Galbraith on Greece

[Woodsman]

Re: Hudson on Greece

[btw u.s.a. $54.7K, so in theory we could afford an economy like the nordic countries, but that seems a pretty remote possibility the way things are structured here.]

In theory.

In practice we spent $16K each to pay for a $5 trillion dollar war on terror or $8.5 million every single day in aid to Israel or $27 billion for GM, $23 billion for AIG and $91 billion for Fannie.

[gnk]

Re: Hudson on Greece

I am Greek American. Both of my parents are Greek - born and raised in Greece. I speak Greek. I was raised in the US, but I have visited Greece countless times in my life. I understand both cultures very well. And I love living in Greece. But it's not perfect.

Where have I said that I prefer dictatorships to Greece? The current right wing party here in Greece, New Democracy, has nothing to do with a dictatorship style government. Was Eisenhower, a Republican, a dictator?

I am in no way a supporter of dictatorships. The only thing I said about the Junta in this thread and others was economically, they were the best stewards of Greece - they created many public works projects with little debt. But I would not want to live under such a regime. Karamanlis, of New Democracy who was Prime Minister of Greece after the Junta and before Papandreou, was also a good leader.

I said it before, there is a wide spectrum of politics here from right to left. If I wanted a dictatorship here in Greece, I would be a Golden Dawn supporter. Those are guys are a different type of lunacy, just as SYRIZA's Left Platform is another kind of Lunacy.

Have you ever watched Tsipras speak prior to the elections? Do you know who Lafazanis is? (Read this) What he wants? There are elements in SYRIZA that are re-living the cold war - right now, in 2015. Just recently, I was at a supermarket and was speaking to the owner. He was telling me about how evil the West is, and that Stalin was a great Leader. I know you find it hard to believe, but there are many people like that who exist here.

I think many here are so stuck on dry economic theory that they can't comprehend what I am describing here, or I am failing in my communication of what is going on here.

I think many here have romanticized the Left of many countries they have never visited or lived in, and don't want to believe that their views or beliefs may be mistaken.

There is an expression here: "First time Left!" It was commonly said by extreme leftists when SYRIZA came to power. Now that same expression is being used by those that are against SYRIZA but in a different context. First Time Left! is being used sarcastically - as in, how in the world are these guys so inept?!!!!

Recent polls show most Greeks right now prefer to stay in the Euro, even if that involves going back to the Memorandum. Why is that? What do they fear? Most Greeks, and many that voted SYRIZA that I know, are worried and do not agree with the hardcore marxist element of SYRIZA: the Left Platform.

Why is that? Do they know something you don't?

The end of the Junta marked a new beginning for Greece. Papandreou's populism and clientelism/patronage to me is just as poisonous to a Democracy as is elite rule. Both are dangerous in the long term.

[gnk]

Re: Hudson on Greece

What remains of the Greek polity is the result of decades of violent, extralegal and antidemocratic actions by the Greek right-wing and that's their epitaph. The coalition of fascist, rightists and antidemocratic forces in Greece who made common cause with foreigners to "save" their country are alone responsible for breaking Greece.

I agree that your explanation is simple and accept that it might be sufficient for folks without a knowledge of Greek history. But beyond that, it's quite a selective view of things.

A small country in a geopolitically strategic location is rarely free of foreign involvement. That's unfortunate, but but that's reality.

Would it have been better for Greece to have been absorbed by the USSR as were the rest of the Balkans?

Since the fall of the USSR, poor people from the Balkans and Russia (including prostitutes) came to Greece for work.

Not the other way around.

[Woodsman]

Re: Hudson on Greece

I am Greek American. Both of my parents are Greek - born and raised in Greece. I speak Greek. I was raised in the US, but I have visited Greece countless times in my life. I understand both cultures very well. And I love living in Greece. But it'...

Your Greek bona fides are peerless, GNK. I disagree with many of your opinions but recognize that they are informed by the anecdotes of your experiences in the country and by the narrative your parents drew for you out of theirs. And as I said, I appreciate the clarity even if we're not eye-to-eye on things.

I forget, was it Faulkner or Williams who said it? "The past isn't dead. It isn't even past." Too much has transpired for folks to simply kiss and make up, Greeks in particular but the condition seems universal. If there was a sincere attempt to find the truth and achieve reconciliation, we might start getting past it in what remains of our lifetimes. But we won't do that.

[gnk]

Re: Hudson on Greece

Your Greek bona fides are peerless, GNK. I disagree with many of your opinions but recognize that they are informed by the anecdotes of your experiences in the country and by the narrative your parents drew for you out of theirs. And as I said, I appreciate the clarity even if we're not eye-to-eye on things.

I forget, was it Faulkner or Williams who said it? "The past isn't dead. It isn't even past." Too much has transpired for folks to simply kiss and make up, Greeks in particular but the condition seems universal. If there was a sincere attempt to find the truth and achieve reconciliation, we might start getting past it in what remains of our lifetimes. But we won't do that.

My views are not just second hand or anecdotal. I draw a lot from history just as you do. I just have the additional benefit of living here. You want to talk history? What about Venizelos when he gained new land for Greece, only to lose the election, and subsequently Greece lost the Greco-Turkish War? What about the Ottoman Empire? Let's go back further to Thucydides' History of the Peloponnesian War. The city states were allies so long as there was a common threat. The threat removed and the city states were back at perpetual war with one another. How far back to we really have to go? I still think 1981 is a good start.

The hard left here in Greece is actually a minority now. That history is almost irrelevant today. And Andreas Papandreou was nothing like the current hard left of SYRIZA. He was a center left politician, that just happened to like hiring voters - like Boss Tweed.

Many people that voted for SYRIZA actually don't support its Left Platform (the hard left members). They were not voting in SYRIZA per se, but voting out/against the traditional two parties. Judging from recent polls, many have come to regret that choice now.

Before I moved to Greece in the summer of 2010 and for a couple years after, I had constantly argued with my father and his brothers and other Free Market thinkers here in Greece about how Greece had gotten to where it found itself then. I used many of the arguments many are posting here. I even said that the leadership back then - Papandreou (the son), Samaras, and the Goldman Sachs banker Papademos, were Americans, they were not Greek! Greece was being manipulated by foreigners and Banks! I said. Austerity would never work, I said.

I shared these thoughts with many people here. Some agreed 100%, others explained to me what life was like during the boom times - the corruption, tax evasion, bloated salaries, etc... and others told me to wait and see, that I would surely change my mind over time.

Those that told me wait and see were right. Years of reading the local newspapers, talking to people, learning about local and national politics, personal histories of many people here and in Athens, going to government offices for paperwork... slowly my views changed. You can never understand a nation's culture unless you live it.

When I was reading about Greece from far away, having lived the bubble to bubble US economy, watching Wall Street practically own the US government and get bailed out while thousands suffered... my views were similar to yours regarding Greece. I was projecting my own country's faults onto another country. After all, irresponsible greedy elites are always to blame, right?

Being born and raised in the US, having worked for many Fortune 500 companies (yes, the rat race) I could never have imagined that somewhere in this world there existed a country where the population was in total control of the government. Unlike the US where many Americans vote against their self interest, here in Greece, the population only held onto governments that guaranteed money or neglected to enforce "inconvenient" laws.

I guess one could say that Greeks enjoyed democracy more than the average American. Too bad they couldn't control themselves and their greedy self interest. As someone else mentioned earlier in this thread, an example of the tragedy of the commons. On an individual basis, its rational, on a collective basis, its catastrophic.

Austerity was working, but keep in mind, the possibility of a new election had started to gather support in the Fall of 2014. Ultimately, three unsuccessful Parliamentary elections for the office of President of Parliament were held from December to January, with a general election at the end of January 2015:


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[Woodsman]

Re: Hudson on Greece

My views are not just second hand or anecdotal. I draw a lot from history... How far back to we really have to go?

Go back as far as the record supports.

"[Of Pericles] many others say that the people were first led on by him into allotments of public lands, festival-grants, and distributions of fees for public services, thereby falling into bad habits, and becoming luxurious and wanton under the influence of his public measures, instead of frugal and self-sufficing."

"Pericles" from Plutarch's "Lives of the noble Grecians and Romans"

Replace Pericles with the name of any other popular Greek politician we've discussed and it's hard to dismiss the remarkable consistency with the views of the Greek political character you outlined.

Years of reading the local newspapers, talking to people, learning about local and national politics, personal histories of many people here and in Athens, going to government offices for paperwork... slowly my views changed. You can never understand a nation's culture unless you live it.

I doubt we'll reach common ground on the efficacy of austerity (it might "work," but for whom) and it's enough for me that you seem to express a balanced view of the people and events. Ultimately, you're there and I'm not GNK and as such you're better equipped to know the facts on the ground. And with Plato and Plutarch standing with you, I'm a fool to argue the point further.

[don]

Re: Hudson on Greece

the efficacy of austerity (it might "work," but for whom)

ATHENS — Vasiliki Meliou did not want to retire at 53, but she had little choice, she said, after the state-owned bank she worked for was sold three years ago.

To stay at the bank carried the risk of being laid off, and with Greece’s unemployment rate above 25 percent, she doubted she would ever find another job.

So she took advantage of an early retirement provision, joining tens of thousands of other public servants who took economic refuge in Greece’s underfunded pension system. “It’s not what I wanted,” she said, “but I could see I was being junked.”

Greece’s big creditors — other eurozone countries, the International Monetary Fund and the European Central Bank — have done little to solve the problem. Instead, they have imposed deep cutbacks on pensions, as much as 48 percent in some cases, and further weakened the pension funds by, among other measures, pressing them to accept huge losses as part of the country’s debt write-down.

Now, even as their austerity policies have driven more Greeks out of the work force and into the pension system, the creditors are seeking deeper cuts still.

Ms. Meliou, who started working at the bank at 18, has already seen her pension payments cut by 35 percent. She says she sometimes cannot sleep for fear of what might happen next.

As it confronts creditors over its huge debts and how best to recover from a still-crippling downturn, Greece’s left-wing government faces few problems that are more substantively and politically daunting than how to meet pension promises to retirees.

In the latest round of negotiations, Greece’s creditors are demanding that Prime Minister Alexis Tsipras make further cuts in pensions as a condition of continuing to help Greece pay its enormous debts.

Mr. Tsipras and his radical-left Syriza party, elected on a promise that they would reject continuing austerity demands by the creditors, are flatly refusing, saying that additional cuts would lead to a humanitarian crisis and cast another blow to a flailing economy, reducing consumer spending power at a time when it is desperately needed.

In an interview published on Tuesday by the Italian newspaper Corriere della Sera, Mr. Tsipras suggested that a deal on Greece’s debt was within reach if the creditors scaled back their demands for cuts to pensions and other social services.

“There just needs to be a positive attitude on alternative proposals to cuts to pensions or the imposition of recessionary measures,” he said.

The problem is that much more difficult because Greece, like most European nations, has an aging population, meaning it has relatively fewer young workers to help pay the bills for the growing numbers of retirees. The imbalance is made even worse by the chronic unemployment among young people since the financial crisis started in 2008.

Greece’s social security system was troubled even before the crisis, already divided into more than 130 funds and offering a crazy quilt of early-retirement options that were a monument to past political patronage.

In 2012, the pension funds, which were obliged under Greek law to own government bonds, were hit by a huge debt write-down as those bonds plummeted in value. As a result they lost about 10 billion euros, or $11.1 billion — roughly 60 percent of their reserves.

Greece’s creditors, seeking to make the Greek labor market more competitive, insisted that the government reduce the amount companies and workers must contribute toward pensions. And they insisted that Greece reduce its minimum wage so that those who do contribute have smaller outlays.

At the same time, the pension system was becoming an even bigger component of the social safety net, absorbing thousands. People like Ms. Meliou retired early, either because of the sale of state-owned companies, because they feared their salaries would be cut and thus their pensions would be smaller, or simply because their businesses failed. Few are living comfortably, and many support unemployed children.

Recent government figures indicate that nearly 45 percent of Greek retirees live at or below the poverty line. About 60 percent get pensions of €700 a month or less.

Still, pensions eat up a big portion of the government’s budget, equivalent to about 16 percent of the country’s shrunken gross domestic product, up from 13 percent in 2009, making it proportionally the most expensive pension system in Europe.

Panagiota Stathopoulou, 55, who retired recently after working 30 years in an unemployment office, said that her pension was supposed to have paid out €900 a month, but that it had been cut to €700. Still, she said, when she looks around her, she feels guilty about having even that much.

At the grocery store recently, she was approached by an old man who asked if she would buy him some food. Like many other retirees, she scrimps so that she can also help one of her children financially. Her daughter’s husband has a job, but he often is not paid.

Greece’s creditors pushed the country to overhaul its pension system early on, pressing it to merge the funds and to limit early-retirement benefits that could seem overly generous to outsiders, such as exemptions that let hairdressers retire at 50.


But this enormous bureaucratic undertaking has created its own problems, particularly at a time when the number of government employees was shrinking.

Reliable data on the state of the Greek pension system does not seem to exist. Platon Tinios, an economist and pension expert at Piraeus University, points out that despite a wave of early retirements, the latest official data suggests that there are 2.65 million retirees today, fewer than the 2.7 million in 2013.

“That just defies explanation,” he said. “They don’t know what they are doing.”

One explanation may be that there is a backlog of more than 400,000 pension applications, some of which have been in the pipeline for three years, government officials have said.

However bad the problems are now, Mr. Tinios said, the situation is likely to get worse. The limits on early retirement in 2010 did not include people who were already vested, he said, meaning that the flow into the system will remain high for years to come. Women who took early retirement, most of whom had lower-paying jobs, will find themselves with small or shrinking incomes for the rest of their lives, he added.

“The system is a ticking time bomb,” he said.


After months of negotiations between the Tsipras government and Greece’s creditors, in which pensions appeared to be a central sticking point, the two sides unveiled dueling proposals last week on a range of issues that could hardly have been further apart.

The creditors want to establish substantial early-retirement penalties for those who still choose the option, and to cut existing pensions even more — even the smallest ones. The proposal also demands further unifying the funds and establishing a closer link between contribution and benefits, most likely setting the stage for yet more cuts.


Other moves could also hit retirees hard. The creditors are calling, for instance, for a sharp rise in taxes on basic consumer goods such as medicine to 11 percent from 6.5 percent, a step that would be felt especially hard by people on fixed incomes. The tax on electricity would go to 23 percent from 13 percent.

In a televised speech Friday night, Mr. Tsipras, the prime minister, called the proposals from the creditors — which would maintain austerity policies that have so far brought little good news to most Greeks — “irrational.”

In his own 47-page proposal, Mr. Tsipras offered to slowly eliminate the remaining early-retirement programs.

Some analysts say that the situation Greece’s pension system faces today was predictable. Jens Bastian, an economist and former member of a team of European Union specialists that helped supervise the country’s bailout, said it was sad to see how little creative thinking was going on.

“Where are the ideas?” he said. “Why weren’t the pension funds replenished? The banks were compensated after the haircut, but the pensions were not.”

Mr. Bastian pointed out that there might be more trouble ahead as retirees turn to the courts. “It’s already happened in a couple of cases,” he said.

Inside a government office in Athens recently, dozens of people waited, some hoping only for an update on when their pensions might come through. Lazaros Papadopoulos, 70, said that he had closed his store and filed the required paperwork three years ago, and that he had been trying to live on a “pre-pension” benefit of €420 a month.

“In this day and age, you would expect that everything was online,” he said. “But no, it’s all paper in there.”


Rania Zygogianni, 51, who is divorced, was also there, holding a thick green file. She was hoping to qualify for a reduced early pension of roughly €500 a month as an older mother with young children, a category that has been eliminated for new workers.

Ms. Zygogianni, who trained as an economist, used to work in the Agriculture Ministry, and she said that she would prefer to work. But she has been looking for a job without success, and she has had to accept money from her mother and her sister.

“It is terrible out there for older women,” she said. “At least this would be something.”

NYT

[gnk]

Re: Hudson on Greece

I guess the original developers of Democracy 1.0 figured out all the bugs, and ins and outs, long, long ago!

But seriously, if US voters could be just a fraction of what Greek voters are (not more than that though!) the Wall Street bailout of 2008 - 2009 would have been handled a lot differently.

Whenever I explain what happened with the 2008 US housing bubble bust, the derivatives, CDSs, CDOs, Glass Steagal repeal and consequences, AIG's purpose, Fed and Congressional bailouts and backstops etc... to Greeks, I always get the same response: "You Americans let your government and Banks do what?!!!!"

Different cultures, I guess.

[Thailandnotes]

Re: Hudson on Greece

http://www.socialeurope.eu/2015/06/g...-the-eurozone/

[astonas]

Re: Hudson on Greece

http://www.socialeurope.eu/2015/06/g...-the-eurozone/

Thanks for posting, Thailandnotes. It was well worth reading.

I feel a bit sorry for Varoufakis.

He has correctly framed the problem (not north vs. south, but rentier vs. masses) but appears largely unaware of the extent of the cultural divide he is trying to overcome.

Most prominently, he speaks of the Marshall plan as though it were universally understood that it was the cause for Germany's resurgence after world war two.

This view is hardly shared by Germany. It is pure Keynesianism. That view is held by only a single one of Germany's "Five wise men". (And that guy is only kept around to provide a steady stream of laughs. I've said it before, and I repeat it here. The germanic monetary culture is NOT Keynesian. It is as close to anti-Keynesian as it can get.

The rest of the five wise men, like the vast majority of the German people, believe that Germany rose out of the ashes in spite of the Marshall Plan (instead crediting the Wirtshaftswunder to the ordoliberal and Social Market philosophies of Ludwig Erhardt). So Varoufakis is basically appealing to a "mutual" understanding of history that not only does not exist, but is in fact widely ridiculed in Germany.

The germanic response can only be one: "Why on earth should we saddle you with the burden of a Marshall Plan, when we know perfectly well that it will be far harder for you to succeed in spite of such a monstrosity?"

[Thailandnotes]

Re: Galbraith on Greece

http://www.ft.com/intl/cms/s/0/5e38f...#axzz3dDJlofVx

"Greece has Nothing to Lose."

Everybody is coming out swinging in the FT.

[Southernguy]

Re: Galbraith on Greece

Greece’s Proposals to End the Crisis: My intervention at today’s Eurogroup

Posted on June 18, 2015 by yanisv

The only antidote to propaganda and malicious ‘leaks’ is transparency. After so much disinformation on my presentation at the Eurogroup of the Greek government’s position, the only response is to post the precise words uttered within. Read them and judge for yourselves whether the Greek government’s proposals constitute a basis for agreement.
Colleagues,
Five months ago, in my very first Eurogroup intervention, I put it to you that the new Greek government faced a dual task:
We had to earn a precious currency without depleting an important capital good.
The precious currency we had to earn was a sense of trust, here, amongst our European partners and within the institutions. To mint that precious currency would necessitate a meaningful reform package and a credible fiscal consolidation plan.
As for the important capital we could not afford to deplete, that was the trust of the Greek people who would have to swing behind any agreed reform program that will end the Greek crisis. The prerequisite for that capital not to be depleted was, and remains, one: tangible hope that the agreement we bring back with us to Athens:

• is the last to be hammered out under conditions of crisis;
• comprises a reform package which ends the 6-year-long uninterrupted recession;
• does not hit the poor savagely like the previous reforms did;
• renders our debt sustainable thus creating genuine prospects of Greece’s return to the money markets, ending our undignified reliance on our partners to repay the loans we have received from them.

Five months have gone by, the end of the road is nigh, but this finely balancing act has failed to materialise. Yes, at the Brussels Group we have come close. How close? On the fiscal side the positions are truly close, especially for 2015. For 2016 the remaining gap amounts to 0.5% of GDP. We have proposed parametric measures of 2% versus the 2.5% that the institutions insist upon. This 0.5% gap we propose to bridge over by administrative measures. It would be, I submit to you, a major error to allow such a minuscule difference to cause massive damage to the Eurozone’s integrity. Convergence had also been achieved on a wide range of issues.
Nevertheless, I will not deny that our proposals have not instilled in you the trust that you need. And, at the same time, the institutions’ proposals that Mr Juncker conveyed to PM Tsipras cannot engender the hope that our citizens need. Thus, we have come close to an impasse.
At this, the 11^th hour, stage of the negotiations, before uncontrollable events take over, we have a moral duty, let alone a political and an economic one, to overcome this impasse. This is no time for recriminations and accusations. European citizens will hold collectively responsible all those of us who failed to strike a viable solution.
Even if some, misguided by rumours that a Greek exit may not be so terrible or that it may even benefit the rest of the Eurozone, are resigned to such an event, it is an event that will unleash destructive powers no one can tame. Citizens from all over Europe will target not the institutions but their elected finance ministers, their Prime Ministers and Presidents. After all, they elected us to promote Europe’s shared prosperity and to avoid pitfalls that may harm Europe.
Our political mandate is to find an honourable, workable compromise. Is it so difficult to do so? We do not think so. A few days ago Olivier Blanchard, the IMF’s Chief Economist published a piece entitled ‘Greece: A Credible Deal Will Require Difficult Decisions by All Sides.’ He is right, the three operative words being ‘by all sides’. Dr Blanchard added that: “At the core of the negotiations is a simple question. How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?”
That Greece needs to adjust there is no doubt. The question, however, is not how much adjustment Greece needs to make. It is, rather, what kind of adjustment. If by ‘adjustment’ we mean fiscal consolidation, wage and pension cuts, and tax rate increases, it is clear we have done more of that than any other country in peacetime.

• The public sector’s structural, or cyclically adjusted, fiscal deficit turned into a surplus on the back of a ‘world record beating’ 20% adjustment
• Wages fell by 37%
• Pensions were reduced by up to 48%
• State employment diminished by 30%
• Consumer spending was curtailed by 33%
• Even the nation’s chronic current account deficit dropped by 16%.

No one can say that Greece has not adjusted to its new, post-2008, circumstances. But what we can say is that gigantic adjustment, whether necessary or not, has produced more problems than it solved:

• Aggregate real GDP fell by 27% while nominal GDP continued to fall quarter-in-quarter-out for 18 quarters non-stop to this day
• Unemployment skyrocketed to 27%
• Undeclared labour reached 34%
• Banks are labouring under non-performing loans that exceed 40% in value
• Public debt has exceeded 180% of GDP
• Young well-qualified people are abandoning Greece in droves
• Poverty, hunger and energy deprivation have registered increases usually associated with a state at war
• Investment in productive capacity has evaporated.

So, the first part of Dr Blanchard’s question “how much of an adjustment has to be made by Greece?” needs to be answered: Greece needs a great deal of adjustment. But not of the same kind that we have had in the past. We need more reforms not more cutbacks. For instance,

• We need to adjust to a new culture of paying taxes, not to higher VAT rates that strengthen the incentive to cheat and drive law-abiding citizens into greater poverty
• We need to make the pension system sustainable by eradicating unpaid labour, minimising early retirements, eliminating pension fund fraud, boosting employment – not by eradicating the solidarity tranche from the lowest of the low of pensions, as the institutions have demanded, thus pushing the poorest of the poor into greater poverty and conjuring up massive popular hostility against another set of so called reforms

In our proposals to the institutions we have offered:

• An extensive (but optimised) privatisation agenda spanning the period 2015-2025
• The creation of a fully independent Tax and Customs Authority (under the aegis and supervision of Parliament)
• A Fiscal Council that oversees the state budget
• A short-term program for limiting foreclosures and managing non-performing loans
• Judicial and civil procedure code reforms
• Liberalising several product markets and services (with protections for middle class values and professions that are part and parcel of society’s fabric)
• Elimination of many nuisance charges
• Public administration reforms (introducing proper staff evaluation systems, reducing non-wage costs, modernising and unifying public sector payrolls).

In addition to these reforms the Greek Authorities have engaged the Organisation of Economic Cooperation and Development (OECD) to help Athens design, implement and monitor a second series of reforms. Yesterday I met with the OECD’s Secretary General Mr Angel Gurria and his team to announce this joint reform agenda, complete with a specific roadmap:

• A major Anti-corruption Drive and relevant institutions to support it – especially in the area of procurement
• Liberalising the construction sector, including the market and standards of construction materials
• Wholesale trade liberalisation
• Media – electronic and press code of practice
• One-Stop Business Centres that eradicate the bureaucratic impediments to doing business in Greece
• Pension System Reform – where the emphasis is on a proper, long-term, actuarial study, the phasing out of early retirements, the reduction in the operating costs of the pensions funds, pension fund consolidation – rather than mere pension cuts.

Yes, colleagues, Greeks need to adjust further. We desperately need deep reforms. But, I urge you to take seriously under consideration this important difference between:

• reforms that attack parasitic, rent-seeking behaviour or inefficiencies, and
• parametric changes that jack up tax rates and reduce benefits to the weakest.

We need a lot more of the real reforms and a lot less of the parametric type.
Much has been said and written about our ‘backtracking’ on labour market reform and our determination to re-introduce protection for waged workers through collective bargaining agreements. Is this some left-wing fixation of ours that jeopardises efficiency? No, colleagues, it is not. Take for example the plight of young workers in several chain stores who get fired as they approach their 24^th birthday so that the employer hires younger workers in their place to avoid paying them the normal minimum wage which is lower for employees under the age of 24. Or take the case of employees who are hired part time for 300 euros a month, made to work full time and threatened with dismissal if they complain. Without collective bargaining, these abuses abound with ill effects on competition (as decent employers compete at a disadvantage with unscrupulous ones) but also with ill effects on pension funds and public revenues. Does anyone seriously think that the introduction of well-thought out collective bargaining, in collaboration with the ILO and the OECD, constitutes ‘reform reversal’, an example of ‘backtracking’?
Turning briefly to pensions again, much has been made of the fact that pensions account for more than they did in the past; as much as 16% of GDP. But consider this: Pensions have shrunk by 40% and the number of pensioners is stable. So, expenditure on pensions has fallen, not risen. That 16% of GDP is due not to spending more on pensions but, instead, to the dramatic drop in GDP which brought with it a similarly dramatic reduction in contributions due to the fall in employment and the rise of undeclared labour.
Our alleged backtracking on ‘pension reforms’ is that we have suspended the further reduction in pensions that have already lost 40% of their value when the prices of the goods and services that pensioners need, e.g. pharmaceuticals, have hardly moved. Consider this relatively unknown fact: Around 1 million families survive today on the meagre pension of a grandfather or a grandmother as the rest of the family members are unemployed in a country where only 9% of the unemployed receive any unemployment benefit. Cutting that one, solitary pension is tantamount to turning a family into the streets.
This is why we keep telling the institutions that, yes, we need pension reform but, no, you cannot just lob off 1% of GDP from pensions without causing massive, fresh misery and a fresh recessionary round as this 1.8 billion multiplied by a large fiscal multiplier (up to 1.5) is withdrawn from the circular flow of income. If large pensions still existed, whose curtailment would make a fiscal difference, we would do it. But the distribution of pensions is so compressed that savings of such a magnitude would have to eat into the pensions of the poorest. It is for this reason, I suppose, that the institutions are asking us to eliminate the solidarity pensions supplement to the poorest of the poor. And it is for this reason that we counter-propose proper reforms: a drastic reduction, almost elimination, of early retirements, consolidation of pension funds and interventions in the labour market that reduce undeclared labour.
Structural reforms promote growth potential. But mere cutbacks in an economy like Greece’s promote recession. Greece must adjust by introducing genuine reforms. But at the same time, going back to Dr Blanchard’s answer, the institutions need to adjust their definition of growth-enhancing reforms – to acknowledge that parametric cuts and tax hikes are not reforms and that, at least in the case of Greece, they have undermined growth.
Colleagues have remarked in the past, and may do so again, that our pensions are too high compared to their older people and that it is unacceptable for the Greek government to expect them to foot our pension bill. Let me be clear on this: We are never going to ask you to subsidise our state, our wages, our pensions, our public expenditure. The Greek state lives within its means. Over the past five months we have even managed, despite zero market access and zero disbursements, to repay our creditors. We intend to keep doing so.
I understand that there are concerns that our government may slip into a primary deficit again and that this is the reason the institutions are pressing us to accept large VAT rises and large pension cuts. While it is our view that the announcement of a viable agreement will suffice to boost economic activity sufficiently to produce a healthy primary surplus, I understand perfectly well that our creditors and partners may have cause to be sceptical to want safeguards; an insurance policy against our government’s possible slide into profligacy. This is what lies behind Dr Blanchard’s call for the Greek government to offer “truly credible measures.” So here comes an idea. A “truly credible measure”.
Instead of arguing over half a percentage point of measures (or on whether these tax measures will have to all of the parametric type or not), how about a deeper, more comprehensive, permanent reform? An automated hard deficit brake that is legislated and monitored by the independent Fiscal Council we and the institutions have already agreed upon. The Fiscal Council would monitor the state budget’s execution on a weekly basis, issue warnings if a minimum primary surplus target looks like being violated and, at some point, trigger automated across the board, horizontal, reductions in all outlays in order to prevent the slide below the pre-agreed threshold. That way a failsafe system is in place that ensures the solvency of the Greek state while the Greek government retains the policy space it needs in order to remain sovereign and able to govern within a democratic context. Consider this to be a firm proposal that our government will implement immediately after an agreement.
Given that our government will never again need to borrow from your taxpayers or from the taxpayers standing behind the IMF, there is no sense in a debate between member-states that compete on whose pensioners are poorer, instigating a race-to-the-bottom. Instead, the debate moves on to debt repayments. How large should our primary surpluses be? Does anyone seriously believe that the growth rate is independent of the primary target set? The IMF understands fully that the two numbers are linked endogenously and that this is the reason why Greece’s public debt must be looked at at once.
Our large debt overhang should be thought of as a large unfunded tax liability. While it is true that the EFSF and GLF slices of our debt are long-dated and the interest rate is not large, the Greek state’s unfunded tax liability, our debt, features a lumpy component that impedes investment and recovery today. I am referring here to the 27 billion of SMP bonds still held by the ECB. This is a short-dated unfunded liability that potential investors in Greece take a look at it and turn back because they can see the funding gap this part of the debt creates instantly and because they recognise that this lump of 27 billion on the ECB books stop Greece from taking advantage of the ECB’s quantitative easing at the very moment when this program is unfolding and is reaching its maximum capacity to come to the aid of countries buffeted by deflation. It is a cruel irony that the country most afflicted by deflation is the one that is excluded from the ECB’s anti-deflation remedy. And it is excluded because of this 27 billion lump.
Our proposal on this front is simple, efficient and mutually beneficial. We propose no new monies, not one fresh euro, for our state. Imagine the following three-part agreement to be announced in the next few days:
Part 1: Deep reforms, including the automated hard deficit brake that I mentioned.
Part 2: A rationalisation of Greece’s debt repayment schedule along the following lines. First, to effect an SMP BUY-BACK Greece acquires a new loan from the ESM, then purchases the SMP bonds back from the ECB and retires them. To underpin this loan, we agree that the deep reform agenda is the common conditionality for successfully completing the current program and for securing the new ESM arrangement that comes into operation immediately afterwards and runs concurrently with the continuing IMF program until the end of March 2016. Short-term funding relies on the outstanding disbursement from the current program and medium to long term funding is completed by the return of the SMP profits, coming up to 9 billion out of the 27 remaining billions, which go into an escrow account to be used in order to meet Greece’s repayments to the IMF.
Part 3: An investment program for kick-starting the Greek economy funded by the Juncker Plan, the European Investment Bank – with which we are in talks already – the EBRD and other partners who will be invited to participate also in conjunction with our privatization program and the establishment of a development bank that aims at developing, reforming and collateralizing public assets, including real estate.
Does anyone truly doubt that this three-part announcement would dramatically change the mood, inspire Greeks to work hard on hope of a better future, invite investors to a country whose asset prices have fallen so dramatically, and give confidence to Europeans that Europe can, even at the 11^th hour, do the right thing?
Colleagues, at this juncture it is dangerously easy to think that nothing can be done. Let us not fall prey to this state of mind. We can forge a good agreement. Our government is standing by, with ideas and with the determination to cultivate the two forms of trust necessary to end the Greek drama: Your trust in us and the trust of our people in Europe’s capacity to produce policies that work for, and not against, them.

[jpatter666]

Re: Galbraith on Greece

Personally, I'm expecting some form of Grexit. Both sides despise and mistrust the other now -- the posturing is over who's going to get the blame.

[don]

Re: Galbraith on Greece

the posturing is over who's going to get the blame

"So when you say, the Philippines deserved it, Iceland deserved it, Ireland deserved it, Africa deserves it, Jefferson County deserved it, Detroit deserved it, and now Greece deserves it, just keep in mind that some day soon they will be saying that you deserve it, because you stood by and did nothing.

When they are done with all the others, for whom do you think they come next? If you wish to see injustice stopped, if you wish to live up to the pledge of 'never again,' then you must stand for your fellows who are more vulnerable first.

The next step, after Greece is subdued, will be to extend that model to other, larger countries. And to redouble the austerity at home under cover of the next financial crisis by eliminating cash as a safe haven, and to begin the steady stream of digital 'bailing-in.' They will not even have to ask, as if it mattered.

The economic hitmen have honed their skills amongst the poor and relatively defenseless, and have been coming closer to home in search of new hunting grounds and fatter spoils. There is nothing 'new' or 'modern' about this. The only thing that changes are the names.

This is as old as Babylon, and evil as sin. It is the power of darkness of the world, and of spiritual wickedness in high places. The difference is that it is not happening in the past, or in a book, it is happening here and now."

Jesse's Cafe Americain

22 JUNE 2015

Les Confessions d'un Assassin Financier - At Home and Abroad


At Home

"And in some ways, it creates this false illusion that there are people out there looking out for the interest of taxpayers, the checks and balances that are built into the system are operational, when in fact they're not.

And what you're going to see and what we are seeing is it'll be a breakdown of those governmental institutions. And you'll see governments that continue to have policies that feed the interests of -- and I don't want to get clichéd, but the one percent or the .1 percent -- to the detriment of everyone else."

Neil Barofsky

Do you see why there is no real reform now? Do you understand the hard choice that a person of honour and conscience is given? Who will make such an unfashionable choice when they have so few models to follow and almost no moral encouragement to find in this vile era of selfishness and greed?

Do you understand now why laws that are widely opposed by the people like the secret pre-approval of the Trans-Pacific Partnership can be bullied through a Congress with an approval rating in the single digits, seemingly without a care?

And abroad

“There are two ways to conquer and enslave a country. One is by the sword. The other is by debt.”

John Adams

Do you see why suddenly a nation must be broken by fraud or by force and rebuilt, bent to the will of the powerful. Why its people can be devastated by harsh policies that make no sense, its sovereignty replaced by a puppet regime, while its assets are privatized and sold?

And if a person follows their conscience and sacrifices greatly for the truth, do you offer any comfort and encouragement, or even a thought or a prayer for them? Are you capable of even caring? Or is it all just another opportunity to make some quick money for yourself?

Would it be any different, if instead of placing bets on the sickness and misery of women and children, you simply murdered them, and took their possessions for yourselves, and sold their clothes, even their teeth and their hair?

It is a hard world after all. And you would become truly exceptional then.

[lektrode]

Re: Greece / Suicide Rate Surges 35% In 2 Years

couldnt resist (and is this 'the future' for The Rest of US ?) ...

Greek Suicide Rate Surges 35% In 2 Years

In a disturbing new report confirming "The impact of economic austerity and prosperity events on suicide in Greece," tough financial austerity measures in Greece have led to a 35% jump in suicide rates in a little less than 2 years.


As KeepTalkingGreece reports, George Rachiotis notes this surge in suicides (especially among men) mirrors a very similar increase in suicide rates from 1989-1994 in Russian men when the so-called “shock therapy” programs were being implemented.

Correlation is not causation, but... (please note when we use the word "austerity" we mean in the "we can't spend seriously crazy amounts of money even if we don't have it" way... which, translated, means "living within your means - no longer funded by insurmountable debt.")

snip...