Galbraith on Greece

[astonas]

Secret Drachma Plan

Looks like there was no secret drachma plan after all, so my other theory holds - Tsipras was incompetent as a negotiator, didn't understand what the stakes really were, and was way over his head. Only when faced with the prospect of Greece actually becoming a failed state on the level of a third world country, with no banking system and requiring airlifts of food supplies and medicines, did choose the lesser evil.

Apparently, Varoufakis was advocating for Grexit from the beginning, but couldn't get Tsipras to take the last step:

HL: You must have been thinking about a Grexit from day one...YV: Yes, absolutely.

HL: ...have preparations been made?
YV: The answer is yes and no. We had a small group, a ‘war cabinet’ within the ministry, of about five people that were doing this: so we worked out in theory, on paper, everything that had to be done [to prepare for/in the event of a Grexit]. But it’s one thing to do that at the level of 4-5 people, it’s quite another to prepare the country for it. To prepare the country an executive decision had to be taken, and that decision was never taken.


HL: And in the past week, was that a decision you felt you were leaning towards [preparing for Grexit]?
YV: My view was, we should be very careful not to activate it. I didn’t want this to become a self-fulfilling prophecy. I didn’t want this to be like Nietzsche’s famous dictum that if you stare into the abyss long enough, the abyss will stare back at you. But I also believed that at the moment the Eurogroup shut out banks down, we should energise this process.

HL: Right. So there were two options as far as I can see – an immediate Grexit, or printing IOUs and taking bank control of the Bank of Greece [potentially but not necessarily precipitating a Grexit]?
YV: Sure, sure. I never believed we should go straight to a new currency. My view was – and I put this to the government – that if they dared shut our banks down, which I considered to be an aggressive move of incredible potency, we should respond aggressively but without crossing the point of no return.
We should issue our own IOUs, or even at least announce that we’re going to issue our own euro-denominated liquidity; we should haircut the Greek 2012 bonds that the ECB held, or announce we were going to do it; and we should take control of the Bank of Greece. This was the triptych, the three things, which I thought we should respond with if the ECB shut down our banks.
… I was warning the Cabinet this was going to happen [the ECB shut our banks] for a month, in order to drag us into a humiliating agreement. When it happened – and many of my colleagues couldn’t believe it happened – my recommendation for responding “energetically”, let’s say, was voted down.

HL: And how close was it to happening?
YV: Well let me say that out of six people we were in a minority of two. … Once it didn’t happen I got my orders to close down the banks consensually with the ECB and the Bank of Greece, which I was against, but I did because I’m a team player, I believe in collective responsibility.

Varoufakis was advocating (and within his own domain of the EuroGroup of finance ministers, also taking) a highly confrontational path, toward Grexit. Tsipras was ok with going along with that plan as a negotiating method -- but not with actually taking the fateful last step.

When the Prime Minister and Finance Minister are not on the same page, the situation can get a lot worse than it needs to. In the case of Europe, politics is handled within the EC, and money within the EG. Most nations manage to be consistent between these bodies, since it is a crucial to national interests to be perfectly coordinated. Apparently this alignment was lacking on the Greek team.


As an aside, I found the following gaffe from the interview amusing.

HL: And George Osborne? What were your dealings like with him?YV: Oh very good, very pleasant, excellent. But he is out of the loop, he is not part of the Eurogroup. When I spoke to him on a number of occasions you could see that was very sympathetic. And indeed if you look at the Telegraph, the greatest supporters of our cause have been the Tories! Because of their Eurosceptism, eh… it’s not just Euroscepticsm; it’s a Burkean view of the sovereignty of parliament – in our case it was very clear that our parliament was being treated like rubbish.

The ultra-neoclassical, pro-Anglo-Saxon-banking Telegraph, and the anti-Europe Osborne, receive praise from the self-described International Marxist finance minister who would like to eradicate neoclassical thinking and anglo-saxon banking in the name of internationalism. This alone should give a clue that Varoufakis was never quite clear on who his enemies - the magnifiers of the crisis in Greece - really are.

Or rather, his gaffe and retraction may hint that he probably does know, but would rather stay focused on his chosen opponent for other reasons.

Not quite a good enough a liar for the political game, but willing to make an effort.

[astonas]

Re: Pilger on Greece

This explains Germany's extreme hostility to Anglo-Saxon banking interests. The modern (post Glass-Steagal) banking practices took hold in France and Switzerland in a big way, while Germany was still trying to fight them off.

Germany's movements against Anglo-Saxon style banking within its borders continue, but apparently there is always refuge for ex-Goldman and Goldman-style bankers ... in the government of the UK.

How do you know if you’re doing a good job in banking? Maybe you will come to hear some of the words and phrases used by former colleagues in the encomium celebrating Sajid Javid’s great and lustrous banking career, published – perversely – in the Guardian.Javid is now business secretary in the British government. Before going into politics, he spent 20 years in banking and worked in London, New York and Singapore, both at Deutsche and Chase Manhattan. And by the sounds of things, he is sorely missed.

A former colleague at Chase in NYC says Javid was introduced to him as, “Off the charts good.” The man was: “Like a priest in a suit…disciplined as they come. – Very methodical, spotless.” Another Chase colleague gushes that Javid was: “very creative, very energetic, and a very likable guy”. He was driven, but not “aggressively ambitious,” which is good in an industry where most people are rabidly self-promoting. Put simply, a US-based economist says Javid was just, “very, very clever.” Not only that, but Javid was good at, “crisis situations.” Most interestingly for anyone trying to make their way in finance, we are informed that he was an “avoider of conflict,” “an internal thinker” and someone who could negotiate Deutsche’s, “political waters.”

Ultimately, however, Javid left banking. These days he’s negotiating political waters for real, but if you aspire to rise to the top in finance feel free to use him as your role model.

Separately, large questions are again being raised about Anshu Jain. The Wall Street Journal has had sight of that nasty report from BaFin, the German banking watchdog, which criticizes Jain personally and says he presided over a culture in which problems were ‘hidden’ or ‘entirely negated’ instead of addressed openly. Euromoney suggests that Jain’s unexpected ‘resignation’ seemed more like an, ‘abrupt dismissal of the incumbent – a firing by any other name.’ It also thinks that Deutsche’s troubles run deeper than a CEO dump: ‘Its investment bank is filled with managers who were schooled in the Goldman Sachs wannabe business model pursued by Jain, a model that often included testing regulatory limits in a way that seems a poor fit for the current environment.’

[touchring]

Re: Pilger on Greece

Again, I was not trying to make Varoufakis out as providing answers; simply that I find him open minded and not "Marxist".

To me, Varoufakis is one of the few politicians in Greece that is willing to speak and does not hide from the truth. I have the feeling that this bailout will fail within a short period of time and will buy only 6 months to a year at the most.

Why I think so? Here's my personal opinion.

Knowing that the 200% debt is unsustainable, Greeks with money in the bank will start to move all their cash out of Greek banks once and for all.

Greeks with real estate investments will also start selling their real estate before the ultimate nationalization and revert to the Drachma comes. Everyone will be fleeing Greece. Foreign investors won't come because their know Greece's economy will be frozen by the new austerity. The likes of Wilbur Ross and Paulson, already burned by recent stock losses will suffer further losses as Greek banks need to recapitalize again.

Just a wild speculation, would this also be the real reason the Greece parliament has voted yes? MPs need a little more time to dispose of their assets in Greece. With Greek banks frozen, they can't do that unless they voted yes!


http://www.wsj.com/articles/investor...ion-1437047435

Investors in Greek Banks Face Wipeout on Recapitalization

Hedge funds taking short-term punt likely to be hit hard


By GILES TURNER

Updated July 16, 2015 12:05 p.m. ET0 COMMENTS

Even as Greek politicians on Thursday passed austerity measures to ensure a new bailout, investors in the country’s banks faced the prospect of their holdings being “wiped out” under the terms of a €25 billion recapitalization plan.
Major investors including Fairfax Financial Holdings and Wellington Management Group decided to increase their stakes in Greek banks in recent months, according to data from the Athens Stock Exchange.
But at present, bank shareholders and creditors are at “risk of significant losses,”François Cabau, an economist at Barclays, said in a recent note to clients.
To avoid imposing losses on depositors and senior bondholders at the Greek banks, shareholders will likely be “wiped out” under the European Stability Mechanism recapitalization, according to Alberto Gallo, head of macro credit research at Royal Bank of Scotland.
Early on Thursday morning Greek politicians voted for measures required for a €86 billion bailout from the eurozone and the International Monetary Fund. The European Central Bank also raised its emergency lending to Greek banks, as a result of “several positive things that have happened” in Greece’s negotiations with creditors, a move that may lead to a partial reopening of some banking services.

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But any new recapitalization of the banks is likely to hit shareholders and certain bondholders under a new set of European regulations—the Bank Recovery and Resolution Directive—enacted at the beginning of the year.
Shareholders, the directive says, “should be severely diluted or wiped out” under a so called ‘bail-in’, which aims to stabilize a failing bank without the need for bailout by public funds. However, Greece has yet to pass these regulations into law, although it is set to vote on doing so in the coming days.
The new regulations don’t differ much from the existing Greek framework, according to a report from law firm Orrick, Herrington & Sutcliffe LLP. In April Greek lender Panellinia Bank was liquidated under current laws, with certain assets folded into Piraeus Bank. Shareholders, which included German cooperative lender DZ Bank, were wiped out.
Greek banks are currently closed and have little capacity to absorb losses when they reopen. Markus Allenspach, head of fixed income research at Swiss bank Julius Baer,said the banks’ capital buffer is of poor quality, and that shareholder “equity will also be written down.”
The Greek state already owns sizable chunks of the major banks following a recapitalization in 2013. Existing shareholders were given warrants by the government to buy back their stakes; the share prices have, however, continued to collapse following the bailout.
Shares in National Bank of Greece SA, the country’s largest bank, have fallen 18% this year, and by around 50% over the past year. Shares in Piraeus Bank A.S. are down 56% this year. Alpha Bank A.E. is down 31.2%. Eurobank Ergasias S.A shares are down 23%.
Past troubles haven't put all investors off the Greek banking sector. Analysis of data from the Athens Stock Exchange over the past few months reveals some blue-chip investors who raised their stakes, while others decided to sell.
In April 2014 Fairfax Financial Holdings, the Canadian investor led by Prem Watsa,invested €400 million into Eurobank following a capital raise, which equated to a 8.7% stake in the bank. The bank’s share price has steadily fallen. Nevertheless, Fairfax upped its stake to 12.9% in early May this year. Today, this stake is worth around €265 million. Fairfax declined to comment.
Capital Group also invested just over €550 million in last year’s capital raise by Eurobank, around 13% in the bank. At the beginning of 2015 the asset manager began to sell down its stake. By June 26, the last day before markets closed, this had fallen to 5.6%, worth around €115 million. A Capital Group spokesman didn’t respond to requests for comment.
At the beginning of the year The Capital Group also held a 3.3% stake in Piraeus Bank, then worth around €200 million. But by the end of the first quarter, the U.S. investor cut its position to below the reporting threshold on the Athens Stock Exchange. Piraeus’s share price had fallen 64% over the first quarter.
Wellington Management Group held a 1.7% stake in Piraeus as of March 23, worth around €40 million. Wellington has held on to the stake. A spokeswoman declined to comment.
Other well-known investors have also chosen to stick it out. Hedge fund Paulson & Co holds a 2.1% stake in Piraeus, a position first taken out in late April 2014, worth €243 million. It is now worth €51 million. A spokesman for Paulson & Co declined to comment.
The Norwegian sovereign-wealth fund, which holds a combined stake of just over €50 million in Alpha Bank and Eurobank Ergasias, said in a statement that “We’re assessing the most probable outcomes and how to act given different scenarios. Currently we’re observing the situation and waiting to see how this unfolds.”
U.S. asset manager Dimensional Fund Advisors, which holds a small $6 million position in Piraeus Bank, said: “Our fully diversified approach to investing means we have exposure to a wide range of securities across markets and asset classes, including stocks like Piraeus.”
Jonas Floriani, banks analysts at KBW Research, and who focuses on Greek banks, said: “I suspect [new investors] were a short-term bet. If you look at the fundamentals it is difficult to convince that Greek banks are a good investment outright.”
Others have decided to sell. Investors including the Dutch national pension fund, Franklin Templeton, TIAA-CREFF, and emerging market hedge fund Charlemagne Capital, have all ditched their stakes in Greek banks in months before markets froze in late June, according to people familiar with the situation.
According to one equities broker based in Athens, who focuses on Greek stocks, said predominantly U.S. and U.K. hedge funds have been buying stakes that others have been looking to unload.
One trader at Eurobank said speculative investors, including a number of Greek retail investors and high net worth investors, picked up stocks in Greek banks.

[Chris Coles]

Re: Pilger on Greece

The challenge with the southern European left is that they (appear) to be drawing inspiration from Marx in the form of Leninism/Stalinism. In ordoliberal northern and eastern Europe, this is obviously anathema -- everyone was raised in constant fear of exactly that. Consequently, while their social attitudes DO take some lessons from Marx, it is in its Trotskyite form. I think that makes a big difference. The resultant ordoliberalism appears to be better able to adapt the concept of the prioritization of the worker, to the observation that markets permit man's motivation to be directed swiftly and efficiently.

It is worth noting that this flavor of Marx also seems to be more effective at resisting Anglo-Saxon incursions than the leftist ideologies of the mediterranean states. I don't think this is a coincidence. Marx pointed out some pretty important stuff, much of which is particularly true for Anglo-Saxon states today. But Leninism/Stalinism is another matter, adding elements which I frankly find hard to justify in any context.

I honestly can't tell if Varoufakis gets this, and is forced to oppose ordoliberalism due to geographic and political circumstance (he'd have no effect if he dared side ideologically with the "german overlords") or if he actually doesn't understand it. Sometimes he seems to fall in one category, others in another. But it should be noted that the flavor of Marx that he seems to take his lessons from is the one that had not only been implemented (ultimately unsuccessfully) in Russia, but was also unsuccessful in blocking Anglo-Saxon banking's incursion throughout the mediterranean states.

When I read Varoufakis, he always seems to be falling into this trap, even if he is mild-mannered, and appears rational in presentation. He writes as though it is the only variant that exists at all, and that there is no ordoliberal challenge to neoliberalism. I haven't read nearly as much of his writing as you, Chris. Perhaps there are depths in him that I don't see. To me he is in large parts correct in identifying the problem, but is (ideologically, not based on personal negotiation skills) incapable of solving them.


You've read more Varoufakis than I, Chris. What's your take?

Edit: I should point out that I inform my opinions with this piece on Marx, written by Varoufakis in 2013: CONFESSIONS OF AN ERRATIC MARXIST IN THE MIDST OF A REPUGNANT EUROPEAN CRISIS, in case that helps.

In a very real sense, Astonas, you highlight the underlying paradox; many viewpoints; no settled strategy. Starting with Varoufakis and his, (and another economist, Stuart Holland), Moderate Proposal for Europe, given massive publicity in the FT, underpinned by five retired European Prime Ministers signing up to it and my own criticism http://www.chriscoles.com/page5a.html where I make the following point; essentially, a debt based economy always drains away prosperity; the associated need for equity capital.

Varoufakis as an excellent example of the continuing need for open debate. His entire life has been a journey of discovery; first that the economics he was being taught did not fit with his underlying instinctive thought processes. Leading to his creating his own viewpoint of where conventional economics is wrong; in turn leading to his now well polished ability to argue against convention.

But; arguing against does not deliver a solution; a point made by several herein.

On the other hand, my input has been entirely to describe a potential solution to deliver 30 million new, free enterprise based, private sector jobs in Europe. In effect, I can only describe a solution. You Astonas have delivered a wonderful description of the underlying problems; others around us are able to describe THEIR viewpoint where it differs from any other.

Very kindly, Woodsman makes me out to be a superman; I am very much Not! All I can deliver is my viewpoint; to reach a workable solution; many viewpoints have to be both delivered and then ultimately; accepted by a very large number of others; each with their own personal credibility laid on the line; each determined to maintain their credibility - regardless of the needs of others.

That makes for a potent mix.

We only need to see the UK Labour Party in complete disarray to see that the conventional "Left", in every shade of Left, has lost touch with a workable solution. So everywhere there is a debate; it must be brought to a potential solution; one that may be seen as acceptable to the majority.

By chance, over the last few weeks I have attended the OECD Forum 2015, the OECD Global Forum on Responsible Business Conduct and the Launch of the OECD Business and Finance Outlook. Yes, there were times when others around me in the audience were saying that, when I took the opportunity to stand up and ask questions; I seemed to be speaking common sense. But the audience was immaterial. A wonderful demonstration being when at the Business and Finance Outlook, I asked: (Paraphrased the full question):

Referring to the introduction and plan of work of Adam Smith's The Wealth of Nations: " The number of useful and productive labourers, it will hereinafter appear, is everywhere in proportion to the quantity of capital stock which is employed in setting them to work, and to the particular way in which it is so employed." In which case with more than ten of million young people unemployed in Europe; By how much is Europe under-capitalised?

http://video.oecd.org/1858/en/Launch...oundtable.html (Go to 02:10:20 onwards)

As you can see, everyone has a different answer. It is this challenge, to get across a potential solution, that is by far and away the greatest challenge; when we are faced with the people that are driving the entire debate from within their own enclosed institutions.

[Thailandnotes]

Re: Pilger on Greece

This is very rich...(but about Portugal)

http://therealnews.com/t2/index.php?...&jumival=14272

I'm wondering about an update from Spain.

[Thailandnotes]

Re: Pilger on Greece

and Galbraith in Harpers....Wow!

The full brutality of the European position on Greece emerged last weekend, when Europe’s leaders rejected the Greek surrender document of June 9, and insisted instead on unconditional surrender plus reparations. The new diktat—formally accepted by Greece yesterday—requires 50 billion euros’ worth of “good assets”–which incidentally do not exist—to be transferred to a privatization fund; all financial legislation passed since SYRIZA took control of parliament in January to be rolled back; and the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) to return to Athens. From now on, the Greek government must get approval from these institutions before introducing “relevant” legislation—indeed, even before opening that legislation for public comment. In short: as of now, Greece is no longer an independent state.

Comparisons have been drawn to the Treaty of Versailles, which set Europe on the path to Nazism after the end of World War I. But the 1968 Soviet invasion of Czechoslovakia, which ended a small country’s brave experiment in policy independence, is almost as good an analogy. In crushing Czechoslovakia, the invasion also destroyed the Soviet Union’s reputation, shattering the illusions that many sympathetic observers still harbored. It thus set the stage for the final collapse of Communism, first among the parties of Western Europe and then in the USSR itself.

Six months ago one could hope that SYRIZA’s electoral victory would spark a larger discussion of austerity’s failure and inspire a continent-wide search for better solutions. But once it became clear that there was no support for this approach from Spain, Portugal, or Ireland; only polite sympathy from Italy and France; and implacable hostility from Germany and points north and east, the party’s goal narrowed. SYRIZA’s objective became carving out space for a policy change in Greece alone. Exit from the Euro was not an option, and the government would not bluff. SYRIZA’s only tool was an appeal to reason, to world opinion, and for help from outside. With these appeals, the Greeks argued forcefully and passionately for five months.

In this way, the leaders of the Greek government placed a moral burden on Europe. Theirs was a challenge based on the vision of “sustainable growth” and “social inclusion” that has been written into every European treaty from Rome to Maastricht—a challenge aimed at the soul of the European project, if it still had a soul. No one in the Greek government entertained illusions on that point; all realized that Greece might arrive at the end of June weakened, broke, and defenseless. But given the narrow margins for maneuver, which were restricted both by SYRIZA’s platform and the Greek people’s attachment to Europe, it was the only play they had.

European creditors responded with surprise, irritation, exasperation, obstinacy, and finally fury. At no time did the logic of the Greek argument—about the obvious failure, over the past five years, of austerity policies to produce the predicted levels of growth—make any dent. Europe did not care about Greece. After resigning as Greek finance minister, Yanis Varoufakis described the negotiation process:

The complete lack of any democratic scruples on behalf of the supposed defenders of Europe’s democracy. The quite clear understanding on the other side that we are on the same page analytically … [And yet] to have very powerful figures look at you in the eye and say “You’re right in what you’re saying, but we’re going to crunch you anyway.”

What Europe’s “leaders” do care about is power. They posture for their own parliaments and domestic polities. There is an eastern bloc, led by Finland, which is right-wing and ultra hard line. There is a model-prisoner group—Spain, Ireland, and Portugal—which is faced with Podemos and Sinn Fein at home and cannot admit that austerity hasn’t worked. There is a soft pair, France and Italy, which would like to dampen the threats from Marine Le Pen and Beppe Grillo. And there is Germany, which, it is now clear, cannot accept debt relief inside the euro zone, because such relief would allow other countries in trouble to make similar demands. Europe’s largest creditor would then face a colossal write-off, and the Germans would face the stunning realization that the vast debts built up to finance their exports over the past fifteen years will never be repaid.

SYRIZA was not some Greek fluke; it was a direct consequence of European policy failure. A coalition of ex-Communists, unionists, Greens, and college professors does not rise to power anywhere except in desperate times. That SYRIZA did rise, overshadowing the Greek Nazis in the Golden Dawn party, was, in its way, a democratic miracle. SYRIZA’s destruction will now lead to a reassessment, everywhere on the continent, of the “European project.” A progressive Europe—the Europe of sustainable growth and social cohesion—would be one thing. The gridlocked, reactionary, petty, and vicious Europe that actually exists is another. It cannot and should not last for very long.

What will become of Europe? Clearly the hopes of the pro-European, reformist left are now over. That will leave the future in the hands of the anti-European parties, including UKIP, the National Front in France, and Golden Dawn in Greece. These are ugly, racist, xenophobic groups; Golden Dawn has proposed concentration camps for immigrants in its platform. The only counter, now, is for progressive and democratic forces to regroup behind the banner of national democratic restoration. Which means that the left in Europe will also now swing against the euro.

As that happens, should the United States continue to support the euro, aligning ourselves with failed policies and crushed democratic protests? Or should we let it be known that we are indifferent about which countries are in or out? Surely the latter represents the sensible choice. After all, Poland, the Czech Republic, Croatia, and Romania (not to mention Denmark and Sweden, or for that matter the United Kingdom) are still out and will likely remain so—yet no one thinks they will fail or drift to Putin because of that. So why should the euro—plainly now a fading dream—be propped up? Why shouldn’t getting out be an option? Independent technical, financial, and moral support for democratic allies seeking exit would, in these conditions, help to stabilize an otherwise dangerous and destructive mood.

[astonas]

Re: Pilger on Greece

Greece needs a bridge loan fast because it can take up to four weeks to hammer out the agreement and fund Greece with the three year program. So far, the only viable option is through the EFSM. Britain wasn't too cooperative at first, but has since backtracked. This is the most likely scenario.

Britain's support for Greece appears to start and end with Euroscepticism. The last I heard, Osborne was just starting to escalate against it. Do you have a link that describes the backtracking?

[Polish_Silver]

what DO greeks want?

I agree with much of what you said.

. . .

Did he not realize that the vast majority of Greeks don't want to go drachma?

. . ..

Do you think there is agreement on many Greeks on realistic goals and policies?

If they do not want a Drachma, do they want to make the changes needed to stay with the Euro?

This is complicated by the fact that a number of changes are needed, probably including:

1) more comprehensive tax collection

2) tightening of pension terms and other public benefits

I'm just thinking of the USA situation right now, and relatively few people will say that a budget deficit is ok, but if you
start talking about cutting the budget or raising taxes, people quickly split into camps.

[Woodsman]

Re: Pilger on Greece

This is very rich...(but about Portugal)...

A specter is haunting Europe. Please turn on the night light.

PRÍNCIPE: Like, my lullaby is, was the song from the most important revolutionary singer in Portugal...It's a lullaby, so it's not--.
JAY: ...What's the gist of it?
PRÍNCIPE: It's just like, sleep, my little kid--and it's just a lullaby song. But anyway, it's--and that the morning star will be here tomorrow, and I will be here with you, and so on. It's just a really a lullaby song. But, anyway--.

[gnk]

Re: Pilger on Greece

Britain's support for Greece appears to start and end with Euroscepticism. The last I heard, Osborne was just starting to escalate against it. Do you have a link that describes the backtracking?

The Brits found a way to support bridge financing for Greece:

Osborne says UK contribution to Greek loan will be fully protected


EU approves emergency loan to Greece

[gnk]

Re: Pilger on Greece

Alexis Tsipras and the false prophets

NIKOS KONSTANDARAS

In the end, Prime Minister Alexis Tsipras made the great U-turn. For the zealots of national self-destruction, he was too hasty in his surrender to “blackmail” and the “coup” by our European partners. For the rest of us, he was slow to see the light, and today Greece faces many more problems because of its collision with reality. It is encouraging that the premier and enough of his aides were able to see the cost of persisting with his previous policy, but there are still so many people in our politics and society who have no grip on reality that we cannot be sure that we will soon find ourselves in an age of consensus, cooperation and stability.

Tsipras was forced to sign a three-year agreement with our partners for a new loan of up to 86 billion euros in exchange for further austerity and reforms. This was not the result he expected when, six months ago, he declared the end of the troika of creditors and the end of austerity. Seeing suddenly that his policy was a threat to the nation, he was forced to change tack and to find the strength to dare to clash with his hardline comrades in the party.

On Thursday, cadres of the Left Platform faction plotted how they would exploit the fact that 39 members of Parliament had not backed Tsipras’s agreement with the creditors. This rift can only lead to a split in the ruling SYRIZA party. The next opinion polls will determine whether Tsipras will have the upper hand or whether he will be on guard continually against comrades who insist on nonexistant solutions at a time when the prime minister has to show a strong hand in government while cooperating with the opposition parties that backed him in Parliament on Wednesday.

For its part, Europe on Thursday took the first steps toward healing the wounds of the past few months. The Eurogroup backed the three-year deal, while the finance ministers of the 28 EU member-states approved a short-term loan for Greece’s needs over the next two months. Moreover, the European Central Bank increased the limit on emergency funds for Greek banks by 900 euros, raising hopes that they may open soon. Many more steps will be needed to normalize the situation, but when money begins to flow into the parched economy it will be evident that Tsipras was right to avoid catastrophe. (It is true that our partners made mistakes – and were often brutal – in their handling of the crisis; it is also true that we demanded more attention than is usual in relations between states.)

The new measures will be tough but they provide the hope of stabilizing the country in a familiar environment, without our following false prophets into the desert. We will also be able to benefit from new policies that the eurozone will adopt, thanks in part to the weaknesses that the Greek crisis highlighted.

With the popularity that he enjoys, with his abrupt maturing over the past couple of weeks, Tsipras has the legitimacy to implement reforms as well as the need to prove that his turnaround was justified. He will be under continual fire from his more revolutionary comrades in SYRIZA. However, if he keeps his head, if he avoids the arrogance of power, if he unites rather than divides, Alexis Tsipras will be in a position to serve his country well.

[vt]

Re: Pilger on Greece

This is certainly a difficult time for the Greek people, and I feel for them and their plight. Southern Europe is having a difficult period, so Greece is not alone.

But this evil German line some are pushing is a false accusation. Southern Europe has managed finances poorly for centuries. Spain has been bankrupt seven times since 1800; Portugal and Greece five times. The Germans were not a part of past bankruptcies.

No one here can show mathematically how a working population can retire at 55 (some at 50) and be supported by a pension system when many live into their 80's and some 90's. No system can support the percentage of government employees you see in Greece. No pension system can support unmarried daughters of government employees with a lifetime pension. This entire system was doomed to failure. In addition very few pay their full tax responsibility. Greece has the worse record of tax cheats.

The Greeks should never have been allowed into the union. Goldman is responsible and some of the banks have current responsibility for keeping this charade going.

But this victim act many are presenting has little basis. I doubt if Greece is able to stay in the union. Default may allow them to recover on a solid foundation. Of course humanitarian aid of food and medicine will be needed during the adjustment period.

[astonas]

Re: Pilger on Greece

The Brits found a way to support bridge financing for Greece:

Osborne says UK contribution to Greek loan will be fully protected


EU approves emergency loan to Greece

Britain on Thursday said it had secured a legally binding deal with other European Union countries to fully protect any British money used in a 7 billion euro bridge loan to Greece.

LOL. I shouldn't have been surprised, I really shouldn't. So Britain is happy to make any loans, no matter how risky, as long as all the risk is backstopped exclusively by the taxpayers of other countries, which means weighted most heavily on the ordoliberals currently fighting the City of London's banks.

They couldn't make it more emblematic of the greater crisis if they tried.

Perhaps if he'd offered to use Credit Default Swaps to bet against repayment at the same time to "hedge" the risk. But I suppose that's better done by the banks, whose accounts can be both secret, and by virtue of fiat, unlimited.


And I can't help but think back again to the remarkably prescient Yes, Minister:

Circumstances have only shifted slightly since 1980. Currently they've got the Germans against the French (who are representing Anglo banking interests), with tiny Greece stuck in between, being ground to dust. Diplomacy indeed. They'll offer just enough help to keep the fight going.

I'm sure their banks will make a killing.

[gnk]

Re: Pilger on Greece

The best thing any country (especially small country) can do in order to minimize becoming a future victim is to get its own house in order. It's no coincidence that countries that have difficulty governing themselves often fall prey to foreign interests - they are easy pickings. Vultures circle dying prey, right?

That's why I may seem abrasive often times in this thread. I see many articles by economists and analysts that overlook this important fact, or don't give it its due significance, and to overlook it to me, is to unintentionally help perpetuate the corruption and disfunctionality. They give Greek governments and the Greek people an excuse.

Greece needs reform, period. It needs a forcing function, and to me, a gradual method of reform would be best. Not a hard crash which would, in my mind, be worse than the 50 billion Euro asset sale Schaeuble wants. In a hard crash, Greece becomes a former Soviet Republic - a carcass ready for the vultures. And in that scenario, the current 50 billion in asset sales would seem miniscule compared to what would be up for sale in a hard crash.

As for Goldman's role in Greece's entry - I have a different take on it. Greece begged Goldman, it had no other choice. Why? Because even back then, in the late nineties, Greece was ready to implode. The drachma was a zombie currency and entry into the Euro could delay the inevitable.

In not only delayed it, it made the subsequent crash harder. Look at the drachma verse dollar the last few years before Greece's entry.


fredgraph.png

[astonas]

Re: Pilger on Greece

That's why I may seem abrasive often times in this thread. I see many articles by economists and analysts that overlook this important fact, or don't give it its due significance, and to overlook it to me, is to unintentionally help perpetuate the corruption and disfunctionality. They give Greek governments and the Greek people an excuse.

Greece needs reform, period. It needs a forcing function, and to me, a gradual method of reform would be best. Not a hard crash which would, in my mind, be worse than the 50 billion Euro asset sale Schaeuble wants. In a hard crash, Greece becomes a former Soviet Republic - a carcass ready for the vultures. And in that scenario, the current 50 billion in asset sales would seem miniscule compared to what would be up for sale in a hard crash.

I can certainly understand why one might be abrasive, and more so than you've been. This is an incredibly trying time for all people in Greece, and what is abstract to us is very tangible pain to you. Once again, you have my deepest sympathies for what you are going through, though I don't pretend to be in a position to feel it with you, it is likely more than I can imagine.

So instead of going around in an ideological circle again, let's try setting ideology to the side completely, and ask the purely pragmatic question, not about what "ought" to happen, but about what "is" happening.

Even if one agrees completely that what Greece needs most is a gradual reform through steady external pressure, and also that excessive emphasis on banks alone provide convenient excuses for anti-corruption forces, it's still increasingly hard seeing how Greece could actually get such beneficial pressure within the Eurozone, going forward.

While the ordoliberal states have been trying to supply this (with very limited success) in the past, what I am seeing now is capitulation. Not capitulation to Greece, of course, but rather to the idea that there are two fights going on here, and keeping pressure on Greece is secondary to the much bigger (just numerically larger) struggle over reducing Anglo-Saxon banking interests in Europe. That's what Schäuble's Grexit talk is about. An admission that it cannot struggle on both fronts at once. A pivot from a position mostly facing Greece, to one facing France and Britain. Giving in on the former, to focus on the latter. And in doing so, creating large financial pressure on the still over-leveraged anglo-saxon banks that have been feeding off the crisis -- and arguably still hold the stings of power in Europe. They certainly do in the ECB.

That means they are willing to STOP the reform pressure on Greece (essentially accepting all existing debts as devaluation losses) in the name of countering these banking interests in France and Italy. That's the opposite of a forcing function for Greece. That pressure would be applied to France and Italy instead.

And they do so acknowledging that Greece does need what you say it does. But they have tried to provide that, and it's done no discernible good, but instead severely tarnished their own efforts to re-join humanity after WW2, and the cold war. The Eurozone is now so divided that it no longer appears willing and able to play the role you seek, from either side. Where there was previously one "pro-pressure" faction for Greece, now it is diminishing to none, as Grexit enters the talks formally.

The way I see it, Northern and Eastern Europe were willing, but they were not capable of overcoming Goldman's (French and Italian) influences in the ECB and IMF. The Anglos are capable, if they were to side with the ordoliberals, but are unwilling to do so, because there is geo-strategic and financial benefit in resisting them.

Thus, the ordoliberals have no choice but to face the Anglo-Saxons at this point. They're a party that needs convincing, just as Greece does, to address major economic problems. And a much more powerful one, at that. As banks, they are also more likely to be convinced by the numbers. In other words, it might be the quicker battle to fight, since a bank is a better approximation for homo economicus than any actual human, much less a society.

There's a lot one could say about why this shift is happening, but ultimately I think it boils down to this: If what you are doing isn't working, and everyone hates you for even trying to do it anyway, then it might be time to stop, and redirect. That's what the ordoliberals are doing by formally entertaining Grexit.

In your opinion, which entity in the Eurozone is, at this time, and going forward, both willing and capable of providing what you seek for Greece?

Because in another bailout cycle, it may not be the germanic ordoliberals.

I'll add that one might well wish that the ordoliberals wouldn't give up yet, but it's hard to see Grexit proposals as being anything but a consideration of exactly that.

So while I understand and agree with your sincere wishes and hopes for Greece to be driven to reform, I just am struggling to find reasons to expect that outcome, within the Eurozone.

As for Goldman's role in Greece's entry - I have a different take on it. Greece begged Goldman, it had no other choice. Why? Because even back then, in the late nineties, Greece was ready to implode. The drachma was a zombie currency and entry into the Euro could delay the inevitable.

It not only delayed it, it made the subsequent crash harder. Look at the drachma verse dollar the last few years before Greece's entry.


[ATTACH=CONFIG]5666[/ATTACH]

By this logic, will further delays not make the crash harder still? If not, why not?