nothing, Sourlas said.
"The smugglers have the support of political power and a relationship with all political parties," he said, declining to elaborate.
TAX REVENUES
University professor Dimitris Mardas has been appointed deputy finance minister to spearhead measures to tackle both un-taxed revenues and corrupt procurement.
In an interview, he outlined the programme he has in mind to defeat the smugglers, from installing GPS systems on fuel barges in ports to new incentives for customs officers to forcing refineries to hand over more data.
Mardas said he hoped to recover a billion euros of missing annual revenue just from tackling fuel smuggling.
But sceptics question if Syriza's hopes for a windfall of tax revenues from the crackdown are realistic.
Harry Theocharis, a former chief tax collector and now a newly-elected MP for a centrist party, said Mardas was exaggerating the revenue lost by smuggling.
The bigger problem, he said, was that tax evasion and corruption in general extends well beyond the rich. But going after evasion by professionals or other restrictive practices such as unfair barriers to professions maintained by trade unions could threaten Syriza's political support.
Nikoloudis has acknowledged that targeting the richest and most powerful would not eliminate tax evasion.
In fact, he found the biggest companies in Greece were the most scrupulous in paying their taxes, unlike many self-employed people. "Specifically everyone who has a hotel or a taverna on an Aegean island systematically commits tax evasion."
An attack on corrupt behaviour by powerful interests was perhaps more about justice than revenue-raising, he said.
"Even if we accept that some people will take their money and go abroad, I would prefer to take that risk instead of seeing the economy of my country based on dirty money and corrupt enterprise."
Not every oligarch would be challenged, and not all crimes of the past could be prosecuted.
"I am not going to fight everyone. I don't want to break my nose. I want to change the system. That's my ambition." (Additional reporting by Nikolas Leontopoulos; Editing by Sonya Hepinstall)
Meanwhile more details have emerged from the Eurogroup. Basically the normal kabuki theatre of the Eurogroup is that there's an agreed statement even if it says nothing and papers over divisions. Lately the Eurogroup FinMin meetings haven't managed even that. Generally (with the partial exceptions of Cyprus and Ireland) because the bailout country wants and needs a loan the big issue is over how much and they agree to anything to get it. The best source for the thinking of the Eurogroup has always been Peter Spiegel of the FT who gets leaks of draft proposals at an astonishing rate.
This has now changed because the Greeks actually have a position and there are negotiations. If I had to guess they're the ones briefing and leaking to Paul Mason. So there are two sides leaking and spinning. The talks ended and there was no statement. Spiegel got the Eurogroup statement that the Greeks rejected as 'completely unacceptable'. Then Mason reported that there had been another draft statement that the Greeks had agreed to - which the Eurogroup totally denied. Then a couple of versions leaked (one from the day the before the meeting and the second from the end of the meeting) which had been produced by Moscovici. The Eurogroup position is now that that document was discussed and did exist but it wasn't agreed - the Greek (or Commission briefing) is that Djisselbloem as chair of the Eurogroup withdrew it from discussion.
There's not much difference of substance between the two. They both contain significant concessions from the Greeks. Especially that the program would be extended in some way and the government wouldn't move ahead with any of their plans during talks. The only difference that I think matters is that the Moscovici draft (which apparently also had the support of Draghi and Lagarde but was opposed by Germany and Spain especially) talks about all of this happening in the movement to a 'new agreement', while the Djisselbloem draft has those concessions but it's all about extending the current program.
So the basic division now seems to be that the Greeks want a new agreement (involving what we all know: substantially lower primary surpluses, replacement of 30% of the reforms, social measures - explicitly mentioned in Moscovici, but I think less important and a new form of oversight). The Eurogroup want the current program to be extended beyond its expiry on 28 February and once it's expired there will be 'flexibility' in its implementation (it's far less clear what this 'flexibility' means). One other interesting point is that both drafts include a little throwaway line to do with use of HFSF funds, but I think it may be indicative of a larger trend in the negotiations, that says the Eurogroup is agreeing to a request by the ECB, the IMF and the European Commission.
Hugo Dixon who has generally been very pro-Eurogroup in this has said that this looks like a mistake by the Eurogroup because the Moscovici draft did include important concessions and if Greece now defaults and leaves the Euro they have a credible argument that a newly elected government wasn't even given the chance or time to come up with their plans.
As I say the substantial difference seems quite small. So a deal should be attainable - Varoufakis has spoken of the European ability to pull a deal out of every seeming impasse.
However Greece is apparently going to request an extension of the program's loan facility but will not agree to extend, implement or complete the program. Tsipras has now also started to announce social measures and roll-backs of some reforms that will be introduced to Parliament this week - ie. we offered not to do anything unilateral, now we will. Which all looks like damage control to me. There are also reports from Athens (where, remember, Syriza are now polling at 45% and would have a clear majority) that if a deal can't be reached this time the government will resign and go to a snap election.
I think there'll still be a deal and it'll be decided at the head of government level, despite all the Eurogroup FinMin sound and fury. But it also looks like the chances of Grexit have increased and I don't think anyone can really predict the consequences of that :mellow:
Oh and Greek inflation is now -2.8% which won't help any debt dynamics.
On the positive side everything in the Core is peaceful and proceeding well.
http://www.reuters.com/article/2015/02/17/us-france-economy-idUSKBN0LL00320150217
QuoteFrench Prime Minister Manuel Valls defied critics from left and right on Tuesday by declaring he would ram a flagship economic reform bill through parliament by decree, bypassing backbench rebels but exposing his government to a no-confidence vote.
Oh :mellow:
Taking a step back a bit I think there's a couple of interesting angles on the Greek talks (one cause for optimism is France and Italy still seem to care and be optimistic, according to Berlin correspondents the BMF is furious which is more negative) but the biggest seems to be the potential Euro-Eurogroup conflict. The Commission seems to be staking out a very different position than the Eurogroup and, for all his faults, Juncker's a smart operator, has a lot of space to move and will have a definite (federalist) vision. It seems to me that an interesting thing that may develop over the next few months is the Commission (and possibly ECB) whose duty is to the European Union and the Euro and the 'European Project' having more disagreements with the Council. I doubt Juncker's 'questions' document will be the last we'll see of it.
Edit: And a useful reminder of Greek austerity:
(https://pbs.twimg.com/media/B-EwnyHCcAAhBmx.png)
Spending was increasing 2007-09 so it's worse than it looks and I think, regardless of how clean your politics are, that cuts on that scale will have humanitarian/social consequences.
Edit: And the Eurozone need to start outlining what happens in the case of a disorderly exit from the program. It wasn't envisaged and I don't think has been planned for, it's not enough as Schaeuble keeps saying that at midnight on the 28th 'that's it'.
This is the context in which Djisselbloem and the Eurogroup are instead amazingly considering a third Greek bailout.
Eurogroup still insisting on old fiscal targets. German Finance Ministry's rejected Greece's extension application - which was expected, but maybe not only three hours after it was made. So far there's no sign that Eurogroup willing to compromise at all.
Meanwhile Bundesbank voted against extending ELA (to solvent banks) and they look like the source for stories that the ECB governing council discussed capital controls - which the ECB have denied strongly.
Edit: Apparently German rejection wasn't expected. Greek language softened and Djisselbloem on board for using it as starting point for tomorrow's negotiations. Several journalists pointing out the total radio silence of non-German leaders since BMF statement.
Quote from: Sheilbh on February 18, 2015, 01:17:59 AM
http://www.reuters.com/article/2015/02/17/us-france-economy-idUSKBN0LL00320150217
QuoteFrench Prime Minister Manuel Valls defied critics from left and right on Tuesday by declaring he would ram a flagship economic reform bill through parliament by decree, bypassing backbench rebels but exposing his government to a no-confidence vote.
Oh :mellow:
Don't worry, just some political posturing by Valls. As for the economic reform bill, being prepared by a guy from Rotschild banking, under a president who said he hated the rich and was an enemy of high finance, I'm not sure if it's really good for the real economy.
Juncker and the SPD have come out and said Greek offer a 'positive sign'.
At some point surely Greece needs to stop the foreplay and word games and put a debt reduction number on the table.
Quote from: Martinus on February 14, 2015, 04:43:12 AM
And then there is this:
(https://fbcdn-sphotos-g-a.akamaihd.net/hphotos-ak-xpa1/v/t1.0-9/10993479_10153071935489060_4826256803212015545_n.png?oh=addfa42e5c3d1c2ca3205aa1af65b8c0&oe=55582B48&__gda__=1431384926_f0b21a404cde6b8648f61ff1623a4ce6)
It's missing at least Die Linke for Germany. That's being charitable and not counting the pro-Putin wing of the SPD.
Incidentally, there was an interview with Le Pen in a Polish right wing rag recently. She said (or at least that's what the cover claimed, as I don't buy that rag) that if her party wins, they are going to roll back the gay marriage in France. Any truth to that, or is this just empty posturing (I assume that it would have been a constitutional nightmare to do something like this, even if there was a political will).
It's possible. Even some conservatives said they would change the law to call these marriages unions. Whether it's only to look good for their conservative bases or a sincere commitment remains to be seen. This could be posturing. As for Marine, she's not pro homo-marriage but did not appear in the demonstrations against same-sex marriages to boost her base.
Her favourite topics being anti-immigration, anti-EU and pro-Putinism. The homo marriage thing seems to be a side issue for her, though a FN top member was recently outed in Vienna.
'pro-Putism'? :x
Is there anything so loathsome that the FN will not embrace it?
Well, they look more and more like the commies of yore, so why not looking up to Moscow? Specially, when Moscow pays the bills, as before.
Schaeuble's overreached I think. France and Italy have publicly supported Greek letter as, I believe, have some in Germany.
50 minute Tsipras-Merkel conversation this afternoon which is the key.
Quote from: Duque de Bragança on February 19, 2015, 11:39:48 AM
Well, they look more and more like the commies of yore, so why not looking up to Moscow? Specially, when Moscow pays the bills, as before.
I think it's the opposite. Putin's regime is closest you get these days in Europe to regimes like that of Franco, Mussolini and Hitler-sans-Holocaust.
It is conservative, hates gays, is allied with the church (but the state as a decidedly dominant partner), practices a form of "crony capitalism", and keeps moving towards an even greater restriction of democratic freedoms.
If you look at it in the CiV ideology terms, Putin's regime is quite clearly under Authoritarianism, not Order.
It's just Russia being Russia: defender of conservative Christian values in the face of Euro-decadence and defender of Christians in the Muslim world.
It's mostly a pose but Russia's basically using the same propaganda as they were in the 19th century.
Quote from: Sheilbh on February 19, 2015, 12:52:37 PM
defender of Christians in the Muslim world.
They are sure doing a shit job of it.
That's part of their PR for helping Assad.
Quote from: Sheilbh on February 19, 2015, 12:41:26 PM
Schaeuble's overreached I think. France and Italy have publicly supported Greek letter as, I believe, have some in Germany.
50 minute Tsipras-Merkel conversation this afternoon which is the key.
Schäuble hasn't overreached. Other than France and Italy who are lukewarm about the Greek letter, he has lots of backing from Spain, Portugal, Finnland, Netherlands, the Baltics etc.
http://www.economist.com/news/europe/21644237-greece-had-chance-make-euro-zone-work-better-it-blew-it-syrizas-scattergun
QuoteCharlemagne
Syriza's scattergun
Greece had a chance to make the euro zone work better. It blew it
CLIP-CLOPPING around Europe over the past few weeks, Yanis Varoufakis, Greece's dashing finance minister, has urged the euro zone to chart a new course. Endlessly forcing new loans upon indebted countries like Greece in the pretence that they will one day be repaid, he argued, was a strategy for depression and deflation. "The disease that we're facing in Greece," he told the BBC, "is that a problem of insolvency for five years has been treated as a problem of liquidity."
This view would not seem outlandish in the academic world that Mr Varoufakis recently quit. Few believe that Greece's debts, worth over 175% of GDP, will ever be repaid in full. But saying so betrayed a woeful misunderstanding of the euro zone's rules. If the European Central Bank shared Mr Varoufakis's view, it would have to cut off Greek banks, potentially driving Greece out of the euro. Indeed, earlier this month, when the minister visited the ECB in Frankfurt, Mario Draghi, its president, snippily told him to keep his opinion to himself. He has not repeated it since.
Mr Varoufakis's gaffe is a mere footnote in a list of mishaps that have characterised Greece's miserable experience in the euro. But it is depressingly typical for a government that, for all its high popularity at home, has squandered every opportunity to improve its lot, and ultimately that of the euro zone. Even as Mr Varoufakis and his colleagues in Greece's ruling Syriza party have loftily declared that the changes they seek would benefit all Europeans, not just Greeks, their negotiating strategy has been small-minded, self-defeating and naive.
Some of this may be put down to inexperience. A few Europeans were guilty of assuming that Alexis Tsipras, the prime minister, would perform what Greeks call a kolotoumba ("somersault") the instant he took office. But Syriza has no excuse for making idle references to the Nazi occupation of Greece. Nor has it helped by playing games with its partners in the Eurogroup of finance ministers. European officials have been incensed by a Hellenic habit of leaking supposedly private discussion papers.
The wrangling over whether to extend Greece's second bail-out, which expires on February 28th, has shown Mr Tsipras's government at its worst. Admittedly Syriza was dealt a bad hand by its predecessor, which before Christmas accepted an extension of only two months. But rather than accept an extension, Mr Tsipras and Mr Varoufakis have dug in their heels, robotically insisting on a "bridging" deal that would unlock euro-zone funding while allowing the government to slow or reverse reforms. Greece's creditors, unsurprisingly, were unimpressed. On February 19th Greece put forward a more conciliatory proposal to extend its loan. But this was almost immediately rebuffed by Germany. Trust has seemingly been so grievously eroded that Greek promises of discipline are not worth much in Berlin.
These spats matter far beyond the hurt feelings of a few politicians. Greece's survival in the euro depends on two factors largely outside its control: the willingness of the ECB to keep its banks on life support, and that of the Eurogroup to strike a long-term financing deal (Mr Varoufakis avoids the term "bail-out") to keep the country afloat. It has weakened its hand on both fronts.
The ECB's reasoning will rest in part on its assessment of the health of Greek banks. Depositors are withdrawing around €2 billion ($2.3 billion) a week. Syriza's stubbornness has hardened attitudes on the ECB's council. On February 18th, it offered only a small increase in liquidity support; and the support will end entirely if two-thirds of its members say so. Some are reported to favour capital controls as a better option. Greece will be on perilous terrain if it enters March without a deal in place.
As for a long-term deal, Germany and others have dangled sweeteners before Greece, including an easing of debt terms and a lower primary-surplus target. But these are prizes to be won at the end of talks, not the beginning. Syriza has already started to reverse some reforms, including privatisations and collective-bargaining rules, antagonising its creditors further. The Eurogroup will probably not withdraw its fiscal offers but, with trust in the Greeks at zero, the reform conditions that it will attach to a third bail-out will surely be tougher than ever.
Time is short, particularly if the Eurogroup fails to agree with Greece on the terms for a bail-out extension. Thanks to a collapse in tax revenues, the government could run out of cash before an IMF bond falls due in March. By squeezing suppliers and raiding funds, Greece may be able to finance itself for a few months, but without further help it will certainly be unable to meet debt repayments to the ECB in July and August.
Isolation is rarely splendid
Yet an essential formula remains unchanged: that neither Greece nor its partners want to see it forced out of the euro (although the odds of an accidental "Grexit" have shortened). So at some point Mr Tsipras will have to perform his kolotoumba, potentially at high cost. At home, having raised expectations of a big win (75% of Greeks support his tough line) he might face calls for a referendum or a new election.
The real Greek tragedy is that, with a bit more statesmanship, Mr Tsipras could have nudged Europe on to a happier path. The euro zone desperately needs a counter-narrative to its failed German-inspired policy of austerity. As leader of the hardest-hit economy, armed with a strong democratic mandate, Mr Tsipras was well placed to offer one. He could have sought allies against excessive austerity and for looser fiscal and monetary policy in places like Italy and France—and even inside the ECB. Yet by quibbling over his debt extension and backtracking so ostentatiously on sensible reform he has alienated more or less everyone. That is quite some achievement.
http://www.bloombergview.com/articles/2015-02-19/why-germany-rejected-greece-s-peace-offering
QuoteWhy Germany Rejected Greece's Peace Offering
The optics of today's events in Europe, admittedly, were bad. Greece seems to have come crawling to its creditors asking for an extension of its current bailout -- something it has resisted doing for weeks -- only for Germany to arrogantly dismiss the request.
From the German point of view, however, that's not what happened at all. Berlin believes Greece's radical leftist government is trying to weasel out of the bailout program by asking for an extension of just one of the legal documents that frame it, instead of the whole package. As far as German Finance Minister Wolfgang Schaeuble is concerned, this isn't a real compromise. And he has a point.
Here's what the letter Greece sent today to the group of finance ministers of euro area countries says:
In this context, the Greek authorities are now applying for the extension of the Master Financial Assistance Facility Agreement for a period of six months from its termination during which period we shall proceed jointly, and making best use of given flexibility in the current arrangement, toward its successful conclusion and review on the basis of the proposals of, on the one hand, the Greek government and, on the other, the institutions.
The agreement in question spells out how Greece's funding is disbursed and repaid. It's a lengthy legal document that makes no reference to any policy commitments Greece must make in order to receive the bailout funds. These were set out in separate programs, which the Greek parliament approved to get the bailout funding released.
Last Monday, Greek Finance Minister Yanis Varoufakis talked to the Eurogroup about bridging Greece's financial gap until a new bailout deal could be worked out. While signaling he wanted to keep the terms of the Master Financial Assistance Facility Agreement, he explained, in a speech whose text has since leaked, which reforms his government planned to continue implementing and which it didn't. He said he couldn't commit to Greece's previous privatization promises because of collapsing asset prices. He also objected to his predecessors' agreements on labor reforms and primary surpluses.
The Eurogroup, however, was resolved to hold Greece to the entirety of the previous deal, not just the part dealing with the disbursement and repayment of money. The wording of a draft Eurogroup statement that Greece apparently rejected on Monday referred to "the current program," not the Master Financial Assistance Facility Agreement.
This would explain today's statement from German finance ministry spokesman Martin Jaeger: "The letter from Athens is not a substantive solution. In truth it aims at bridge financing without the requirement to fulfill the program. This does not meet the criteria approved by the Eurogroup on Monday".
Here's how Holger Schmieding, chief economist at Berenberg Bank, explained it in a research note today:
Whether or not extending the "master financial assistance facility agreement" comes close to asking for an extension of the "current programme" is a matter which lawyers can discuss for ages. The financial assistance agreement itself does refer to full conditionality in its section about any disbursement of funds. But if Greece does not request any further disbursement of funds under the agreement, it may argue that it does not subject itself to full conditionality upon extending the loan agreement. The Greek request hence invites the interpretation that it wants to extend the assistance agreement solely as a basis for the ECB to keep Greece afloat.
In other words, the German finance ministry fails to see what the government of Greek Prime Minister Alexis Tsipras is giving up. It still wants a new deal on its debt (which is not even under discussion yet) and it's still rejecting previously approved reform programs. Extending the bailout agreement on such terms would simply give Tsipras more breathing space to seek a debt write-off, as he originally intended. It would also give him a boost with the Greek electorate, which would undoubtedly be impressed with its government's success in negotiating with the fearsome Germans.
Schaeuble and the other Eurogroup finance ministers are not against giving Tsipras the six-month extension, but they want assurances he will behave throughout that period as though he were someone else -- for example, his far less radical predecessor Antonis Samaras. Putting the millstone of the previous programs around Tsipras's neck would have the added benefit of playing well with German and other Central European voters. German Economy Minister Sigmar Gabriel said today he was glad Greece was ready to negotiate, but it couldn't be allowed to distribute the costs of its social policies to other countries in the euro area: "We can't explain to Slovak citizens why the minimum wage in Greece is twice as high but Slovak taxpayers should make transfers to Greece."
I still believe Germany will eventually make concessions to Greece to keep it in the euro area, but it is clearly determined to extract a price for its generosity. At the least, Berlin wants to force Tsipras and his team to give up most of their radical leftist ideas -- they might even want to drive them out of power in the process.
Contrary to the prevailing sense of urgency, there's time for more tug-of-war. "Deadlines are not firm in Europe," Schmieding notes, so even after Greece's current bailout runs out on Feb. 28, the world will not end: the ECB can still fund Greek banks and the country can hold off its creditors while talks with the Eurogroup continue. Expect more brinkmanship on both sides in the coming days -- and more meaningful concessions from Greece.
Finally I know what "bridging" means.
More later, but Djisselbloem had already accepted it (and NL, FR, and IT are a big chunk of the Eurozone) and for the first time the Eurogroup is publicly divided. That's an overreach.
BTW Shelf, it would now appear that your line about Greece not wanting any more money was totally wrong.
Quote from: Martinus on February 19, 2015, 12:48:35 PM
Quote from: Duque de Bragança on February 19, 2015, 11:39:48 AM
Well, they look more and more like the commies of yore, so why not looking up to Moscow? Specially, when Moscow pays the bills, as before.
I think it's the opposite. Putin's regime is closest you get these days in Europe to regimes like that of Franco, Mussolini and Hitler-sans-Holocaust.
It is conservative, hates gays, is allied with the church (but the state as a decidedly dominant partner), practices a form of "crony capitalism", and keeps moving towards an even greater restriction of democratic freedoms.
If you look at it in the CiV ideology terms, Putin's regime is quite clearly under Authoritarianism, not Order.
When I spoke of commies, I referred to the old French communist party. A party against the EEC, anti-immigration, anti-NATO who also advocated buying French. They weren't big human rights defenders and did not mind much the authoritarian or even totalitarian USSR.
As for not liking gays, Stalin and Brezhnev did not like them too. Marine is much more gay-friendly than her father. Easy, I know, but still true.
Austrian FinMin gave an interview to a paper in which he said the usual line. This morning the Ministry clarified his comments were before the Greek letter and Schaeuble's response. As I say I think when Germany's line is giving pause in Vienna and The Hague they've maybe overreached.
Pre-Eurogroup meeting of Lagarde, Juncker, Moscovici, Djisselbloem, Schaeuble and Varoufakis. I suspect that'll matter more than Eurogroup.
Quote from: Zanza on February 19, 2015, 02:15:44 PM
Quote from: Sheilbh on February 19, 2015, 12:41:26 PM
Schaeuble's overreached I think. France and Italy have publicly supported Greek letter as, I believe, have some in Germany.
50 minute Tsipras-Merkel conversation this afternoon which is the key.
Schäuble hasn't overreached. Other than France and Italy who are lukewarm about the Greek letter, he has lots of backing from Spain, Portugal, Finnland, Netherlands, the Baltics etc.
He's overreached in this sense. He's now put Germany way out on front in responding to Greece. The hardliner policy is a German policy and would not exist without Germany taking the lead. And it is a bone headed policy. It is increasingly likely Greece will exit the EZ and even if the fallout can be contained that is a bad policy outcome, a lot worse than taking up the Greek government's pretty reasonable proposal.
Quote from: Admiral Yi on February 19, 2015, 03:30:18 PM
BTW Shelf, it would now appear that your line about Greece not wanting any more money was totally wrong.
There have been a lot of verbal formulations but the policy has been the same since election day: reduce the primary surplus to around 1-1.5% yearly and adjust the interest payment schedule to reflect that.
What is reasonable about the Greek proposal?
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.
Quote from: Admiral Yi on February 20, 2015, 11:48:08 AM
What is reasonable about the Greek proposal?
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.
As I've said a bunch of times, in substance there are asking for a write-down, period.
It's reasonable because the debt is too high and austerity+ tight money has killed growth.
Just as the write-offs of Latin American debt in the 80s were reasonable. Although then as now the right thing was done only after exhausting all the other alternatives. This time there may be real negative consequences to European institutions.
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.
I also find it very odd that you describe a situation in which Germany is paying 1.4% and Spain 2% as "tight money."
It's tight money if your MoU doesn't allow you to borrow.
MoU?
Quote from: Admiral Yi on February 20, 2015, 12:14:48 PM
MoU?
Memorandum of Understanding. Mainly the guidelines you're expected to adhere to in exchange of bailout money.
Then it's not the money that's tight, it's the individual risk that is too high.
Quote from: Admiral Yi on February 20, 2015, 11:56:26 AM
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.
The underlying proposal to reschedule the debt and lower payments is reasonable; indeed not to do would be unreasonable.
Since the EU partners were not prepared to agree on that it was also reasonable to extend the EU backstop given that principal payments are coming due and an outright default is not considered desirable.
Quote from: Admiral Yi on February 20, 2015, 12:02:57 PM
I also find it very odd that you describe a situation in which Germany is paying 1.4% and Spain 2% as "tight money."
The ECB was running positive nominal rates for years when other central banks were at or near zero, notwithstanding the fact the Europe's deflation problems were worse. See other thread. Even now, nominal rates in excess of 2 percent translate into real rates also in excess of 2 percent. Which sadly appears well above the norms for actual or even potential growth in the Eurozone.
Quote from: The Minsky Moment on February 20, 2015, 01:16:40 PM
The underlying proposal to reschedule the debt and lower payments is reasonable; indeed not to do would be unreasonable.
Since the EU partners were not prepared to agree on that it was also reasonable to extend the EU backstop given that principal payments are coming due and an outright default is not considered desirable.
How have you learned that Greece requested a debt reduction and the creditors refused? All I've been reading is dueling euphemisms.
And to clarify, agreement is not required for a debt reduction/default; that can be done unilaterally. What is dependent on the creditors' agreement is the repercussions that attach.
Quote from: Admiral Yi on February 20, 2015, 01:23:46 PM
How have you learned that Greece requested a debt reduction and the creditors refused? All I've been reading is dueling euphemisms.
I'm reading the same thing but translating the euphemisms. All the Syriza proposals amount to the same thing - reducing the debt. Whether that is done by straight write-down or by "rescheduling" in any number of ways so that the NPV of the payment flow is lower is economically speaking six of one, half dozen of the other.
QuoteAnd to clarify, agreement is not required for a debt reduction/default; that can be done unilaterally. What is dependent on the creditors' agreement is the repercussions that attach.
Sure that's always the case in these situations. And usually an agreement is preferable to default if it can be reached. The additional factor present here is the possibility of Greek exit from the entire monetary union, which makes cooperation more desirable than usual.
My guess is the real sticking point is whether Greek banks will qualify for emergency ECB lending after a default renders them insolvent.
The fuckers could at least wait until I get my German bank account up and running.
Looks like four month extension agreed. Moscovici tweets 'on avance, on avance, on avance' :lol:
Ah... Looks a bit like a four month extension until Monday.
Those are four very short months indeed.
So far this looks very similar to the Varoufakis letter. Change seems to be in timing.
Quote from: Sheilbh on February 20, 2015, 03:07:27 PM
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.
QuoteThe 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].
Lagarde is interesting (:wub:) she's referred to statement as very dense and very deep and said 'read it very carefully'...
http://www.economist.com/blogs/buttonwood/2015/02/greece-and-eu
QuoteGreece 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.
Quote from: Zanza on February 20, 2015, 03:10:27 PM
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?
Quote from: Sheilbh on February 20, 2015, 03:14:15 PM
Lagarde is interesting ( :wub: )
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fwww.zerohedge.com%2Fsites%2Fdefault%2Ffiles%2Fimages%2Fuser3303%2Fimageroot%2F20150211_yellen.jpg&hash=88605b6c355fc4527fefc060733b9061c286b8ef)
Quote from: Admiral Yi on February 20, 2015, 03:22:12 PM
Quote from: Zanza on February 20, 2015, 03:10:27 PM
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.
Quote from: citizen k on February 20, 2015, 03:26:13 PM
Quote from: Admiral Yi on February 20, 2015, 03:22:12 PM
Quote from: Zanza on February 20, 2015, 03:10:27 PM
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.
Quote from: Zanza on February 20, 2015, 03:10:27 PM
QuoteThe 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:
QuoteThe 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:
QuoteThe 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.
Quote from: Admiral Yi on February 19, 2015, 03:30:18 PM
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.
QuoteAnd 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.
QuoteAnd 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 :lol:
QuoteThen 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.
QuoteCan 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.
My first impression is that you are not addressing any of the points I raised.
On that Buttonwood piece, it brings to mind Juncker's discussion piece for Eurogroup leaders:
QuoteJuncker sparks debate about a core eurozone union
At the EU summit Thursday (12 February) Commission President Jean-Claude Juncker presented ideas for a core eurozone union, a concept viewed with apprehension from numerous quarters.
Juncker presented an Analytical Note on the Economic and Monetary Union (EMU), prepared in close cooperation with the President of the European Council Donald Tusk, the President of the Eurogroup Jeroen Dijsselbloem, and the President of the European Central Bank, Mario Draghi.
The Euro Summit of 24 October 2014 invited Juncker, in close cooperation with Dijsselbloem and Draghi, "to prepare next steps on better economic governance in the euro area".
One of the arguments used by Juncker is that the eurozone has not recovered from the 2008 economic crisis in the same way as the US, which might point to the fact that an incomplete monetary union adjusts much slower to downturns than unions with a more complete institutional framework in place.
Although the Analytical Note doesn't go as far as asking for separate institutions, and that a special budget be set up for the eurozone, and also does not mention EU treaty changes, it raises a number of questions which lead in those directions.
"To what extent can the framework of EMU mainly rely on strong rules, and to what extent are strong common institutions also required?", asked Juncker.
In particular, the question "How can accountability and legitimacy be best achieved in a multilevel setup such as EMU?" appears to suggest that Juncker is considering the setting-up of a eurozone parliament.
Other questions include:
"How could a better implementation and enforcement of the economic and fiscal governance framework be ensured?",
"What instruments are needed in situations in which national policies continue – despite surveillance under the governance framework – to go harmfully astray?"
"To what extent is the present sharing of sovereignty adequate to meet the economic, financial and fiscal framework requirements of the common currency?"
As Juncker explained it, this analysis prepares the ground for discussion, and is meant to be the first step towards a report of the Four Presidents (Commission, Council, Eurogroup, ECB) on the future of the Economic and Monetary Union, expected for June. Member states are expected to be involved in the preparation of the report.
Central and Eastern European member states, which are not yet members of the eurozone, are wary of ideas promoting a core eurozone. To a certain extent, they are reassured by the fact that Council President Donald Tusk, a Pole, is also Euro Summit President and is closely involved in the preparations of future proposals.
Although the Report of the Four Presidents is expected in June, the Juncker proposals are likely to make waves in the UK, where general elections will be held on 7 May. British Prime Minister David Cameron has promised a referendum on the UK remaining in the EU if he wins the elections.
Cameron's plan is based on a "new settlement of Britain in Europe", which means a treaty change which doesn't necessarily go in the same direction as for setting up a core eurozone union.
Quote from: Admiral Yi on February 20, 2015, 04:01:30 PM
My first impression is that you are not addressing any of the points I raised.
Then I misunderstood them as I was trying. Can you put the points in a very clear way for me? :blush:
Interesting Greek response in the press seems to be that very few people expected a better deal than this was popular, so Syriza may lose support on the left but more than likely to keep their vote in the Greek middle (whose trust in PASOK and ND's been destroyed).
Onto Monday and then May :lol:
Edit: Incidentally the impression from the market people/financial journalists I follow is also that this is about as good a deal as Greece could expect (at this stage) and, on the substance, barely different from the Varoufakis letter.
I think the key difference is his letter was proposing a moratorium on fiscal targets and unilateral actions with new agreed reforms for the next six months, but extending the loan of the program. This extends the whole program for six months but (as Moscovici had floated) will use 'flexibility' within program to adjust fiscal targets and reforms, and no unilateral actions.
Edit: Also everyone's being very careful in using the formal language. It's all about the MMFA and the 'institutions' rather than the Troika. Lots in the statement about the 'current' program. On primary surplus targets Varoufakis has nicked my favourite Juncker line (and there are many....well three) by saying it's Europe at its best: 'constructive ambiguity' :lol:
Quote from: Sheilbh on February 20, 2015, 03:14:15 PM
Lagarde is interesting (:wub:) she's referred to statement as very dense and very deep and said 'read it very carefully'...
That's the lowest bar for :wub: I've ever seen! :lol:
I think she's difficult for a gay man to resist:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fichef.bbci.co.uk%2Fwwfeatures%2F624_351%2Fimages%2Flive%2Fp0%2F18%2F64%2Fp0186445.jpg&hash=9eac6799eeb39eb4a8476d704ce0900f76608795)
:wub:
Edit: Also having actually read the statement now I think this could be a good step forward. Which is something I don't think I've ever said after a Eurogroup summit.
As I say it all depends on Monday and possibly the EuCo the next day but it's a start and both sides are moving.
Quote from: Sheilbh on February 20, 2015, 04:02:49 PM
Then I misunderstood them as I was trying. Can you put the points in a very clear way for me? :blush:
Let's start with the one about tight money and the MoU. The fact that a condition of the bailout is that Greece's ability to borrow on the market is limited has nothing to do with the tightness or looseness of the euro. A currency is tight or loose. An individual borrower is not tight or loose.
Quote from: Admiral Yi on February 20, 2015, 05:36:53 PM
Let's start with the one about tight money and the MoU. The fact that a condition of the bailout is that Greece's ability to borrow on the market is limited has nothing to do with the tightness or looseness of the euro. A currency is tight or loose. An individual borrower is not tight or loose.
Okay. I was ignoring the tightness/looseness point because I've nothing to add to Minsky's point - not least because I don't understand it. Except this chart, if it means anything to you:
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fi.telegraph.co.uk%2Fmultimedia%2Farchive%2F02850%2Femu-money_2850421b.jpg&hash=cbde1cb2b5d5dea032f4ace9a4a302aa5d27d2d7)
I was just agreeing with Cel, I think part of the reason Spanish yields are low (though again, look in the other thread to see how many negative interest bonds there now are in Europe) is possibly because the government's limited in how many they can issue but as growth is low, there's deflation and they're still capital for banks they are, tragically, worth buying.
Edit: Incidentally as I think this does seem like the first step to giving Syriza a chance which I think they deserve as Greece's first non-corrupt leaders since Kapodistras it's probably fair to say that if they fail to govern reasonably competently and transparently and fail to take corruption and entrenched interests then it should probably be the end of the road for Greece.
Edit: And I really think Schaeuble is like the finance minister equivalent of Rumsfeld. I cannot understand any possible purpose for a line like this 'the Greeks certainly will have a difficult time to explain deal to their voters' :blink:
Quote from: Sheilbh on February 20, 2015, 05:44:22 PM
Edit: And I really think Schaeuble is like the finance minister equivalent of Rumsfeld. I cannot understand any possible purpose for a line like this 'the Greeks certainly will have a difficult time to explain deal to their voters' :blink:
Quote
As usual, the fine print of any European "deal" is revealed not only after the agreement, but after the US market close. So for all those waiting for the real punchline, here it is - it also is the reason why Greece got until Monday to reveal the list of "reforms" it would undertake:
"We're in trouble next week if creditors don't accept Greece's reforms", Greek Finance Minister Yanis Varoufakis says. "If our list of reforms is not backed by the institutions, this agreement is dead and buried."
That's bad. But... "But it's not going to be knocked down by the institutions."
For his sake, let's hopes he is correct in predicting what the Troika, pardon, Institutions will do. Because this is precisely what Schauble meant when he said that the "Greeks Certainly Will Have A Difficult Time To Explain The Deal To Their Voters (http://www.zerohedge.com/news/2015-02-20/shots-fired-schauble-says-greeks-certainly-will-have-difficult-time-explain-deal-the)": under the conditionality of the Troika's approval, the Tsipras government now has to walk back essentially all the promises it made to the Greek people - promises which by some accounts amount to over €20 billion in additional spending - or the Troika, pardon Institutions, will yank the entire deal and the Grexit can then commence.
And that's the bottom line.
It's also the reason Schauble was gloating: because he gave the Greek government just enough rope with which to hang itself.
Then again, if and when the Tsirpas government is booted out next once the Greek euphoria turns to disgust and disillusionment, does Germany really want to negotiate with Golden Dawn instead?
I'm more optimistic. Though there are multiple interpretations and a spinning war and obviously it's true that a lot of the hard work is ahead and as I say this is a four month extension until Monday. But, as Lagarde put it this is a timeline and the potential of fiscal targets based on economic reality not inaccurate, panglossian IMF projections made in 2012 is a big start. I do also think there's constructive ambiguity here: '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.'
On the whole pre-election promises thing it doesn't matter. None of the previous governments that have dealt with the Eurogroup could credibly say no. They all went, ultimately, semi-supplicating and weren't really negotiating terms. I think the expectation that Syriza would soft-pedal their policy plans once they got into office fell into that. For example everyone expected them to quietly stop talking about increasing the minimum wage. Because they didn't that's now a concession they can make, had they stopped talking about and then in negotiations said 'well we won't raise the minimum wage' they'd be met with shrugged shoulders because they'd have already conceded it. As it is not passing it without the support of the Eurogroup, the EC and the IMF is now, suddenly, a concession.
Within days of the election Varoufakis publicly said they wouldn't keep all their pre-election promises if it isn't possible with running a negotiated surplus. They've said they accept 70% of the program reforms. Everything Tsipras has said in his 'not a step back' speeches has provided him with bargaining chips - one of the Greek concessions is already no unilateral actions - and he never actually set a time except for the minimum wage but even then it was tied to economic recovery and Varoufakis has said they'll be looking at that 'creatively'.
So I think the Greek people expect a considerable amount of back-pedalling. They have a very strong left - the Eurosceptic Left Platform is a huge chunk of their party base and opposes any deal - but I think they're becoming a party that's bigger than that. But if you look at approval ratings of their handling of the negotiations it's at over 70% (as is staying in the Euro), they've got majority approval from voters of every other party including New Democracy and they didn't win the election because 36% of Greeks suddenly became 'radical' left, but because the other parties had so failed that they were the only alternative. They won the middle ground and I think they'll probably try and keep it (they could have issues with the Left Platform but it is interesting that they've constantly kept To Potami updated who could possibly join a coalition if needed). Despite all of that support under 50% actually think Syriza can make a deal. Even this is better than a - what New Democracy or PASOK ever got near and b - Greek expectation. The Greeks have had the expectations beat out of them. A government negotiating and delivering even some of their promises will be a novelty.
It is interesting but the Greek journalists I follow just after the election were saying that they wondered how Europe would take it when they discover there's not much radical about Syriza and are now saying that what they've got today - which is only a start - is about the best deal Greeks had hoped for. And watch Varoufakis' press conference, this was the most confident and assured he's been - he's either a very good actor or he really believes they've got a decent deal.
And I think there's an element of what I suggested in this. They've potentially got four months to prove themselves: '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.' If they're not good for that and they can't govern competently and non-corruptly then I think it will and should be the end of the road for Greece in the Euro. But they need a chance.
The quick analysis I read said that Greece pretty much surrendered its radical stance in everything: radical of TEH PEOPLE is over.
As I say there's a lot of spin.
I suppose part of it is weighing up what you think matters and is most important.
So if your emphasis is supervision, or 'structural reforms', or Syriza's election promises then I can see that they conceded a lot from January 25.
My point is they'd already conceded all of that by yesterday. What's new is that the Eurogroup have conceded on austerity and in my opinion the difference between a 4.5% to a 1.5% surplus is key.
Lots to do, obviously, but I think there's a very solid starting point here for a good deal for Greece which is a good deal for Europe.
Edit: And it is fair to say there are profoundly different opinions on this.
Edit: One niggle that's emerged. Because this is an extension as normal Greece won't get the next tranche until it ends. in April. Trouble is there's a €7 billion repayment to the IMF before which apparently no-one's considered as it's not at all clear at the minute, even if everything goes well on Monday, how that'll be paid....It may be that, at the minute, the Eurogroup and the Greeks don't actually know...:mellow:
I haven't seen any sign that the bad guys have agreed to 1.5% primary surplus.
Quote from: Admiral Yi on February 21, 2015, 02:08:06 AM
I haven't seen any sign that the bad guys have agreed to 1.5% primary surplus.
They've been saying it for weeks.
https://www.google.co.uk/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=varoufakis+primary+surplus+1.5%25&tbm=nws
Sorry. By bad guys I meant the troika. :P
They haven't. It will form part of the larger negotiations. My guess is they'll meet around 2-2.5%.
Greek cabinet approved their list of reforms. No doubt there'll end up being negotiations on them but they seem positive they'll be acceptable.
Edit: One thought. The ECB may be legally barred from its Troika role. The IMF will (sadly) end their program in 2016. Will it just be the Commission that has the supervisory role in Greece then? :mellow:
Interesting piece by James Galbraith floating around about his time working with Varoufakis over the last few weeks. He was amazed, as an old Congressional staffer, at the dysfunction of European bodies and how ad hoc everything is. Other interesting point is it confirms the impression that the IMF, EC and ECB were generally working quite productively with the Greeks, but things are far more difficult and fractious with the member states.
Is that surprising? The member states were putting up their own money.
Except for Germany and Slovakia that's somewhat true. It's not surprising just nice to have the suspicion confirmed.
It may matter more in the future too. All of those institutions have backed off quite considerably from their positions in 2010. It may matter as I think the Commission role is going to grow and Juncker's far more politically savvy and far, far more federalist than Barroso. I think he's bound to use the Eurozone crisis and, potentially, growing divisions within the Eurogroup to strengthen the Commission further :ph34r:
What I said is not true for Germany and Slovakia? :huh:
Yeah. Slovakia's only contributed money to the common European fund (as has Greece). In the first bailout which was bilateral loans managed by the Commission, Slovakia refused to participate.
German taxpayer money is only on the line if Greece defaults. Germany's loan came KfW the German development bank which issued bonds for the money, which in turn are guaranteed by the German government. So if the Greeks default the German taxpayer is on the hook but not otherwise.
Aside from that the German involvement is through, like the Slovakian and indeed Greek involvement, common European funds. The EFSF is, I think guaranteed by member states, so again they're only on the hook if they actually default (I don't know how the Greek bit of the guarantee would work in this case). Then there's the ESM (to which the Greeks have also contributed and are the 7th largest shareholder) - the ESM is guaranteed by the European Commission with the EU budget as collateral.
Nobody else is on the hook unless Greece defaults. It's like a definition of being on the hook.
What?
My point is yes member states did put up their own money for the Greek bailouts with the partial exception of Germany and total exception of Slovakia.
Obviously all member states are liable if Greece defaults - though I'm not sure how that actually works with the EFSF money (which is most of it).
Well it's a technically correct distinction without any real meaning.
In fact it could be argued that the Krauts put up disproportionately more of their own money, because they handed the upside away to private bond holders while keeping the downside risk.
It makes it more baffling that the member states are seemingly more indifferent to a Greek default than the technical institutions they've asked to help administer the bailout that have often also loaned the Greeks money (especially the IMF).
Edit: I have always had a simplistic interpretation of 'put up' as pay for :P
Edit: Also hard-left of Syriza have started slamming the government today. Shouldn't be an issue as PASOK and, I believe, To Potami have said they'll support the deal. But a positive nonetheless and a reminder that lots of Syriza really don't like or trust Varoufakis. He's very much there because Tsipras trusts him.
Quote from: Admiral Yi on February 22, 2015, 08:44:13 PM
In fact it could be argued that the Krauts put up disproportionately more of their own money, because they handed the upside away to private bond holders while keeping the downside risk.
Also because they save more money and for whatever reason, sovereign bonds have a favored position in their market. Why is that? Why are the Germans buying Spanish bonds instead of stocks, real estate or something else?
I think there may be a need for some tweaking in the reserve requirement rules. If all euro bonds are equal, then all euro nations will have equivalent rates, which happened. If some of those were too risky, then they should have had commensurate interest rates and also been exempt from being considered as reserve assets in banks. With all of the incentives that brings.
Quote from: Sheilbh on February 22, 2015, 08:24:50 PM
German taxpayer money is only on the line if Greece defaults. Germany's loan came KfW the German development bank which issued bonds for the money, which in turn are guaranteed by the German government. So if the Greeks default the German taxpayer is on the hook but not otherwise.
Eh? Isn't that a completely meaningless distinction? The KfW is a government institution that is by law guaranteed by the German taxpayer. Whether the KfW takes a loan in the bond market or the Finanzagentur (which is another government agency that handles German government debt) seems to be a technicality.
I am sure the other countries have some legal entities etc. that handle their government finances as well. It's not like "the Portuguese taxpayer" or "the French taxpayer" exists as a legal entity that would have loaned Greece money directly.
Looks to me like someone in the Anglosaxon press wanted to make a point about how Germany doesn't expose itself or something, but - as so often - doesn't understand how the German state is organised.
I personally don't think I understand it properly, but I've not seen anything that really explains it. Since my German is horrible shit.
Quote from: MadImmortalMan on February 23, 2015, 06:02:05 AM
I personally don't think I understand it properly, but I've not seen anything that really explains it. Since my German is horrible shit.
The obligations and assets of the KfW are not shown as part of the government balance sheet, so loaning money to Greece doesn't increase the German government debt figures. That might be where the perceived difference is.
As previously mentioned, Spain is taking an extreme hardline against Greece in these negotiations:
http://www.bloomberg.com/news/articles/2015-02-22/spain-said-to-lead-eu-push-to-force-terms-on-greece (http://www.bloomberg.com/news/articles/2015-02-22/spain-said-to-lead-eu-push-to-force-terms-on-greece)
QuoteSpain Said to Lead EU Push to Force Terms on Greece
(Bloomberg) -- As euro-region finance ministers turned the screw on Greece in Friday's talks, the group's usual enforcer, Wolfgang Schaeuble of Germany, was eclipsed by Spain's Luis de Guindos, according to two people with direct knowledge of the talks.
De Guindos took the toughest line with Greek Finance Minister Yanis Varoufakis as the bloc forced him to adhere to the terms of the country's existing bailout to retain access to official financing, the people said, asking not to be named because the conversations were private. When the group rejected Schaeuble's call for a Tuesday meeting to scrutinize Greece's plans to meet those conditions, De Guindos insisted, winning agreement for a teleconference, they said.
The Spanish government is particularly sensitive to the fortunes of the Syriza government in Greece because the party's Spanish ally, Podemos, has surged to the top of some recent polls. A victory for Varoufakis would have strengthened Podemos's argument that De Guindos's boss, Prime Minister Mariano Rajoy, was wrong to impose austerity on Spain.
The Spanish government "has always been constructive but it has to defend its interests," Guindos said on Friday. "A climate is developing in which the new Greek government is adapting to the rules that affect us all."
A spokeswoman for De Guindos said his ministry disagrees with the characterisation of the content and tone of the conversation. Spain is in favor of dialogue and flexibility within the existing rules and has shown its solidarity with Greece by contributing 26 billion euros ($30 billion) to its bailout at a time when its own financing conditions were not good, she said.
Struggling to fend off a sovereign default, the Greek government acceded to European demands that it respect the conditions of its existing bailout package at Friday's meeting in Brussels. The Greek government must submit a list of economic measures it will undertake by Monday and finance chiefs will then decide whether the proposals go far enough.
Dijsselbloem Successor
De Guindos, at times raising his voice, railed against Varoufakis in Friday's meeting, telling him he has to win the trust of his euro-region counterparts and learn how politics is conducted at the European level, one of the people said.
De Guindos's ministry denied that there was shouting or that the economy minister raised his voice, according to a spokeswoman.
De Guindos has been in the running to replace Jeroen Dijsselbloem of the Netherlands as head of the euro-region finance ministers' group when the Dutchman's term expires this year.
Spain's general election is due around the end of the year and Iglesias has pledged to restructure the country's 1 trillion euros ($1.1 trillion) of public debt if he wins.
Quote from: Sheilbh on February 20, 2015, 05:44:22 PM
Okay. I was ignoring the tightness/looseness point because I've nothing to add to Minsky's point - not least because I don't understand it. . . . I think part of the reason Spanish yields are low (though again, look in the other thread to see how many negative interest bonds there now are in Europe) is possibly because the government's limited in how many they can issue but as growth is low, there's deflation and they're still capital for banks they are, tragically, worth buying.
Interest rates are not necessarily a reliable guide to tightness or looseness of monetary policy. Milton Friedman famously referred to this as a "fallacy" and argued (in the context of Japan's "Lost Decade") that low interest rates were generally an indicator that monetary policy had been overly tight in the recent past. His short 1998 editorial in Japan could be pretty easily rewritten for the present by taking all the references to Japan and the BOJ and changing them to Europe and the ECB.
http://www.hoover.org/research/reviving-japan
QuoteInitially, higher monetary growth would reduce short-term interest rates even further. As the economy revives, however, interest rates would start to rise. That is the standard pattern and explains why it is so misleading to judge monetary policy by interest rates. Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy.
Japan's recent experience of three years of near zero economic growth is an eerie, if less dramatic, replay of the great contraction in the United States. The Fed permitted the quantity of money to decline by one-third from 1929 to 1933 . . . The Fed pointed to low interest rates as evidence that it was following an easy money policy and never mentioned the quantity of money. The governor of the Bank of Japan, in a speech on June 27, 1997, referred to the "drastic monetary measures" that the bank took in 1995 as evidence of "the easy stance of monetary policy." . . .. Judged by the discount rate, which was reduced from 1.75 percent to 0.5 percent, the measures were drastic. Judged by monetary growth, they were too little too late, raising monetary growth from 1.5 percent a year in the prior three and a half years to only 3.25 percent in the next two and a half.
After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.
http://www.bbc.com/news/world-europe-31580138
QuoteGreece will send a list of reforms aimed at securing a bailout extension to EU partners on Tuesday morning, missing a Monday deadline, officials say.
:lol:
:lol:
:lol:
Though in fairness to the Greeks it's apparently held up in Brussels. They did submit it in time to the EC EcoFin DG.
Quote from: Zanza on February 23, 2015, 05:50:40 AMEh? Isn't that a completely meaningless distinction? The KfW is a government institution that is by law guaranteed by the German taxpayer. Whether the KfW takes a loan in the bond market or the Finanzagentur (which is another government agency that handles German government debt) seems to be a technicality.
As I say my understanding of 'put up' is paid for. Slovakia hasn't at all and Germany's done so in a way that, like the EFSF, it's only exposed if Greece defaults - whereas most other countries did it through general government.
There's nothing right or wrong about that, but it's useful to remember when all the rhetoric about the 'x taxpayer' is swirling around. For example why the Slovakian taxpayer who's got a lower minimum wage than the Greek should have to bail them out anymore - they haven't, unless the Greeks default. Or de Guindos' €26 billion of Spanish taxpayers' money that's been given to the Greeks, most of that EFSF. In terms of putting up taxpayers' money the US has arguably put more money in than Spain so far through the IMF and the UK more than Finland. De Guindos is correct - if a deal isn't reached.
The "Spain gave 26 billion € of taxpayer money to the Greeks" is used more like a rhetorical club to bludgeon the Greeks and the Spanish public with, rather than a real economic worry. The Spanish government wants Syriza to eat as much crow as possible in order to prevent it looking good and pushing Podemos' electoral chances.
I think that's true of everyone.
Sensible, solid set of SYRIZA structural reforms.
Quote from: Sheilbh on February 24, 2015, 12:20:35 AM
:lol:
In terms of putting up taxpayers' money the US has arguably put more money in than Spain so far through the IMF and the UK more than Finland.
The IMF is not funded by taxpayer money.
Galbraith on negotiating in Europe: http://fortune.com/2015/02/20/greece-germany-yanis-varoufakis/
:lol: @ Christine Legarde on the Daily Show.
God, I'm gonna miss John Stewart. There is no other show right now that is comedic and has actual non-pop-culture public figures of that calibre.
One thing that puzzles me is why Greek banks are holding any Greek bonds at all. Why not other countries' bonds?
Healthy banks will avoid Greek bonds. Doomed banks are fucked anyway if Greece defaults, so why not profit from carry trade?
That's also something that happened in Spain.
I don't understand why Greek banks would necessarily be fucked if Greece defaulted.
Quote from: Admiral Yi on February 25, 2015, 05:44:43 PM
I don't understand why Greek banks would necessarily be fucked if Greece defaulted.
Don't countries normally underwrite their banks to a certain degree?
Quote from: Jacob on February 25, 2015, 06:05:38 PM
Don't countries normally underwrite their banks to a certain degree?
I don't know what you mean.
Quote from: Admiral Yi on February 25, 2015, 06:06:22 PM
Quote from: Jacob on February 25, 2015, 06:05:38 PM
Don't countries normally underwrite their banks to a certain degree?
I don't know what you mean.
Things like securing deposits. And whatever the hell it was the Irish did to back up their banks during the banking crisis, but that the Icelanders didn't.
Ah. Like deposit insurance.
OK, I can see see depositors yanking their money if deposit insurance disappears.
I wouldn't be surprised if the local regulator also encouraged local banks to keep local bonds.
Quote from: Jacob on February 25, 2015, 06:07:32 PM
Things like securing deposits. And whatever the hell it was the Irish did to back up their banks during the banking crisis, but that the Icelanders didn't.
The Irish didn't just secure despositors, they secured Irish banks bondholders and creditors :bleeding: