Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

[Southernguy]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

Corruption vs. economic development....
The fastest growing economy during the last 30 years, and by a very wide margin, has been China.
Of course, a perfectly honest country.
More to it: who would benefit by Greece (I take your information on the subject, dear GNK at face value) cleaning up it's land registry system?
Me, being a bit weird mind, seems to think that banks would be main beneficiaries. You can't mortgage property with not clear cut ownership title.
To the little fellow with no suprlus capital living in a place with no clean title is of small importance. The only minus is being unable to mortgage the place which is, on the long term, a plus. When you think as an investor in real estate having many property without title is really a drag, the pool of investment object falls drastically.
Moreover; asking Syriza people to correct such a complex matter in the few months they have been in office and in these particular circumstances is plain absurd. I do real estate business here and know quite intimately the complexities around correcting such a situation. Decissions should be made as to whom is the title-owner of hundreds of thousands (I imagine in a country of Greek's dimensions) of pieces of land. And after that the amount of paperwork implied; you should have to study every case in detail, is inmense. Sure a work for many years and in a country without the pressing urgencies Greece has faced the last years, not to say the last weeks.
As for Tsipras ability as leader, if the information about his capitulation to the creditors is right, there aren't many good things to say.
I predicted it here in the "Galbraith" thread on Greece after knowing about Varoufakis resignation on Monday. After that capitulation was the only logical outcome. On that, I hope I was wrong.

[gnk]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

More to it: who would benefit by Greece (I take your information on the subject, dear GNK at face value) cleaning up it's land registry system?
Me, being a bit weird mind, seems to think that banks would be main beneficiaries. You can't mortgage property with not clear cut ownership title.

Actually, it's not the banks that benefit. Here in Greece, every major profession has a powerful lobby/or representative group. Of course, one of the most powerful is the legal lobby. Lawyers make a killing dragging court cases through an inefficient legal system for years. In all my family's dealings with real estate, most of the money went to lawyers and surveyors. None went to banks. Nothing is mortgaged.

Don't take my word for it. Ask any Greek, from any political party affiliation, and they will tell you the same thing.

[Southernguy]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

You did not understand: my point is; who will benefit from creating a clean land registry?. Not who benefits now with the present situation.

[gnk]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

The government surprisingly - as it can better monitor property ownership and compare that to tax forms. Things have improved recently and it was primarily due to the troika imposing property taxes. The property tax issue in and of itself is another debate. But what I am saying is that an unintended result was that people were forced to declare correct information regarding real property on their yearly tax forms. In the past, that wasn't the case and many tax evaders purchased property as a way to hide wealth since the government never had a system in place to compare deeds with tax declarations.

So the question remains, why did the government take so long, and was forced by the Troika, to clean up this mess? I think many in government and many wealthy people wanted it to remain that way to hide wealth.

So now most of the chaos found in the land registry deals with properties outside city limits. We're talking villages here, or recent retail areas that used to be farmland. It's a process, and it is improving. But nonetheless tiresome for those trying to clean up title to properties, as often times, a case has to be brought to court. It has always been a bonanza for lawyers.

[astonas]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

astonas, of all the posters here that have tried to diagnose the Greek issue, you have the best well written, and well researched posts. Not only I and many other like minded in Greeks would agree, but many on the left would agree as well with your points. Thank you.

I had just written a long post detailing the corruption I have seen and experienced firsthand. I deleted it because even though I am an anonymous poster - the details were just too specific. So I'll just say this, even though it will never sink in for many. The corruption in Greece is extreme, and ubiquitous. A lot of what I wrote dealt with the land registry issue you post several posts down. Working in real estate in Greece, whether its sales, or estates, clearing up titlework, or trying to get just compensation from an eminent domain action, is enough to drive anyone insane. The level of corruption and mismanagement and incompetence is mind boggling. And it is not just in real estate matters. Even licensing for just about anything.

Thus, when I see posts about banksters or evil Brussels, or dry economic theories, I can't help but be harsh. I have been a victim of corruption and government disfunctionality. It is not Brussels that affects me. I actually want Brussels to have more power over Greek matters because no Greek government has ever addressed the issues. Ever.

Thanks gnk. I value your contributions here as well. The on-the-ground perspective is very important, and greatly appreciated.

But I do feel compelled to point out that it is one of many valid perspectives here on iTulip. Being on the ground has many advantages - including the ability to cut out a lot of the media's filters. That is extremely helpful, when everyone reporting has their own spin for any story. We do need that!

But there is also an intrinsic challenge in being close to a problem, and it is not a personal one, but a universal human one. The human mind, when assessing loss, gives vastly higher weight to those losses that are immediate, personal, and visible. When one is personally experiencing corruption, as you are so eloquently and passionately describing, the mind will tend to focus on that. It is a considerable evolutionary advantage to do so, and it is not a problem, as long as we can step back and look at the bigger picture occasionally as well.

Thus stepping back, even away from the ground, also adds real value. There are indeed effects at play that stem directly from the sort of large-scale aggregate interventions that are being brought up by those you dismiss. And even if they aren't the most visible to the man-on-the-ground, that very fact means they can often grow to proportions more significant than the local corruption. If you aren't easily seen stealing by the locals, you can steal a lot more. So the visible corruption is indeed a part of what is preventing progress. But it may just be that the unseen interests with back-door access to power have had the means, motive, and opportunity to drain even more from the country.

And there are valid reasons to think that they have. The "bailout" in 2010 is probably the most critical moment of this crisis, when not only Greece, but also the ordoliberals who thought they might help, were screwed over by the troika. Let's take a closer look.

We'll start by breaking down the "Troika" everyone talks about, to tease out who was doing what for whom. The troika is: The European Commission, the IMF, and the ECB.

EC

The European Commission was at the critical moment in 2010 led by Jean-Claude Juncker from Luxembourg (the tiny, bank-filled state that serves as the "Switzerland" of the Eurozone, and is more Anglo-Saxon in its banking philosophy). Remember that he was the one that Tsipras threw his support behind after it became clear he couldn't get the post himself, and while he was hardly the favorite of Merkel, she ultimately had to go along with him, but mostly because Britain was against him, since he was generally pro-Euro. I think it's fair to classify him as decidedly Anglo-Saxon, though not of the British "destroy-Europe" mold. His influence here is that of a tie-breaker; in this case, he allowed the ECB to steamroll the IMF, which was deviating from its reliably Anglo-Saxon position.

IMF

It is a factual matter to say that the IMF's interests are decided based on votes distributed in accordance to financial contributions from member countries. That means that the US, and to a lesser extent, the UK, play an outsized role, compared to how much skin they have in the Eurozone game. Consequently, while the nationality of the leader is by tradition European, the economic philosophy generally leans more heavily toward the Anglo-Saxon than the bulk of Europe does.

In 2010, the IMF in Washington was lead by Dominique Strauss-Kahn.

I know people here have speculated before about whether his undoing was really about his desire to place his personal political ambition for the French presidency above those of the IMF's largest stakeholder, the US. But setting aside all speculation, the facts are pretty clear that he was advocating debt relief for the mediterraneans, particularly at the expense of private bond-holders.

Most iTulipers, I imagine, would be inclined at this point to agree that this would have been preferable to the eventual result of transferring the losses onto the public balance sheets. So while he was Anglo-Saxon enough to get the job, he was clearly trying to bridge the Anglo-mediterranean philosophical gap. I'd guess it is uncontroversial to classify him as a "Keynesian", more than an ordoliberal.

ECB

But when it came down to it, it was Trichet at the ECB who really destroyed the possibility of appropriate private haircuts in 2010:

The paper, released by the independent think-tank the Centre for International Governance Innovation (CIGI), claims that the negotiating team from the International Monetary Fund (IMF) had pushed for debt haircuts for private bank sector holders of Greek debt. That would have meant those banks getting less than the amount they expected to be paid back. The idea was to provide an orderly process out of the debt crisis and to put the country onto a sustainable footing to repay its creditors.

However, the paper's authors claim, the proposal came under fierce opposition from former ECB president Jean-Claude Trichet. At an ECB meeting in the spring of 2010 a member of the central bank's executive board brought up the prospect of debt relief. Trichet allegedly "blew up," the paper says:

The ECB president “blew up,” according to one attendee. “Trichet said, ‘We are an economic and monetary union, and there must be no debt restructuring!’” this person recalled. “He was shouting.”

(The more complete analysis, which has its own slant, but seems to be pretty well-researched, can also be read here.)

Now, it's pretty clear who Trichet was pals with. He was in Goldman Sachs's pocket, like so many others. He certainly covers their interests as best he can in interviews, and he also did so in key policy decisions, like this one:

May 2011 - Trichet keeps secret files

J-C Trichet vetoed a legal proceeding by Bloomberg vis a vis the EU's General Court, for the ECB to release details about the Goldman-Greece deal (Bloomberg). The timing, one month before the June hearing, cannot be overlooked. The pretext, preventing market risk, was deemed inadmissible by Bloomberg news' Editor in chief (Bloomberg).

This guy is clearly Anglo-Saxon through and through. He's the one defending Goldman, not just in words, not just by preventing a haircut, but even by blocking anyone from looking at what role Goldman might have played in the past. And he also defended Draghi (ex-Goldman) as his successor, to ensure that the secrecy could be kept going, as it is still.

So, with all that. Is it REALLY just about Greek corruption? (for that matter, given who was driving, could it really be about germanic conquest?) Isn't it possible that corruption in the troika leadership played a role as well?

As much publicity as Merkel gets for saying "No" she wasn't the one doing the blocking when it counted, nor were any of the other proponents of ordoliberal methods in northern Europe. That privilege went exclusively to the Goldman boys at the ECB, with ratification led by their ideological analogue in the EC, Juncker, with pertinent information kept secret by their own internal vetoes of information releases.

So yes, Greece might truly need external pressure to reform. And yes, the ordoliberal "sword of Damocles" might conceivably have been a pathway to that (we'll never really know now). But the truth of the matter is that that ordoliberal approach was never really tried. It was pre-empted by entrenched banking interests, first. Once the debt was carried chiefly by the northern Europe public, instead of private holders, the sword of Damocles was made ineffective. A greek default would no longer damage just Greece, but also everyone else in Europe. That meant it wasn't really the serious localized threat it needed to be. Instead, it opened the door for game theoreticians to try to "work the system" of Europe. It is therefore no longer a surprise that this is exactly what happened next, with Varoufakis and Tsipras simply stepping into roles that were made possible, and in some ways, inevitable, by Trichet in 2010.

To use your "sword" analogy again, the game had changed, with the division of the sword into many swords, now hanging over everyone's head. It stopped being ordoliberal motivation for Greece, and instead became a game of "whoever blinks first, loses". Since Greece had the least to lose, they could carry that game further than they could before, and they did so.

And now it has been confirmed that Tsipras has capitulated. I mentioned in another thread that the election was unnecessary. And others here thought I was being undemocratic. Let me explain. The election was not scheduled, it was a snap election because Samaras was incompetent and Tsipras was unrelenting in his Parliamentary attacks.

A complete waste of time, energy, and now, lots of money, including a tanking economy. Only if Tsipras becomes a true reformer will it have been worth it.

I live with the corruption, I live with the government disfunctionality, I live with the capital controls and threats of dwindling supplies including medicines. So when I see people from thousands of miles away posting the same recycled BS explaining this Greek episode as only a two dimensional bankster v. poor people story, I lose it. Sorry if I offended anyone, but it's different when you live it.

Again, thank you for your perspective, I mean that quite sincerely. I am not diminishing the role you play in telling your side of the story. But it is also worth acknowledging that there are in fact TWO sets of corruption here. One on the ground, and one high up, in the corridors of power. They aren't mutually exclusive. They are BOTH damaging Greece, and the European project. The former directly, and the latter in ways harder to see. But both are real.

In the beginning I had two theories about Tsipras. One - he is incompetent as a negotiator and we will get essentially the same agreement after killing our economy unnecessarily. Two - the marxist element of his party will somehow pull off a drachma plan that lays the blame on the EU.

It looks like the incompetent theory prevailed. But then again, until the ink is dry, we will not know until Sunday.

The fireworks in Greece will begin shortly. Many will feel betrayed by Tsipras. His marxist base is going to lose it.

Yes. Tsipras has not done very well. And it's possible that he won't be treated well, either. I'm less certain, however, whether anyone exists, who in his place, could have done better.

The forces outside his control seem so much bigger than anything he could possibly have gotten his hands around.


Can you name someone you think might have succeeded in doing something different?

[lakedaemonian]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

The fireworks in Greece will begin shortly. Many will feel betrayed by Tsipras. His marxist base is going to lose it.

How would you rate Greece's chances of a return to the politicized violence it experienced in the 1970's/80's?

[gnk]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

astonas, great post, great discussion.

I agree that boots on the ground can color ones perspective. But run a search on this forum and you will see my posts dated from 2010 - I know full well the banking system's manipulation of Greece. It was detrimental to many EU countries, not just Greece. It also played a role in extracting money from some EU members to be funneled to the banks of other EU members. This of course influenced how the political solution for Greece was developed - detrimentally so. I agree.

But, being a Greek (dual) citizen, and understanding Greek culture has given me a different perspective now. Not just regarding the present dangers of capital controls, but regarding Greece's long term future. If corruption and other cultural issues are not addressed, Greece will once again become a victim in the future. I guess one can compare what I am saying to what came first, the chicken or the egg.

This is what I mean:

Are countries like Greece manipulated more than other countries due to their culture, or is their culture negatively influenced by foreign interference? Is it both? Is Greece a basket case today due to the cold war right/left schism? (and a better argument could be made that 400 years of Ottoman rule has scarred Greek society) Or, was Greece always a basket case, making foreign involvement, or as you say "the corridors of power" that much more likely to get involved?

As a Greek citizen, I know I can't change global banking powers. But as a citizen, I can try my best to elect politicians that want to reform Greece, and in that process, make Greece less likely to be bankrupt, much less victimized by banking powers in the future. Given Greece's history, it's common for politicians here to blame foreign powers (small country psychology - you won't see this in Germany or the US) to divert public attention away from government corruption and incompetence.

There is only one way for smaller, weaker countries to ward off foreign involvement, and that is to self improve. Make your country stronger, be honest with yourself and don't always blame the foreigner. Small countries can't lead the charge to change the world - Tsipras has just learned that lesson the hard way. But Tsipras can stop corruption, patronage and clientelism here in Greece, but will he? So far, I have seen the opposite.

My goal is to improve Greece, and when many analysts write that Greece is a victim of banks or Brussels, I hope you understand my reaction. It's not that I disagree with them 100%, it's that their story, to me, is more often than not, lacking a lot of the whole story that needs to be told - for Greece's future. To me, an analyst simply saying Greece would be better off with the drachma is irresponsible. At least they can learn a few things about Greece first and its ability to roll out a new currency, and what that means to the average person - the full story - the good, the bad, and the ugly.

You ask if there is someone that could have succeeded. I don't know if that's the right question as I think little can be done differently, by anyone. Personally, I'm no fan of Samaras, but I voted for him for the sake of stability. Things were getting better in some ways, and in other ways at least they weren't getting worse. Now we have to start the clock all over again - actually, it's like we went back in time to 2010. A needless exercise that only benefited journalists and analysts.

Unfortunately, Greece doesn't have any decent leaders right now. The old guard (PASOK and ND) has rightly so, lost all credibility. The newer political parties are mostly extreme right and left and I mean really extreme.

In January, I would have preferred to vote for Theodorakis or Leventis, but they polled too low, and my vote for ND Samaras was a practical one, in my view - it was to keep Tsipras from winning.

In 2012, I initially voted Drasi (a now defunct libertarian party), but when the elections went to round two - I voted Samaras, to keep Tsipras from winning.

[gnk]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

Slim chance. I would be surprised if the violence exceeds what we saw in 2010.

[gnk]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

To me, this is the type of analysis that explains the Greek problem. It is not the common simplification one sees all too often in the media.

[astonas]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

astonas, great post, great discussion.

Thanks, I concur, and likewise am enjoying this exchange; I learn a lot from your posts, and hope for continued correspondence.

I agree that boots on the ground can color ones perspective. But run a search on this forum and you will see my posts dated from 2010 - I know full well the banking system's manipulation of Greece. It was detrimental to many EU countries, not just Greece. It also played a role in extracting money from some EU members to be funneled to the banks of other EU members. This of course influenced how the political solution for Greece was developed - detrimentally so. I agree.

But, being a Greek (dual) citizen, and understanding Greek culture has given me a different perspective now. Not just regarding the present dangers of capital controls, but regarding Greece's long term future. If corruption and other cultural issues are not addressed, Greece will once again become a victim in the future. I guess one can compare what I am saying to what came first, the chicken or the egg.

This is what I mean:

Are countries like Greece manipulated more than other countries due to their culture, or is their culture negatively influenced by foreign interference? Is it both? Is Greece a basket case today due to the cold war right/left schism? (and a better argument could be made that 400 years of Ottoman rule has scarred Greek society) Or, was Greece always a basket case, making foreign involvement, or as you say "the corridors of power" that much more likely to get involved?

As a Greek citizen, I know I can't change global banking powers. But as a citizen, I can try my best to elect politicians that want to reform Greece, and in that process, make Greece less likely to be bankrupt, much less victimized by banking powers in the future. Given Greece's history, it's common for politicians here to blame foreign powers (small country psychology - you won't see this in Germany or the US) to divert public attention away from government corruption and incompetence.

There is only one way for smaller, weaker countries to ward off foreign involvement, and that is to self improve. Make your country stronger, be honest with yourself and don't always blame the foreigner. Small countries can't lead the charge to change the world - Tsipras has just learned that lesson the hard way. But Tsipras can stop corruption, patronage and clientelism here in Greece, but will he? So far, I have seen the opposite.

My goal is to improve Greece, and when many analysts write that Greece is a victim of banks or Brussels, I hope you understand my reaction. It's not that I disagree with them 100%, it's that their story, to me, is more often than not, lacking a lot of the whole story that needs to be told - for Greece's future. To me, an analyst simply saying Greece would be better off with the drachma is irresponsible. At least they can learn a few things about Greece first and its ability to roll out a new currency, and what that means to the average person - the full story - the good, the bad, and the ugly.

I think I understand, and better now than before. Please let me know if you conclude that I don't, after you read my suggestion concerning which of the two effects might currently be the limiting factor for reform. I remain willing to learn.

Your desire to improve what can be made better in Greece is of course also admirable. I hope that desire never fades for you; it is indeed vital. And it is even better when it is directed into those efforts most likely to bear fruit. Which is, I think, what we are ultimately discussing here.

I am hoping that you, too, understand that while those who look at the situation and come to a different conclusion may have a different geographic and/or political perspective, we do still share your goal -- working out the best path for the people of Greece.

Different perspectives can lead to very different proposals, but that doesn't mean that we are taking the consequences that you and your family will experience firsthand lightly. For some of us, it is that desire to minimize suffering that brings us forward to discuss the subject here. The Euro crisis, and Greece in particular, has been discussed on these forums for a long time now, filling several threads. And the vast majority of serious analysis, regardless of the perspective, has dwelt not on things like "how do I make a buck off this?" but rather "what should Greece, and Europe as a whole, do for its people? What is in their best interests?"

So please remember that while we may not be with you physically, I hope you have a sense that within this iTulip community, even those who see the Drachma as a better long-term path forward are not your adversaries, but sincerely wish you well in whatever tumultuous times might be ahead. What we are all striving to find, is a way to make the worst of those times as short and painless as possible.

In short, we may find different answers here, but I hope you do not doubt the sincerity, intent, or well-wishes, of this community.


There are many reasons why one might come to a different Drachma answer than you. Here is a sketch of mine:


This crisis in Greece is clearly not the first time that a nation has defaulted. Videos and articles about Argentina and other cases have come up a lot on these pages. I think that by now we on iTulip certainly understand that this is not the sort of thing to wish on anybody. Default, or equivalently devaluation, isn't something anyone wants to see Greece go through.

But also appearing on these pages have been analyses that suggest that countries suffer MORE the longer they wait to devalue their currency, if such an action is to come. That once oligarchic looting begins in earnest, the longer you wait, the more gets looted. And the quicker you shed the burden, the more national assets, and civil society, can be preserved.

The IMF, since Argentina's troubles, had a very specific "No More Argentinas" rule, in its playbook. It was created precisely to avoid such worst case scenarios. But that rule was actually sidestepped, in the case of Greece, in 2010. Since it was considered (for the first time ever) the "junior" partner of a Troika, rather than the opposition to the Central Bank, DSK made an exception. I've already posted this link, but it really is worth reading if you want to create an accurate prediction of what outcome to expect going forward. Forgive the long quote, it begins on page 12 of the full document. I've added some emphasis.

THE COP-OUT
The €30 billion loan that the IMF planned to give Greece was bigger than any the Fund had given any other country. It also set a record based on another key metric, going further than any previous loan in exceeding the Fund’s usual rules limiting a country’s annual borrowing to 200 percent of its “quota,” which is essentially the amount that each member nation contributes to the Fund based on economic size. At 3,200 percent of quota, Greece’s loan was, therefore, indisputably subject to the standards the IMF had established in 2003, after the Argentine default, restricting the use of giant loans to cases where they are clearly justified.

These standards, as will be recalled from the explanation above, required that a country receiving an extraordinarily large loan must have a high probability of debt sustainability. Unsurprisingly, SPR did not believe Greece met this standard — and SPR had unique leverage over this matter, because its signature is required on any document of this kind going to the executive board.¹¹

Strauss-Kahn was learning of the No More Argentinas rule for the first time, and during the first week of May 2010, he found himself in the middle of a bitter dispute that threatened to derail the Greek rescue, with potentially cataclysmic effects on markets. The board was scheduledto meet within days to formally approve the program — but what should the board be told? How could the board bestow its blessing and allow the disbursal of IMF resources, if it was going to blatantly break the rule? What sort of message might the Fund send by doing so, regarding both Greece and future programs?

Moghadam and his SPR colleagues, backed by Haganand a few others, were firmly dug in: although it was unclear whether Greece’s debt was sustainable or not, the probability of sustainability was not “high” by any reasonable definition of the word, so the department should not certify that the program fulfilled the criteria for an exceptionally large loan. Simply pretending otherwise would make a mockery of a rule that, for good reasons, was supposed to prevent the Fund from making bad mistakes. Senior staff members would be queried closely at the board meeting; how could they say, with straight faces, that they had reached comforting conclusions about Greece’s debt based on “rigorous” and “systematic” analyses, as the rule required?

Their position elicited a torrent of denunciations from other members of the staff as well as some of the deputy managing directors, who accused Moghadam and his allies of risking a global crisis over a bureaucratic obstacle. Some rules are made to be broken, they contended, and this one surely merited bending under the circumstances. Determining debt sustainability is not like measuring temperature, or atomic weight; it is a subjective judgment. The European Department believed in good faith that the program stood a chance of working, which ought to suffice. “It seemed to a lot of us that [Moghadam and Hagan] were thinking about how their reputations might be affected,” said one participant in the debate. “Your ultimate objective is protecting the global financial system, not your good name.”

To the irritation of Moghadam’s foes, Strauss-Kahn declared that he would not force anybody to sign something they were uncomfortable with. But the managing director was also determined for the program to go forward, with the big dollop of IMF cash that Greece had been promised. A compromise emerged: instead of certifying that Greece had a high probability of debt sustainability, the staff would tell the board that “on balance,” the country’s debt appeared sustainable. At the same time, the Fund would create a new exception to its rule, dropping the high-probability requirement for crises that risked general contagion (defined as “systemic spillovers”). This new exception could be applied in all future cases, not just Greece.

The IMF’s first serious test of its No More Argentinas rule was ending in a cop-out. “Nobody was really happy,”Strauss-Kahn acknowledged. But uppermost in his mind atthe end of the first week of May were other developments: the negative market reaction to the Troika deal with Greece was reaching a crescendo; a new plan was in the offing for dealing with future European crises; and the Fund was once again in danger of being sidelined.

All of the above means, with a few other facts I'll go into next, that there really never was a chance for Greece to be "saved" within the Eurozone.

Risk of an eventual Argentinean-style looting was accepted as the price to pay for preventing contagion, by the very institution (IMF) that had been brought into the Troika by the ordoliberals, to ensure that such rules would always be followed. As the world's experts in national rescues, that was the reason they were permitted to join in the first place. But instead, they ensured that a categorical default of some kind was baked in from the very beginning, before the plan made it to the ECB, and before it was seen by the EC.

By itself, this rule change wouldn't necessarily have been fatal for Greece. Germany had recovered economically from 1949-1955 under an even larger load. But in addition to the IMF permitting a large debt, the ECB insisted that this debt not be privately held, but rather publicly, and specifically within the EU at that. Together these facts set up the perverse incentives that meant that Greece was always likely to be an Argentina, with looting going on until a final breaking point, never really recovering. That ordoliberal reform attempts really couldn't ever take hold.

My previous post mentioned how the delocalization of the cost of failure ensured that ordoliberal reforms were also doomed. But summarizing: with the cost of failure distributed to all parties through the nationalization of risk by the ECB, Greece was left with a perverse incentive structure. A simple default was now a worse scenario for Europe, than for Greece itself. Successful reform, however, would be far more painful within Greece, with no pain seen in the rest of Europe. Ordoliberal reforms to eliminate corruption and transform Greece into a Sweden require the tradeoff of one pain for another. But with that motivation gone, these were also doomed, since the sword of Damocles now hung more closely over someone else's head. This caused considerable frustration for both Greeks like yourself, and for the northern Europeans insisting on such reforms.

Even from the beginning, a communication gap, along with the haste in which the deal was thrown together, ensured failure. The ordoliberals didn't understand in time that the organization that was supposed to enforce the rule, had instead panicked and fudged it. That the rules being enforced no longer enabled success, but prohibited it. And the dominant Anglos, whether from self-interest or philosophical dogma, didn't realize that the welfare of Greece could or should be protected; that the private sector could in fact weather the storm just fine. (This last fact was later demonstrated, too late, in 2012.)

So Tsipras was actually correct to challenge the requirement that he work with the "institutions" (Troika) instead of national leaders. The rule that was meant to protect the people of Greece had been rewritten into one that could not. And this new rule persists forward, to 2012, and now to 2015, where the IMF is releasing a much-delayed revised opinion.

But while Tsipras' request was apparently justified, the general lack of understanding of the magnitude of the cultural gap (on all sides) also meant that Tsipras' challenge to the negotiating framework would not ultimately be successful. Both figuratively and literally, parties were not only not on the same page, they weren't even using the same language. It didn't help that Tsipras and co. were simultaneously playing the game theory, and thus lost the trust they needed to overcome that communication barrier. But no prior government had fared much better, either, so how much can that be said to matter?


In other words, in their haste to prevent contagion, early on, in 2010, the IMF and ECB made two decisions that cascaded through the rest of the crisis until today, ensuring that domestic reforms within Greece would remain politically impossible until a full default occurred. There might have been moments when different parties could have interceded, but either the cross-cultural understanding did not exist to do so successfully, or if it did, it apparently could not overcome the entrenched financial interests that were profiting from speculating on the crisis.

And none of this is poised to change going forward. The last five years basically just comprises various failures to successfully communicate about this fact. Is a sixth likely to change anything? I'm having trouble imagining that. Perhaps you have a different perspective.

You ask if there is someone that could have succeeded. I don't know if that's the right question as I think little can be done differently, by anyone.

I'll admit that my question was in part rhetorical, which is why it may not have appeared exactly the right one.

I asked it because I don't think there is anyone who could have done better. Not because Tsipras is great. Just because the limiting factor today does not appear to be the politician in charge. The person in the role, the decisions they make; those are not what is stopping reform from happening. The original source of the problem was in the structuring of the debt. Now it is compounded by five years of added frustration. That can only make things even harder.

Ordoliberal reforms were being attempted concurrently with Anglo-Saxon wealth extraction, and given the perverse incentives that were created in the debt structure in 2010, those policies were the easier "solution" to go along with. It was objectively far less painful for the average Greek citizen to have the country slowly suctioned away by bankers, even before any cultural effects at all are added to the picture. There was an error in the creation of the debt structure that made this so, and this error effectively closed the "externally-forced reform" pathway. So the culture gap was a big factor in the communication about the problem, but I'm not sure it was the limiting factor in the success of the reform efforts themselves. No reform ever happened anywhere, unless it was seen as a way to sooner or later alleviate some other pain point.

So we have Dutch bureaucrats pounding their heads against the wall of the Greek Cadastre efforts, and similar scenes throughout Greece over the last five years. Even if the Greek culture had been radically different, a rational economic actor will seek to distribute economic pain elsewhere, if that is possible. In 2010, the IMF and ECB made it possible.

I think enough evidence exists to establish that the Troika has failed Greece so thoroughly, that it makes future structural reforms extremely unlikely until after a currency devaluation occurs. If this is indeed true, the least damaging option available to the Greek people is to get through that devaluation process while Greece still possesses many of its national assets, so that rebuilding may begin earlier, and with greater remaining infrastructure capital than would be available after waiting. The eventual presence of privately-held debt after such a devaluation is actually going to be a much BETTER forcing function for reform than the broken debt structure, providing only perverse incentives, that exists in Europe today.

I certainly understand that this is not a happy picture that I am painting, and I am very sorry for that. My intent is not to cause you distress, or to make light of either your circumstances, or the hardships that I now believe are inevitable for Greece. But I wanted to give you the best writeup I could, following wherever the data I've encountered so far leads me, in the hope that you might find a way to benefit from it, in your quest to better your circumstances, and those of Greece.

This is the conclusion that I, very regrettably, find inescapable. No matter what winds up happening, I wish you, and Greece, much luck.

[vt]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

http://mentorspeak.blogspot.com/2015...ce-differ.html


Sunday, July 5, 2015

How austerity measures of Greece differ from auterity measures of India in 90s?

Our country took austerity measures in such a way to ensure payment of debt over other things while greece did not do so. And to an extent, economy is like a thermometer one has to cure the disease to bring down the fever


What explains their stance of not paying debt over other things sir?
It requires a full discussion on greece's economy
The first striking thing is that Greece ran a sizable current account deficit that grew from 6.6% of GDP in 2000 to 15.5% of GDP with most of the increase coming in the second half of the decade. A current account deficit basically arises from increases in import costs over export earnings. It is symptomatic of an excess of consumption over income. Greece financed this consumption boom not by drawing down domestic (public and private) savings or gross foreign exchange reserves of the central bank but through the contracting of external debt which swelled from a manageable 73% of GDP in 2000 to close to 160% of GDP by the end of the decade.
If debt was used to finance growth enhancing projects such as investments in health and education, infrastructure, or other investments with a rate of return higher than the cost of the debt, an indebted country could very well remain solvent.
Even as Greece’s debt burden grew ever more onerous, its burgeoning underground economy fueled massive illicit financial flows from the country. Based on well-established economic models, Global Financial Integrity (GFI) estimates that over the past decade ending 2009, Greece lost an estimated US$160 billion through unrecorded transfers through its balance of payments. Interesting, according to study conducted at GFI, there were illicit inflows into Greece which approximately totaled US$96 billion through the misinvoicing of trade transactions, probably as a result of import duty evasion and smuggling.
The shoddy quality of Greek data on balance of payments, external debt, and national accounts mean that the estimates of illicit flows may be understated. In fact, an IMF assessment of Greece’s statistical system in 2002/03 gave high marks for professional integrity, accuracy, and reliability when in fact the Greeks have been fudging their books for a long time.
I sincerely wish our country does not lose integrity like the greek. But you never know till the bubble bursts.


Greek crisis in a nut shell for the laymen :
The endeavour below is to - explain a very complicated circular trading (round tripping algorithm) nonsense that became a crisis - in a simple way..
MARY is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar – she will go broke.
To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.
She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Mary's 'drink now, pay later' marketing strategy and, as a result, increasing numbers of customers flood into Mary's bar.
Soon she has the largest sales volume for any bar in Dublin — all is starting to look rosy.
By providing her customers freedom from immediate payment demands Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.
Consequently, Mary's gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary's borrowing limit.
He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.
At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into Drinkbonds and Alkibonds. These securities are then bundled and traded on international security markets.
The new investors don't really understand that the securities being sold to them as 'AAA' secured bonds are really the debts of unemployed alcoholics. They have had a 'rating house' certify they are of good quality.
Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary's bar. He so informs Mary.
Mary then demands payment from her alcoholic patrons, but, being unemployed alcoholics, they cannot pay back their drinking debts.
Since Mary cannot fulfil her loan obligations she is forced into bankruptcy. So she now is broke.
The bar closes and the 11 employees lose their jobs.
Overnight, Drinkbonds and Alkibonds drop in price by 90%.
The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Mary's bar had granted her generous payment extensions and had invested their firms' pension funds in the various Bond securities. They find they are now faced with having to write-off her bad debt and with losing over 90% of the presumed value of the bonds.
Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro, no-strings attached cash infusion from their cronies in government.
The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Mary's bar. How do you think they will vote for the "referendum" ? With a "yes" or a "no" ???
Now, thats economics in 2015.

Why do external financing agencies give loan to a country that is not managing its economy?
when the going is good, all things happen. when it gets bad, you know the difference.
The sum total of my understanding of economics is that if there is addition of money without addition of value, there is bound to be a bubble burst somewhere some time.

Sir if greece quits EU...what will be the impact on other EU member?
EU will lose money - may be have to write off debts
But it may get away with a finger amputation rather than lose a limb
Forecasting external debt default is an extremely complicated task. While economic models often successfully identify countries with external debt crisis after the fact, they remain poor predictors of one. This is one of the issues in international economics.

[astonas]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

To me, this is the type of analysis that explains the Greek problem. It is not the common simplification one sees all too often in the media.

You're right. It is a well-written piece, and sheds a lot of light, in what is often a confusing cloud of spin. Thanks for sharing it.

As I was reading it, the following paragraph got me to thinking: (emphasis mine)

However, the crucial fact that has largely sailed unnoticed in the coverage thus far is the role of French banks, which probably did by far the most reckless lending to Greece. That makes the French government’s current advocacy for Greece either an act of particular chutzpah or of undeclared contrition.

I was wondering why such a thing might have gone so underreported, and started reviewing some of the more thorough blow-by-blow write-ups I'd read. I certainly hadn't been paying attention to France much either, since they really don't get much press, even while being pretty big players.

I noticed that indeed, the majority of people who had fingerprints on the bad deals did happen to be French. They were usually tied to Anglo-Saxon banks, so I had generally been focusing on their ideological stance (which is my usual paradigm), and not really paying much attention to their nationality. Dominique Strauss-Kahn's role at the IMF and Jean-Claude Trichet's at the ECB were in fact arguably most central to the biggest mistakes, for both the Greek people, and the European project.

Perhaps there is something about the French flavor of Anglo-Saxon banking that is particularly worrisome? I had previously assumed that a passionate desire to be "pro-Europe" was the most distinguishing characteristic between the US and UK flavors, and I still think that plays a role. But France also has a long history of being the center of Europe, and the frustration at seeing Germany get its preference in limiting the scope of the ECB might have been particularly grating. Remember that it was France above all who saw the EU as a tool to confine and restrain Germany, as it re-unified. Having a Germanic Europe would achieve precisely the opposite of that goal, and hence it was vital that Germany not only absorb more of the cost, but even more important that it be left with the blame, for any subsequent troubles. That would weaken it politically, within Europe.

To be fair, any explanation must also include the less sinister, more prosaic motivations as well. DSK was interested in the Presidency of France. The French banks were getting vastly more in bailouts than the German ones, but the German public getting the bulk of the bailout bill, would have made for a great campaign story in France. The "bailout" wasn't just about a transfer of the losses from private to public, and profits from poor to rich. It was also heavily motivated by a huge transfer of debt from France to Germany.

I'd guess that Germany went along with the bailout/transfer in part because it thought that being the major holder of Greek debt also meant that it could hold Greece accountable for reforms. That falls perfectly in line with their ordoliberal conception. We've since seen, of course, that this turned out not to work out at all, given that the ordoliberals still wound up being defeated by the Anglo-Saxons on the "creditors" side of the negotiating table.

Perhaps the ordoliberals thought, maybe even still think, that they could simply out-wait any other faction? We'll see.


In other news, going back to 2010 again...

Your initial statement about avoiding the common simplifications of the media also caused me to wonder about something else that had just been discussed. So I just went back and checked a minor detail, in a passage I had recently quoted from Business Insider. Remember when Trichet had to shout down an objector, who was arguing that Greece could never pay back the loans, that instead private investors should take the loss, if Greece was to avoid becoming another Argentina? I made a guess, dug back into the cited source, and happened to be right. It was the German representative, Jürgen Stark, advocating for Greece. Here's a more complete quote from the original source:

Greece’s place on the spectrum was on the insolvency end, according to the data Giorgianni presented at the hotel meetings, which is called a “debt sustainability analysis.” The details of this one remain secret, but like any debt sustainability analysis, it projected what would happen to Greece’s debt-to-GDP ratio under various assumptions regarding economic growth, the government’s ability to run fiscal surpluses, interest rates and so on. These simulations indicated that Greece’s chances of falling into explosive debt dynamics were uncomfortably high, implying that it was time to consider a restructuring.

Such a conclusion simply was not tolerable to Europe’s senior-most leaders, the most implacable of whom was the ECB’s Trichet. The issue arose at an ECB meeting in the spring of 2010, when Jürgen Stark, a member of the six-person executive board, argued that Greece’s debt was unsustainable, and that therefore the solution should include losses for private creditors.

The ECB president “blew up,” according to one attendee. “Trichet said, ‘We are an economic and monetary union, and there must be no debt restructuring!’” this person recalled. “He was shouting.”

It messes with a very common and convenient narrative to wonder why, at the most critical moment, Germany was advocating for the fair treatment of Greece, while France's two most powerful representatives were acting against it, in their rush to protect private anglo-saxon style banking interests.

After all: "Germany pushed it down our throat, to save their banks" is probably a pretty dominant theme all over the Anglo-Saxon press, and especially throughout Southern Europe, isn't it?

But the deal itself was crafted not by Germany, but by the US-based IMF (led by a French politician) with the bank bailout added by another Frenchman at the ECB. And Germany's objections, voiced in Greece's defense, had to be literally shouted down and overruled, in order to make the corrupt deal happen.

Has anyone heard those facts in the mainstream press? Nah, the "Germany and Greece as enemies" story has far better entertainment value. And even if it only looks true at the most superficial level, it'll explain things well enough to distract most people.

[astonas]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

To me, this is the type of analysis that explains the Greek problem. It is not the common simplification one sees all too often in the media.

I've been up late catching up on the Europe news, this crucial weekend. I thought I'd post a quick summary of the ... let's just say less-contemplative, more rapid-response media's snippets of data concerning the EG's recent discussions of Tsipras' final offer on day 4 of the 5-day extension, in case people cared to see some musings on them. Sorry they don't form a particularly coherent story, but that's the nature of the timeframe. Perhaps they'll paint a pointillist picture instead.

It is said that a French team helped to craft the Greek offer to help ensure its acceptance. At this moment, though, it looks like at least 10 out of 19 countries are saying "too little, too late", and the EG is now divided chiefly between the merely highly skeptical, and the entirely unconvincible. Finland was apparently never going to agree, insisting instead on exactly zero concessions for Greece, and Eastern Europe is still livid at Greece's insulting claim that it has given up more than any other state for the European effort. “We have suffered much more than Greece,” Mr. Ligi said in an interview. “But we did not stop to whine about it, we took action.” Meanwhile the Netherlands is considerably outstripping Germany in skepticism that any promised reform could be believable, given the referendum's results. It's not exactly pandemonium, but it isn't what you'd call a calm reception either.

Tsipras' "diplomatic efforts" do appear to have brought the ordoliberal states together like never before. Fear of that very fact seems to have brought the anglo voices together as well, though.

The US is making sure its interests are being heard from the sidelines. France is a vocal advocate for wiping the debt away. But so far, of the actual EuroGroup participants, the only two I've been able to find willing to take a vocal public stand in favor of both accepting Greece's offer as is, and replying with debt forgiveness, are France and Italy. That doesn't mean they necessarily stand entirely alone, of course, but I find it interesting that no one else seems to be speaking up with them, while there's no shortage of diversity in the quotes on the other side.

I'd guess that if voting were by nation, instead of percentage contribution, the discussion would be long over, and the response to Greece would be a simple "no". It's still likely to be very negative, but with fractional votes, it's more likely to be "no, unless..." with current discussion mostly about how dramatic the "unless" part will be. I'm not sure if Tsipras could really go back to Greece and get approval for even more concessions, after the referendum's strong response. It was supposed to strengthen, not weaken, his bargaining stance. Finland, at least, is determined to punish based on that fact alone.

But in spite of all the above negativity, there is one very interesting proposal that's been floated, involving a way to re-introduce a private-debt element, that might provide clear, short-cycle, market feedback to Greece's reform progress. It would certainly be better (in the sense of more direct feedback to drive ordoliberal reform) than renewal of terms before a troika once every 2-3 years. It's hard to say where the proposal will go at this point, but it could wind up unsticking a stuck process ... eventually ... if that's even still relevant then.

Even the usually-hidden split between Anglo-Saxons and Ordoliberals on the "creditor" side of the negotiating table is finally being acknowledged publicly. That doesn't seem like the sort of thing either party would admit to, unless they thought the mediterranean perspective was gone forever (via grexit).

Nothing is final until a vote is taken, but over all, I'd say things are not looking good for a solution.

[gnk]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

Been busy lately, but I do want to respond to you in greater detail when I have time. But one quick comment:

So long as Greece is as it is, there will always be a French Bank, a Troika, an adversarial nation, etc...

The EU is comprised of many nations, at different stages of development, and wealth. I think by now, in these past five years, it should be safe to assume that Greece is alone in an entirely different category.

[astonas]

Re: Slavoj Zizek on Greece's 'No', and Greece's idealism vs EU's technocrats

Been busy lately, but I do want to respond to you in greater detail when I have time. But one quick comment:

So long as Greece is as it is, there will always be a French Bank, a Troika, an adversarial nation, etc...

The EU is comprised of many nations, at different stages of development, and wealth. I think by now, in these past five years, it should be safe to assume that Greece is alone in an entirely different category.

I agree fully with most of what you are saying. But I think it is worth noting that for your desired sword of Damocles to actually force reform, it needs to be held by an entity that cannot be negotiated with. Private bond holders can be unreasonable - and quick in response - in a way that public governments, with their own histories of transgressions, and conflicted constituencies, just can't.

The ordoliberal states are certainly coming close to being inflexible enough. But for it to really stick, there also needs to be more unanimity on the part of creditors than exists in Europe today. For one thing, one faction of the creditors (whose largest player is France) is clearly willing to give in entirely for the sake of an ever-closer union in Europe, and its own national interests in shifting costs ever-eastward.

In principle, debt might have been able to force the reform you desire. In practice, this particular debt arrangement just wasn't ever up to getting that job done.

A new set of creditors might really be what is needed, not a rearrangement of the same deckchairs, or a swap of the occupants of those chairs.

I look forward to your more complete reply. In the meantime, look out for you and yours. I hope things don't get too rough for you.