Galbraith on Greece

[jk]

Re: Does Greece need China?

we need to distinguish between the EU [european union] and the eurozone [countries that use the euro as their currency]. the latter is a subset of the former. greece could leave the eurozone without leaving the eu.

[astonas]

Re: Does Greece need China?

we need to distinguish between the EU [european union] and the eurozone [countries that use the euro as their currency]. the latter is a subset of the former. greece could leave the eurozone without leaving the eu.

Yes. If it could do so, it should.

My understanding, however, is that due to detailed wording of the Maastricht treaty, the steps it would need to take to leave the Eurozone would cause it to be in violation of the EU rules as well.

That isn't necessarily insurmountable, but it would take time to make the changes in EU law to allow for what must, for pragmatic reasons, be a rapid movement in the EMU.

I'd need to refresh my memory with the treaties to say anything definitive on that, however. It is possible a clever EU lawyer has been working on a loophole.

[jk]

Re: Does Greece need China?

Yes. If it could do so, it should.

My understanding, however, is that due to detailed wording of the Maastricht treaty, the steps it would need to take to leave the Eurozone would cause it to be in violation of the EU rules as well.

That isn't necessarily insurmountable, but it would take time to make the changes in EU law to allow for what must, for pragmatic reasons, be a rapid movement in the EMU.

I'd need to refresh my memory with the treaties to say anything definitive on that, however. It is possible a clever EU lawyer has been working on a loophole.

even if it would somehow violate eu rules, i question whether there's any enforcement mechanism. both france and germany were in violation of eurozone deficit limits for several years early on, and nothing happend. and i would hazard that eu rules are even looser than eurozone rules. my guess is that there's no enforcement.

[don]

Greecing the Bear

Russia the Concern

If there is a deal, it will be for one reason only: Fear of driving Greece into the hands of Russia.

Just today, Greek Energy Minister Unveils Plan for €2bn Gas Deal with Russia.

Greece has mapped out details of a planned landmark €2bn gas project with Russia in a move that could stir tensions with Brussels just as Athens is seeking a third bailout.

Panayotis Lafazanis, the firebrand leftist energy minister, presented preliminary plans for the project to Greek energy executives in Athens on Thursday in a defiant speech, vowing the government would not be pushed around by EU institutions.

The promised deal with Russia is a sharp rebuke to Brussels, which wants to reduce EU dependence on Gazprom and argues that southeastern Europe should diversify its supply by prioritising gas from Azerbaijan.

Opening his remarks with pugnacious references to the eurozone crisis, Mr Lafazanis said Greece was aiming to secure a deal with Brussels as quickly as possible. But he warned EU institutions that Athens was not about to roll over.

“Greece is no one’s hostage,” he said. “The Greek people’s No vote, and I am referring to all of the people, is not going to become a humiliating Yes. Greece is not, under threat of execution, ready to accept any fait accompli.”

No One's Hostage

If another deal is signed, Greece will remain a hostage. It's as clear as that.

[astonas]

Re: Does Greece need China?

Wolfgang Schäuble is happy to point to the correct door:

Pulled by the current
Some Europeans suggest the legal tangles of Grexit can be avoided by pretending that Greece is not actually leaving. Wolfgang Schäuble, Germany’s finance minister, has spoken of a “temporary” Grexit. If the Europeans allowed the Greeks to issue scrip or temporarily to introduce an emergency parallel “currency”, Greece might in effect suspend its membership of the single currency without technically leaving (see article). Such a non-Grexit exit would allow European politicians to put off pesky problems such as how to deal with the losses on the ECB’s balance-sheet. Technically, it could also be reversed if Greece struck a deal with its creditors at a later date.

Just make it "officially" temporary, and it's all legal.

I suspected this wrinkle had been worked out long ago. It was only a question of who had the willingness to point it out. I'm sure it is no surprise to anyone by now that Schäuble has no problem being the bad guy.

[don]

Re: Does Greece need China?

Mish asks the rhetorical question: was it pick your carpet . . . .

Time Machines Appear in Brussels

Via the magic of time machines, it appears that midnight three weeks ago has still not arrived.

I say that because the midnight hour for a Greek deal came and went weeks ago. Yet, this evening, the New York Times says Greece Submits 11th-Hour Bailout Proposal to Creditors.

Only a day after grim predictions of financial and social collapse in Greece, a scramble appeared underway to work out the details of a new bailout package to bring the country back from the brink.

Germany’s truculent finance minister, Wolfgang Schäuble, finally gave a little on debt relief for Greece, admitting Thursday that “debt sustainability is not feasible without a haircut,” or writedown of debt.

Donald Tusk, the prime minister of Poland and the president of the European Council, said on Twitter that any “realistic proposal from Athens needs to be matched by realistic proposal from creditors on debt sustainability to create win-win situation.”

What was breathtaking, however, was how in a matter of hours the entire dynamic in the Greek crisis seemed to shift, from apocalyptic warnings of a Zimbabwe in the Balkans, to a fresh optimism that the basics of a deal could be worked out.

The question now is whether that apparent change of heart reflected a new political determination to cut a deal that keeps Greece in the eurozone.

Breathtaking About Face! Forward March!

Tspiras can likely force anything through Greek parliament following the massive "No" campaign.

But how does one explain the sudden "about face" by Wolfgang Schäuble?

The New York Times offers this explanation: "There is a group of people who have been sent to help the Greeks, to try to transform words into action," said a French government official with knowledge of the effort.

Group of People?

Hmm. Who can that "group of people" be at this hour (whatever hour it may be) other than the US?

It would not surprise me in the least if the US guaranteed Greek debt.

“France refuses that Greece leaves the eurozone in the name of our position and our commitments,” he [French prime minister Manuel Valls] told lawmakers in the National Assembly on Wednesday in a speech that was broadcast live on Greek television.

Valls also suggested that Mr. Tsipras’s most pivotal request — a program to make Greece’s mountainous debt more sustainable — be taken seriously by other European countries as part of any deal. Until recently, that has been nearly a taboo idea in Europe’s halls of power, since European taxpayers are currently on the hook if Greece defaults on its debts.

“There can be no taboos. It is essential to establish a sustainable trajectory for Greek debt in the coming years,” Mr. Valls said.

Even German Vice Chancellor Sigmar Gabriel, is in on the about-face act. Yesterday the Financial Times reported Alexis Tsipras loses Sigmar Gabriel, his last best hope in Germany.


"Alexis Tsipras had pulled down the last bridges over which Europe and Greece could have moved to a compromise."

Today Gabriel says "It’s not a case of bringing Alexis Tsipras to his knees, but it is certainly not that Europe should be brought to its knees."

Obama Calls

"In a flurry of recent phone calls with the French, German and Greek leaders, President Obama and Treasury Secretary Jack Lew have pressed all sides to come to a deal that would avoid a breakup of the eurozone."

The US concern clearly is NATO and Russia. The US does not want Greece to fall into Russian hands.

If there is a deal, the US is behind it.

Deal or no deal, what the hell did Obama promise or threaten to cause this miraculous reversal by Schäuble, Tusk, Gabriel and others?

That's what I want to know.

[gnk]

Re: Does Greece need China?

The only group of people reported in the media was a team of French technocrats that helped the Tsipras Administration. I think Mish is going tinfoil here. As for Obama, the message has been the same since day one.

Another nudge for Tsipras: Merkel just visited the Balkans - Bosnia, Albania. That's a clear message to Greece. The US, having "cleared" the Balkans back in 1996 of any Russian influence, has allowed the EU to plan to expand there, possibly mitigating somewhat Greece's geopolitical relevance. A Greece economically in tatters, outside the EU, while countries like Albania get EU membership and privileges would be a bitter pill for Greece to swallow.

And don't underestimate the Macedonia/FYROM issue. It's still a sore topic here in Greece. FYROM being recognized as Macedonia, in the EU, while Greece is out of the EU would be considered a tragic failure in Greece.

[gnk]

Re: Does Greece need China?

This sums it up pretty well, without putting on the tinfoil:

SYRIZA MP Mitropoulos: "There have been mistakes on all sides in negotiations. We cannot manage a Grexit"

The problem that arises now is passage of any agreement in the various EU member parliaments. Merkel and other EU leaders are going to have a very difficult time. It should not have taken so long. Unless, that's what Tsipras wants in the end.

I'm still torn between the two theories: real incompetence or drachma plan all along using "incompetence."

I really don't know.

[Woodsman]

Re: Galbraith on Greece

Uber alles

Syriza has thus managed to deliver to the neoliberals a victory more complete than they could ever have engineered on their own. This has been the basis of our criticism, that Syriza by engaging in an open war against an opponent it could never hope to vanquish, was doing not just itself but also the Greek people and the left, lasting damage.

The Greek negotiations are now being steered in large measure by the French, who are conceivably next in line if there is a Grexit, given Marine Le Pen’s rising star. If Greece and the lenders manage to reach an agreement, it’s hard to think that Greek citizens will see the ruling coalition as anything other that a creditor puppet state. If the two sides can’t agree and Greece falls into a Grexit, the economic devastation will be so large as again to discourage any state save Italy and France, from pursuing a Eurozone exit, and even in those two countries, it is likely to give Euroskeptics considerable pause.

The net effect is to give Germany, its retrograde ordoliberals, and its neoliberal allies freer rein to continue their destructive austerity policies. Despite how counterproductive austerity clearly is, Greece will be used as tangible proof that the cost of Euroexit is vastly higher. And that means that Germany will be able keep pursuing policies destined to destroy the Eurozone going well beyond their sell-by date: running large trade surpluses, refusing to finance its trade partners, and bucking all measures to move to meaningful Federal fiscal spending that might buffer national differences in performance and stealthily recycle some of the German trade surpluses. The end result will be more oppression, more suffering, and a more catastrophic eventual Eurozone breakup.

http://www.nakedcapitalism.com/2015/...ed-greece.html

[don]

Re: Galbraith on Greece

Charles Hugh-Smith

Maintaining the Illusion of Stability Now Requires Ever-Greater Extremes

July 10, 2015

This much-needed re-set to an economy that serves the many rather than the few is what the Powers That Be are so fearful of.

On the surface, everything still looks remarkably stable in the core industrial economies. The stock markets in Japan, Germany and the U.S. are only a few percentage points off their highs, and we're constantly assured that inflation no longer exists and official unemployment is low.

In other words, other than the spot of bother in Greece, life is good. Anyone who signs on the dotted line for easy credit can go to college, buy a car or house or get another credit card.

With more credit, everything becomes possible. With unlimited credit, the sky's the limit, and it shows.

Europe is awash with tourists from the U.S., China and elsewhere, and restaurants are jammed in San Francisco and New York City, where small flats now routinely fetch well over $1 million.

In politics, the American public is being offered a choice of two calcified, dysfunctional aristocracies in 2016: brittleness is being passed off as stability, not just in politics but in the economy and the cultural zeitgeist.

But surface stability is all the status quo can manage at this point, because the machine is shaking itself to pieces just maintaining the brittle illusion of prosperity and order.

Consider what happened in Greece beneath the surface theatrics.

1. Goldman Sachs conspired with Greece's corrupt kleptocracy to conjure up an illusion of solvency and fiscal prudence so Greece could join the Eurozone.
2. Vested interests and insiders gorged on the credit being offered by German and French banks, enriching themselves to the tune of tens of billions of euros, which were transferred to private accounts in Switzerland at the first whiff of trouble. When informed of this, Greek authorities took no action; after all, why track down your cronies and force them to pay taxes when tax evasion is the status quo for financial elites?

3. If Greece had defaulted in 2010 when its debt was around 110 billion euros, the losses would have fallen on the banks that had foolishly lent the money without proper due diligence or risk management. This is what should have happened in a market economy: those who foolishly lent extraordinary sums to poor credit risks take the resulting (and entirely predictable) losses.

4. But since the big European banks that were on the hook for the 110 billion in bad debt were highly leveraged (estimates are 30 to 1), then a mere 5% loss in their capital would render them insolvent--a Lehman Moment of cascading defaults that the European leadership could not allow, as not only would their cronies lose fortunes but they would lose power when the fragile house of cards they'd constructed collapsed.

Here is the debt in 2009--mostly owed to private banks and bondholders:


5. The status quo's solution: transfer all the private bank debt to the taxpayers of the Eurozone members and loan Greece another 200+ billion euros in exchange for the illusion of reform and a squeezing of average Greek households to pay the interest due on the ballooning debt.

Here is the debt in 2015--almost all was shifted onto the backs of Eurozone taxpayers:



6. Five years later, the debt has exploded to 340 billion euros, triple the debt that should have been written off in 2010 when it became clear Greece could not pay the debt down or even service the interest payments.

7. Five years of austerity and suffering by the Greek people have all been for naught, as the entire euro system is untenable, the debt cannot be paid and the simulacra reforms did nothing to change the power structure or the corrupt, dysfunctional status quo in the country.

8. To maintain the surface illusion of stability for five years, the Powers That Be tripled the debt, vastly increased the risk of default and the damage a default would unleash, and caused undue suffering above and beyond the costs of default and a return to a national currency--a re-set that, if undertaken when it became clear there was no way the debt could be paid in 2010, would already be over and done.

This re-set, while painful in the short-term, is the only mechanism available to force reforms on a self-serving kleptocracy and rid the economy of a dependence on unsustainable credit expansion.

This much-needed re-set to an economy that serves the many rather than the few is what the Powers That Be are so fearful of, for it is the few who garner most of the gains of a corrupt, fully financialized neofeudal system and it is these few who fund the election campaigns of the politicos who are so desperate to maintain the perquisites of the Financial Nobility.

Austerity is meted out to debt-serfs while those at the top transfer tens of billions to their private accounts.

There are variations of this basic flow of income from serfs to the nobility, of course; stock market bubbles are inflated by authorities, insiders sell, sell, sell as credulous banana merchants and wage-earners buy, and then when the bubble bursts, these same authorities ban selling by the small-fry bagholders.

But this is not real stability; it is a brittle simulacrum of stability, an illusion that has required the status quo to pursue extremes of policy and debt that are intrinsically incapable of yielding stability.

In effect, the status quo has greatly increased the system's vulnerability, fragility and brittleness--the necessary conditions for catastrophic collapse--all in the name of maintaining a completely bogus facade of stability for a few more years.

[don]

Re: Galbraith on Greece

Follows the full text of a letter Greek PM Tsipras send to the Troika: Commission President Juncker, ECB's Draghi, and the IMF's Lagarde regarding the latest Greek deal proposal.

Dear President and Managing Director,

The attached proposal for a comprehensive and specific reform agenda by the Minister of Finance of Greece - aimed at complementing the request for a loan facility from the ESM of July 8 2015 - is conveyed to you following the Euro Summit decision of July 7 2015.

In this context, it will be assessed by the three institutions to be presented to the Euro Group. It constitutes the result of many months of formal and informal negotiations that the Greek government undertook with the institutions at all levels, aiming at reaching a program that will be economically viable and socially just.

With this proposal, the Greek people and the Greek government, confirm their commitment to, fulfilling reforms that will ensure Greece remains a member of the Eurozone, and ending the economic crisis. The Greek government is committed to fully implementing this reform agenda - starting with immediate actions - as well as to engaging constructively on the basis of this agenda, in the negotiations for the ESM Loan.

This reform agenda constitutes part of the wider effort of the Greek Government, towards reforming the Greek economy and public administration, through fighting corruption, clientilism and inefficiency, promoting social justice and creating a positive environment for sustainable economic growth. Thanking you for our cooperation,

Yours sincerely,

Alexis Tsipras

What is left unsaid: any debt haircut requests (recall just on Sunday night Tsipras requested a 30% debt haircut in line with the IMF's debt sustainability proposal), and any mention of the Greek referendum which Tsipras personally called two weeks ago to the day to reject precisely the proposal he is now presenting.


Greece’s Syriza-led government agreed to a massive new €13 billion (US$14.34 billion) package of austerity measures yesterday evening, less than a week after Sunday’s landslide “no” vote in a referendum on European Union (EU) austerity.

The proposal would be the deepest package of cuts since the EU austerity drive began in Greece in late 2009. It goes well beyond the proposed €8 to 9 billion in cuts initially demanded by the EU in talks with Syriza.

The 13-page proposal was submitted to the EU, International Monetary Fund (IMF) and European Central Bank (ECB) before the midnight deadline previously set by the institutions. In exchange for cuts, the Greek government is reportedly asking for a €53.5 billion ($59.2 billion) loan to the Greek state and some form of debt restructuring, allowing it to avoid state bankruptcy and remain in the euro currency area.

The austerity measures reportedly include sharp increases in the regressive VAT sales tax and an increase in the retirement age to 67 by 2022. The elimination of additional payments to the poorest pensioners will take place by the end of 2019, a year earlier than previously scheduled.

Plans for the privatization of state assets, including ports and airports, will go forward. The proposal also includes a reported increase of the corporate tax to 28 percent, rather than 29 percent, a reduction requested by the IMF.

In proposing the new austerity package, Syriza has with extraordinary rapidity repudiated the vote in Sunday’s referendum, which Syriza itself had called and presented as a model of democratic accountability. More than 61 percent of the population rejected precisely the measures that the government has now adopted.

Even as Syriza officially called for a “no” vote, Tsipras had no intention of fighting EU austerity. The prime minister expected to lose the vote and, in response, abandon office and leave it to another government to impose the cuts.

[gnk]

Re: Galbraith on Greece

V for Verhofstadt

The EU has a new political rock star after Belgian's speech in the European Parliament goes viral.

By RYAN HEATH AND MAÏA DE LA BAUME
10/7/15, 12:39 PM CET
Updated 10/7/15, 2:52 PM CET

Forget Yanis Varoufakis. The Greek crisis has produced a new political rock star: Guy Verhofstadt.

A battle royale in the European Parliament with another dark-suited, open-collared leader — Greek prime minister Alexis Tsipras— catapulted Verhofstadt into the global spotlight this week.

Since Wednesday morning the former Belgian prime minister’s fiery seven-minute speech lecturing Tsipras on how to solve the Greek crisis has been viewed more than 7 million times in several languages and shared tens of thousands of times on social media.

That’s double the number of people who voted “No” in the Greek referendum, and nearly as many who watched online U.S. President Barack Obama’s 2012 election victory speech.

The speech was a mixture of tough love and plain-talking, aimed at waking the Greek government out of complacency in the high-wire negotiations taking place to keep them in the eurozone.

“Nobody in his right mind wants a Grexit, but I warn you, that is what is going to happen,” Verhofstadt said, aiming his remarks directly at the Greek leader seated not far away in the Parliament chamber. “That is what is going to happen if we and especially you don’t take your responsibility.”

Tsipras remained calm and took notes while Verhofstadt, who has long maintained that the Greek crisis is a symptom of bigger European problems, continued in the manner of teacher lecturing student.

Here are a few of the main applause lines from Verhofstadt:

• “You don’t have to be afraid of the European Parliament!” — the opening line of the speech, a reference to the fact that Tsipras had resisted several invitations to appear in the assembly in the last several months.
• “I’m angry because you are talking about reforms but we never see concrete proposals of reforms. We are in fact sleepwalking towards a Grexit.”
• “It is not you or it is not us who are going to pay the bill. It will be the Greek citizens who are going to pay the bill.”
• “You have to open the markets and professions for young people …. and end the privileges of ship-owners, of the military, of the Orthodox church, of the Greek islands, and the privileges of the political parties who receive every day money from the Greek banks that are in fact bankrupt.”
• And his concluding exhortation to Tsipras: “Do it!”

One reason for the success may be that instead of a lengthy oration, Verhofstadt used punchy arguments, even deploying the listicle technique of saying, “Let me give you the five things you have to do.”

Preparation for the speech nearly turned to disaster. Verhofstadt and his close advisers began preparation only late Sunday night in Strasbourg, over dinner in at Chez Yvonne, a traditional Alsatian restaurant in one of the narrow alleyway streets surrounding the city’s cathedral.

When the time came to draft, Verhofstadt’s iPad had only 2 percent battery left, setting off the Liberal leader’s well-known temper. Then the 3G cut out. There was no WiFi. And the iPad soon died.
With the technology options drying up, the Liberal leader decided to keep it simple: Address Tsipras directly and make just five points. The points were tapped into an iPhone and prepared on paper just before Verhofstadt walked into the Parliament’s hemicycle chamber.

As the speech began to go viral, other European politicians seemed a little envious of the attention and questioned whether the timing and tone of the speech was appropriate.

“Verhofstadt makes one mistake. It is not the moment,” Daniel Cohn-Bendit, a former leader of the Green group of MEPs and another politician known for his rabble-rousing speeches, told French channel BFM TV. “He could have given a similar speech a month ago, two months ago. He didn’t look at the big picture, Guy Verhofstadt.”

[don]

Re: Galbraith on Greece

Proposal to Screw European Taxpayers

You never know who's reading your blog, until you receive emails. I received a pair of them this week from Father Joseph Fessio, S.J., Founder and Editor of Ignatius Press.

While I am quite certain we disagree on many issues, Father Fessio is dead on accurate in his analysis of the New York Times DealBook article A Bold Proposal to Offer Greece Some Financial Relief.

The DealBook article was written by written by Landon Thomas Jr.

Thomas trumps up a plan written by Mitu Gulati and Lee C. Buchheit, two debt lawyers who played a central role in the restructuring of Greece’s debt in 2012.

The Proposal

A few snips from DealBook shows the master plan to be nothing but a gift to hedge funds and vultures at the expense of eurozone taxpayers and Greece.

European governments do not want to lend Greece any more money, nor do they want to have their debts written down, Mr. Gulati said. So the trick, he argued, is devising a mechanism that can persuade private sector investors to pick up the slack.

They say, private-sector bond investors should be granted a powerful incentive to load up on risky Greek debt by being awarded seniority over public sector debt holders.

That means these nongovernment lenders would jump to the head of the line of creditors in terms of who gets paid first if, in the future, Greece does not have enough money to pay all of its lenders.

“This is not a substitute for debt relief,” Mr. Buchheit said. Nor, he added, should it be seen as a way for Greece to escape the tough reforms it needs to put in place to make the economy more functional and efficient.

Father Fessio Analysis

Father Fessio writes ....

Hello Mish,

Please blast these people. The same people who helped shaped the 2012 Greek bailout now have a new proposal: that private investors loan money to Greece in return for senior debt position!

So the private investors who unloaded all their debt (at huge profits) onto European taxpayers are now going to offer more debt financing, but senior, so they can make more money off the deal when Greece defaults.

Bold Ripoff

I responded to Father Fessio that I did not have to blast anyone out of the water because he just did.

Granting hedge funds and vulture capitalists senior rights is precisely the wrong thing to do. Moreover, the results speak for themselves.

Lars sent me his analysis a few days ago and it fits right into this article.

Lars writes ...

Hello Mish

The 2010/2012 rescue package was €240 billion of which something like €206 billion has been paid out. The key element here is that 77% of the funds went to German/French banks in order to save them from collapse.

Simply put, the eurozone used the Greek taxpayers to save itself and the banks.

The ECB entered the scene also in 2010 and by summer 2011 the Target2 imbalance (for Greece) was a little over €100 billion. We then got the "whatever it takes" pronouncement by ECB president Mario Draghi in July 2012 and deposits started to flow back into Greece. By autumn of 2014 the imbalance was down to €30 billion.

In November 2014, capital flight from Greece started again and since then the Target2 imbalance has grown by €75 billion.

The total Eurozone/ECB exposure is now at least €326 billion. In addition, private creditors are owed €70 billion.

Then there are guarantees by the government on short term debt and debt owed by GSEs.

Europeans seem blind to rescue facts.

Rescue Facts

1. [*=left]The 2010 rescue package was not for Greece but for the eurozone itself. Eurozone and Greek taxpayers were used to save the euro system. This was a despicable act.
   [*=left]The ECB has kept things going by providing liquidity from the “beer drinking” part of the eurozone to the "wine drinking part".
   [*=left]Huge imbalances within the eurozone are now a fact, and they are growing thanks to Draghi's QE.

I watched a debate on Greece on French TV yesterday. They are all clueless as to what is really happening. I also spoke to a Dutchman yesterday and he said he was not concerned about Greece because Dutch exposure was only €5 billion. He almost fell over when I told him it's more like €50 billion. Dutch exposure to the whole eurozone is €120 billion. I did not tell him that as I did not want to provoke a heart attack.

Best regards,

Lars

Generous Terms

German chancellor Angela Merkel has stated many times recently that Greeks got generous terms on its alleged bailout.

Merkel is either a blatant liar or dumb as a rock. I believe the former. It is the bailed out banks in Germany and France that got generous terms.

To save French and German banks of €60 billion or so in losses on Greek bonds they never should have purchased in the first place, eurozone taxpayers are now on the hook for at least €326 billion.

Draghi's famous "whatever it takes" speech should have been suffixed with "to save the banks".

Greek and eurozone taxpayers got the shaft and remain at risk. And now Landon Thomas Jr., Mitu Gulati, and Lee C. Buchheit have a plan to further screw Greece, putting eurozone taxpayers further at risk in the process.

All three of them can take their "bold proposal" and shove it where it belongs.

http://globaleconomicanalysis.blogsp...As51F0fMisK.99

[vt]

Re: Does Greece need to borrow?

By MATINA STEVIS

Updated July 11, 2015 4:10 p.m. ET
ATHENS—A note from Greece’s finance minister to his prime minister warned that the country needed tough economic overhauls if its economy was to live up to its European aspirations.
“We can take on the task to truly lead the country to a European direction, on condition that the Greeks—those who are living well, not those who are suffering—will make the necessary sacrifices,” the finance minister wrote.

That was in September 1996. The finance minister was Alekos Papadopoulos and the prime minister was Konstantinos Simitis, but the letter could have been written today.
In the past quarter century, Greece has had a handful of reformist politicians who foresaw the problems that are now threatening the nation with bankruptcy.

Their reform proposals were fought by their colleagues in parliament and savaged by the media and labor unions. They invariably found themselves sidelined.
Greece’s international creditors, the eurozone and the International Monetary Fund, have long been insisting that the country push forward, ignoring vested interests, with “structural” reforms.

They are demanding deep changes to the rules and habits of government, both within the state apparatus and in its interactions with citizens and the private sector, for example via taxation, professional licensing or pensions.

Since the eruption of Greece’s debt crisis in 2010, successive governments have prioritized fiscal austerity—trying to raise government revenue and cut expenditure—instead of tackling deeper reforms of the system head on.

Many foreign officials involved in Greece’s ill-starred bailout efforts over the past five years say they have learned what Greece’s past would-be reformist politicians always knew: In Greece, hurting vested interests is harder than taxing citizens to death.

Mr. Papadopoulos learned that early on.

He held three senior cabinet positions between 1993 and 2002, and passed key reforms as finance, home affairs and health minister.
As finance minister, he brought in a team from the U.S. Internal Revenue Service, which consulted Greece on how to set up its own tax-crime squad.

He introduced Taxis, the digitized tax platform Greeks still use today. His tenure marked some of the first important steps Greece took toward a modern tax system. They were also among the last. Tax avoidance, evasion and fraud are now fingered by Greece’s international creditors as chronic problems keeping Greece from recovery and growth.

By 2002, Mr. Papadopoulos, who was elected with the center-left Pasok party, could see Greece was veering off the track he had tried to put it on as finance minister. He had been part of the Pasok effort to lead Greece into the euro area, and felt at the time that the country was bingeing on the cheap credit that had come with the common European currency.

Just as the euphoria of spending euros was spreading through Greek society, Mr. Papadopoulos told Mr. Simitis the country’s finances were out of control. They fell out and Mr. Papadopoulos resigned from the cabinet.

“My fight with Simitis came because in 2002, instead of accelerating reforms within the euro, they stopped completely. The way things were being managed in the economy was leading us straight to bankruptcy,” he said, resting his head on his hand at a quiet cafe in central Athens.

Mr. Papadopoulos’s cotton-white hair is testament to his battles: “I was attacked in brutal ways even by my comrades inside Pasok whose constituents were upset because of the reforms I was passing. It came at an enormous personal cost.”

Tassos Giannitsis is no stranger to this kind of war: His tenure as labor minister was more short lived, and the battles against him even more visceral. Mr. Giannitsis in 2001, again in the Pasok government led by Mr. Simitis, put forward a comprehensive proposal to reform the pension system.

Trade unions, opposition parties and Pasok itself unleashed menace on Mr. Giannitsis.

‘They called me ‘the Cassandra’’
—Former Greek Labor Minister Tassos Giannitsis

“Giannitsis was annihilated after his pension-reform proposals. There are few precedents for this kind of universal attack on a politician,” said Loukas Tsoukalis, a prominent economics professor here.

Mr. Giannitsis’s proposals, which would have reduced the pension levels Greeks receive and made the system overall more sustainable given the country’s demographic and labor-force trends, were never taken to parliament.

“From the fridge to the bin!” said the front page of newspaper To Vima on April 28, 2001, as the frozen pension-reform plan was scrapped for good.

“When I told my colleagues in the cabinet about the reforms I was proposing—which mind you were not the toughest available—the attitude I got was that I was spoiling the party,” Mr. Giannitsis said in an interview.

“They were, like, ‘everything is going great right now, why are you bothering us with a problem that may implode in a decade?’”
Mr. Giannitsis had one supporter in that cabinet meeting: Mr. Papadopoulos, who not only agreed that the reforms were necessary, but famously added that they should be tougher, with deeper cuts to pensions and an overhaul of benefits, because what Mr. Giannitsis was proposing was “peanuts” compared with what was needed.

Stefanos Manos, a market-oriented politician on the conservative end of the political spectrum, came before Messrs Papadopoulos and Giannitsis and left a legacy of overhauls in privatizations, tax administration, opening of closed markets like mobile telephony, and reforms of the murky land registry—a key institution in any modern economy that however continues to be a problem in Greece.

Few senior politicians in Greece have been as unpopular as Mr. Manos, Mr. Tsoukalis said. In 1998, Mr. Manos was kicked out of the conservative New Democracy party for supporting a proposal by the opposition, Pasok.

“He was the one key person who so early on talked about the bloated state, the unsustainable pension system, and was blocked repeatedly because of resistance from his own party and from society,” says Mr. Tsoukalis of Mr. Manos.

“I couldn’t understand how so many people would want to have so much, to the detriment of the public good,” Mr. Manos wrote in the foreword of his book. “I made an army of enemies.”
The firebrand Mr. Manos has since been involved in liberal politics in Greece, with parties that seldom get more than 1.5% of the popular vote.

Today, more so than in their times in government, these three politicians and a few others are coming to be seen as among the minority of officials who spotted and attempted to change early on some of the core problems that have led to Greece’s almost intractable crisis today.

“They called me ‘the Cassandra’” said Mr. Giannitsis of the headlines during his unpopular push for reforming the pension system.
Cassandra, in the Greek myth, was a clairvoyant doomed to always be right, but never believed. She went crazy.

[gnk]

Re: Does Greece need to borrow?

Good article, vt. This disaster has been in the making for a long time. And those that saw it, and tried to do something about it, were punished. I always said that the drachma was a zombie currency, and that Euro adoption not only kept the game going longer, but made the eventual bubble collapse much larger.