Galbraith on Greece

[don]

Re: Galbraith on Greece

This makes me wonder if Greece is really suitable to remain in the Eurozone.

Germany has had to bear the burden of Europe's lesser Volk - Franco's Spain, Mussolini's Italy, Antonescu's Romania, Horthy's Bulgaria, etc. for some time. Not an easy job but somebody has to do it . . . .

[Woodsman]

Re: Galbraith on Greece

...This makes me wonder if Greece is really suitable to remain in the Eurozone.

Considering they entered by means of falsified financials, no.

Greece admits deficit figures were fudged to secure euro entry
BY DANIEL HOWDEN AND STEPHEN CASTLE IN BRUSSELS

Greece admitted yesterday that the budget figures it used to gain entry to the euro three years ago were fudged. The Finance Minister, George Alogoskoufis, said the true scale of Greece's budget deficit was massively understated enabling Athens to dip below the qualification bar and into the EU's single currency.

http://www.independent.co.uk/news/wo...y-6157967.html

--

Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt

By Beat Balzli

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules...

http://www.spiegel.de/international/...-a-676634.html

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Wall St. Helped to Mask Debt Fueling Europe’s Crisis
By LOUISE STORY, LANDON THOMAS Jr. and NELSON D. SCHWARTZ

In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.

http://www.nytimes.com/2010/02/14/bu...pagewanted=all

[don]

Re: Galbraith on Greece

and the larger consequences . . . .

[shiny!]

Re: Galbraith on Greece

Germany has had to bear the burden of Europe's lesser Volk - Franco's Spain, Mussolini's Italy, Antonescu's Romania, Horthy's Bulgaria, etc. for some time. Not an easy job but somebody has to do it . . . .

Germany created Franco's Spain, Mussolini's Italy etc in the first place. Karma.

[Southernguy]

Re: Galbraith on Greece

After Varoufakis resignation I am sure there shall be a compromise. Time to buy assets whose value has been pumeled by Greek situation?

[jpatter666]

Re: Galbraith on Greece

After Varoufakis resignation I am sure there shall be a compromise. Time to buy assets whose value has been pumeled by Greek situation?

I wouldn't. I retain my belief that Greece will leave the Eurozone. I know GRG55 has reiterated that it doesn't make sense, but we've entered a stage where emotions and not common sense are driving the system. I do not think the EU or Greece has the necessary leadership to keep the ship off the shoals. I've believed for some time now this has become more who gets the blame for Grexit. The end destination has been known.

[don]

Re: Galbraith on Greece

Germany created Franco's Spain, Mussolini's Italy etc in the first place. Karma.

Shiny!

Mussolini's Italy was the first fascist state (1922 - consolidated as a dictatorship 1925), admired by Hitler as his forebearer.

[RebbePete]

Re: Galbraith on Greece

Remember, "the market can remain irrational longer than you can stay solvent." These things always seem to take longer than you'd expect to play out.

[santafe2]

Re: Galbraith on Greece

It will be IOUs first ... then the NGD (New Greek Drachma).

The situation in Greece is interesting because default and devaluation through the Drachma is probably the best path for the Greek people if the bankers like GS are not allowed to claw back their losses. The EU may make a better offer after their meeting in Paris on Tuesday. If they don't, the Greek banks will be out of Euros and the government will have to re-capitalize the system. They can't do it with Euros and even if they could they couldn't devalue the Euro. I don't see another choice; new currency or major EU concessions.

[vt]

Re: Galbraith on Greece

The usual suspects:

http://news.yahoo.com/latin-america-...QDBHNlYwNzcg--

[don]

Re: Galbraith on Greece

As concerns mount that Greek banks will run out of cash and about the damage being inflicted on the country’s economy, hopes for a breakthrough faded. EU leaders voiced despair and descended into recrimination over how to respond to Sunday’s overwhelming rejection of eurozone austerity terms as the price for keeping Greece in the currency.

Tsipras, meanwhile, moved to insure himself against purported eurozone plots to topple him and force regime change by engineering a national consensus of the country’s five mainstream parties behind his negotiating strategy, focused on securing debt relief.

Tsipras also sacrificed his controversial finance minister Yanis Varoufakis, in what was seen as a conciliatory signal towards Greece’s creditors.

In Paris, Chancellor Angela Merkel and President François Hollande tried to plot a common strategy after Greeks returned a resounding no to five years of eurozone-scripted austerity. The two leaders were trying to find a joint approach to the growing crisis ahead of an emergency eurozone summit on Tuesday to deal with the fallout.

But Merkel said there was no current basis for negotiating with the Greek side and called on Tsipras to make the next move.

As eurozone leaders prepared for today’s emergency summit in Brussels , the heads of government were at odds. France, Italy and Spain are impatient for a deal while Germany, the European commission and northern Europe seem content to let Greece stew and allow the euphoria following Sunday’s vote give way to the sobering realities of bank closures, cash shortages and isolation.....



Earlier today Bloomberg leaked the ECB would keep its ELA frozen for Greek banks at its ?89 billion ceiling level last increased two weeks ago. However we did not know what the ECB would do with Greek ELA haircuts, assuming that the ECB would not dare risk contagion and the collapse of the Greek banking system by triggering a waterfall solvency rush in Greek banks if and when it boosts ELA haircuts. Turns out we were wrong, and as the ECB just announced "the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA."

Full Press Release:

ELA to Greek banks maintained

• Emergency liquidity assistance maintained at 26 June 2015 level
• Haircuts on collateral for ELA adjusted
• Governing Council closely monitoring situation in financial markets

The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.

ELA can only be provided against sufficient collateral.

The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.

In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.

The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.

What does this mean? Since it is almost certain that the haircut is being increased (as decreasing the ELA haircut makes no sense since Greek banks still have about €20 billion in ELA collateral buffer and instead the ECB would have simply raised the total ELA amount), it means that the ECB just took its first practove step toward launching a Greek bank bail in. [it has since been confirmed that haircuts are being raised].

Here is the summary sensitivity analysis indicating what a specific ELA haircut translates to in terms of deposit haircut. Basically what the ECB just did is to increase the haircut from the existing level of about 50% which was unusable anyway due to the freezing of total amount of ELA at €89 billion, to 60% at which point the collateral buffer - unusable as it may be - was entirely eliminated from €24 billion to virtually nothing.




Another way of showing this dynamic is presenting the ELA haircut on the X-axis and the corresponding deposit haircut on the Y-axis once the critical "haircut" threshold of 60% in ELA haircuts is crossed.



Further confirmation that this was a haircut increase comes from Reuters reporting that the ECB will hike the haircut just enough to reduce the collateral on Greek banks to slighly above the current level of use which is about €90 billion. In other words, the ECB increased its haircut from roughly 50% to just about 60% above which level depositor bail ins begin.

Needless to say, this decision makes it quite clear that it was not Greece, but the ECB pushing all along for "burning the Greek bridges."

[jk]

Re: Galbraith on Greece

actually euro notes, currency not electronic totals, are printed by the national central banks, including the greek national bank. they will have a Y in their serial numbers to identify that it was the greek bank that printed them. i can imagine people all over europe examining every piece of currency they get in an exchange.

[gnk]

Re: Galbraith on Greece

Tsipras, meanwhile, moved to insure himself against purported eurozone plots to topple him and force regime change by engineering a national consensus of the country’s five mainstream parties behind his negotiating strategy, focused on securing debt relief.

Tsipras also sacrificed his controversial finance minister Yanis Varoufakis, in what was seen as a conciliatory signal towards Greece’s creditors.

He engineered the referendum because his own party was going to topple him. This strengthened his position.

Seeing that a significant part of his own party will never agree to anything that the creditors want, he brought in the other parties. This also "spreads" the responsibility around, so in future elections, the other parties can't blame Tsipras alone for a bad deal.

Varoufakis, on a personal level, is just plain annoying. Others in Tsipras' party are not exactly shedding tears right now.

And the ECB has done more than it should have done according to its mandate.

[Thailandnotes]

Re: Galbraith on Greece

Europe's finance model is nothing like the Anglo American finance model. It may not be squeaky clean, but its not as bad as he describes it.

Almost everyone I read would beg to differ...



Take the case of Georg Funke, who ran Depfa, a German public mortgage bank. Depfa helped Athens get a star credit rating, raised €265 million for the Greek government railway, helped Portugal borrow €200 million to build up a water supplier, and gave €90 million to Spain to construct a privately operated road in Galicia. For a while, the middle class in Greece like the middle classes in Spain and Ireland, benefited from the infrastructure spending stimulus. When Depfa nearly collapsed in 2008, Funke was fired.

Or take the case of Georges Pauget, the CEO of Crédit Agricole in France, who bought up Emporiki Bank of Greece for €3.1 billion in cash in 2006. Over the next six years, Emporiki lost money year after year, blowing money on one foolish venture after another, until finally, Crédit Agricole sold it for €1 – not €1 billion or even €1 million – but a single euro to Alpha Bank in October 2012. Crédit Agricole’s cumulative loss? €5.3 billion.

Money poured in from other banks like Dexia of Belgium. Via Kommunalkredit, Dexia loaned €25 million to Yiannis Kazakos, the mayor of Zografou, a suburb of Athens, to buy land to build a shopping mall. It made similar loans to other Greek municipal authorities including Acharnon, Melisia, Metamorfosis, Nea Ionia, Serres, and Volos.

“The tsunami of cheap credit that rolled across the planet between 2002 and 2007 … wasn’t just money, it was temptation,” financial writer Michael Lewis wrote in Vanity Fair. “Entire countries were told, “The lights are out, you can do whatever you want to do, and no one will ever know.”

Bloomberg took a look at statistics from the Bank for International Settlements, and worked out that German banks loaned out a staggering $704 billion to Greece, Ireland, Italy, Portugal, and Spain before December 2009. Two of Germany’s largest private banks—Commerzbank and Deutsche Bank—loaned $201 billion to Greece, Ireland, Italy, Portugal, and Spain, according to numbers compiled by BusinessInsider. And BNP Paribas and Crédit Agricole of France loaned $477 billion to Greece, Ireland, Italy, Portugal, and Spain.

There is a very good parallel to this situation of cheap and easy money in the recent sub-prime mortgage crisis in the U.S.

In a recent book, A Dream Foreclosed: Black America and the Fight for a Place to Call Home, author Laura Gottesdiener explains that 30 years ago, African Americans were unable to borrow money to buy houses because of a practice called redlining—where banks drew fictitious red lines around neighborhoods they would not lend to even if the borrowers had good credit and good jobs.

Today, redlining is illegal, but the reverse has happened. In the 1990s, poor people around the U.S. were offered 100 percent loans to buy houses at low rates with virtually no collateral.

“The mortgage market for white Americans was flush. There was no more money to be made from issuing mortgages to white Americans. The banks needed new consumers,” Gottesdiener told Corporate Crime Reporter magazine. “So, they moved into the minority market. But they weren’t selling the conventional loans. They were selling these incredibly exploitative predatory loans.”

We know how the sub-prime crisis ended in 2008 – and it almost brought down the global economy.

What happened after the creation of the Euro was very similar. The Greek government is in debt today to Germany and France not just because they borrowed money for unwise projects, but also because the bankers pushed them to take money that they would never have been able to approved under normal circumstances.

But as Stiglitz has noted, these German and French banks have now been rescued. An ATTAC Austria study showed that 77 percent of the €207 billion provided for the so-called “Greek bail-out” went to the financial sector and not to the people.

http://www.globalresearch.ca/eurozon...eece-2/5460786

[shiny!]

Re: Galbraith on Greece

Shiny!

Mussolini's Italy was the first fascist state (1922 - consolidated as a dictatorship 1925), admired by Hitler as his forebearer.

You're right. My mistake. I was thinking about how Germany supported the rebels in Spain to overthrow the government.