Galbraith on Greece

[jk]

Re: Pilger on Greece

I'm not an expert on dirty dealings, but I would expect there to be thousands of ways for such a deal to go down, and each would have its own fingerprints. To indulge such pure speculation:

A banker would probably want to start with a pleasant and plausible excuse for talking to an MP, to provide a legitimate cover.

I could imagine, for example, a banker approaching a member of parliament for help in "finding" the owner of an old numbered swiss bank account abandoned since WW2, and "believed" to belong to someone from the MP's constituency. A wink and a nudge could go a long way, and it is easy enough to give a clear indication that the poor holocaust victim would surely be happy to see it used against oppressive Germans, should no legitimate heirs be found. The account number and passcode could be handed over, and the only way to spot it would be a sudden appearance of unexplained cash being spent (or hidden in another oversees account) by the politician, or his campaign.


.

how about an email from the oil minister of nigeria?

seriously, though, we already have cyprus selling citizenship, straight up, no sleight of hand required. i'm not sure much subterfuge would be required.

[touchring]

Re: Whodathunkit?

I once told a Greek friend this:

If the US and Europe really wanted to do serious damage to Russia, they would hand over Greece to Russia, and say, "good luck!"

My friend nearly fell off his chair laughing.

Russia is over-rated by MSM, just as Saddam, Iran and BinLaden were over-rated before them.

China is the key to Greece's recovery. What many people don't realize is the undeclared Chinese economic alliance. Where China goes, the others like Taiwan, Singapore, South Korea, Indonesia and Thailand will follow, so you got a block of $14 trillion in combined GDP, more than 7 times Russia.

[ProdigyofZen]

Re: Pilger on Greece

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.

GNK, do you seriously believe this?

All Greek assets will be appropriated and in fact the first course of action has been to sell off as many assets as possible, evidenced by the Greek islands going on for sale already.

Greece will look more like Mexico than Germany.

Get ready for your new overlords.

Germany did what Kant implored nations to never do to ensure a perpetual peace:

1. "No secret treaty of peace shall be held valid in which there is tacitly reserved matter for a future war"
2. "No independent states, large or small, shall come under the dominion of another state by inheritance, exchange, purchase, or donation"
3. "Standing armies shall in time be totally abolished"
4. "National debts shall not be contracted with a view to the external friction of states"
5. "No state shall by force interfere with the constitution or government of another state"
6. "No state shall, during war, permit such acts of hostility which would make mutual confidence in the subsequent peace impossible: such are the employment of assassins (percussores), poisoners (venefici), breach of capitulation, and incitement to treason (perduellio) in the opposing state"

Specifically, #2, 4, and 5.

[gnk]

Re: Pilger on Greece

GNK, do you seriously believe this?

All Greek assets will be appropriated and in fact the first course of action has been to sell off as many assets as possible, evidenced by the Greek islands going on for sale already.

Greece will look more like Mexico than Germany.

Get ready for your new overlords.

Germany did what Kant implored nations to never do to ensure a perpetual peace:

1. "No secret treaty of peace shall be held valid in which there is tacitly reserved matter for a future war"
2. "No independent states, large or small, shall come under the dominion of another state by inheritance, exchange, purchase, or donation"
3. "Standing armies shall in time be totally abolished"
4. "National debts shall not be contracted with a view to the external friction of states"
5. "No state shall by force interfere with the constitution or government of another state"
6. "No state shall, during war, permit such acts of hostility which would make mutual confidence in the subsequent peace impossible: such are the employment of assassins (percussores), poisoners (venefici), breach of capitulation, and incitement to treason (perduellio) in the opposing state"

Specifically, #2, 4, and 5.

Yes, assets will be sold including rocks that have been sticking out of the sea, uninhabited, for centuries. It's funny, but when people hear islands are to be sold, they think of the bigger islands that have entire cities, towns and villages. As if the deal includes the villagers for free labor. It's nothing like that. These islands being sold will not be carted off to Germany, they will remain where they are, as islands do, and will be developed using whatever materials and services the local economy of neighboring developed islands or the mainland can provide. About time!

As for other assets like public utilities or transport. Most are overstaffed with bloated budgets, headed by inexperienced political appointees that do nothing and get paid extremely well.

Greece has been functioning worse than an emerging economy for decades. One of the main reasons islands have not been sold before is a question of title work. The greek land registry is abysmal, and the government never had incentive to improve it.

[astonas]

Re: Pilger on Greece

Yes, assets will be sold including rocks that have been sticking out of the sea, uninhabited, for centuries. It's funny, but when people hear islands are to be sold, they think of the bigger islands that have entire cities, towns and villages. As if the deal includes the villagers for free labor. It's nothing like that. These islands being sold will not be carted off to Germany, they will remain where they are, as islands do, and will be developed using whatever materials and services the local economy of neighboring developed islands or the mainland can provide. About time!

As for other assets like public utilities or transport. Most are overstaffed with bloated budgets, headed by inexperienced political appointees that do nothing and get paid extremely well.

Greece has been functioning worse than an emerging economy for decades. One of the main reasons islands have not been sold before is a question of title work. The greek land registry is abysmal, and the government never had incentive to improve it.

Perhaps the following argument will appear to be a string of technicalities to some, but I see it as crucial to applying Kant's point. Kant's rules are meant to apply to national territory (eg. boundaries and borders) and sovereignty, but not to the citizenship of private land owners.

Even if Greek islands are sold, they still fall within Greek borders, and may be taxed, governed, and even seized via eminent domain by the government of Greece, just as before. Regardless of the citizenship of the owner, they are still Greek islands. The "sale" of such assets thus remains at the (reversible) pleasure of the Greek government, as is the case for all sovereign states.

The same applies to other state assets. Even if they are sold, governance is retained by Greece. If a utility is sold, it is still subject to whatever regulations the Greek government places on it, and if a future Greek government decides to fix its rates or output, it has the ability to do so. If such restrictions make the utility unprofitable, the loser would be the investors who paid money for the asset. If sufficient anger builds up so that a revolutionary party is elected, assets could be nationalized, and again become the property of Greece. That's part of what it means to be sovereign over a nation, and that is retained by the people as long as Greece remains a representative democracy. Yes, markets may not like such actions. But it is the privilege of a sovereign to decide whether it will listen to them.

Now, to the extent that other states have a say in what laws Greece is passing, that does give up sovereignty. But even in this case, the sovereignty has been voluntarily given up by elected representatives, in exchange for something that they presumably hold to be a greater good for their people. This means that Kant's rules have not been violated here either. Kant's rules allow for the formation of a European Union, just as they allow for the creation of the United States of America. Sovereignty may be transferred to a larger elected organization, as long as it is done by the state's elected officials, representing the people. Kant would have absolutely no objection to the Greek deal.

His essay was written in 1795. He had seen what the United States had gone through to forge its own constitution prior to 1789, including the horse-trading of some state interests against others. His view was that states not only could, but should give up sovereignty to larger representative governments, to prevent war between them. That was what the rules for perpetual peace were all about in the first place! The EU was formed to implement those exact principles by gradually transferring sovereignty; doing so is not a violation of his rules, but rather their fullest realization.

For those who argue that the decision was not voluntary, but rather forced, it should be pointed out that there is no external military force that is engaged with Greece. Instead, Greece is being told that if it wants more of other nations' taxpayers' money, it must meet certain conditions. Its elected representatives have full freedom to not get more money, and retain full sovereignty. (In fact, that is precisely what the ordoliberal north would now prefer that Greece do, in the form of a Grexit.) So Kant would see this, too, as a part of the horse-trading that goes into each state's decision to join a union, on whatever terms its representatives can negotiate. Greece may not be crucial enough to Europe to get good terms, but if it doesn't like what it can get, the option to leave is still there. Not even the slightest threat of military intervention has been made, metaphorical references to exactly that notwithstanding, to make Greece stay in the EMU.

Those who claim that this choice is "forced" are thus not only inconsistent with Kant, they are implying that it was possible for Greece to have some other option that it did not have. But the only choices that any nation has, in peace, is to enter into a mutually agreed contract with other nations. Greece did have that choice here. Make a deal, or walk away. And at the end of any negotiation, that is always the only choice that both sides ultimately have. Is the deal, whatever it may consist of, better than no deal at all? Greece's elected representatives decided it was. (However much I may disagree, I very rightly don't get a vote.)

That's why the #ThisIsACoup movement is falsely representing the nature of the decision. The implication is that Greece did not have a choice. But Greece did have a choice. What the #ThisIsACoup movement is really demanding is thus not for Greece to be given a choice it didn't have, but instead for other nations to not be given the same choice. That would be a coup (actually, 15 of them, in parallel).

They are asking for Greece to be spared from making a decision that it would rather not make. But that's neither the same thing, nor is it realistic. All choices have consequences, without exception. The choice to take on more debt has a consequence. So does the choice to join the EMU. If one doesn't like those consequences, one is still free to choose the other option.

(There is one party that gets to change that rule of consequences, by being a global military hegemon, who can intimidate without any physical invasion at all. But in the world today, that certainly isn't Germany, or even all of northern Europe. That's the U.S.)



My personal opinion is that much of Greece's debt can, and should, be classified as "odious". That it was not all borrowed with a sincere intention to help the people of Greece. That for this reason Greece would be justified in defaulting on it by deflation. And that this is indeed the best path forward for Greece at this time.

But even with all that, Greece would still not be correct in expecting or demanding that there should be absolutely no consequences for having that debt in the first place. There will always be natural and unavoidable, if regrettable, consequences.

The ultimate price of a default will be weighed by the markets for debt, should a Grexit ultimately be chosen. If the lenders of the world agree, on average, that the debt was odious, then lending rates will recover relatively quickly, as long as newly-issued debt can be demonstrably shown to be differentiated from such an "odious" classification through appropriately transparent oversight.

If, on the other hand, the markets see the "odious" classification as merely a dodge to escape legitimate debt, or if the perception is that the new debt is on track to be just as unsustainable as before, then interest rate recovery will take far longer, until that judgement fades away. But either way, that feedback will permit the Greek government to rapidly adjust its policies to ones that are both credible, and numerically justifiable.

Now, if the markets are being rigged by banks who use massive leverage to manipulate markets to destroy national economies, so that they can wipe out their huge CDS obligations, and turn a small net position into a massive windfall, that's an entirely different matter! The way to tackle that is to destroy the ability of those banks to take any such actions. That is a legitimate role for a continental government like the EU, and should be pursued aggressively. Even a move as drastic as freezing all payments on CDSs related to Greek default could potentially be warranted, if such manipulations were found to be at work.

[Thailandnotes]

Re: Pilger on Greece

https://www.youtube.com/watch?v=xsD1I9bOgEs

[gnk]

Re: Pilger on Greece

Even if the debt by itself is arguably odious, keep in mind, it is still part of a larger package.

The debt itself is structured such that the interest rates are low, and the payments, as a percentage of gdp, not as large as they would normally be. I don't have the figures, but as of the last memorandum, as a percentage of gdp, Greece was paying roughly the same or less than Italy and Spain.

Furthermore, the package is not all stick and no carrot. This new agreement includes 35 billion earmarked for investments/subsidies*, to be paid out by 2020, thus lessening the impact of the debt payments and increased taxes on the general economy to a degree - at least until 2020 - which by then, I would hope more will be done in terms of debt re-structuring. The EU is structured such that it is easier to spend money on investments than it is to write off debt.

The VAT tax structure is brutal.

Besides that, the reforms are proceeding. Greece's judicial system is extremely inefficient. It can take years to resolve basic land or contract disputes, which hinders investment. Just yesterday, a vote was passed in the Legislature updating the current laws of civil procedure. When was the last time those laws were updated? In 1967. This would not have occurred without EU involvement.

Just yesterday, I read an article about new tax audits - aimed at freelancer professionals - doctors and lawyers for the most part. There are 600 individuals each with hundreds of thousands of euros in the bank, or have recently wired abroad such large amounts, yet their past tax declarations do not support such large deposits. Up to now, little to nothing has been done about that issue.

I hope we muddle through, I hope the reforms are implemented, including those that particularly address clientelism and patronage, and corruption, and I hope that a debt restructuring does take place.

This is the first time since the initial crisis that I see a real potential acceleration and actual implementation of reforms. There have been some reforms in the past, but not nearly what should have been done due to interest groups. In the past, it was mostly cuts to spending, and little to improve the bureaucracy or corruption.

*Greece has already benefited from preferential treatment: Greek programmes financed with EU funds in 2007-2013 receive a higher proportion of EU financing. Therefore, Greece is required to co-finance less than many other countries via a 10% "top up" of EU co-financing until mid-2016. In many cases, this means that the EU pays for 95% of the total investment cost under the 2007-2013 financing period (as opposed to the maximum of 85% otherwise applicable).

[gnk]

Re: Pilger on Greece

It's great to see a community coming together like that.

[Chris Coles]

Re: Pilger on Greece

Now, if the markets are being rigged by banks who use massive leverage to manipulate markets to destroy national economies, so that they can wipe out their huge CDS obligations, and turn a small net position into a massive windfall, that's an entirely different matter! The way to tackle that is to destroy the ability of those banks to take any such actions. That is a legitimate role for a continental government like the EU, and should be pursued aggressively. Even a move as drastic as freezing all payments on CDSs related to Greek default could potentially be warranted, if such manipulations were found to be at work.

Has anyone introduced the concept of addressing the inherent "leverage" involved with the debt? By that I mean, the banking related debt is always proportionately a small part of the savers deposit; leveraged to create new debt. Is it at all possible to argue that the only part of the debt that truly needs to be repaid is the proportion taken from the original savers deposit.

Yes, I do understand that the underlying problem is the need to resolve the banking companies accounts; but surely that is a matter than can be overcome?

[don]

Re: Pilger on Greece

from the July 7th Foreign Affairs magazine . . . .

A Pain in the Athens

Why Greece Isn't to Blame for the Crisis

By Mark Blyth


When the anti-austerity party Syriza came to power in Greece in January 2015, Cornel Ban and I wrote in a Foreign Affairs article that, at some point, Europe was bound to face an Alexis Tsipras, the party’s leader and Greek prime minister, “because there’s only so long you can ask people to vote for impoverishment today based on promises of a better tomorrow that never arrives.” Despite attempts by the eurogroup, the European Central Bank, and the International Monetary Fund since February 2015 to harangue Greece into ever more austerity, the Greeks voted by an even bigger margin than they voted for Syriza to say “no” once more. So the score is now democracy 2, austerity 0. But now what? To answer that question, we need to be clear about what this crisis is and what it is not. Surprisingly, despite endless lazy moralizing commentary to the contrary, Greece has very little to do with the crisis that bears its name. To see why, it is best to follow the money—and those who bank it.

The roots of the crisis lie far away from Greece; they lie in the architecture of European banking. When the euro came into existence in 1999, not only did the Greeks get to borrow like the Germans, everyone’s banks got to borrow and lend in what was effectively a cheap foreign currency. And with super-low rates, countries clamoring to get into the euro, and a continent-wide credit boom underway, it made sense for national banks to expand private lending as far as the euro could reach

So European banks’ asset footprints (loans and other assets) expanded massively throughout the first decade of the euro, especially into the European periphery. Indeed, according the Bank of International Settlements, by 2010 when the crisis hit, French banks held the equivalent of nearly 465 billion euros in so-called impaired periphery assets, while German banks had 493 billion on their books. Only a small part of those impaired assets were Greek, and here’s the rub: Greece made up two percent of the eurozone in 2010, and Greece’s revised budget deficit that year was 15 percent of the country’s GDP—that’s 0.3 percent of the eurozone’s economy. In other words, the Greek deficit was a rounding error, not a reason to panic. Unless, of course, the folks holding Greek debts, those big banks in the eurozone core, had, over the prior decade, grown to twice the size (in terms of assets) of—and with operational leverage ratios (assets divided by liabilities) twice as high as—their “too big to fail” American counterparts, which they had done. In such an over-levered world, if Greece defaulted, those banks would need to sell other similar sovereign assets to cover the losses. But all those sell contracts hitting the market at once would trigger a bank run throughout the bond markets of the eurozone that could wipe out core European banks.Clearly something had to be done to stop the rot, and that something was the troika program for Greece, which succeeded in stopping the bond market bank run—keeping the Greeks in and the yields down—at the cost of making a quarter of Greeks unemployed and destroying nearly a third of the country’s GDP. Consequently, Greece is now just 1.7 percent of the eurozone, and the standoff of the past few months has been over tax and spending mixes of a few billion euros. Why, then, was there no deal for Greece, especially when the IMF’s own research has said that these policies are at best counterproductive, and how has such a small economy managed to generate such a mortal threat to the euro?

Part of the story, as we wrote in January, was the political risk that Syriza presented, which threatened to embolden other anti-creditor coalitions across Europe, such as Podemos in Spain. But another part lay in what the European elites buried deep within their supposed bailouts for Greece. Namely, the bailouts weren’t for Greece at all. They were bailouts-on-the-quiet for Europe’s big banks, and taxpayers in core countries are now being stuck with the bill since the Greeks have refused to pay. It is this hidden game that lies at the heart of Greece’s decision to say “no” and Europe’s inability to solve the problem.

Greece was given two bailouts. The first lasted from May 2010 through June 2013 and consisted of a 30 billion euro–Stand By Agreement from the IMF and 80 billion euro in bilateral loans from other EU governments. The second lasted from 2012 until the end of 2014 (in practice, it lasted until a few days ago) and comprised another 19.8 billion euro from the IMF and another 144.7 billion euro disbursed from an entity set up in late 2010 called the European Financial Stability Facility (EFSF, now the European Stability Mechanism, ESM). Not all of these funds were disbursed. The final figure “loaned” to Greece was around 230 billion euro.

The EFSF was a company the EU set up in Luxemburg “to preserve financial stability in Europe’s economic and monetary union” by issuing bonds to the tune of 440 billion euro that would generate loans to countries in trouble. So what did they do with that funding? They raised bonds to bail Greece’s creditors—the banks of France and Germany mainly—via loans to Greece. Greece was thus a mere conduit for a bailout. It was not a recipient in any significant way, despite what is constantly repeated in the media. Of the roughly 230 billion euro disbursed to Greece, it is estimated that only 27 billion went toward keeping the Greek state running. Indeed, by 2013 Greece was running a surplus and did not need such financing. Accordingly, 65 percent of the loans to Greece went straight through Greece to core banks for interest payments, maturing debt, and for domestic bank recapitalization demanded by the lenders. By another accounting, 90 percent of the “loans to Greece” bypassed Greece entirely.

Telling though those numbers are, they still miss the fact that, after Mario Draghi took over from Jean Claude Trichet at the ECB in late 2011, Draghi dumped around 1.2 trillion euro of public money into the European banking system to bring down yields in the Long Term Refinancing Operations (LTROs). Bond yields went down and bond prices soon went up. This delighted bondholders, who got to sell their now LTRO-boosted bonds back to the governments that had just bailed them out. In March 2012, the Greek government, under the auspices of the troika, launched a buy-back scheme that bought out creditors, private and national central banks, at a 53.4 percent discount to the face value of the bond. In doing so, 164 billion euro of debt was handed over from the private sector to the EFSF. That debt now sits in the successor facility to the EFSF, the European Stability Mechanism, where it causes much instability. So if we want to understand why the combined powers of the eurozone can’t deal with a problem the size of a U.S. defense contract overrun, it’s probably wise to start here and not with corrupt Greeks or Swabian housewives’financial wisdom. As former Bundesbank Chief Karl Otto Pöhl admitted, the whole shebang “was about protecting German banks, but especially the French banks, from debt write-offs.”

Think about it this way. If 230 billion euro had been given to Greece, it would have amounted to just under 21,000 euros per person. Given such largess, it would have been impossible to generate a 25 percent unemployment rate among adults, over 50 percent unemployment among youth, a sharp increase in elderly poverty, and a near collapse of the banking system—even with the troika’s austerity package in place.

To fix the problem, someone in core Europe is going to have to own up to all of the above and admit that their money wasn’t given to lazy Greeks but to already-bailed bankers who, despite a face-value haircut, ended up making a profit on the deal. Doing so would, however, also entail admitting that by shifting, quite deliberately, responsibility from reckless lenders to irresponsible (national) borrowers, Europe regenerated exactly the type of petty nationalism, in which moral Germans face off against corrupt Greeks, that the EU was designed to eliminate. And owning up to that, especially when mainstream parties’ vote shares are dwindling and parties such as Syriza are ascendant, simply isn’t going to happen. So what is?

Despite Germany being a serial defaulter that received debt relief four times in the twentieth century, Chancellor Angela Merkel is not about to cop to bailing out D-Bank and pinning it on the Greeks. Neither is French President Francois Hollande or anyone else. In short, the possibilities for a sensible solution are fading by the day, and the inevitability of Grexit looms large. It is telling that Tsipras and his colleagues repeatedly used the phrase “48 hours”—sometimes “72 hours”—as the deadline for getting a new deal with creditors once the vote was in. This number referred to how long Greek banks could probably stay solvent once the score went to 2-0.

At the time of writing, the ECB is not only violating its own statutes by limiting emergency liquidity assistance to Greek banks, but is also raising the haircuts on Greek collateral offered for new cash. In other words, the ECB, far from being an independent central bank, is acting as the eurogroup’s enforcer, despite the risk that doing so poses to the European project as a whole. We’ve never understood Greece because we have refused to see the crisis for what it was—a continuation of a series of bailouts for the financial sector that started in 2008 and that rumbles on today. It’s so much easier to blame the Greeks and then be surprised when they refuse to play along with the script.

[gnk]

Re: Pilger on Greece

ANATOLE KALETSKY

JUL 22, 2015Why the Greek Deal Will Work

LONDON – Now that Greek banks have reopened and the government has made scheduled payments to the European Central Bank and the International Monetary Fund, does Greece’s near-death experience mark the end of the euro crisis? The conventional answer is a clear no.

According to most economists and political commentators, the latest Greek bailout was little more than an analgesic. It will dull the pain for a short period, but the euro’s deep-seated problems will metastasize, with a dismal prognosis for the single currency and perhaps even the European Union as a whole.

But the conventional wisdom is likely to be proved wrong. The deal between Greece and the European authorities is actually a good one for both sides. Rather than marking the beginning of a new phase of the euro crisis, the agreement may be remembered as the culmination of a long series of political compromises that, by correcting some of the euro’s worst design flaws, created the conditions for a European economic recovery.

To express guarded optimism about the Greek deal is not to condone the provocative arrogance of former Greek Finance Minister Yanis Varoufakis or the pointless vindictiveness of German Finance Minister Wolfgang Schäuble. Neither is it to deny the economic criticism of the bailout provisions presented by progressives like Joseph Stiglitz and conservatives like Hans-Werner Sinn.

The arguments against creating a European single currency and then allowing Greece to cheat its way into membership were valid back in the 1990s – and, in theory, they still are. But this does not mean that breaking up the euro would be desirable, or even tolerable. Joining the euro was certainly ruinous for Greece, but there is always “a great deal of ruin in a nation,” as Adam Smith remarked 250 years ago, when losing the American colonies seemed to threaten Britain with financial devastation.

The great virtue of capitalism is that it adapts to ruinous conditions and even finds ways of turning them to advantage. The United States in the mid-nineteenth century was badly suited for a single currency and a single economic structure, as evidenced by the Civil War, which was provoked as much by single-currency tensions as by moral abhorrence to slavery. Italy would probably be better off today if Garibaldi had never launched unification.

But once unification has happened, the pain of dismantling the political and economic settlement usually overwhelms the apparent gains from a break-up. This seems to be the case in Europe, as clear majorities of voters are saying in all eurozone countries, including Germany and Greece.

Thus, the question was never whether the single currency would break up, but what political reversals, economic sacrifices, and legal subterfuges would occur to hold it together. The good news is that Europe now has some persuasive answers.

Indeed, Europe has overcome what could be described as the “original sin” of the single-currency project: the Maastricht Treaty’s prohibition of “monetary financing” of government deficits by the ECB and the related ban on mutual support by national governments of one another’s debt burdens. In January, ECB President Mario Draghi effectively sidestepped both obstacles by launching a program of quantitative easing so enormous that it will finance the entire deficits of all eurozone governments (now including Greece) and mutualize a significant proportion of their outstanding bonds.

Moreover, European governments have belatedly understood the most basic principle of public finance. Government debts never have to be repaid, provided they can be extended in a cooperative manner or bought up with newly created money, issued by a credible central bank.

But for this to be possible, interest payments must always be made on time, and the sanctity of debt contracts must always take precedence over electoral promises regarding pensions, wages, and public spending. Now that Prime Minister Alexis Tsipras’s government has been forced to acknowledge the unqualified priority of debt servicing, and can now benefit from unlimited monetary support from the ECB, Greece should have little problem supporting its debt burden, which is no heavier than Japan’s or Italy’s.

Finally, Germany, Spain, Italy, and several northern European countries required, for domestic political reasons, a ritual humiliation of radical Greek politicians and voters who openly defied EU institutions and austerity demands. Having achieved this, EU leaders have no further reason to impose austerity on Greece or strictly enforce the terms of the latest bailout. Instead, they have every incentive to demonstrate the success of their “tough love” policies by easing austerity to accelerate economic growth, not only in Greece but throughout the eurozone.

This raises a key issue that the Tsipras government and many others misunderstood throughout the Greek crisis: the role of constructive hypocrisy in Europe’s political economy. Gaps between public statements and private intentions open up in all political systems, but these become huge in a complex multinational structure like the EU. On paper, the Greek bailout will impose a fiscal tightening, thereby aggravating the country’s economic slump. In practice, however, the budget targets will surely be allowed to slip, provided the government carries out its promises on privatization, labor markets, and pension reform.

These structural reforms are much more important than fiscal targets, both in symbolic terms for the rest of Europe and for the Greek economy. Moreover, the extension of ECB monetary support to Greece will transform financial conditions: interest rates will plummet, banks will recapitalize, and private credit will gradually become available for the first time since 2010. If budget targets were strictly enforced by bailout monitors, which seems unlikely, this improvement in conditions for private borrowers could easily compensate for any modest tightening of fiscal policy.

In short, the main conditions now seem to be in place for a sustainable recovery in Greece. Conventional wisdom among economists and investors has a long record of failing to spot major turning points; so the near-universal belief today that Greece faces permanent depression is no reason to despair.

[Chris Coles]

Re: Pilger on Greece

In short, the main conditions now seem to be in place for a sustainable recovery in Greece. Conventional wisdom among economists and investors has a long record of failing to spot major turning points; so the near-universal belief today that Greece faces permanent depression is no reason to despair.

Or, to put it another way; now the banks can return to lending even more debt to finance growth!!

[Thailandnotes]

Re: Pilger on Greece

http://www.nytimes.com/2015/07/26/op...pgtype=article

[astonas]

Re: Pilger on Greece

http://www.nytimes.com/2015/07/26/op...pgtype=article

Another view, in the same paper.

http://www.nytimes.com/2015/07/25/op...ht-region&_r=0

[astonas]

Varoufakis in private conference call with Hedge Fund Managers

http://www.marketwatch.com/story/sec...ing-2015-07-27

I found a few interesting things here: (1) Varoufakis appears to be quite eager to provide details to the kinds of hedge funds that have been manipulating Greece's fate in the markets, (2) he is clear that he did not have a mandate to take Greece out of the Euro, but that he intended to do so anyway, (3) and he also reveals that his idea of a "Plan B" involved hacking his own ministry - presumably illegally.

But the conversation wasn’t meant for the ears of the public, according to Varoufakis during the call. While discussing how he authorized a childhood friend to hack into the Greek finance ministry’s software (more on that later), he cautions listeners: “You can’t tell anyone that. This is totally between us.”

The audio recording itself was eventually released with Varoufakis' permission.

One more tidbit. Varoufakis has confirmed explicitly that Grexit was always far less about Greece than it was about France:

“Schaeuble has a plan. The way he described it to me is very simple. He believes that the eurozone is not sustainable as it is. He believes there has to be some fiscal transfers, some degree of political union,” he said.

“And he said explicitly to me that a Grexit is going to equip him with sufficient bargaining, sufficient terrorizing power in order to impose upon the French that which Paris has been resisting.”