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Greece is Out of Time, Again

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By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

There is definitely something odd happening in Europe. I can’t quite put my finger on it, so I thought I would list out my musings on the topic and see what I can come up with.

Firstly, overnight there was talk that the ECB appears to have entered into a bond swap deal with Greece:

The national central banks in the euro zone are set to exchange their holdings of Greek bonds into new bonds in the run up to a private sector debt deal to avoid taking any forced losses, euro zone sources said on Thursday.

The euro zone is putting the finishing touches to a second bailout deal for Greece for finance ministers’ approval on Monday, paving the way for a debt swap with its private creditors needed to avoid a ruinous default in March.

The deal, which aims to halve in nominal terms what Greece owes to investors, slashing its debts by 100 billion euros, is set to include a legal requirement for bondholders to accept losses. This would have put the ECB in a tricky position, leaving it open to claims it was financing governments.

So what does this mean? Well, if it is true, IMHO it means that the PSI+ deal is nowhere near where it is claimed to be and Greece is just a few steps away from introducing collective action on its bonds. As I stated previously:

One of the other outstanding questions around Greece is what is to be done in the case that the PSI negotiations fail. If that turns out to be the case then Greece will need to enact collective action clauses to force, or at least threaten to force, bond holders into a new deal. CDS issues aside, the problem is that this will require the ECB to come to the table as it holds a large proportion of Greek debt. However, the ECB has previously stated that it does not intend to be part of any such deal and given its position as the “backstop” will not enter entertain any such discussions. Therefore, for a collective action clause to make sense, even as a threat, the ECB will need to offload its holdings of Greek debt to another European institution that could credibly support a collective action against other bond holders.

This deal is simply a twist on that plan as the ECB would be issued new bonds outside the reach of the collective action, presumably under English law. As far as I am concerned this is not the positive news that markets appeared to have interpreted as, which leads me to my second issue.

Back in January I noted that Germany’s rhetoric on Greece had very obviously changed:

Interestingly, what I have noticed over the last week is the sudden rise in statements from European leaders that they may simply let Greece go.

As we have seen over the last week every time Greece presents what appears to be a resolution to an outstanding issue Germany, or one of its northern partners, throws down yet another roadblock.

We have seen this countless times over the last month, beginning with Germany’s insistence that the PSI+ deal wasn’t good enough even though it seemed to have been signed off by both parties. This has continued recently with what appears to be petty demands over small amounts of money and signatures, even though the Greek parliament had already ratified the agreed austerity packages.

Even when all of these demands were met, up pops yet more demands:

On Wednesday, eurozone finance ministers signaled that lenders were closer to delivering a EUR130 billion bailout package after Greek political leaders pledged commitment to a stringent economic reform program and detailed measures to bridge a EUR325 million fiscal gap.

But in a statement, the group’s president, Luxembourg Prime Minister Jean-Claude Juncker, stressed the need for “specific mechanisms” to strengthen surveillance and ensure priority is given to debt servicing.

And there is another problem. In order for the PSI+ deal to occur there are a number of background operations that need to happen, yet given all of the stalling the time table continues to compress.

Briefly the course of events is as follows:

The offer of exchange by the Hellenic Republic needs to be open for at least 10 days in order to gather up interest and for holders to evaluate the offer. So far no details have been released on the particulars of the offer. There is talk of GDP warrants, and 20 different bonds being offered although not as an option. The IIF may know the details but it does not represent all the bondholders.

However, a bond holder cannot rationally be expected to commit his bonds if the EFSF money is not in place. There are two technicalities here:

European parliaments need to approve the package so that the 30billion of the cash component can be in place and

35 billion need to be approved to have the buyback of the collateral from the ECB.

The last point is a sticky one. Most GGB’s [Greek government bonds] are used by their holders as collateral with the ECB. In other words they are tied in a repo operation with the central bank. Even pension funds that do not have access to the ECB give them to Banks in order to be used for the repo. Thus for these bonds to be available for an exchange they need to be out of the ECB repo. The deal assumes 35 billion as a loan from the EFSF so that these Greek bonds can be replaced with suitable collateral for as long as the exchange lasts.

Hence, it is not just the 30 billion of the cash offer but also the 35 billion for the collateral swap. EFSF would have to issue these bonds and then the process of exchange must start with the ECB. This could take another week.

Even if the Greek side starts the offer on Tuesday 21st Feb right after a successful Eurogroup then the process cannot start until the German parliament approves of the deal which is on the 27th Feb. Why should a bondholder commit or even reveal his intentions before the money is in place. Thus we have reached the end of February with nothing really in place. The first week of March must be used to free the collateral from the ECB and the second to rush the bond exchange if it is for Greece to meet the obligation on the 20th March. If Greece wants to push CACs then the schedule becomes extremely tough.

If the deal with the ECB is actually happening then it would appear that the threat of collective action is on the agenda and the PSI+ deal is going to be forced through at some stage. That being the case , there doesn’t appear to be enough time for all of the operations to occur by March 20 and therefore, under current conditions, Greece would default.

So what does this all mean?

Well I am not sure, which is why I wrote this post. But given all of the evidence I think we are likely to see some sort of small loan being offered to Greece to ensure it doesn’t default in March, but no real deal being offered until after the April elections.

Obviously this is a guess and I am likely to be proved wrong, but at this point in time the available information points towards this outcome. I just wonder how Greece will take the news if I turn out to be correct.

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43 comments

  1. SteveA

    There are many cloudy issues about the mechanisms that could be employed in the scenarios you outline, but I’d suggest a few additional points:

    - The retroactive action clause can exempt ECB holdings (the clause would already constitute a default, so why not);

    - The ECB’s recourse on repo is to the pledgor, not to the issuer. One would like to assume that the ECB has been taking in Greek bond repo at market rates, less a haircut, and that the haircut has been frequently adjusted. I’d assume there would be some kind of novation on the repos, with a release for the tender and replacement with the new bonds plus cash for the difference.

    - Writers of CDS should have been taking their losses through daily marking; however there is possibly a liquidity issue for some writers of Greek CDS, since the ECB has already been taking in everything short of rugs and doorknobs to collateralize liquidity borrowings.

  2. Broken Cipher

    “So what does this all mean? Well I am not sure, which is why I wrote this post”: the deep thinker’s disclaimer, extraordinary and refreshing….– :)

    1. Yves Smith Post author

      I’m a big fan of getting reader input, but I usually try to structure posts so that my questions are on subissues, or obvious mysteries, like how CDOs really worked circa 2008.

    1. bmeisen

      Please shut off this creep Yves. I firmly believe that censorship under specific conditions is justified.

  3. Fiver

    Another good piece, and timely for me.

    Just posted this on NC’s previous item on Greece and will re-post here. One of the questions I was asking myself: is the holdup for a default perhaps ONLY to ensure delivery of tens of billions to PSI holdouts?

    For anyone who already saw, please save yourself a repeat:

    Oh that Greece had defaulted when it should’ve, and blown every hedge fund and bankster on the planet to the Moon and we all had another chance to get it right rather than merely strengthening their hands. Two years is a long time for top predators to prepare. What is keeping Greece from defaulting now? Is it the next loan that will largely evaporate in debt repayment, or is it the tens of billions of that next loan tagged to pay out to PIS holdouts that the politicians need to deliver?

    In any case, I’ve thought default and EZ exit was always the best option in the full knowledge it will not be at all easy. The German people are screwed either way. Ditto French, Italian, Irish, American, Japanese, Chinese, Indian and everyone else with an economy completely warped by the process of corporate globalization.

    “Someone” and others rightly ask what it is Greece actually CAN do should it default. My suggestion is some form of Constituent Assembly that essentially excludes the current leadership class and focuses on what sort of future CAN be built in a world dominated by very large, hostile corporatist entities and their captured governments. And I’d suggest an end to blaming Germany, or Merkosy, etc., and the start of doing what needed doing long, long ago, i.e., the dismantling of the Greek elite structure. Greece should act as if it’s setting the example for the rest of Europe.

    And to learn from example, Greece right now ought to pay serious attention to the best living model of struggle against very long odds and that is Cuba – NOT as a political model, but as a model for a Cupboard Is Bare, shared-sacrifice, make-it-work-with-what-you-have economy that sustainably delivers the most important goods and services. Because believe it or not, that is where we are all headed not far down the road, not a “we’re all poor” world, but one with radically different ideas of what “wealth” even means – unless we leave in the current hands, and the path spiraling down the toilet.

    1. Jim Haygood

      ‘Greece right now ought to pay serious attention to … Cuba – … as a model for a Cupboard Is Bare, shared-sacrifice, make-it-work-with-what-you-have economy.’

      Even if we’re all headed that way, there’s a transition problem. Whether or not the EC revokes Greek citizens’ right to work anywhere in the EC, a low-wage, shared-sacrifice Greek economy implies large, steady population flight — particularly among young adults.

      Why do boats and even 1952 Chevrolets with pontoons and a propeller on the end of the driveshaft wash up on Florida beaches? Because as long as there’s a wealthier culture nearby, the young and ambitious want to get THE HELL OUT of austerity. Stopping them from leaving can only be done with machine gun nests and razor wire around the border, a la former East Germany.

      If Cuba were not an island, its fifty years of enforced austerity would never have happened.

      1. JIm Sterling

        I think that, to the architects of the European Single Labor Market, displacing people from their homes and sending them to be cheap migrant labor in the core countries is the plan, not a problem. It lowers labor values in the core, allowing them to employ their domestic capital more profitably, and it lowers asset values in the depopulated countries, allowing them to invest their profits in overseas capital.

        1. ambrit

          Mr. Sterling;
          I tend to agree. The ‘problem’ with this thinking, (which I’m quite sure you are cognizant of,) is that it is short term thinking. So, the deal is structured for the benefit of the Rentier Class, is it? We’ve seen this movie before, and it has always ended badly. Why oh why won’t those silly b—–s in the FIRE sector sit down some evening and read up on the concept of “Deferred Gratification?”

        2. Dave of Maryland

          Europe will end up with an expatriot Greek underclass to be manipulated at will, precisely as the Mexican/Central American underclass is in America. Both with the goal of further driving down domestic wages. First they destroyed Mexico, then Latvia, and now Greece.

          Hey, what’s wrong with the Cuban political system? The Shining Path was never one of their problems. Cuba is an example of a country that successfully recovered from this kind of problem.

      2. Fiver

        You will note if you read what I said, that what I advocated was a democratic procedure to create a new democratic body to finally ditch the Greek elite which has looted the country and moved the wealth (and a good many of their own backsides) out of the country leaving a stupendous mess no matter WHAT Greece does at this point.

        I quite specifically stated that Cuba should be viewed, not as a political model, but as a coping-strategy model. Cubans have come up with a panoply of ingenious solutions to deal with an austere situation they DID NOT cause.

        You cannot claim to know how well Cuba might’ve fared had Cuba not been immediately attacked by the US, and though of absolutely no threat, is STILL treated as some form of virulent contagion that cannot engage in normal trade when even a cursory glance at US relations with the rest of the world to this very minute reveals cozy relationships with brutish regimes in dozens of countries with far, far worse track records – not even remotely in the same ball park.

        You can insist that the wealthy who own globalized corporatist mayhem maintain their current grossly lopsided positions and practices both within countries and among countries if you wish – and the Drone King and His Merry Band of Miscreants will doubtless concur. But such a policy courts what amounts to an open-ended series of eruptions and a state of permanent crisis, which will eventually envelope the US as well. Toss the prospect of another 2 billion people into the mix with a planetary ecosphere already severely damaged and it’s absolutely evident that if we do NOT change course Nature will change it for us.

        I advocate nothing more sinister than practical advice to a people in trouble (take a look at what Cuba has managed to achieve from a “no infinite pie” perspective) and listening to the voice of Sweet Reason itself when it comes to assessing how much longer we can possibly stay on this idiotic track.

      3. skippy

        WOW Jim,

        Are you unaware that Castro was invited to D.C. That he was graciously afforded visiting dignitary status, pomp and ceremony. And that it was only after he clearly stated that trade was OK, but, he or the people of Cuba were not going to return to the bitch status of the gangster corporate US interest’s, that things went bad.

        Skippy… he wanted a level playing field, D.C. said yeah right ex – cabana boy, look bend over and you’ll be a rich man… other wise it’s forced austerity for eternity. ROFLOL… the Cubans fleeing are running into the arms of their oppressor. See how it works.

    2. andy

      As we continue to fathom the “craft” involved in our high-finance free market global banking oil food drug fashion war gun slavery system, the corruption of governments is just another tool in the tool kit. As are bridery, blackmail, extortion, torture, and miseducation. To continue the stuggle to return representation, power and ultimatly our destiny, to the people who vote in democracies is to face the fact that it will be extremly hard, and sometimes painful to turn the tide. If the default in Greece is a weapon held at the head of a victim, and can be fired when the elite holding the gun have finnished their mugging, then endless demands for social justice in their lucrative holdings (our societies) may trigger more tools and weapons to be unsheathed. But we know this, right? Occupy anywhere, Occupy everywhere.

    3. tiebie66

      Absolutely, I could not agree more and hope that Greeks will seize the moment and rise to the occasion. IMO, human resources, rather than natural ones, are the prime determinants of success (so I agree with the Cuba example). I fear, however, that Greece does not have the human capital to pull off such a feat at present. From yesterday (Austerity Policy Destroying Greek Society): “In a very competitive job market, Greek parents sought to equip their children to secure a job as a civil servant.” This appears to be the mindset; note the emphasis on the civil service and the lack of a broader vision. I expect that more crises will need to occur before the required learning will have occurred and the re-engineering of Greek society can take place. Wish I am wrong.

  4. Jim Haygood

    Is the March 20th drop-dead date really as firm as all that? After all, this involves sovereigns who can change the rules and move the goalposts at will.

    When a corporate bond payment is missed, creditors sometimes hold off on immediately forcing bankruptcy if there’s a prospect of a deal.

    Greece’s plight is in the old and gnarly world of Europe, where nothing is absolute.

    1. charles sereno

      The Ides of March is somewhat flexible, depending upon your calendar, but surely it would be a stretch to April.

  5. Jesper

    If this OECD report is an accurate description of reality, then Greece has some big problems:
    Greece: Review of the Central Administration
    Executive summary
    http://www.keepeek.com/Digital-Asset-Management/oecd/governance/greece-review-of-the-central-administration/executive-summary_9789264102880-6-en

    Greeks are accepting the quality of their administration and are willing to allow it to handle their money. I’m not so sure that I’d be willing to allow the current Greek administration to handle my money/taxes.

    I expect there will be a default. The question is when and who’ll pay for it – Taxpayers in the rest of Europe or the ones who lent out money to Greece together with the ones who wrote the CDS as protection against default?

  6. Ignacio

    Regarding next elections it appears that the main parties are becoming less and less popular, specially PASOK would plunge to very low vote numbers. I think that your hypothesis is absolutely correct and the eurocore wants to see what happens in the next elections. It is pretty clear that whatever the current government does or agrees, it can be reversed by the next government so any agreement would possibly short-lived.

    Greek politicians are playing now a comedy in which whenever a German representative says anything about Greece they play to feel very much offended and pretend as if they were defending Greece interests and honour fiercely. My guess is that greeks will not be fooled in this game.

  7. Allen C

    Perhaps Greece can do what California does and begin sending out IOUs instead of real checks.

    Does Greece have a 30 day grace period on the bonds?

    The fact that this is dragging out and no one seems to know exactly why is indicative. One is left to wonder whether the donor countries are looking for Greece to exit.

    The trult pathetic predicament is that not only is Greece hopelessly unable to pay its debts it needs to borrow more to fund its deficit. The modern era Piper is certainly slow and letharic.

    1. Susan the other

      Slow and lethargic buys time? For default swap holders to trade their CDSs daily and achieve a lower level of loss that can be absorbed by the private greek debt holders? Filtering the toxins into the entire system. How organic.

  8. Renodino

    Good piece on the BBC yesterday interviewing illegal immigrants in Greece who want out because Greece is no longer a European country. “This place is Asia.”
    The suffering there is so massive these pieces of paper flying all around the world that are the focus of so much attention will be like the feathers flying off a beheaded chicken.

  9. RueTheDay

    Felix Salmon has a good post today on the ECB swap. Basically, there’s nothing there – it’s been planned from the beginning and is just the ECB swapping bonds that are about to take a haircut for bonds that will not take a haircut. The PSI was always about private bondholders and the ECB was always excluded from the haircut agreement. Nothing new there and no reason for the markets to be rallying on the news.

    The biggest future stumbling block for the bailout, IMO, is that Germany (and probably France) will insist that the bailout funds be placed in a segregated account earmarked for principal and interest payments to bondholders and also that an external overseer be appointed to not only be responsible for that fund’s disbursement but also to ensure that the general budget cuts Greece has agreed to actually get implemented.

    The Germans (and other Europeans) are worried that the 130 billion will get spent on pensions, government worker salaries, and other expenses, and Greece will just end up defaulting anyway. It’s a valid concern. The Greeks are starting to feel like if the Germans want to just bailout the banks and institutions that hold their bonds, they ought to just do it directly without imposing crippling austerity on the Greek economy. Again, a valid concern.

    There’s a good chance that late March will finally be the end game on all of this.

    1. Fiver

      The Greek Government already knows the bulk of the 130 billion Euros will go straight back to creditors (likely ECB). So WHY didn’t Greek politicians opt for default already? Only the PSI holdouts stand to get anything at all out of this next package of “funding”. I rather suspect that’s the only reason this is playing out in such a convoluted fashion, i.e., how to give PSI the best possible break without triggering a credit event until AFTER the PSI money is safely in hand. Greece should walk:

      http://www.nytimes.com/2012/02/18/business/global/europes-central-bank-is-said-to-ready-swap-of-its-greek-bonds.html?_r=1&ref=greece

      1. Jesper

        So lets see whats happening now:

        1. Greece changes their laws to benefit the ECB to the tunes of billions of euro and this also saves the face of several high ranking ECB officials
        2. The ECB then gives an opinion on how well Greece is managing its economy

        The ECB will surely not be influenced in its opinion by the gift from Greece, or?

  10. proximity1

    In (french) radio news and commentary–though not necessarily from french sources in all instances–I have heard that some of the parties to the debt discussions tacitly suppose that Greece leaves the European Union or, at a minimum the euro currency group of nations. However, it’s taboo to state that expecation (in some cases, that desire) right out loud. If true, some in not much of the discussion and tactics may be driven in part by an effort to simply drag things out until such a departure by Greece becomes inevitable. As in so much of contemporary political affairs, stating the truth simply and plainly is out of the question –no matter how apparent it may be to all sorts of observers. Instead, enormous energy goes into posturing, into phony gestures and into elaborate schemes of make-believe for public consumption.

    Wherever one looks, one finds a political class of decision-makers who are fifth-rate and morally bankrupt. That isn’t in itself something new but the levels of incompetancy, cynicism and moral terpitude are still amazingly high.

  11. orionATL

    what it all means seems quite clear – the germans want the greeks out of the euro zone (and possibly, want the euro buried).

    when a person, institution, or government professes repeatedly to want something to happen (as germany has), but keeps putting obstacles in the way of its happening,

    it’s a reasonable conclusion that the negative result is the true desired goal.

    i think the primary german objective now is to avoid obvious blame for the destruction of the euro, at least inside germany, by forcing greece (or portugal, or spain) to default and leave the euro.

    it remains to be seen whether the u.s. will put their finger in the dike, or decide, ex post, to pick up the pieces.

  12. Hannibal

    Greece needs to default, write off all debt with everybody taking a hit, dump the Euro and print Drahgmas. Start fresh.

  13. chas

    Default on what? Some “money” created out of thin air (fractional reserve banking) used to buy Greek bonds?

    What a stupid little game we’re playing.

  14. Mac

    Much of the dealings I really don’t understand all of but there are some basic facts i do understand.
    If at the behest of various folks such as Merkel the economy of Greece is forced down and down there is no chance of ever paying off the loans. More and more people in Greece will find ways to operate outside the formal economy and the Government will have less and less resources. There were at one time in England debtors prisons, if one could not pay their debts they were thrown in prison until they paid, clever plan huh? Seems to me that is what the EU is forcing on Greece.
    All the fine Financial language will not fix that sort of logic!

  15. different clue

    Fiver,

    You wondered who should be ( or even is) planning for joint survival in the shared cupboard-is-bare future. The only way to get the various levels of American government to think about that here in America would require an overwhelming majority of Americans to jointly decide that tomorrow’s cupboard is bare, and then to decide that government institutions are the tools to plan for the shared poverty-survival future, and then beat those government institutions into submission to that goal.

    Those who feel they can’t wait that long can turn to people who are already thinking about how to survive in the bare-cupboard future in their own little corners of society and reality. First, I wonder whether country-poverty people in semi-isolated parts of America like Appalachia, Ozarkia, etc. may have accumulated knowledge on how to survive with barer cupboards than most people reading these threads. Second, there are slightly-to-very-well-off people who are thinking about this and suggesting plans and approaches where anyone who wants to read and follow their work can do so. There are hundreds and hundreds of possible groups and sources to find and follow on the web.
    Jeff Vail (Rhizome–a Theory of Power and other things). John Robb of Global Guerillas and just lately of resilientcommunities.com. Ran Prieur. Sharon Astyk. The Contrary Goddess. Richard Heinberg( Powerdown). Dmitri Orlov to some extent. And hundreds of others . . . but those are a start. They can be websearched by those who care enough to do so . . . before the web goes dark intermittently and then goes dark for good.

  16. GCT

    I look at this differently then you folks in finance. I am not a professional investor in anything. I am an ole guy about to retire and I look at this in two ways. First a little story. After leaving the military I was trained and served as a credit manager for a big box homecenter/contractor business. My job as you wll know was to grant or deny credit. My bosses wanted me to grant credit anyway I could and in doing that different demands were made depending on their credit history. Credit would be given based on signed contracts and the contractor meeting those demands and if they did not we denied them credit. It taught me alot on the way I look at you folks with theories and outlooks on markets and soverign countries.

    My first take is the EU is making more and more demands on Greece until they finally either cave or tell them they do not want to meet the demands and will defualt. Happened all the time in the business I was in.

    The take I think applies the most to this situation in my mind anyway is they are trying to make an example out of Greece. They have to do this if the Euro is too survive. The other countries are waiting in the wing to see how Greece is handled before they play their hands and the EU knows this. The EU and IMF are going to make this as painful as possible to keep the other countries inline and to show them this will happen to them if they do not tow the line.

    I know this may be a tad simple outlook for some and we could argue about Greece and the other debtor countries spending too much. I think the Northern European countries got the better deal though. I lived in Germany when they had the DM for 5 years and they were having a hard time with their strong currency exporting like they do toady with the Euro. So I do not look at this as just those dam club med countries are overspending all the time. I look at this as people making bad loans and cannot collect, so now they will basically screw the population in said countries.

    This does truly sadden me as I look at us here in the USA and our time may be just over the horizon. I hope and pray I am wrong. Love this site been reading here a long time. Thanks and if I am too simple I will gladly read the comments as I love to learn from you all and other sites.

    1. LRT

      This is the most sensible comment in the thread. It is basically a debtor management problem. It doesn’t much matter how we got here. It was as usual in debtor situations a mixture of idiotic or fraudulent borrowers and idiotic or fraudulent lenders. However, even if one could assign blame properly, it would not help with solving the problem.

      The popular point of view here appears to be, write off the debt and let Greece start from scratch with little or no debt. The idea seems to be that all the Euro countries would assume all the Greek debt, so the lenders would be more or less whole. Or some, in a spirit of vengeance, seem to want the lenders to take the entire hit.

      That would work, for all of a couple of years. After which we would have huge and increasing Greek deficits, huge and increasing entitlements, huge and increasing Greek debts to anyone idiotic enough to lend to them.

      The Greek problem is really simple in origin: its a political and ruling class wanting the country to live beyond its means. It cannot be done. Or, it can be done if the rest of Europe and maybe the world pays, but they are, like it or not, not going to do that.

      This is not Germany putting the boot in. This is what happens when a country borrows far more than it can ever pay. There is no good way out, unless everyone else agrees to subsdize it indefinitely. Which they are just not going to do. Realism about Greece must start here.

      By the way, lots of talk on this thread about emigration from Greece. The problem always has been, people try to better themselves. They can see they are living in a corrupt no growth country, with a fixed class structure and no prospects. So they leave. As far as they are concerned, what they find in the countries they move to is better life and opportunity. They are probably right. To call this some sort of oppression is idiotic. Or rather, its quite correct, but the oppression is not happening where they go, its happening where they lived in the first place.

      You have to ask about the former GDR, why did they not open the borders, everyone would have left, discovered how awful it was outside, and then come back. The reason is simple, the country would have been empty of everyone who could move in a couple of years. The Stasi would have been reduced to spying on itself.

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