Galbraith on Greece

[Thailandnotes]

Re: Does Greece need to borrow?

It’s basically the same fake debate/media blitz that’s gone on and on in the states. Who got us into this mess the most? Those lazy teachers or Bank of America, welfare queens or FDR?

Punished?

[gnk]

Re: Does Greece need to borrow?

Greek government disfunctionality and corruption and welfare system is on very different level than in the US. At least that's what I see, and I'm originally from New Jersey!

[Polish_Silver]

The cash fix?

The government and the banking system are nearly bone dry. I can't begin to describe to you what that means to the economy. What I have been hearing from business people is shocking - from tavern owners to major importers, to members of shipping families.

Anyway, a parallel currency or IOUs was an idea floated around by Varoufakis, and several hours later, he is no longer Finance Minister. Right now, what matters is what the ECB will do in a few hours.

. . .

I mean that right now the cap controls are hurting medical supplies. I recently saw a shared post on fb where a pharmacy in Zakynthos was searching for a specific drug.

Money is not moving, and I don't know how a lot of people will make it this winter without tourist dollars . . . .

GNK, this seems like a good reason to separate the deposit and payments systems from the lending/risk systems.

The deposit and payment system should not be affected by bankruptcy anywhere in the system. It is because the banks lend at leverage, and the deposits are considered part of the banks capital, that this can happen.

This is not my idea. It has been advanced by Lacey Hunt, Kotlikoff, and others for years.

But I still do not understand why the pharmacy cannot offer a cash payment for the supplies it needs. Could the pharmacy demand payments in cash ?
In that way, they would establish a payment system independent of banks.

[don]

Re: The cash fix?

from Jesse's Cafe Americain:

Varoufakis: Behind Germany’s Refusal to Grant Greece Debt Relief and the Rise of the Will to Power

"What is at stake is a rather heroic rebellion by a very beleaguered people against a doctrine which has been destroying their lives — the austerity doctrine and the whole neoliberal project. For the rest of us, what is at stake is whether we have the moral courage in the sense of ethical responsibility to stand up to it."

Jamie Galbraith, Greek Revolt Threatens Entire Neoliberal Project

It is probably less an issue of ethical responsibility and more an act of self-interest for most. Having taken their fill of the Third World, and now working their way into the developed nations, why would anyone assume that Greece would be sufficient for the maw of neoliberal greed.

The above interview with Galbraith is worth reading. For one thing it contains the seed of the current spin that Tsipras called the referendum in order to lose it, and to somehow save himself and betray the Greeks. And for another you will be able to read what Jamie Galbraith really thinks, the parts that the friends of the financial establishment have carefully excluded from their versions of the story.

The calling of the referendum was politically brilliant, because it defused the notion of an extremist government standing irrationally against the Troika. This derailed the path towards a 'color revolution' backed by the oligarchs, to take out these mad leftists who were not speaking for the people.

Remember the economic decision involving Europe which provoked the recent coup d'état in the Ukraine? In that case the government did not have the backing of the people, and it took hold, at least in the Western portions of the country. Wash, rinse, repeat.

Of course the Greek referendum was famously too close to predict when first called by Syriza, and surprisingly late in the game for most everyone else as you may recall And Tsipras called it to lose? How soon some choose to forget. But it changed the course of events in a dramatic way. As it was it did not help their bargaining position, but as Galbraith says they did not expect it to improve their bargaining position because their counterparts were implacable and not negotiating in good faith.

But it put the field of play into better terms if your goal is playing for survival, and time. Syriza is knocking down all the rationales and excuses to visit harsh terms on Greece that the Troika and their enablers are using. They are exposing the Eurocrats for what they really are.

Empires set on unsustainable foundations are like financial bubbles and Ponzi schemes. They are inherently non-productive and consuming, so they must continue to grow, or choke on their own detritus. Transferring wealth as your major economic policy requires a steady source of new supply.

Most of the American media has fallen into line with the neoliberal agenda. It might seem surprising, but power has its attraction under corporatism, even for people who would ordinarily consider themselves to be 'liberal.'

There are concerning things happening in the Western world, and a lack of traction towards individual freedom amongst 'the great democracies.'

We look with a sense of foreboding at Germany's growing desire to bring their version of order and efficient management of lands and people to the rest of Europe.

The growing militancy in Japan, and Abe's aggressive pushing aside of constitutional restraints, is undernoted in the West, but of great concern to those in Asia.

Greece would look to the US for assistance in vain, given that Obama's representative to the continent is Victoria Nuland, the bearer of color revolutions and the reaping of ancient lands and cultures for profit.

No, even the developed nations of the West have been caught up in the will to power.

What is good? All that enhances the feeling of power, the Will to Power, and the power itself in man. What is bad? All that proceeds from weakness. What is happiness? The feeling that power is increasing--that resistance has been overcome. Not contentment, but more power; not peace at any price, but war; not virtue, but competence.

The first principle of our humanism is that the weak and the failures shall perish. And they ought to be helped to perish.

Friedrich Nietzsche

At least in this latest incarnation of the will to power some, including the Pope thank God, are speaking out early, publicly, and strongly against the rising tide of injustice, the senseless abuse and indifference towards people, especially the vulnerable and the weakest, and the impulse towards dehumanizing bureaucratic rule and neo-totalitarianism.

How many human lives, how much misery, how much of the richness of the land, are we willing to sacrifice to the indifferent god of the markets and its insatiable Banks.

As always silence is complicity, and apathy is a comfort to something as old as Babylon, and evil as sin.

Behind Germany’s refusal to grant Greece debt relief

Posted on July 11, 2015 by yanisv

Tomorrow’s EU Summit will seal Greece’s fate in the Eurozone. As these lines are being written, Euclid Tsakalotos, my great friend, comrade and successor as Greece’s Finance Ministry is heading for a Eurogroup meeting that will determine whether a last ditch agreement between Greece and our creditors is reached and whether this agreement contains the degree of debt relief that could render the Greek economy viable within the Euro Area.

Euclid is taking with him a moderate, well-thought out debt restructuring plan that is undoubtedly in the interests both of Greece and its creditors. (Details of it I intend to publish here on Monday, once the dust has settled.) If these modest debt restructuring proposals are turned down, as the German finance minister has foreshadowed, Sunday’s EU Summit will be deciding between kicking Greece out of the Eurozone now or keeping it in for a little while longer, in a state of deepening destitution, until it leaves some time in the future.

The question is: Why is the German finance Minister, Dr Wolfgang Schäuble, resisting a sensible, mild, mutually beneficial debt restructure? The following op-ed just published in today’s The Guardian offers my answer. [Please note that the Guardian’s title was not of my choosing. Mine read, as above: Behind Germany’s refusal to grant Greece debt relief ). Click here for the op-ed or…

Greece’s financial drama has dominated the headlines for five years for one reason: the stubborn refusal of our creditors to offer essential debt relief. Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure? The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics.

In 2010, the Greek state became insolvent. Two options consistent with continuing membership of the eurozone presented themselves: the sensible one, that any decent banker would recommend – restructuring the debt and reforming the economy; and the toxic option – extending new loans to a bankrupt entity while pretending that it remains solvent.

Official Europe chose the second option, putting the bailing out of French and German banks exposed to Greek public debt above Greece’s socioeconomic viability. A debt restructure would have implied losses for the bankers on their Greek debt holdings.Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.

To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well.
Once the sordid operation was complete, Europe had automatically acquired another reason for refusing to discuss debt restructuring: it would now hit the pockets of European citizens! And so increasing doses of austerity were administered while the debt grew larger, forcing creditors to extend more loans in exchange for even more austerity.

Our government was elected on a mandate to end this doom loop; to demand debt restructuring and an end to crippling austerity. Negotiations have reached their much publicised impasse for a simple reason: our creditors continue to rule out any tangible debt restructuring while insisting that our unpayable debt be repaid “parametrically” by the weakest of Greeks, their children and their grandchildren.

In my first week as minister for finance I was visited by Jeroen Dijsselbloem, president of the Eurogroup (the eurozone finance ministers), who put a stark choice to me: accept the bailout’s “logic” and drop any demands for debt restructuring or your loan agreement will “crash” – the unsaid repercussion being that Greece’s banks would be boarded up.

Five months of negotiations ensued under conditions of monetary asphyxiation and an induced bank-run supervised and administered by the European Central Bank. The writing was on the wall: unless we capitulated, we would soon be facing capital controls, quasi-functioning cash machines, a prolonged bank holiday and, ultimately, Grexit.

The threat of Grexit has had a brief rollercoaster of a history. In 2010 it put the fear of God in financiers’ hearts and minds as their banks were replete with Greek debt. Even in 2012, when Germany’s finance minister, Wolfgang Schäuble, decided that Grexit’s costs were a worthwhile “investment” as a way of disciplining France et al, the prospect continued to scare the living daylights out of almost everyone else.

By the time Syriza won power last January, and as if to confirm our claim that the “bailouts” had nothing to do with rescuing Greece (and everything to do with ringfencing northern Europe), a large majority within the Eurogroup – under the tutelage of Schäuble – had adopted Grexit either as their preferred outcome or weapon of choice against our government.

Greeks, rightly, shiver at the thought of amputation from monetary union. Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.

To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilisation of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available.

With Grexit reinforcing the ECB-induced bank run, our attempts to put debt restructuring back on the negotiating table fell on deaf ears. Time and again we were told that this was a matter for an unspecified future that would follow the “programme’s successful completion” – a stupendous Catch-22 since the “programme” could never succeed without a debt restructure.

This weekend brings the climax of the talks as Euclid Tsakalotos, my successor, strives, again, to put the horse before the cart – to convince a hostile Eurogroup that debt restructuring is a prerequisite of success for reforming Greece, not an ex-post reward for it. Why is this so hard to get across? I see three reasons.

Europe did not know how to respond to the financial crisis. Should it prepare for an expulsion (Grexit) or a federation?

One is that institutional inertia is hard to beat. A second, that unsustainable debt gives creditors immense power over debtors – and power, as we know, corrupts even the finest. But it is the third which seems to me more pertinent and, indeed, more interesting.

The euro is a hybrid of a fixed exchange-rate regime, like the 1980s ERM, or the 1930s gold standard, and a state currency. The former relies on the fear of expulsion to hold together, while state money involves mechanisms for recycling surpluses between member states (for instance, a federal budget, common bonds). The eurozone falls between these stools – it is more than an exchange-rate regime and less than a state.

And there’s the rub. After the crisis of 2008/9, Europe didn’t know how to respond. Should it prepare the ground for at least one expulsion (that is, Grexit) to strengthen discipline? Or move to a federation? So far it has done neither, its existentialist angst forever rising. Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.

What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.





James Galbraith: Greek Revolt Threatens Entire Neoliberal Project

An inside look at the referendum and what could happen next.

By Lynn Stuart Parramore / AlterNet
July 9, 2015

James K. Galbraith, author of The End of Normal and professor at the Lyndon B. Johnson School of Public Affairs at UT Austin, has an inside view of the crisis leading to the recent referendum in Greece. Galbraith has worked for the past several years with recently departed Greek finance minister Yanis Varoufakis as both a colleague and co-author, and he has just returned from Greece, where he looked down over the rooftops of Syntagma Square as citizens made history in a strong vote against austerity. He discusses the last week’s dramatic turn of events and what is at stake going forward as the austerity doctrine — and the entire neoliberal project — come under threat. This post was originally published on the blog of the Institute for New Economic Thinking.

Lynn Parramore: What’s your take on the attitudes of the creditor powers — the European Central Bank (ECB), International Monetary Fund (IMF) and European Commission (EC) — toward Greece?

Jamie Galbraith: What happened on the 26th of June was that Alexis [Tsipras] came to realize, at long last, that no matter how many concessions he made he wasn’t going to get the first one from the creditors. That’s something Wolfgang Schäuble had made clear to Yanis [Varoufakis] months before.

But it was hard to persuade the Greek government of this because its members naturally expected, as you would when you’re in a negotiation, that if you make a concession the other side will make a concession. That isn’t the way this one worked. The Greeks kept making concessions. They’d present a program and the other side would say —as you can read in the press — oh, no, that’s not good enough. Do another one. Then they’d complain that the Greeks were not being serious.

What the creditors meant by that was this: when you come around and agree to what we tell you, then you’re serious. Otherwise not. This is the way bad professors treat extremely recalcitrant students. You come in with a paper draft and they say, no, that’s not good enough. Do another one.

LP: Have the individual creditors differed on how to treat Greece?

JG: There are some divisions amongst the creditors that are well known. But they’re all variations on the theme of insular, sheltered, cloistered people who do not understand what is happening in Greece and do not know the economics. So, for example, the EC tends to be a little bit nicer, the IMF tends better on debt restructuring but worse on the structural issues, and the ECB was infuriated by the fact that its technocrats couldn’t walk into any ministry in Athens and make demands and be paid attention to. So there were different aspects of this that seemed to trouble different creditors, but it all amounted to the fact that between them there was no basis for arriving at anything other than the original Memorandum of Understanding [bailout program].

LP: What exactly triggered the breakdown that led to the referendum?

JG: What happened was that the IMF took the staff level agreement draft that the Greeks has presented, and marked it up in red ink and presented it back to the Greeks as an ultimatum— this is what we will accept. Or rather [EC president] Juncker presented it back to the Greeks as an ultimatum. And Yanis was told, take it or leave it. So they basically had no choice but to walk away from it, to leave it.
LP: How do you think the referendum has changed the situation? Has it given the Greeks leverage or not?

JG: That’s a difficult question. The recent Ambrose Evans Pritchard piece is very much on the mark [“Europe is blowing itself apart over Greece and nobody seems able to stop it”]. The Greek government and particularly the circle around Alexis, were worn down by this process. They saw that the other side does, in fact, have the power to destroy the Greek economy and the Greek society — which it is doing — in a very brutal, very sadistic way, because the burden falls particularly heavily on pensions. They were in some respects expecting that the yes would prevail, and even to some degree thinking that that was the best way to get out of this. The voters would speak and they would acquiesce. They would leave office and there would be a general election.

But civil society took this over in the most dramatic and heroic fashion. It was an incredible thing to see. The Greeks, amazingly, voted 61 percent no. That, momentarily, gave a jolt of adrenaline to everybody in the government. But the next morning, they were back where they were before. And that’s why, of course, Yanis left at that point. What will happen now really will depend on whether there is anything forthcoming from the creditors in Brussels. It’s a very uncertain situation. It depends a lot on specific people on the Greek team.

LP: What are the alternatives for Greece at this point?

JG: Capitulation or exit. It really depends upon a political judgment in the Greek government, which is opaque to me. There is definitely, let’s say, a concession caucus in the circle around Alexis Tsipras. That is a problem because that is obviously not what the Greek people want.

LP: What does it mean to the rest of the world if Greece capitulates or exits? What’s at stake?

JG: What is at stake is a rather heroic rebellion by a very beleaguered people against a doctrine which has been destroying their lives — the austerity doctrine and the whole neoliberal project. For the rest of us, what is at stake is whether we have the moral courage in the sense of ethical responsibility to stand up to it.

LP: Is the austerity doctrine — which has been widely discredited by economists — under serious threat?

JG: It is definitely under threat from an increasingly emboldened political movement across Europe — certainly in Spain, certainly in Ireland, probably in Portugal, Italy, and France. So the answer is yes. This is what terrifies the European elites about the Greek situation. What Syriza did was to wipe out — and the referendum completed the job — the leadership of the previous sort of condominium of governing parties, which were a neoliberal conservative party and a neoliberlized social party. Now what do you find in the rest of Europe? Look at Germany, look at France. You find exactly the same thing. And of course, the elites in those countries fear the same phenomenon. So what we’re seeing is an allergic reaction to what they regard as a political threat of the first order.

[jk]

Re: The cash fix?

But I still do not understand why the pharmacy cannot offer a cash payment for the supplies it needs. Could the pharmacy demand payments in cash ?
In that way, they would establish a payment system independent of banks.

i would imagine that under current conditions people will be hoarding cash.

[don]

Re: The cash fix?

the Austrian Solution?

[KGW]

Re: Galbraith on Greece

His latest thoughts: http://ineteconomics.org/ideas-paper...uropean-elites Again, the U.S. uber alles fails! Yeah, baby!

[gnk]

Re: Galbraith on Greece

from the above article:

What's at stake?

What is at stake is a rather heroic rebellion by a very beleaguered people against a doctrine which has been destroying their lives — the austerity doctrine and the whole neoliberal project. For the rest of us, what is at stake is whether we have the moral courage and the sense of ethical responsibility to stand up to it.

Now read this: (Somewhere in the middle, is the true story)

Zakynthos, Greece — The Venetians who ruled this island paradise for centuries called it the Flower of the East. Much more recently some Greeks have called it “to nisi ton tiflon,” or “the Island of the Blind.”

This island in the Ionian Sea is famous for its sublime beaches and sparkling turquoise waters. It is also where one of the most brazen scams to plunder Greece’s beleaguered treasury took place.

In a notorious scheme that may provide guidance to eurocrats trying to figure out whether this country deserves another big bailout this Sunday, as many as 700 people of the island’s 35,000 residents falsely claimed that they were blind. They were rewarded with more than 350 euros ($477) a month in compensation.

A leading local politician and an ophthamologist were said to be the ringleaders, although in a lovely twist the medical documents that some of the “blind” provided to the authorities to get their money had been signed by a urologist.

The scheme, which operated for years, was finally shut down in 2011 after one of the “blind” was said to have been caught driving his Porsche. Among the cheats receiving the monthly stipend, which cost the government several million euros a year, were a taxi driver and a hairdresser, according to Greek media reports at the time and many foreign news sources which reported the fraud and others involving entitlements with great enthusiasm.

The epicentres of this trickery were from the hamlets of Kalipodo and Kipseli. The communities are a few minutes drive north of the town of Zakynthos where Russian oligarchs and Hollywood royalty tie up their mega yachts across a promenade that is as pretty as any on the Mediterranean Sea.

When I stopped by Kalipodo a few residents were enjoying the evening air and the buzz of cicadas on the balconies of their pastel-coloured homes, which were secluded in a lush maze of leafy palm trees and bougainvillea. None of them was willing to speak with me. However, a few of their neighbours in Zakynthos were.

“This is a beautiful place and people come from all over to admire it, but every village has its donkeys. I don’t feel guilty,” said Spartakos Delianis, who was a mathematics professor before becoming a restaurateur.

“I know from a good friend of mine who grew up in Canada before returning to Greece that your country was built on the rules of Her Majesty. Every country has its own mentality and it has never been the same as that here. What we have is the mentality that rules are made to be broken.”

To make his point, Delianis pointed at the motor bikes that constantly roared past his seaside restaurant. Although not wearing a helmet carries a mandatory 350 euro fine the law is rarely enforced.

Nobody on Zakynthos wore a helmet because being Greek permits “the freedom to break the law,” Delianis said. “When my son sees that nobody wears a helmet he thinks he, too, doesn’t have to wear one.”
Anastasia Pomoni, who worked at the airport, smiled when asked whether the sobriquet, “Island of the Blind” was deserved.

“I don’t see anything that I can do about this,” she said. “It was a common secret here, but this is not the only place in Greece where this kind of thing goes on. This is a beautiful island where some people tried to earn money too easily. Just look at the voters’s lists. Of 100 names on the list 20 of them are dead and some of them died a long time ago.

“To be honest, with the system we have in Greece, nothing shocks me any more.”

As Delianis bluntly put it, “In Greece the fish stinks from the head.”

The whole debate about Greece and its use of the euro since 2001 would never have arisen if the country had told the truth about its finances from the outset. As it finally admitted to the EU in 2004, it had intentionally cooked its books, underestimating the deficit, specifically so that it would be eligible to join the euro zone gravy train.

Guesses vary about how much money is lost through tax evasion and tax avoidance, with estimates ranging as high as 20 billion euros a year. Proving this with any precision is difficult, but the University of Chicago produced a paper that suggested that since four Greeks in five reported that they owed more than what they earned, but were somehow able to pay their debts off, they were obviously grossly under reporting their real incomes. In what may or may not come as a surprise, the statistics indicated that accountants were found to be the leading offenders.

There are many egregious examples of entitlements gone berserk. One of the better known ones was that until a few years ago about 40,000 unmarried daughters of deceased public service workers received 550 million euros per year. The rule now is that these daughters can no longer receive a share of their late fathers’ pensions after they reach the age of 18. But Greece’s Court of Audit is considering whether sons should be entitled to retroactively claim this bounty because they had been victims of sex discrimination.

“I cannot say this is right,” Anastasia Pomoni said. “There is a sense today that we are bad because we do not pay what we should, but we are not all bad.”

Countering Zakynthos’s reputation as “the Island of the Blind,” she recalled the island’s heroism in successfully hiding every one of its 275 Jews during the Nazi occupation.

Nobody did any jail time for the fraud scheme in Zakynthos. Those who were caught were ordered to repay their ill-gotten gains in installments. According to local police, they are still doing so.

Several islanders reacted with fury when told I was doing a story about how many of them had claimed to be blind. Spartakos Delianis seemed bemused by the enquiries.

“It was a beautiful idea to be in Europe, but we started from a different point than the other countries,” he said. “You judge Greeks from a Canadian point-of-view. But what we have here is an invisible system. You can bang your head against this wall, but you can’t smash it.”

National Post

[Polish_Silver]

Grexit vs repayment

I suspect Piketty might be asking for something that is already in the works, perhaps even baked into the mysterious "Plan B".

I think Germany will still assist Greece in minimizing the extent of any humanitarian crisis, and that will probably include direct financial transfers or writing off large chunks of remaining debt. The issue from the germanic perspective was never as much about getting their money back as about ensuring that whatever "Europe" it was in (however large or small that winds up being) plays by the rules they see as essential for long-term economic success . . .

Astonas, that makes a lot of sense. However, "playing by the rules" has not been done consistently. Virtually every nation in the EU has violated the budget deficit rules, and the punishments have never been imposed. One also has to wonder how Greece got into the EU in the first place. What has changed to prevent similar future calamities?

The EU needs to have rules which are "self enforcing" that is, not subject to political tampering. If properly structured, market forces would be the enforcement mechanism. I read many times that banks were required to treat all sovereign debt as equal. That is why the banks loaded up on PIG debt---they were legally required to. So the very rules of the EU prevented market forces from imposing restraint on debt levels, and now people are blaming the banks. The banks could have made a stink, but they probably knew they would get bailed out. To me, it's a politically contrived system that is inconsistent with market and behavioral forces.


I watch Deutsche Welt and they interview a Greek merchant, he claims he won't be able to import goods on a Drachma system because the devaluation will be so great. What he should say is that the exchange rate would make the imported goods to costly for Greek salaries. So he is really saying that Greek consumption is being subsidized by the Euro.

[don]

This is a Mistery?

Shockingly Stupid Sequence of Events

I am seldom stunned by political stupidity. In fact, I am surprised when I don't see it.

Yet, I have never witnessed a political reversal so shockingly stupid as we saw tonight from Greek Prime minister Alexis Tsipras.

For months on end Tsipras claimed he would not accept blackmail by Germany. He rejected Germany's "final offer" in favor of a referendum.

He encouraged Greek citizens to vote "no" to the bailout referendum. Then they did, by an overwhelming majority.

Breathtaking Political Capitulation

Tonight, Tsipras reversed himself 180 degrees, and accepted the newest "final offer" that was far worse than the one he turned down a short while ago.

The deal so harsh that I agreed with Paul Krugman's description of "grotesque".

Specifically, Krugman said of the latest deal "This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for."

Whether or not one believes in the eurozone, and no matter what side one takes in the debate, there is no question regarding Krugman's description.

Creditor Demands

For the complete list of creditor demands, please see Tsipras' Choice: Total Capitulation or Grexit; Text of 4-Page Eurozone Demands.

Germany demanded, amongst many other things, that Greece put up €50 Billion in collateral (no doubt islands and state businesses at bargain basement prices).

The creditor demands remind me of the war reparations at the end of WWI that ultimately collapsed Germany and led to WWII. That may be a bit of an exaggeration, but that is what comes to mind.

ThisIsACoup

Following months of rants against Germany and the Troika, culminating in a referendum in which the Greek people overwhelmingly agreed the deal was a bad one, Tsipras bowed down and accepted a far, far worse deal.

In Critics Flock to Site "ThisIsACoup"; Killing the European Project; Illusions; Who's Going to Pay?, I offered my take on why the eurozone would fail.

I still stand by that analysis. The eurozone remains fatally flawed.

Who's Going to Pay

In spite of this stunningly idiotic reversal, I still maintain that one way or another, Germany will pay a price (by bailout, by default, or by destructive breakup).

Only the timeline and who gets the blame has changed.

Tsipras Trades Royal Flush for Draw at Inside Straight

Tsipras won the game. He had the backing of Greek citizens no matter what he did. The opposition party leader and former prime minister resigned following the "no" vote in the referendum.

Blame for Grexit was squarely in the Germany's hands. And it was even in the best interests of Greece to default.

Tsipras traded all that away for nothing!

Questions

• [*=left]Did the US bribe Tsprias with a secret account worth millions?
  [*=left]Is someone holding his kids hostage?

If one of those (or something similar) does not explain the reversal, then what does?

http://globaleconomicanalysis.blogsp...hOgEE4uf87f.99

[gnk]

Re: This is a Mistery?

Varoufakis had been telling Tsipras all along that the world will experience an economic meltdown if the EU did not capitulate to Greek demands.

When the markets yawned after the IMF payment went in arrears, that's when the EU knew it could turn the tables.

Furthermore, the Greek gov was not prepared with a drachma plan, so it would be a greek economic implosion.

That's it really. No tinfoil req'd.

[GRG55]

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

- enough time has passed to allow sufficient amounts of Greek debt to be transferred to the public ledger, thus removing most of the consequences of default from the European banking system

- a default was always inevitable; unlike some years ago the consequences for Greece are now much greater...the present government can't be held responsible for that.

- I still see no logical or rational reason for Greece to leave the currency union; if it happens it will be a political mistake rather than a calculated economic decision.

The all night session was worthy of a union labour negotiation; keep everyone up all night until they are so exhausted a deal gets done

Euro zone strikes deal with Greece after all-night struggle

Mon Jul 13, 2015 7:51am EDT

Euro zone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euros bailout to keep the near-bankrupt country in the single currency.

The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged leftist Prime Minister Alexis Tsipras to abandon promises of ending austerity and could fracture his government and cause an outcry in Greece.

"Clearly the Europe of austerity has won," Greece's Reform Minister George Katrougalos said...

...If the summit had failed, Greece would have been staring into an economic abyss with its shuttered banks on the brink of collapse and the prospect of having to print a parallel currency and in time, exit the European monetary union.

"The agreement was laborious, but it has been concluded. There is no Grexit," European Commission President Jean-Claude Juncker told a news conference after 17 hours of bargaining...

...In almost the only concession after imposing its tough terms on Tsipras, Germany dropped a proposal to make Greece take a "time-out" from the euro zone that many said resembled a forced ejection if it failed to meet the conditions.

Tsipras was subjected to a 17-hour browbeating by leaders furious that he had spurned their previous bailout offer on more favorable terms in June and held a referendum last week to reject it. Only France and Italy worked to try to soften the terms being imposed on Greece...

[gnk]

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

I'm not feeling relief yet. This thing has to be implemented - does Greece have the political will? Heads are going to roll at Syriza, the extreme elements removed, and Tsipras is going to have to cooperate with the opposition.

And to think, just about two years ago, Tsipras was the leader of a minor party that voted against Memorandum #2 and blasted the establishment parties for passing it.

And now? The strictest memorandum ever, being pushed by Marxists no less!? I guess Tsipras was able to envision what economic collapse would do to Greece and himself.

SYRIZA, welcome to reality.

[don]

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




With the provocative and dramatic Greek "time out" language pulled from the final finmin and summit draft language, the two most humiliating aspects of the latest extend and pretend "deal" for the Greek people will be the return of the Troika's (surely we can call it the Troika again as part of the Greek capitulation) IMF mission to Athens, and the escrowing of some €50 billion in Greek assets in a liquidation fund.

Granted said fund will not be domiciled in Luxembourg as was originally envisioned, but Europe will still have control and first refusal rights over what are technically Greek properties, in the process Athens handing over about 25% of Greek GDP (and sovereignty) over the Brussels.

What are these assets? For the answer we go to the horse's mouth, Jeroen Dijsselbloem, who laid out the holdings of the proposed Greek privatization that would be sold off as follows: "it still is going to be an independent fund, valued at €50 billion which can be airplanes, airports, infrastructure and most certainly banks.”
Bloomberg quotes the Eurogroup finmin president:

They will be brought in with the target to privatize those in the coming years, but we will take our time for that.

We then hope for proceeds of EU50 billion, but that will be clear later.

The banks first have to be refinanced from this aid program, but after that I take it that they’re worth money and then we can sell them.

The proceedings are aimed at lowering Greece’s national debt.

In other words, Greece will be liquidated piecemeal to repay creditors. In even other words, the proceeds from the Third Greek Bailout will not only not reach the Greek people, but Greece will have to sell itself in pieces to top off the creditors' funding needs.

Dijsselbloem concludes: "That is good for Greece, but also good for us. We are in the end the ones from whom the money is borrowed."
It was not exactly clear why this would be good for Greece.

So for all those curious, here are some of the "assets" that already have, or soon will hit Ebay.


The only caveat: when (not if) Greece defaults again, and it is time to collect on Europe's secured DIP loan (which is what the Third bailout really is) collateral because not even the French socialists can push for a fourth bailout, good luck trying to repossess Aegean islands or the Santorini ferry terminal.

Oh, and for those struck by a case of deja vu, the €50 billion privatization "plan" is nothing new: it was first proposed by the IMF in 2011. This is what happened next:


What does the IMF say now about this latest privatization proposal? "Not realistic."

Which may be a problem for Greek banks since as the summit deal envisions, half of the privatization "proceeds" will go to recapitalize Greece's insolvent banks. Proceeds which the IMF projects will be about €2 billion until 2018!

This is a problem because with this implicit admission that the Greek financial sector will effectively never receive the needed funds to remain stable, any ELA increase by the ECB will be promptly used by Greek depositors to yank as much money as they can, awaiting the next weekly dose of monetary generosity from Mario Draghi, as both capital controls and the Greek bank run remain a permanent fixture of Greek daily life.

[santafe2]

Re: This is a Mistery?

I am seldom stunned by political stupidity. In fact, I am surprised when I don't see it.

Yet, I have never witnessed a political reversal so shockingly stupid as we saw tonight from Greek Prime minister Alexis Tsipras.

To your point...