Say It With Me: Lagarde Is NOT Threatening To Scuttle Bailout Deal

By Nathan Tankus, a writer from New York City. Follow him on Twitter at @NathanTankus

The endless march of misreporting on the IMF and Lagarde’s statements continues. An added wrinkle is that her latest statement was made on a french news service Europe1, making it more difficult (at least for me) to check up on what she really said. Luckily IsabelPS is a reader as well as a great translator. Before we get to what she actually said, lets go to how Lagarde’s statements have been reported. The FT headline was “IMF’s Lagarde: Greek plan not viable”. If this headline was accurate this would mean that the current deal being offered to Greece was “not viable” in Lagarde’s eyes. A “non-viable” deal would presumably be a deal the IMF can’t be involved in. Another implication of this headline is that the IMF, as an organization, is threatening to destroy the current deal. The lede goes on to say:

The head of the International Monetary Fund said Eurozone creditors’ plan for Greece is “categorically” not viable without a reduction in debt. Speaking on France’s Europe1 Radio from Washington, Christine Lagarde reiterated that Greece needs debt relief. She wouldn’t say what amount of relief Greece would need, but said the current plan isn’t viable.

This walks back the headline somewhat because it makes clear that she was not speaking of the “current” deal but about a hypothetical deal that didn’t include “a reduction in debt”. As always, lets check up on what Lagarde actually said in context. IsabelPS introduces her statement this way:

She is asked if the thinks that the plan that is being devised is possible without debt relief and she answers:

“The answer is quite categorically no. I think that is the reason why the European partners [agreed] totally [to] the principle of debt relief at the end of that document that was signed in the early hours of monday that states the principle of debt relief without, of course, stating neither the amount nor the way to go about it, but the principle is  non disputable…

For us to participate it is necessary on one side that there is a complete program and, in our view, the complete program must stand on two legs: the greek leg that consists in reforming deeply the economy in order to liberate it, to give it a capacity for growth and consists in keeping a sound fiscal line to give solidity to the country without being excessive; the second leg is the lenders’ leg, that consists on one side to give financing and on the other side to restructure the debt to make its burden lighter. For us, for the IMF, this should be an ensemble [possibly different word] in order to be successful. You see, it’s not a caprice, it’s not the IMF meddling in affairs, it’s the rules that are applied to all countries that are members of the IMF because, in reality, they lend to each others and it’s in this spirit that there are rules with the purpose of allowing countries to return to a stable economic situation, namely, to finance themselves on their own in the financial markets.

Here two things jump out. First, the questioner really was asking about a hypothetical version of the plan, not the plan itself. Second she is not threatening the current deal in any way. She sees the “European partners” as agreeing with “the principle of debt relief” where the negotiations will just be over how much and how exactly it happens. Recall that not reducing the face value of the debts but compressing interest rates, extending maturities and deferring payments all de facto accomplish the same thing. They want this of course because it allows them to delay the recognition of losses.

Another important aspect is something she reiterates from earlier talks that they want to introduce a program that “consists in reforming deeply the economy in order to liberate it, to give it a capacity for growth”. This economic quackery gives her a window to save face by declaring victory with vastly insufficient debt relief since the dizzying array of reforms will supposedly create growth, reducing the amount of debt relief needed. If this growth doesn’t materialize she can say they didn’t do enough reforms, just as she explained the lack of growth in the last 18 months.

The “principle” of debt relief has indeed been widely acknowledged. Confusion has resulted from the negotiations where Syriza demanded that debt restructuring be a part of structural reform discussions. As with much of Syriza negotiating tactics, this makes economic sense but misunderstood their political position in negotiations. Debt restructuring is and was meant to be the piece meal reward for the Greek government completely submitting itself to the Troika and the rest of Europe. Masters are often generous to their most obedient serfs, peons or slaves. See for example ECB President Mario Draghi’s statement that:

I believe that by and large that programme has these features. And finally, there is another issue that has been widely discussed: is debt relief necessary? It’s uncontroversial that debt relief is necessary, and I think that nobody has ever disputed that. The issue is: what is the best form of debt relief within our framework, within our legal, institutional framework? I think we should focus on this point in the coming weeks.

Thus Lagarde and consequently the IMF is not a threat to the deal as long as there is even the most pro forma of debt relief (again through measures that preserve the face value of the debt). If debt restructuring is indeed a deal breaker for Lagarde it is likely that she has already gotten commitments for whatever amount of debt restructuring she deems acceptable for the IMF. Shauble would have certainly raised a huge stink if he thought there was a chance the IMF would sink the deal which he did not. Additionally the Bundestag (as well as other eurozone parliaments), voted in favor of reopening negotiations. In addition to the above statement from Draghi (which is likely very informed by high level discussions including directly with lagarde) Donald Tusk told Peter Spiegel explicitly that “my impression was absolutely unambiguous that Lagarde is ready to participate in this programme, and it was indisputable in fact”

Thus as I said at the end of the last piece:

If Lagarde wanted to wash her hands of Greece or attempt to coerce Europe into more “generous” debt restructuring measures she would have been saying that explicitly and loudly. Until there is a headline that says “Lagarde says no IMF money will be dispersed without extensive debt restructuring” read reporting on IMF “motivations” and “warnings” with extreme skepticism. If this does ultimately prove true, it will become clear well after the current round of deals are already done and thus be no help to Greece at all.

Her using the phrase “not viable” in the context of a hypothetical deal without explicitly saying the IMF would not be involved without debt relief (and specifically a “large” amount) does not constitute that headline. I would suggest readers not hold their breath waiting for it.

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  1. Lars Jørgensen

    I have not read all the comments to your analysis of IMF’s ‘leak’ the other day. But if the article below (from July 15.) has not been mentioned, it should be of interest. Actually it says exactly what I argued in reply to your article the other day. First IMF tried to press internally then they went public to put more pressure on. Here it is:

    “The real threat is to its credibility as the world’s biggest multinational lender.
    It is a story of conflict with Europe – and with itself.
    On July 7 IMF managing director Christine Lagarde said that the situation in Greece demanded a restructuring of debt.
    Chief economist Olivier Blanchard told the BBC a few days later that the IMF had been privately urging the European creditors for several months that sizeable debt relief was the only credible option.
    By going public the IMF hoped it could swing the argument against the European creditors, in particular Germany who believed debt forgiveness was unacceptable.
    In what was obviously a co-ordinated move US Treasury secretary Jack Lew came out with a near identical statement.
    In short, they argued Greece’s debt position was unsustainable. There had to be restructuring.”

    1. Nathan Tankus Post author

      I dissected Lew’s statement. the idea that this was “obviously a co-ordinated move” is bizarre given the context of the statement. This statement is imputing motives that are nowhere to be found when you read their statements in the original. I do encourage you to ignore the secondary reporting (including mine) and look at all the statements these figures have made themselves.

      1. Lars Jorgensen

        Ok, I do not have the time to go deeper into this. And I think, that when you still hold on to your interpretation, here where everybody can check things, it is safe to trust you.

        1. Nathan Tankus Post author

          Yes I’m doing this precisely because people do not have time to dissect all press coverage themselves but at the same time I want people who do have the time to check out the statements I dug up (which took effort itself) and dispute or confirm my interpretations. That’s why i tried to provide quotes from all the statements in as much context as possible and provided links to every available interview.

          1. susan the other

            Actually, this is pretty ground-breaking. A dedicated service to what is actually happening, and what is actually being said, in clear language. Greece is almost indecipherable. Even if I tried to dig it up myself, I’d still have to make assumptions based on almost nothing. I think I love this. Someday our language will evolve to this, like a sense of smell!

    2. bob goodwin

      Yves changed her opinion on the IMF screed, and may well do it again. Nobody knows what Lagard will do, least of all Legard.

      There are few now who do not realize what a mess they have. The noises being made now are mostly about keeping the keels vertical, and not the ship moving forward. There is no way to walk back the crisis, and nobody yet has any idea to what to do.

      I take Lagard’s stammering at face value. There is nothing correct to say.

      The US has a huge interest in keeping the EU together, even while the left and right see it as an atrocity. Sherman needed to march through Greece to keep the EU together, but nobody prepared the populace for war. I have no idea if Obama is up for the challenge, as the US is the sole power that can get both Greece and Germany to tow the same line. He certainly has shown the balls for unpopular international leadership with Iran, so maybe there is hope.

      1. Yves Smith

        As Keynes said, “When my information changes, I alter my conclusions. What do you do, sir?”

        All I’ve done is change my assessment of odds. That is hardly an earthshaking change. Moreover, had you read the post carefully, it laid out a series of events that taken together posed a risk of the deal not happening. We clearly specified our logic and how we came to that reading. Finally, our change in assessment was limited to Greece getting its “third bailout,” not to what happens longer term.

        Now, if someone has a very risky procedure, say the odds they die on the operating table are 50%, but it they live through the operation, they have good odds of survival, your pegging of the odds of success is lower before they have the procedure than when they roll out of the operating room alive. That’s what happened with the Greece deal. They got through a critical window of vulnerability, and the window of vulnerability proved to be less risky because Lagarde came out and said the Eurozone lenders could satisfy the IMF without making haircuts.

        And what the IMF wrote was not “screed,” it was a draft sustainability report, which we embedded. Lagarde had not made any public statement at the time we posted on it and made our initial assessment. Several media outlets quoted “a senior IMF official” who maintained that the report would make it well nigh impossible for the IMF to agree to a deal that did not contain haircuts.

        As it has been revealed via Lagarde’s remarks, she does not think so and she makes the call.

      2. Nathan Tankus

        My position has been consistent throughout all my pieces on this subject and all of Lagarde’s statements have been consistent in my view. Internal consistency doesn’t mean her positions aren’t insane however.

  2. Cugel

    What makes anybody think that what Lagarde actually believes has any influence on what she says or does?

    Does she really think that the IMF expert analysts are wrong that:

    “The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date—and what has been proposed by the ESM. There are several options. If Europe prefers to again provide debt relief through maturity extension, there would have to be a very dramatic extension with grace periods of, say, 30 years on the entire stock of European debt, including new assistance.

    “This reflects the basic premise that debt cannot be assumed to migrate back onto the balance sheet of the private sector at interest rates close to the current AAA rates before debt levels have been brought to much lower levels; borrowing at anything but AAA rates in the near term will bring about an unsustainable debt dynamic for the next several decades. Other options include explicit annual transfers to the Greek budget or deep upfront haircuts. The choice between the various options is for Greece and its European partners to decide.

    She would be more than wildly incompetent if she wasn’t aware of all this. But, she’s going to say none of it for political reasons. She’s under pressure especially from the non-European member states to get the IMF’s money back. She’s under pressure from the EU and she has her own political career to think of. The IMF has lost an immense amount of prestige and suffered the worst default in its history.

    So, no. She’s not going to torpedo the negotiations by making demands that won’t be met and which will explode the lies that the IMF’s money is going to be paid back by Greece. She didn’t get the IMF into this mess. That was done by her predecessor in 2010.

    So, it’s like inheriting the captaincy of the Titanic – after it hit the iceberg. The only question now is “how can I secure a lifeboat for myself” and “who’s going to get the blame?”

    “If she wanted to wash her hands of Greece” she would be saying so? Why? What’s in it for her? Would Schäuble and the Bundestag fund this “debt restructuring” as outlined in the Memo – a massive haircut to German taxpayers or else a “massive extension” with a 30 year “grace period”? Or even more absurd, “explicit annual transfers to the Greek budget.” Where will the money come from? The IMF itself? The German taxpayer?

    As Varoufakis has explicitly stated since his firing, everybody acknowledged from the beginning that massive debt restructuring, including exactly the kinds of debt relief quoted in the leaked memo made “economic sense”. There was no debate. It was just off the table.

    If you are arguing that Lagarde is not going to rock the boat between now and next year, then fine. She probably will attempt to extend and pretend.

    It’s just increasingly difficult to keep pretending that Greece is going to pay.

    It’s almost impossible now; how much worse will things be in December or whenever they get around to negotiating the 3rd round, especially if the Greek government collapses in chaos and NOBODY is really in charge – which seems more and more likely.

    That has been the problem all along, yes? Who’s going to implement the Memorandum? Samaras and New Democracy tried and failed. Now Tsipras being forced to swallow the same bilge and he’s failing. It’s flat impossible to keep implementing it in the midst of continuing and worsening economic collapse, and no political support. Syriza has failed and split with 40 of 149 members walking. This only opens the way for Golden Dawn or potentially the Left Opposition of Syriza.

    What choice does Lagarde have? She could blow up the negotiations, and force Grexit. But, what good would that do the IMF? The Bundestag would be no more likely to pay back the IMF then. Schäuble would use the catastrophic failure as the perfect excuse to blow up the Eurozone and advance his long term dream of a new politically integrated EU government run by Germany, with a finance minister with real power; an EU shorn of all the troublesome southern European countries, like Greece, Spain, Italy, and probably France.

    Not exactly what Lagarde would like to see happen on her watch.

    1. Nathan Tankus Post author

      “If you are arguing that Lagarde is not going to rock the boat between now and next year, then fine. She probably will attempt to extend and pretend.”

      Yes this is precisely my argument and it is not what is being presented in the press. What the press is saying and its disconnect from her statements is important.

      “What choice does Lagarde have? She could blow up the negotiations, and force Grexit. But, what good would that do the IMF? The Bundestag would be no more likely to pay back the IMF then. Schäuble would use the catastrophic failure as the perfect excuse to blow up the Eurozone and advance his long term dream of a new politically integrated EU government run by Germany, with a finance minister with real power; an EU shorn of all the troublesome southern European countries, like Greece, Spain, Italy, and probably France.

      Not exactly what Lagarde would like to see happen on her watch.”

      Right which is why she’s going to extend and pretend until her term runs out and if things blow up before she’s out she’ll claim that things messed up because the Greeks didn’t sufficiently do structural reform. It’s a statement so nonsensical that it is very difficult to debunk, especially in official circles. As Yves said, her attitude is I’ll Be Gone, You’ll Be Gone

      1. Cugel

        Except of course, that she may very well not “be gone.” She may be sitting there in December while the Eurozone burns.

        And claiming the Greeks didn’t do enough “structural reforms” when the EU has taken complete control over their economy isn’t going to satisfy anybody. As Joseph Stiglitz pointed out, “Pottery Barn rules apply. You broke it, you own it.” Greece has capitulated completely. There are no more excuses. Schäuble might very well find himself outmaneuvered again. He’s the key figure, but there are other centers of power to consider. So far nobody has been on Greece’s side, but now that the terrible leftists have been disciplined, that might change.

        So, I rather think Lagarde will try and get as much “debt relief” as she can for Greece, and force as much of the debt burden off of the IMF and onto Germany as possible. She has some structural allies in this, most certainly France and Italy, and possibly the United States. Obama doesn’t want a melt-down on his watch right as he’s trying to march off into the sunset and cement his “legacy.” That’s what happened to Bush in 2008 and he’s so still so toxic eight years later that I doubt the GOP will even invite him to their 2016 convention. All it will take for Obama to go down in history as an utter failure would be another economic collapse, triggered by a Eurozone collapse. All he’s really done so far is signal that this is the EU’s problem and that he has more important matters of concern, like containing Russia. That is likely to change.

        1. Yves Smith

          Her term ends next July.

          The IMF has 16.4 billion remaining to disburse from its “second bailout.” It could conceivably go as far out as March before it signs up for the “third bailout”.

          You seem to be ignoring what we have said repeatedly.

          The issue is haircuts, as in reduction in the face amount of the debt. Germany says no (the excuse is that it amounts to a fiscal transfer, which is a no-no under Eurozone rules).Lagarde has effectively said she is fine with that.

          Debt relief can take other forms, as in extensions of maturities, lowering interest rates, and deferring interest payments. Greece got 100 billion euros of debt relief in the 2012 “second bailout”.

          The IMF debt sustainability report expressed considerable doubt as to whether debt reduction ex haircuts would give enough in the way of relief. That was the cause of the consternation. Lagarde’s message since the memo came out has been 100% consistent: we want debt relief and we don’t need haircuts to get what we need.

          1. Jim Haygood

            ‘we want debt relief and we don’t need haircuts to get what we need.’

            This seems to point to restructuring Greece’s debt into zero coupon bonds. Set the interest rate low enough, extend the date of the bullet payment far enough into the future, and the NPV (Net Present Value) can be reduced to any value desired.

            Of course, the present value of a billion euros in 2065 is far lower than a billion euros today. But if the public can be convinced that ‘no haircuts occurred,’ this artful dodge might skate through. We don’t need no stinkin’ haircuts.

  3. susan the other

    Funny how all things morph. Wish the free press had followed logic since 1994. And earlier. When the world switched to TINA the press took a sabbatical. It was baked in the cake that Germany was the most important country in Europe because it was the protector of capitalism – of the neoliberal variety. The Germans really were naturals for the job. And it and France were the only two countries capable of this guardianship. Because their industry capacity was very strong. But how things change. So, fun-nee: now they have a huge and devastating political mess on their hands. Karma anyone?

  4. Gabriel

    Perhaps it would useful to turn this question around, and ask where the misinterpretation is happening, rather than whether the statements are misinterpreted.
    As far as I can tell (Nathan, correct me if I’m wrong) the primary source of these dubious (or at least stretched) exegeses has been the FT (the only other one, with one article, was the NYT story based on that talk Lew and Lagarde gave at Brookings).

    So, rather than assuming that Lagarde is announcing major policy disagreements with the Eurogroup in French language interviews, could it be more useful to ask why the FT seems to be pushing the “debt relief/restructuring line” to such a tenuous extent? Is it what Peter Spiegel is getting from his sources? or are his editors determined to force that interpretation of events, as some indirect way of exerting pressure for a not-quite-as-doomed deal?

    1. Nathan Tankus Post author

      It’s very difficult to figure out who precisely is the original source for these things but my guess is you’re correct. I think they have sources feeding them this line. Originally I thought it was the Obama administration. Than after digging into the older statements I think someone relatively major at the IMF is involved. it’s possible that the anonymous IMF person is coordinating with the administration or that they both have an incentive to present Lagarde and Lew’s statements a certain way and their anonymous/off the record conversations with reporters are amplifying each other’s efforts.

    2. Yves Smith

      I believe you are new to reading the site. What you have done is give an assignment, which is against our written policies (see Policies in the header bar). We are a site run by all of 1.3 people. Would you make a similar demand of vastly better resourced MSM sites?

      Having said that, never attribute to malice that which can be explained by incompetence. The initial source of the leak was Reuters. One of the loudest promoters of the “IMF is scuttling the deal” interpretation was Ambrose Evans-Pritchard of the Telegraph, who has appeared to be much closer to Greek sources than creditor sources.

      As for the FT being confused (it even had an article about the non-IMF creditors being confused), Spiegel is famed for being close to sources in Brussels and is Brussels-based The IMF is in Washington. Spiegel could be getting reports from the European program team, and we’ve speculated that they could be the source of the leaks. I’d have to check to see how often he quoted IMF people directly (and remember, he is often on stories with several bylines).

      The most plausible thesis is that the leaks were a form of staff revolt that Lagarde has tamped down.

      1. Gabriel

        I’m terribly sorry. I didn’t mean my comment as an assignment for further reporting by NC, but rather as an alternative avenue for discussion in the comments. I’ll be far more careful to make this clear in the future.

        I didn’t, in the course of what was clearly a horribly-written comment, mean to attributing anything to malice or conspiracy, but it just struck me that the framing that Nathan complains about seems to be coming (to a significant extent, anyway) from the FT, and I made some very primitive guesses as to the reason. But, to repeat, I had no intention of structuring this as a demand that NC enlighten me in this regard, and apologies again for writing sloppily enough to give that impression.

  5. IsabelPS

    Let me see if I get this right:
    1) Lagarde says that this plan will not work without debt relief
    2) Debt relief can take 3 forms: fiscal transfers; debt write-offs; extension of maturities and lowering of interests, grace periods, the first two being off the table (she says so in this interview)
    3) She states the conditions for the IMF to stay on board (it cannot be something piecemeal,two legs, etc)
    4) The IMF needs to be paid what is owed in order to lend some more (stay on board)
    Now comes the bit I’m not sure about: the IMF has to stay on board because otherwise an entirely different program would have to be devised. Or is this new thing indeed an entirely different program and not an extension of the previous ones? I think this question has to do with ESM or another similar acronym.

    I’m just trying to understand if the IMF CAN actually get out. If it cannot, Lagarde framed the conditions for the IMF to stay, didn’t she? It doesn’t really matter what she would like to do, isn’t it? Or Blanchard or Thomsen, for that matter.

    1. Yves Smith

      The issue was haircuts. Everyone expects the deal to include debt relief. The debt sustainability report said it would be very hard to make the numbers work with maturity extensions, etc, only, which meant the report said in bureaucratese that haircuts were needed. But the Germans absolutely will not do haircuts. That’s the potential outtrade.

      Lagarde solved that problem by saying the IMF would agree to other forms of debt relief if they were aggressive enough.

    2. Nathan Tankus Post author

      Well in theory she’s just interpreting the articles of agreement. In reality she has a ton of latitude. If the IMF were really held to the standard that it can only be involved if it makes the debt sustainable it would almost never have made a loan in decades. It’s all about making their crazy estimates workable and she can do that by taking whatever pro forma form of debt relief they give and just pushing on the “reforms” to jumpstart theoretical growth estimates in such a way that the debt becomes sustainable. The interesting question is whether a) an IMF staff report produced after a deal is done would contradict Lagarde’s analysis b) would it be leaked or will they close the leak by the time that report is produced.

      The Eurogroup is giving “bridge financing” (ie emergency loans) to Greece so that it can pay back the IMF, ECB and others so they can stay involved. European elites want to keep the IMF involved so they don’t have so much direct financial burden. There would likely be no deal without the IMF.

  6. Paul Tioxon

    Greece is the Haiti of The European Union. A debt forced upon a member of the EU, a founding member of NATO, and maybe or maybe not remaining in the Eurozone, that simply can not be repaid due to the political decisions of the core nations of the EU will produce the exact same results as the French history of enforced debt placed upon its former colony of Haiti for daring to have the only successful slave rebellion in known history. To this day, the people of Haiti are a sovereign nation, their revolution not being defeated. This makes them unique in history. What does not make them unique is the bitter price of blood money demanded by the French government as reparations for the lost property of their citizens as a result of the successful revolution. If you have ever wondered why Haiti is so pathetically poor, you need look no further than the French debt which was not satisfied until 1947, from the 1804 revolt. Even in the aftermath of WWII and NAZI occupation, the French still demanded payment!!!! Is it any wonder that Greece, who obviously is incapable of repayment is nothing other than a political prisoner of debt, now descending into the enmeshment of cruel punishment that can only be enforced by the police power of the state by the political will of the governments of Europe.

    Trying to follow the rational discourse of the events and negotiations of this financial savagery is bewildering due to the enmeshment of treaties, political, military and financial all competing as final authorities at the same time,all up against the limits of their own non-reasoning. Stripped of the mumbo jumbo of financial complexity that hides the crushing political defeat of the Greek people and their government the iron fist of punishment by capitalist embargo. No different than the Arab Oil Embargo of 1973, no different than the French Embargo from the beginning of the 19th Century until 2 years after the end of WWII against Haiti, Greece is being flayed alive for public consumption for no other reason other than they can be, and no will stand up and stop it. As French President Hollande tries to make reparations to Haiti for its moral debt, which future European Leader will cry tears of forgiveness and make amends for this crime against humanity?


    “François Hollande on Tuesday became the first president of France to make a formal state visit to Haiti, where bountiful resources and brutal plantation slavery made it the European nation’s most profitable colony before an independence uprising more than two centuries ago.

    For Haiti’s government and business community, the visit is a welcome opportunity to encourage more investment and highlight progress made since a devastating 2010 earthquake obliterated much of Port-au-Prince and surrounding areas.

    But for some in impoverished Haiti, Hollande’s presence is a reminder of the debilitating costs of the successful slave revolt that made Haiti the world’s first black republic in 1804. Crippled by an international embargo enforced by French warships, Haiti agreed in 1825 to pay France an “independence debt” of 150m gold francs to compensate colonists for lost land and slaves. Although the indemnity was later reduced to 90m gold coins, the debt crippled the Caribbean nation, which did not finish paying it off to French and American banks until 1947.

    “We Haitians know that a big reason why we are suffering today is because we were forced to pay France for our freedom. If we were not punished for our independence long ago, we would have had a better time,” water seller Jean-Marc Bouchet said on a dusty, unpaved street in Port-au-Prince.”

    1. John Jones

      Great post Paul thanks for posting this.
      It reminds me of my last two posts

      “A German friend of mine said the following, almost reading my mind: just as Germany forced Greece to pay for its own occupation during the last world war, now that Greece is occupied again, she is also being forced to pay for her own occupation.”

      William Mallinson

      And how the losses of one people and country enhances not only those who stole and killed but their future generations gain from it as well. And the descendants of the victims still suffer consequences.

      “I think when ever people come into a country after such events like clearing out of land of natives or people there before them or the building of a state on slave labor etc. Even after these events have long past or we are or not descendants of the perpetrators. Then they/we have benefited from their immense sacrifices and loss that destabilized their descendants today who have to live with the loss and results etc of what happened to their families and countries. I think the least we/people can do is give them due respect understanding and compassion. And make sure as a state or as people we help to get them out of their situations any way we can. Instead of repeating the same or similar disregard for said people that only adds to the pain they already suffer.”

  7. IsabelPS

    If maturities are stretched “forever”, if the grace period is “almost forever” and/or interests are close to zero, it’s virtually as good as write-offs, isn’t it? Without explicit haircuts. Or am I wrong?

    I keep thinking that the problem is that Greece needs MORE money.

    1. JTMcPhee

      The Greeks need to reduce corruption, and maybe that admixture of people of varying degrees of decency and virtue and clout just need “less debt,” rather than “more money.” Think Jubilee? Which seems historically to have been a mixture of grace and brute reality — that which cannot sustain, won’t. Corporations get their “grace” in Chapters 7 and 11 of the Bankruptcy Code, one set of “laws” that like all others, including the treaties that Schaueble says might not allow a central finance ministry for Europe but necessity might trump (ahem) strict legality, are subject to fiddling… Those quaint notions called “nations?” Well…

      What could be an organizing principle that would lead to the political-economic outcomes that the mass of humanity could live with?

  8. -jswift

    re: Yves Smith — July 19, 2015 at 3:23 pm— (reply button failed)

    As Keynes said, “When my information changes, I alter my conclusions. What do you do, sir?”

    With all due respect to Keynes, there is another option: not to change sides, but simply to “zoom out”.
    The point is that one needs a context to process information, and this includes a separation of signal from noise, which in particular presumes a model of what constitutes noise! This comes down to what is usually called the “overfitting” problem — in other terminology, setting confidence levels. So one can decide that there simply isn’t enough signal and accept that what is reliable in the intepretation is less than what was first estimated.

    It strikes me in the discourses that you have been analyzing here that there is sometimes not enough meat in the speeches to make the decision you want, on what is really meant, in a rigorous way; it seems more of a job for a historian or political specialist, but beyond real scientific analysis.

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