While Greece and its creditors are being more circumspect than usual as they try to hammer out the terms of an agreement by Wednesday evening prior to a previously-scheduled EU summit later this week, what little messaging that is leaking out is not as positive as it should be. In general, in negotiations, both sides tend to overhype any smidgeon of what could conceivably be called progress in order to create a sense of momentum. Here, with Greece having made large enough concessions that even hardliners are willing to contemplate the latest Greek proposal, there’s more unhappiness from both sides that one likes to see at this juncture. After a breakthrough, you expect to see more positive sentiment, mixed with doubts about maybe having given too much.
Now the testy mood may simply be due to how much bad blood exists between both sides. And an old saying in negotiating is that a good deal is when both sides feel bruised. But that type of deal is typically a one-off, not one where the parties have to continue to live with each other.
Given how high the stakes are, let’s hope that these troubling undercurrents are just noise and I’m being too much of a worrywart. But what has me concerned is that the Greek side has already crossed its red lines, which puts the Tsirpas government at some risk of delivering (or at least delivering on the unduly tight timetable, between the ongoing bank run and the drop dead date of a €3.5 billion payment due the ECB on July 20). And there are more signs than I like that the Germans and perhaps the IMF want to push Greece even further.
Since this is all in play, I don’t want to belabor the matter overmuch. Nevertheless, here are some not so good signs:
Lack of an official announcement showing preliminary support for the Greek offer. Consider this from an interview yesterday by BBC with Greece’s Economy Minister Giorgos Stathakis:
He said he expects eurozone government heads to issue a communique later today that will say there is now a basis for a formal agreement with Athens to complete the current bailout programme and release €7.2bn of vital funds.
Readers are encouraged to correct me, but I see no sign this happen. EC officials like Donald Tusk and Pierre Moscovici have made positive noises, but there aren’t as many preliminary approvals as one would like to see at this juncture. In fairness, Merkel did make acknowledge that progress had been made, but her tone was cautious, and it is widely believed that she will not back any deal unless the IMF signs off.
Unhappiness within the ruling coalition to the point elections might be necessary. From Reuters:
Greek lawmakers reacted angrily on Tuesday to concessions Athens offered in debt talks and parliament’s deputy speaker warned the proposals would struggle to win approval, puncturing optimism that a deal to lift Greece out of crisis might be quickly sealed….
“I believe that this programme as we see it … is difficult to pass by us,” Deputy parliament speaker and SYRIZA lawmaker Alexis Mitropoulos told Greek Mega TV on a morning news show.
If parliament does fail to back the latest offer, which included higher taxes and welfare changes and steps to curtail early retirement, Tsipras might be forced to call a snap election or a referendum that would prolong the uncertainty..
‘The prime minister first has to inform our people on why we failed in the negotiation and ended up with this result,” Mitropoulos said. “I believe (the measures) are not in line with the principles of the left. This social carnage … they cannot accept it.”
Now this unhappiness may die down. But at a minimum it suggests the creditors will have difficulty pushing the Greek government much further. The Guardian reports that pensioners plan protests today. A large turnout would embolden skeptics and might turn fence-sitters against the deal. From Helena Smith:
Pensioners have announced that they will be taking to the streets at 6pm (4pm BST) in what they say will be a mass display of protest against the leftist-led government’s proposed austerity package. Some 70 coaches, packed with retirees, are currently on their way to Athens.
I have just spoken to Manolis Rallakis, general secretary of the federation of Greek pensioners, who says older Greeks feel “totally betrayed” by the tough measures envisaged in the leftist-led government’s proposed austerity package.
“We feel totally betrayed, totally disappointed, that this government is continuing the cut-throat policies that every other government also enforced. What we are seeing are countless indirect and direct taxes that, once again, the little man on the street will be forced to carry,” the 75-year-old told me.
“Pensions have been cut by between 60 and 40 percent and now they want more with additional income for health care and the like, services that we paid for all our working lives through contributions to funds. It is outrageous. Where are the 13 and 14th pensions that they stole from us? Why should we go on paying the price?
The 13th and 14th payments were the two supplementary monthly incomes that pensioners received until they, too, were cut with the crisis…
Nearly 45% of Greece’s 2.5 million retirees now live on incomes of less than €665 a month – below the poverty line defined by the EU. Over half that number fell below the threshold at the start of the crisis in late 2009.
The Greek communist trade union, Pame, will also take to the streets this afternoon to protest an agreement that will not only bankrupt but butcher people, it said.
Greece is unlikely to have the financial runway to allow for elections, if it comes to that. From the Financial Times:
Analysts at Citigroup reckon in any case that at the current elevated rate of deposit withdrawals, the banks have sufficient collateral to secure only another 20 days of ECB money.
The run rate would be likely to continue at high levels if a deal were to look to be in jeopardy.
Merkel is contending with an unhappy coalition that wants more from Greece. Remember, Germany is not the hardest of the hardline countries, so the fact that a significant cohort of German lawmakers, reflecting broader public sentiment, are looking askance at the Greek proposal is troubling. From Politico:
Shortly after receiving the Greek proposal, Martin Selmayr, European Commission President Jean-Claude Juncker’s major-domo, trumpeted via Twitter that it was “a good basis for progress.” Asked about that assessment later Monday, German Finance Minister Wolfgang Schäuble delivered a withering takedown.
“We haven’t received any substantial proposals,” Schäuble said. “It shouldn’t be that some unauthorized person over the weekend is creating expectations. It has to be a serious review.”…
A hint of deeper discord surfaced Monday in Berlin, where officials reiterated Schäuble’s position that an agreement would only be possible once Greece had agreed to strict oversight and a catalogue of preconditions
Bear in mind that oversight and “preconditions” amount to further demands from Greece. They also add to the complexity of negotiating when time is already perilously short.
The Financial Times corroborates these concerns:
Hours after Germany’s Angela Merkel gave a cautious welcome to Greece’s latest reform proposal, she received a sharp reminder of the depth of frustration back home when one of her own backbenchers poured scorn on the bailout talks….
Not for nothing was Ms Merkel asked in Brussels about the challenges of getting any deal through parliament. As often, she parried the question, saying there would be work to be done.
Both Der Speigel and Frankfurter Allgemeine Zeitung called for the deal to be examined and negotiated, with Frankfurter Allgemeine Zeitung taking a tougher line. What concerns me is that the German MPs will feel compelled to demand more from Greece out of negotiating reflex (surely there is more to be had!) and to prove to voters that they have been tough. But pushing Greece runs the risk of upsetting the deal by forcing Tsipras to call for a referendum or snap elections.
There are too many signs of a punitive attitude towards Greece among its counterparties. IsabelPS pointed out this story in the Guardian, noting that this was not the sort of slant one expected to see there:
Greece’s date with destiny started with its upstart prime minister, Alexis Tsipras, being slapped on the face. It is the customary gesture of endearment from Jean-Claude Juncker, president of the European commission. It means the two men are friends, despite Juncker saying at the weekend he no longer trusted Tsipras.
And the day that was supposed to arrest Greece’s collapse into bankruptcy, and prevent the euro’s diminution, ended more than 12 hours later on Monday evening with the bizarre spectacle of a phantom summit….
Tsipras caved and there may well be hell to pay back in Athens. But the Greeks were nonetheless said to be impersonating cats and too much cream. Tsipras wanted a favourable summit declaration to take home with him, but the meeting ended late on Monday night without granting him that. The aim was quite the contrary, said a senior EU official. The idea was “to remove from Tsipras the illusion he can get a better deal at the summit, or that a decision can be taken at the summit level. The point is to have Tsipras learn the position of the other leaders. No negotiation”.
It was Tsipras who wanted a summit in the first place, insisting that Greece’s pain and the eurozone’s troubles could only be sorted out at the highest political level. The answer he heard from the chancellors, presidents and prime ministers was an ultimatum: “You can have your summit, but you’re not getting a negotiation.”
Donald Tusk was reported in other stories as having been criticized for officials for being a Chicken Little in calling the summit. But I suspect there was another reason that Eurocrats do not want to acknowledge: that if Greece had made no offer or a clearly inadequate one over the weekend, the national leader would have used the session for emergency planning for a default and possible Grexit.
Another sign of simmering hostility, from Politico:
National finance ministers fumed Monday over the time and cost of attending the countless Greece summits that produce little more than large travel bills…
National delegations receive an annual stipend from the Council to finance their summit travel and accommodations. They are free to spend it as they wish, but the more often the leaders meet, the quicker the cash runs out.
The Greeks didn’t have to bother with airport security lines.
They flew to Brussels late Sunday by a government jet rather than on a scheduled commercial flight. According to a Greek government source with knowledge of the flight itinerary, they chartered their own ride for “flexibility” reasons because today’s summit had no clear finishing time. The government source said that Greek ministers usually fly commercial.
The Greek delegation is staying at The Hotel, where rooms go for €300 to €500 a night. The hotel off Avenue Louise has served as host to U.S. President Barack Obama and claims to have the best views in town.
The last story read like petty gossip and in many ways, it is just that. But these negotiations have ben going on for months and many people on both sides have come to genuinely not like each other. As Peter Spiegel mentioned today in the Financial Times:
In the words of one senior official close to the negotiations, many people at the IMF “would rather cut off their little finger” than extend what has been a fractious and controversial relationship with Greece. But it is “unrealistic” to believe that Greece’s economic woes will be solved less than a year from now.
And from an article over the weekend:
“In diplomacy, national interests set the stage but human emotions determine the script,” said one veteran eurozone diplomat who has been involved in multiple EU-level negotiations. “The longer the negotiations take, the more sympathy, love, rancour, jealousy and exasperation come into play. It’s the one profession that robots are least likely to take over.”
In other words, despite the fact that the stakes are high and the Eurocrats understand that even a contested and uncomfortable deal is probably better and vastly less uncertain than a rupture, simmering anger may lead them to try to push Greece further than it can go (and that’s already allowing for the fact that we regard the level of primary surpluses that Greece has agree to meet as draconian). And they can too easily justify acting out of difficult-to-contain rancor as necessary to pacify unhappy voters that are loath to continue funding Greek bailouts. In other word, the negotiations remain fraught Negotiations with Greece remain fraught. Only a narrow path has been opened to getting a deal done, and it is far too easy for the parties, for reasons good and bad, to stray from it.
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It is possible that the parlimentary unhappiness is binary. Much of what Syrza would like to do will be painful for some but good for many. The Troika (I just like the term better), on the other hand want to comfort the comfortable and afflict the afflicted. Thus by making it a binary problem, either Syrza crosses their red lines or they default and leave the Euro, they are stuck with pissing off a substantial population either way. As such they probably can’t survive any deal.
How much of this frustration, both from the Troika and the public, will carry forward into negotiations with Spain and Italy?
Also, how much momentum has Syriza taken out of the anti-austerity movement?
> Also, how much momentum has Syriza taken out of the anti-austerity movement?
The January election in Greece has certainly ended the first round of anti-austerity struggles with the second round being more based on parliamentary representation, thereby promoting the anti-austerity discourse from the fringe into the mass arena.
From my point of view, the streets will once again chime in as soon as it perceives the parliamentary road as a dead-end with austerity continuing. It will certainly chime in if another outbreak of the financial crisis requires unprecedented rescue parachutes for the banks.
The next relevant elections are Portugal in early October, and Spain on 20 November.
– In Portugal, the center-left socialists PS and popular jurisdiction considerably adsorbed the ant-austerity movement. The PS however didn’t deliver and continuously lost traction over their unclear stance on austerity and the privatization of the national TAP airline.
Under the impression of hard left alliances CDU and Left Bloc gaining further traction and polling at about 18% (and rising), the PS has moved further left towards abandoning austerity.
– In Spain, Podemos has visibly suffered from the Greek impasse and allegations of proximity towards the Venezolan regime. They have also lost many centrists to the center right-neoliberal Ciudadanos party to once again represent mostly leftist voters. On the eve of the 24 May municipal elections, though not at all a marked defeat, they seem to have touched bottom and start to gain traction again. Now that some of their local candidates arrived in power, they will be able to gain confidence and become more vocal on basically left-wing causes. Their latest push for a Green New Deal might only be the beginning.
At the same time the outspoken anti-austerity movement has further weakened in mainland Europe, where to a large amount right-wing nationalist currents increasingly coopted the largely unorganized crowds. Unless these anti-establishment right-wingers successfully break a wedge into the Western European bloc, they won’t be pushed to expose their complete lack of alternatives to the current neoliberal paradigm. Unless a new round of the economic crises hits the European economies hard, it will be only then that the masses all over Europe can unite to overcome austerity and neoliberalism.
Yves, thanks again for the excellent coverage of this drama, really the best on the ‘net.
There is something that I still don’t understand though:
I get it that YV &co have already caved on surpluses, that theyre going to go ahead with austerity no matter what. I also get it that they should have implemented capital controls long ago, and not taken Grexit off the negotiating table.
With this in mind, if I were a Greek MP who would have to vote on this deal, it would seem my choices are:
a) vote Yes, accept pension cuts and the rest of the austerity package, and gear myself up for the same series of battles every 6 months; or
b) vote No in hopes the Troika would relent (ie, de facto retabling Grexit); with the possibility of once a default occurs Syriza could be shaken up and the surpluses reconsidered.
Frankly, all the options are bad. Grexit would be very bad at least at the beginning. Continued austerity under Syriza would be very bad medium to long term. But there’s no wayback machine to undo the damage Syriza has done.
Back when they came into office I vociferously argued that Grexit would be bad, but Syriza’s continuous blunders each day make Grexit comparatively more attractive than the alternative Syriza is offering. Therefore I do not understand why you seem to be definitely in favour of voting Yes on the “deal”. At what point would you throw your hands up with what Syriza is imposing and say “yes this is worse than the effects of Grexit”?
Yves is right that the Germans and Eurocrats are unhappy. Syriza came into the negotiations bluntly blaming Austerity for the crashing economy, which is like going to Rome and blaming Catholicism and the Pope for priest pederasty – you’re not going to convince any of the true believers that their religion is wrong and immoral, even though in this case it is.
After many attempts to fudge things, the EU got fed up because they are convinced (rightly) that Syriza has no intention of fulfilling the Memorandum as previous governments agreed. 6 Months of futile negotiations later, and we’re left where we started.
No Negotiation! No compromise! No debt-relief! No! No! No!
Well, Greece is now doing what it can, agree to what it must, and extend the negotiations another 6 months. Problem is that the Germans are tired of negotiations because the continuing crisis shoves some responsibility on them to fix things, and they want to wash their hands of everything and walk away blaming the lazy Greeks. That’s the only way they can “win” politically among their hard-line voters.
So, of COURSE their instinct is to throw even more straw on the camel’s back and turn the screw at the last minute. They don’t really want a deal, because a deal, no matter how one-sided, is a slow motion exhibit on how Austerity is an utter failure and swindle.
The same issue will emerge again in December or January 2016, when the Greek economy has further declined amid horrible suffering, and Greece is once again asking for debt relief because the economy declined 2.5% in 2015, and any primary surplus is simply impossible.
From the political perspective, for the Germans even victory is actually defeat. They are not going to get the Greeks to pay back the money.
For the Greeks, it’s a disaster, compounded by high expectations when Syriza came into power. There’s no way the Greek government can implement this Agreement any more than PASOK could.
I keep saying: remember why we are here in the first place. PASOK had massive support back in 2010 and virtually none today, all because they attempted to implement the Memorandum. Any government that tries will collapse. The Germans don’t care about Democracy or whether Greek voters are happy, what they want is rule by executive fiat of the bankers.
Only that is also impossible to implement. There’s lots of loose talk about a new coalition government or snap-elections, but neither is really going to be possible. Nothing can paper over the simple fact that the majority of the Greeks are really opposed to continuing with Austerity, and any government that tries to continue it will quickly collapse amid votes of no confidence. And no snap elections are likely to give anybody power to do the impossible, implement the Memorandum.
And as for rule by some executive decree without parliamentary support, that is the Heinrich Bruning solution, and we all know what happened to him.
Well said, Cugel!
According to some commentators, there’s no deal on VAT hikes and pensions cuts if there’s no debt forgiveness.
https://twitter.com/russeurope/status/613117736642854912
https://twitter.com/YanniKouts/status/613327433480208385
See also the full text of the greek proposal :
http://www.tagesspiegel.de/downloads/11870514/1/Regierungsvorschlag%20Griechenland
http://www.sueddeutsche.de/wirtschaft/griechischer-sozialminister-skourletis-ohne-dogmatische-politiker-koennten-sich-beide-seiten-besser-verstehen-1.2534533
In this interview the Greek labor minister makes exactly that claim.
“SZ: Und wo hakt es noch?
PS: Sehr wichtig ist für uns die Schuldenfrage. Das Problem unser Schulden muss nachhaltig gelöst werden. Das ist ein kritischer Punkt, der Katalysator für ein Abkommen. Wenn wir das nicht schaffen, kann es sein, dass es keine Einigung gibt.”
“SZ: And what are the remaining difficulties (with the deal)?
PS: What’s very important to us is the debt-question. The problem of our debts must be solved in a long-lasting way. That is a critical point, the catalyst for an agreement. When we don’t achieve that, it could be that there is no agreement.”
While the Greek labor minister’s sentiments make sense, the labor ministry is not at the table negotiating this deal. There is nothing to indicate that debt relief is part of it; that was always to be negotiated as part of the “third bailout”. Those talks were expected to start almost immediately after this deal was reached.
The labor minister himself has only one vote on any legislation required to implement a deal (assuming legislation needs to be passed, but the Germans may insist on that) just like any other Syriza MP. Whether enough other Syriza and ANEL MPs agree with his sentiments should this come to a vote to scupper a deal is yet to be determined.
> The labor minister himself has only one vote
Labor minister Panos Skourletis is however one of the most influential senior executives of Syriza. Together with Zoi Konstantopoulou and the Left Platform, a breakaway faction led by him would break Syriza into two commensurate parts.
Conclusion: Skourletis’ disagreement with a particular deal means there will be either no deal or no more Syriza.
This entire negotiation, seen from the outside, seems overly one-sided. It is as if the parent (IMF, ECB, financial elite) are bound and determined to give the Greek kid a good whipping. The negotiation seems to be over whether Greece is to be beaten with a belt or a switch. Everyone agrees, a greek default would be bad for the greeks. But wouldn’t it also be bad for Greece’s counterparties? Yes, the nominal amount is manageable – but we’re talking the global casino here, there’s no doubt CDS and CDO-squareds, etc. hung on that nominal amount – weapons of mass financial destruction that no one wants to unwind. I guess that because a default would be really, really bad for Greece and only nasty for the financial kings, they’ve got all the leverage. While I truly do sympathize with the Greek people, I really wish they’d default and give the big dogs something to worry about.
This has been my take all along. We are all aware of Greece’s maturity problems (i.e. inability to collect taxes, corrupt government, shaky legal system, etc.) but these are the results of deep historical problems, not something that just popped up in the last ten years. To fix them will take decades, and it sure as hell won’t happen if you can’t pay for a glut of bureaucrats to do it. In addition to paying for bureaucrats to look after the bureaucrats (stability requires a lot of redundancy). This redundancy is something there is plenty of in the wealthier “more stable” Euro states thus their powerful, privileged position. In an ethical world the burden of responsibility should rest on the powerful (IMF, ECB, etc.), but debts must be paid, God knows, and only paid through human suffering, many pounds of human flesh. Dated ideas, dated perspectives.
I hate to say it, but do you negotiate much when you go to your bank for a loan?
It was Syriza that told voters it would repudiate the terms of the old memorandum (entered into as part of its 2012 “second bailout”) while it still needs 7.2 billion in funds from that deal not to default, AND a “third bailout” from the same lenders to make payments coming due over the summer and fall.
Moreover, many media accounts in January and February as well and ones I heard privately from sources friendly to Syriza, the creditors fully expected to give Greece debt relief in the “third bailout”. ‘
In addition, it is explicit in EU and Eurozone treaties that national government cede elements of national sovereignity to EU/Eurozone institutions. As an example, Greece does not have a central bank. The Bank of Greece is effectively a node of the ECB.
In other words, Syriza’s premise has been that it is negotiating as an equal. The message has been consistent that it isn’t.
Petty gossip it maybe, but those things count. Stupid, stupid, STUPID negotiators!
I have to admit that Greece’s concession caught me by surprise, but I think it’s going to work. Tsipras realized that since the EU wanted a budget surplus and his party wanted no cuts to pensions, he could meet both objectives by raising taxes (sharply) while leaving spending untouched. I think he’ll be able to sell it to both groups, and I think for all the unhappy feelings in the negotiations, the deal will get struck as both sides just want the whole thing to go away.
It won’t fix the underlying problems, of course, and we’ll be right back here having the same discussion sooner than anyone thinks. The can has been kicked down the road, but for how long . . . ?
Well, what is the point then? If Greece is better-served outside the eurozone, then there is no point in delaying the moment of truth.
Warren Mosler:
The European left, as imbecile as always. Puppies of corporations as long as they can hold their ideals.
hopeless.
“As we discussed leaving is looked at as a move to the right and a victory for the right and nationalism.”
Who exactly looks at leaving as a move to the right? Just Mosler? Moderate wing of Syriza? Most of the MMT camp and moderates in Syriza, a majority of the Greek population?
If progressive is partially defined as some kind of endorsement of the anti-democratic bureaucratic monstrosity presently running Europe, and if it is also defined as endorsing the creation of even more structures of international administration–then the progressive Left is truly lost.
And a critique of the “Left” which says it has deteriorated into simply liberal members of the professional-managerial elite as the key social base for what passes as “left-wing” political parties that are, in turn, intimately connected to Big Capital, Big State and Big Bank–seems right on target.
It bears repeating again and again, that any austerity deal of any kind is a victory for the neo-liberal order. The proper view is to cheer for no deal/default and weep at any sort of agreement that harms the ordinary people of Greece and promises to do the same for many millions more in Europe as the Troika sights are set on the other peripheral countries.
The current Greek government, excepting the “hard” left of Syriza (in reality the “real” left), is still drinking the neo-liberal Kool-Aid and it seems the only hope is that the Troika remains intransigent and the Greek government takes the default route against its will. Syriza is bending over backwards to avoid the only solution that has any chance of stopping the neo-liberal rot.
Capital controls, nationalization of the banks, parallel currency, negotiate the debt for pennies on the dollar after default. This is what needs to happen, otherwise these deals simply dig a bigger hole that a future, more courageous Greek government will have to dig out of.
For caving at this point Tsirpas has pushed the Greek economy into a deep recession and basically destroyed the Greek banking systems. Besides pensioners and etc feeling like they have been abandoned, the middle class and people still working are asking we went through all of this for something which could have been agreed to fairly early on. Tsipras has not only made political enemies outside the country but inside.
However, for all of this, Greece will never be a functional country until significant internal changes are made which the socialists and communists do not want to do. The problems faced by Greece are very similar to those faced by Venezuela but Venezuela has huge oil reserves to save them.
Venezuela is “saved” because they can recycle their profits back into the local economy. They have their own currency which can’t decamp to other countries. And they can run a national debt which captures surplus that isn’t otherwise taxed.
i guess that is why they have a shortage of everything there including toilet paper and that (following on the same theme) their currency has gone into the crapper. An economy that only a socialist or communist can enjoy. By the way this article only goes through 2013 but the devaluation has continued.
Venezuela Currency Devaluation
Currency Crisis Ahead?
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By Joseph Cafariello
Thursday, December 19th, 2013
Venezuela’s economy is in dire straights. Its productivity has plummeted, its debt has skyrocketed, its currency is the weakest it has ever been as far as available data shows. And it’s about to take another hit in March of next year in an emergency effort to bring runaway inflation under control and draw foreign investment into its ailing oil industry.
Venezuela on the Brink
Strict currency controls at Venezuela’s central bank limiting the amount of USD allowed to circulate within its borders have lead to a shortage of dollars, strengthening the value of the USD and weakening Venezuela’s bolivar, resulting in skyrocketing inflation from 17.2% in November of 2012 to 46.85% in October this year.
To combat such high inflation, Venezuela needs to keep its interest rates high, currently straddling the 16% mark for some two years already. Yet this has made it much more costly for the government to raise money, which it desperately needs to finance a growing budget deficit projected to reach 10.75% of GDP, while GDP itself shrinks from 4.73% in 2012 to 1.43% this year.
To finance this deficit, the nation has been tapping into its reserves, depleting them by some 29% this year alone, from $29.9 billion USD at the start of 2013 to some $21.3 billion last month. It has also been forced to borrow heavily, with combined internal and external debt growing by over 39% in the last two years to $110 billion USD.
Rising consumer prices, depleting foreign reserves, high interest rates, and spiralling debt accumulation have prompted Standard & Poor’s Rating Services and Moody’s Investors Service to cut Venezuela’s credit rating to Caa1 — just four steps above default — with Moody’s citing “increasingly unsustainable macroeconomic imbalances and materially higher risk of an economic and financial collapse.”
More if you care to read it:
http://www.wealthdaily.com/articles/venezuela-currency-devaluation/4903
Venezuela is not at all comparable to Greece.
Venezuela already controlled its own currency, its central bank, and its payments systems. Greece does not.
For Venezuela, all it had done is devalue its currency. Sudden currency devaluations, as when Argentina stopped pegging its currency to the dollar, result in a period of severe economic pain followed by good growth.
This is not what is in store with a Grexit.
Greece will also have capital controls, a failure of all its private banks followed by a need to resolve them (which includes funding and working out bad assets), a bank holiday, and emergency introduction of a new currency, which include introducing of a new or or major modifications of existing payment systems. Greece does NOT control its payment system; the ECB does.
A mere 12 day bank holiday in Cyprus for a comparatively simple deposit bail in did lasting damage to the economy. It took ten years of planning and three years of execution to have the conversion to the euro go smoothly.
A Grexit would be tantamount to taking a blowtorch to what is left of Greece’s economy.
This is the best blog for discussion on Greece but Bill Mitchell is also an excellent economist.
central banks
“While the doomsday claims about the consequences of a Greek exit were nonsense (and remain so today) and designed to advance the neo-liberal agenda of the elites, there is no doubt that the integrity of the Eurozone was under threat in early 2010 as the Greek government approached insolvency.”
Syriza was pretty much forced to accept the theoretical idea of running a surplus as the only way to meet the demand of having funds to pay back the troika. If the troika was serious they would ask Syriza for more details on its jobs program.
The way I read the current situation is:
a) The IMF said, seemingly in response to previous Varoufakis proposals, that debt reduction was a must given the changed landscape of reduced primary surpluses, etc.
b) Tsipras saw the bluff, by adjusting the amount they wanted, but conditioned to debt reduction
c) The troika folds
…
back to the negotiation room.
The missing tweets by A. Tsipras: The repeated rejection of equivalent measures by certain institutions never occurred before-neither in Ireland nor Portugal. #Greece (1/2) and This odd stance seems to indicate that either there is no interest in an agreement or that special interests are being backed. #Greece (2/2)
Replace Venezuela by Ecuador, which uses the US dollar but has been more successful than Venezuela in the economical aspect… in spite of being classed as CCC by credit rating agencies.
The real problem of Greece is not the currency (or not only) but EU legislation that makes very hard or even impossible to apply “socialist” (or “Reinische Capitalist”, i.e. state intervention) policies at all.
In my opinion Greece could do alright retaining the euro but exiting the EU.
I see that Ecuador floats a national debt. If Greece could do that, that would certainly help. That way they could recycle more profits back into the local economy.
But I would think being on your own currency would help immensely in floating a national debt. Would protect against revulsion of having a national debt which is a high percentage of GDP for instance.
And then having your own central bank would have upsides too, e.g. they can always monetize the debt and retire it out as it matures.
So for instance, I doubt ECB would monetize Greek bonds after Greece leaves EU, even if they’re still on the euro.
lucky for tsipras no one in greece wants to be prime minister(except jaba the slut – evan veni) and his millionaire marxist hard left wing knows this is their one and only moment in government. they will make noise but will never split from the great cat-herder alexis…
having found his noise prior to the election more becoming of a drunk (thus my disrespect of calling him tsipouro) i am actually quite impressed by his ability to keep fighting in the face of unbearable odds…
live to fight another day prime minister…yes the troika to death and agree to anything they say…create calm and peace…and then you will have 90 days of no sleep hard work to get over the hump…do your best peter the great and drag hellas kicking and screaming into the modern world…oh…and stop tucking your thumbs under your fingers in a fist when you are about to say something you dont fully believe in…if i noticed…they noticed to…
Also Venezuela is “saved” because it is stimulating internal demand, turning formerly unemployed impoverished masses into consumers with jobs. Greece is going in the exact opposite direction: destroying internal demand, impoverishing the masses. Cutting pensions and running surpluses only digs that hole deeper.
Yes. Won’t be long before Germany doesn’t have to outsource their supply chain to China. Greece will be so impoverished, nobody will be able to beat them on cost.
Please read above. Lots of demand has been stimulated, just no products to buy!
It is such a socialist utopia I am kind of surprised plane loads of leftist are not leaving daily from the US to go there. Just another Peronist! Obama and Hillary are also Peronist as well as Tsiparis.
Let’s flip this around. If USA devolved to the governance that is used to govern euro-land, we would have low-GDP states experiencing the same thing as Greece. It would be a race to the bottom by the low-GDP states, where high-GDP states would be perpetually extracting the majority of wealth from the low-GDP states. The idea being to impoverish them enough to keep the supply chains outsourced to the low-GDP states as cheap as possible without causing them to pick up their marbles and stop playing the game (exit).
And we would have people blaming the low-GDP states that’s it their own fault for being socialist communists.
First, I do not accept GDP as a measurement. To many flaws. For instance, if you borrow and spend that money no matter how wasteful, it is counted as GDP.
Second, there are a large number of states that are currently very similar to Greece prior to 2008. This list includes California, Illinois, Michigan, New Jersey, Pennsylvania, Massachusetts, Rhode Island and a few others. Similar to Greece the only way these states are staying a float is borrowing like Greece.
I am very confident that soon similar to Greece these states will hit the wall and go teets up. They will then start circling the drain faster and be asking the other states to bail them out. I do not wait until that time, I call them Socialists/Communists now (notice any trait among these states). But also similar to the EU and Greece, the USA is basically bankrupt. I have said for a long time, “the US government will attempt to save everything until in the end it will be fighting to save itself.” Just like Greece you will see pensions slashed and standards of living go into free fall. There will be a fight to extract everything that can be extracted from the states listed above who have borrowed like drunken sailors. The US as well as most state, local and city govt’s are dead men walking.
You are living in a mirage mainly delivered through the US being the reserve currency. When this ends (not if) a big part of this country will be screwed!
You broke the code. You need to go spread the word to other sites.
Perhaps write a book and join the Sunday talk show circuit.
“Nearly 45% of Greece’s 2.5 million retirees now live on incomes of less than €665 a month” :”The Greek delegation is staying at The Hotel, where rooms go for €300 to €500 a night.”
“What a wonderful world”
It has turned toxic.
Lack of trust on both sides, when I read about ‘strict oversight.’
Maybe I misread things, but to me, some believe Tsipras and Varoufakis would fight for their cause, and some believe they were game-theory smart (may or may not fight for their cause as well).
To the latter, on the execution of their strategy, I wonder if they think that things have unfolded, up to now, the way the Greek team has planned all along. Was there anything they could have done differently – perhaps confronting the incompatible goals (that’s what I have read) of ending austerity and remaining in the Eurozone, pre-election?
The main driver which people do not understand is the Greek people really really do not want to leave the Euro. I was kind of surprised by that but did a little digging. Why, well prior to joining the Euro there currency (the Drachma) had no value outside of Greece. The Greek population might not like the Germans but they dislike their government even more. A Greek relative of mine one day said to me, “He loved Greece, but he hated the Greek people.” He really did not hate the people, he hated the disfunctionality of Greece brought about by a huge bureaucratic govt which was incapable of accomplishing anything. Everyone in Greece wants to join the government because they work little and get paid. When you get paid in Euros it is worth something. When you get paid in Drachma it is worth nothing.
It’s like all the key things happen before show time.
Look at how Greece entered the currency zone by, like everyone else, fudging the numbers.
And then, look at how they went along with the incompatible goals, again, like all the politicians everywhere, to get elected.
All these happened before she entered or they got elected.
I suppose it’s no different than before the political leaders get together, the financial ministers must have worked things out.
Graduate Economics
Eliminating anonymous cash takes working capital out of the hands of labor, locking the system into central control. And Family Law destroys marriage, for the purpose of raising children, without which there is no future, to subsidize civil marriage with accrual accounting. Life is distilled from gravity.
There are as many ways to think about economics as there are people, and more. Choose one that suits your purpose, but don’t follow the herd and expect History not to repeat.
Capital maximizes rent/income, to maintain the status quo. Labor maximizes income/rent, to implement modernization. And the planet does not stand still. In a closed system, how most are bred public education to think, nothing gets done and the economy comes to a halt. One way to think about the middle class is as a transfer case, like a hook and a block, implemented like a multiplexer, to provide media event horizons.
As you can easily see in Greece, and everywhere else if you look, the upper middle class, closest to capital, the professionals, which as a group can in no way feed themselves directly from nature, is about to throw the lower middle class, bringing it natural resources for money, under the bus, at a loss in living standards. And all the professionals really have is words, taken from others for the purpose, which is why it is terrified of leaving the monetary union, resulting in extortion, from the top down.
Welfare is the minimum cost bid to tip the scale; that’s what they are always negotiating. Neither capital nor the middle class can reboot themselves, but anyone in any event horizon can switch over to labor, at any time, if they can get separation from the gravity of their event horizon, which is merely a perception, locked in by habits, which is why you want to spend some time in each event horizon, which requires momentum beyond the knowledge of empire.
I had a business professor one time who wore make-up and wrote a very popular book, in economic circles, and he was better than most, at what he did, teach kids with very thin, very neat, leather briefcases, to sell derivatives, and I liked him, because he had a sense of humor about it all. I was always the guy the gang came after, with bigger and bigger gangs.
…
Graduate Economics
Troika’s plan w.r.t. Greece is simple, in my opinion. Take for example, a pensions model from Eastern Europe (in a country yet outside of the Eurozone):
2% of the pensioneers receive over 445 E/month;
9% receive in the bracket [222; 445] E/mo;
64% [111;222];
25% under 111E/mo.
The poverty threshold per person is 117E/mo.
The retirees will have access to the (hopefully) cheap food produced within the country, but probably not much else; especially after the govt will decide to export the food to pay up the debt.
This is the “EU convergence” offered to Greeks by the Europeans.
Graduate Economics
Eliminating anonymous cash takes working capital out of the hands of labor, locking the system into central control. And Family Law destroys marriage, for the purpose of raising children, without which there is no future, to subsidize civil marriage with accrual accounting. Life is distilled from gravity.
There are as many ways to think about economics as there are people, and more. Choose one that suits your purpose, but don’t follow the herd and expect History not to repeat.
Capital maximizes rent/income, to maintain the status quo. Labor maximizes income/rent, to implement modernization. And the planet does not stand still. In a closed system, how most are bred public education to think, nothing gets done and the economy comes to a halt. One way to think about the middle class is as a transfer case, like a hook and a block, implemented like a multiplexer, to provide media event horizons.
As you can easily see in Greece, and everywhere else if you look, the upper middle class, closest to capital, the professionals, which as a group can in no way feed themselves directly from nature, is about to throw the lower middle class, bringing it natural resources for money, under the bus, at a loss in living standards. And all the professionals really have is words, taken from others for the purpose, which is why it is terrified of leaving the monetary union, resulting in extortion, from the top down.
Welfare is the minimum cost bid to tip the scale; that’s what they are always negotiating. Neither capital nor the middle class can reboot themselves, but anyone in any event horizon can switch over to labor, at any time, if they can get separation from the gravity of their event horizon, which is merely a perception, locked in by habits, which is why you want to spend some time in each event horizon, which requires momentum beyond the knowledge of empire.
Ultimately, you want to be able to build and engage event horizons based on the load you want to pick. In one instance, you may want a single sprocket and 10 gears. In another, you may want two sprockets and 5 gears. But in no case do you want one sprocket and 2 gears, which is what Carney & Kids are building. Canada had massive excess natural resources, which it is now destroying, and massive subsidies from the U.S., which are rapidly depleting.
Best business practice, objective based management, is a ruse, to maintain the status quo of natural resource exploitation, fed by demographic variability, like a virus, with infrastructure leverage. Funny, the Church presenting Galileo as evidence, after persecuting and killing him, for existing beyond time, as understood by Church and King, middle class and capital, at the time.
Individuals are disallowed by law to start a taxi service, without the prerequisite bribe, but Uber is allowed to start a taxi service, with individuals who have no rights, but efficient commoditization, a multibillion dollar capitalization. In what world does that make sense, except in the rabbit hole the majority chooses to occupy?
Did you see that Ubergirl spokesperson explaining how it all made sense, and those politicians nodding their heads in agreement?
Boeing isn’t going anywhere you want to go. It’s going to war, with shoddy US merchandise, to protect an economy that is nothing more than Internet advertizing, leverage on the margin, but get onboard if you like. There is nothing the empire has built, all derivatives, that labor cannot take down, in the blink of an eye, nut to what end?
Labor has nothing to fear from any nation/state, because, if left to its own devices, capital will destroy itself every time, pitting itself against nature, which it sees as the enemy. It’s like the make-up economy. The critters slab on make-up, which closes the pours, which increases the need for make-up, instead of drinking water and marrying someone they love, to make their cheeks rosy, and soft as a dove.
You aren’t going to get anywhere by destroying the leading edge, which is exactly what the majority wants, and fails to do every time, extorting itself out of existence, over time, from the bottom up. That’s it, have me wash your dishes because you are too lazy to get up and do it yourself, and pretend to be busy, talking about politics and religion, which is obviously way over my head.
Don’t hitch your load to a politician, in black robes or white, and expect it to hold.
Why do you suppose labor’s motor grows?
I had a business professor one time, who wore make-up and wrote a very popular book, in economic circles, and he was better than most, at what he did, teach kids with very thin, very neat, leather briefcases, to sell derivatives, and I liked him, because he had a sense of humor, about it all. I was always the guy the gang came after, with bigger and bigger gangs.
First thanks Yves for the coverage of Greece drama or perhaps EU drama.
I have to say that I love Greece and their people. The problem is that for a reason or another they do not produce anything, to put in simply term. The only way to have pensions of 500 € is to borrow without repaying. Other country in Eu have pensions in half, you know.
But if we look from a non economic perspective, we may understand the real drama. The real game is about destabilizing Eu that was up to now a successful outcome. Just compare with what happened in the last two centuries. Whatever the player on the ground will do it will all lose. The only winner will be the master of the game and it is not Greek or German. The picture is clear separate Russia from EU and divide Eu. Just the old “divide et impera”.
How much longer before a politician realises he could govern better if his country had PLC status?
And Yves was right again
A few centuries ago, she’d have been burned at the stake!
The basic problem I am seeing is that Europe really doesn’t want Greece in its union, period.
If Europe did want Greece, there would be some sign of it in the negotiations: some give and take, some accommodation. There is nothing of the kind. Instead, there is the kind of sadism practiced by Lucy with the football.
And the reason Europe doesn’t want Greece is that Germany and Brussels see nothing to gain by it: there’s no capital, no resources, and no market to exploit. Europe has a sufficiency of impoverished Labor, already, it doesn’t need any more. All Europe sees in its future with Greece is a Black Hole of responsibility and expense. Poor miserable, long-suffering, put-upon Europe.
And that is why there will NEVER be any money forthcoming from the Troika.
Greece will soon be out of the Eurozone (except perhaps by name) and a full-fledged client state of Russia. Russia, unlike the Eurozone, sees a lot of value in Greece as a friend and neighbor and partner.
Familiarity (in Europe) breeds contempt. But it’s not really that Europe is familiar with Greece, more likely, it’s guilt over the way Europe has treated Greece since before WWI.
I think it probable that the only reason Greece hasn’t been booted out of the Eurozone is that the US wants to thwart Russia, and puts pressure on its NATO allies. Not a good basis for a marriage, in any case.
You are absolutely right on the last sentence.
But just a question. What did Greece for Eu?
A couple of notes:
On one side, I just read at Greek Left Review that Wikileaks has reported that Hollande is holding emergency secret meetings with select ministers, as well as with German SDP colleagues (totally bypassing Merkel), to study the seemingly unstoppable Grexit scenario and its impact on France. → https://greekleftreview.wordpress.com/2015/06/24/wikileaks-french-president-approves-secret-eurozone-consultations-meeting-with-german-opposition/
On the other side, Spanish newspaper Público reported yesterday that Greece has more tanks (German tanks, mind you) than Germany, France and Italy together, being the NATO member with highest military expenditure per GDP ratio (USA excepted). So if you are still wondering where did all that borrowed money go to, the answer is that largely to feed the German weapons industry. → http://www.publico.es/internacional/deuda-militar-francia-y-alemania.html
Interesting new article on aljazeera: http://www.aljazeera.com/news/2015/06/tsipras-slams-greece-creditors-bailout-talks-150624095630032.html
This quote is important:
[emphasis mine]
Paul Craig Roberts:
Greek People Demand Their Own Destruction
“Some years ago Thomas Frank wrote a book, What’s the Matter with Kansas. The book is about how brainwashed Americans vote against their own economic and political interests.
…
Today Thomas Frank could ask the same question about the brainwashed Greek population. On June 22, …
[Thousands rally in Athens amid summit to avert ‘uncontrollable Grexident’]
a huge rally of Greeks in Athens waiving the EU flag and demanding that their government sell them out to the troika.
…
Among Western people, the Greeks have experienced the heartlessness and greed of the One Percent more severely than any other Western people. Yet, the Greeks accept their mistreatment as the price of being European.
It is a wonder that Alexis Tsipras hasn’t resigned and damned the idiot population to hell.“
I’m reading the live updates on the Greek debt negotiation at Russia Today and it seems that Lagarde is sabotaging any possible deal. The Germans also don’t seem to be willing to reach any agreement any time soon.
And a sarcastic humor note, a tweet that reads: “Weird how Tsipras and Greece are getting reprimanded on tax collection by Jean-Claude Juncker, the former PM of a corporate tax haven”.
Also NATO opposes Greece cutting its military spending, no matter it’s a wasteful black hole.
And a nice graph of the Greek debt: total 316 bn €, most of it “bailout” money that all it does is paying for itself: 240 bn €. So the original debt in 2010 was 76 bn € and “thanks” to EU and the IMF it has now become more than four times larger, while demolishing the Greek GDP by a quarter (-26%). It’s clear that Greece is better off bankrupt than with any possible deal.