THE GREAT BIG FAT GREEK THREAD

[wonderpup]

My god, you are an idiot...NOBODY FORCED the GREEKS into their current position.

Even the IMF have admitted that the Greeks needed debt writedowns not more unpayable debt- but they were forced to go down the borrowing route to facilitate the transfer of the bad loans of German and French Banks onto the backs of EU taxpayers.

So while Greece is certainly not blameless the fact is that their current position is not one of their own choosing- it is the outcome of a deeply cynical exercise in 'extend and pretend' to preserve the banks and the credibility of the Euro zone.

This is why Greece is now saying they do not want more loans to keep the farce going- they want a real long term solution, one that involves a restructuring- but it seems that the EU Aristocracy- AKA the Germans- are determined to keep them forever trapped in debt servitude.

In reality this is not about debt anyway, it's about social engineering- the Germans are attempting to reshape Greece to make it conform to their own ideals and values- I suppose we should be grateful that this time they are using debt as their weapon of choice instead of something more kinetic as they once more attempt to remake Europe in their own image.

[Steppenpig]

but they were forced to go down the borrowing route to facilitate the transfer of the bad loans of German and French Banks onto the backs of EU taxpayers.

No one forced them to do anything. The Greek government agreed to aan arrangement because they thought it would be in their best (personal) interests. They could have acted as the current government is. They could have defaulted and/or grexited.

Actually (possibly for the first time in my lfe) the EU seems to have done something useful. It has brought about change in Greek politics, and so the possibility of a better future for the Greek people. If the EU had given the previous government an easier option, then they would still be in power, and the future for Greece would be dismal.

[R K]

I do not let anyone talk down on Schwaebische Hausfrauen, especially if they are able to bake a delicious Hefezopf with a lot of butter in it. If you were referring to Merkel, she is from the Uckermark. Calling her Swabian would be as if you called Alex Salmond an Englishman.

I didnt. I was referring to Merkels own nonsensical thrifty Swabian housewife model.

Angela Merkel has praised the "thrifty Swabian housewife" and suggested Swabian women's supposed practice of making lots of money, but saving it rather than spending it, as a model for Europe, to the irritation of many outside Germany.[

http://en.wikipedia.org/wiki/Swabia

Read Pettis for a deeper understanding of why german savings were exported via their banks into the periphery causing the imbalances which have led to the defaults. i.e. why Merkel is wrong

http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-1871-73/

Then by all means come back and explain why you think Pettis is wrong.

Edited February 8, 2015 by R K

[R K]

an interesting post in the comments section of the Pettis article:

Fascinating synthesis, thank you. There is one very important element that you might not even know existed/exists in explaining the transfers from Germany to the Euro-periphery: German asset capital weightings for their banks. By allowing their banks to apply lower capital requirements for loans to state and semi-sovereign entities around Europe, the German authorities created a perverse race amongst German Landesbanken and others to make loans to uncreditworthy entities suh as Greek, Italian and Spanish towns, regions and quasi-sovereigns. If you were to dig into the composition of the specifically-German constructs of Schuldscheine and Pfandbriefe, you would be flabbergast by the volumes of loans made directly by German banks to these debtors who now struggle to find the means to repay. This doesn’t even touch on the direct arbitrage loan portfolios of the Landesbanken and entities such as IKB (forgotten that disaster already?). Where was the BaFin and the Bundesbank back then? Delve into KfW’s purchases over the last 10 years and you’ll find even more shockers. Go one step further and understand how all of these flows were multiplied when funds flowed back via the bond market to Europe’s largest borrower, the European Investment Bank, who in turn made uneconomic and never-to-be-repaid infrastructure loans to….you guessed it: Greece, Italy, Portugal, Ireland and Spain. Even after the first Greek rip-off, oops, write-off, the German banks INCREASED their exposure to Greek government debt. Why? Perverse German/Basel capital ratios and, of ourse, that other “G” word not often used in your synopsis, greed.

[billybong]

It's high time for both Greece and Germany to have a gofundme appeal.

[Bloo Loo]

an interesting post in the comments section of the Pettis article:

loans are two way affairs.

I dont condone stupid banks deliberately making stupid loans.

However, those same stupid banks need to have their faces slapped by a default..Only Greece imposes austerity on Greeks.

[billybong]

The exchange below is quite interesting from the Pettis link - helping to clarify what Pettis says about it's not the nations of Germany or Spain etc to blame.

Steven

Thank you for this highly engaging analysis.
I absolutely agree with you that the current crisis was not brought about by any cohesive national entities such as “Spain”, “Germany” or “Greece”. I do believe, however, that the level of sophistication among policy makers is not quite as “terrifyingly low” as you would have the reader believe.
The real reason for their strenuous efforts to attribute guilt to individual states is not an intellectual error; unsurprisingly, it is a policy tool. The question of who is to blame is just superficially important and in fact serves as a proxy answer to the most important question of all, namely who will bear the costs. And this question very much boils down to “Spain”, “German” and “Greece” because it is at the national level that pensions are cut, labor laws are relaxed, public sector employees are fired and taxes are raised.

Michael Pettis

You are probably right, Steven. I am usually not a big believer in explanations that require people to act stupidly or with malice, but I guess I have succumbed. We tend on average to respond to incentives, and it is far more useful to ask what the set of incentives are that would lead policymakers to accept national rather than sectoral allocations of blame and adjustment costs, even though this cannot help but strengthen the extreme nationalists. Of course that leads to interesting questions. Is it in Hollande’s interest to strengthen or to weaken the FN? I don’t know enough about French politics to answer, but I guess next month is going to be an interesting month. I always assumed that the first reaction of the French to Hebdo Charlie would be to pull together in solidarity, but I wondered whether that solidarity could last through late March. If not, I assume it is nothing but a gift for FN. To me FN and Marine Le Pen are the lynchpin.

Which seems to amount to the policy makers being to blame - aka the various governments and other authorities along with the bankers and their other cronies and suchlike.

It's also interesting that when policy problems arise the whole concept of globalisation seems to exit the scene.

Edited February 8, 2015 by billybong

[Limon]

Well, Tsipras isn't going for any half measures; his inaugural Parliamentary speech is basically him saying "full speed ahead, damn the torpedoes, and I double-dog-dare you to kick us out."

I think he's spectacularly misjudged the mood elsewhere in Europe and his arrogance is going to shatter Greece for a generation or more.

[Gigantic Purple Slug]

Well, Tsipras isn't going for any half measures; his inaugural Parliamentary speech is basically him saying "full speed ahead, damn the torpedoes, and I double-dog-dare you to kick us out."

I think he's spectacularly misjudged the mood elsewhere in Europe and his arrogance is going to shatter Greece for a generation or more.

he has to shoot for the moon, then accept what he gets and try and sell it to the Greek public.

I don't think it will be enough. He won't get enough of an offer from the rest of the eurozone to be able to sell the greek voters on it.

my guess there will be a lapse into default and the Greek government will try some sort of fudge. Probably say they will keep the euro but pay public sector workers in new greek currency that will be "temporary" and exchangeable with euros in the future pending future "successful" negotiations or some mammoth bodge like that.

The important issue is for the Greek government to be able to claim to its people that they were "forced" out, otherwise they have no chance of staying in power IMO.

[dances with sheeple]

The main thing is that German, American and other bankers eventually take losses, that is the victory. Default by sovereign states is the only way forward.

[Silverfinger]

However, those same stupid banks need to have their faces slapped by a default..

+1. This is the most important aspect of this tragedy, and really the downfall of capitalism: all those banks that made those PIIGS loans should have gone under back when it was time. A bust of epic proportions was needed to clear out the system. Now it's kinda worse than ever before. A few major German bank defaults would have been a great tool to reign in German bubble economics and the developing house price hyperinflation. Instead, as always, it will be carried out on the back of the currency, and we're seeing something akin to a German crack-up boom.

[bogbrush]

No easy way through now, even the new lot are asking for more loans now. Like more loans will help anything.

Disaster to leave the Euro but actually it's just a disaster deferred from when they joined. I hate the European project, it will be enjoyable watching it collapse even though nobody will escape the short term pain. The funniest bit will be watching Germans see whatever currency they're using soar to the stratosphere. As an exporter there this will be most enjoyable.

[interestrateripoff]

Alan Greenspan: "Greece Will Leave The Eurozone" And "There Is No Way That I Can Conceive Of The Euro Continuing"

"Greece will leave the Eurozone. I don't see that it helps Greece to be in the Euro, and I certainly don't see that it helps the rest of the Eurozone. It's just a matter of time before everyone recognizes that parting is the best strategy.... The problem is that there there is no way that I can conceive of the euro of continuing."

Mr Magoo speaks.

[interestrateripoff]

Greece Gambles On "Catastrophic Armageddon" For Europe, Warns It "Only Has Weeks Of Cash Left"

One of the bigger problems facing the new, upstart Greek government, which has set before itself the lofty goal of overturning 6 years of oppressive European policies and countless generations of Greek cronyism, corruption and tax-evasion is not so much the concern about deposit outflows and bank runs - even though it most certainly will be in the next few days unless the Tsipras government finds some resolution to the dramatic standoff with Merkel and the ECB - but something far more trivial: running out of money.

[interestrateripoff]

Yanis Varoufakis Sums Up Europe In One Sentence

"A clueless political personnel, in denial of the systemic nature of the crisis, is pursuing policies akin to carpet-bombing the economy of proud European nations in order to save them."

[dances with sheeple]

Yanis Varoufakis Sums Up Europe In One Sentence

"A clueless political personnel, in denial of the systemic nature of the crisis, is pursuing policies akin to carpet-bombing the economy of proud European nations in order to save them."

Fighting talk. How long until this all blows up?

[Neverwhere]

Alan Greenspan: "Greece Will Leave The Eurozone" And "There Is No Way That I Can Conceive Of The Euro Continuing"

"Greece will leave the Eurozone. I don't see that it helps Greece to be in the Euro, and I certainly don't see that it helps the rest of the Eurozone. It's just a matter of time before everyone recognizes that parting is the best strategy.... The problem is that there there is no way that I can conceive of the euro of continuing."

Mr Magoo speaks.

So a Grexit is off the table and the euro will continue indefinitely then...

[R K]

+1. This is the most important aspect of this tragedy, and really the downfall of capitalism: all those banks that made those PIIGS loans should have gone under back when it was time. A bust of epic proportions was needed to clear out the system. Now it's kinda worse than ever before. A few major German bank defaults would have been a great tool to reign in German bubble economics and the developing house price hyperinflation. Instead, as always, it will be carried out on the back of the currency, and we're seeing something akin to a German crack-up boom.

That was inevitable. Since German savings can no longer be recycled into the periphery (if maintained) they end up in higher domestic consumption, investment, house prices and wages since germany is unable to raise the relative value of its currency within EZ and refuses to alter her model. She will argue that int rates must rise to cool the domestic economy which is precisely the wrong response.

Germany inflating and raising wages and consumption relative to Southern EZ is part of the solution. If the EZ is to remain intact it is inevitable.

[Silverfinger]

Germany inflating and raising wages and consumption relative to Southern EZ is part of the solution. If the EZ is to remain intact it is inevitable.

I do not think that there is much room for this. If there is a lack of demand from the rest of Europe, the German export industry will not be keen to increase their costs. The public sector has seen cuts (wages, increased retirment age) for years, so I would not keep my hopes up there either. I know that what you write is Draghi's idea of how to solve this mess, but I don't think there is much sympathy for it in Germany.

On another note: most comments on DER SPIEGEL with regards to Tsipras' speech are positive. The message of the German populace (aka comments on the SPIEGEL story) is: Dear Greeks, please follow through with what you think is good for you, default, and get the heck out of the Euro!

[dances with sheeple]

I do not think that there is much room for this. If there is a lack of demand from the rest of Europe, the German export industry will not be keen to increase their costs. The public sector has seen cuts (wages, increased retirment age) for years, so I would not keep my hopes up there either. I know that what you write is Draghi's idea of how to solve this mess, but I don't think there is much sympathy for it in Germany.

On another note: most comments on DER SPIEGEL with regards to Tsipras' speech are positive. The message of the German populace (aka comments on the SPIEGEL story) is: Dear Greeks, please follow through with what you think is good for you, default, and get the heck out of the Euro!

Unfortunately what is good for the German sheeple is not going to be good for the banking "elites"? Buy more popcorn time IMO.

[crashmonitor]

http://www.foxnews.com/world/2015/02/09/markets-hit-by-greece-impasse-after-tsipras-renews-pledge-to-ax-bailout-debt/

Beggars belief really that the equity markets are not still not ''bovvered'' by developments in Greece. I guess Tsipra's categorical can't pay won't pay this weekend is just not being taken seriously.

The belief is that Central Bankers have got this covered with QE and that the 7000 break out is about 99% guaranteed this year, so hell why not fill your boots at 6800. Certainly loads of support at 6800 this morning. Never mind that the FTSe 100 is trading at an expensive 16 p/e and oil and miners earning are about to fall off a cliff.

Obviously speculators are certain the free money is a given and the plebs are going to get a good inflationary head kicking come what may.. Just seems a bit too easy to me.

Edited February 9, 2015 by crashmonitor

[R K]

I do not think that there is much room for this. If there is a lack of demand from the rest of Europe, the German export industry will not be keen to increase their costs. The public sector has seen cuts (wages, increased retirment age) for years, so I would not keep my hopes up there either. I know that what you write is Draghi's idea of how to solve this mess, but I don't think there is much sympathy for it in Germany.

On another note: most comments on DER SPIEGEL with regards to Tsipras' speech are positive. The message of the German populace (aka comments on the SPIEGEL story) is: Dear Greeks, please follow through with what you think is good for you, default, and get the heck out of the Euro!

Precisely why EZ is in a mess.

If Germany refuses to change they must either leave or be kicked out of the EZ.

This is nothing surprising or new. Ive been saying it on here for the last 5 years. It is only now Varoufakis is reaching a wider audience with his perfectly rational explanation of the problem and the solution.

Edited February 9, 2015 by R K

[Quicken]

http://www.theguardian.com/business/live/2015/feb/09/greek-bailout-crisis-tsipras-bridging-loan-live-updatges

The selloff in Athens is picking up pace, sending the main ATG index down almost 6% today.

It’s heading back towards the lows plumbed immediately after Syriza won last month’s election.

Tsipras plans:

• Abolish the single property tax (ENFIA) and replace it with another tax targeting large real estate properties.
• Re-increase the tax-free threshold to €12k (from its current €5K).
• Restore the 13th pension for gross monthly pensions below €700 from end 2015.
• Introduce subsidized meals for families living below the poverty line.
• Rehire 3,500 civil servants who lost their jobs as a result of the mobility scheme introduced by the previous government in the public sector. However, this number would be subtracted from the 15,000 recruitments scheduled for this year.
• Raise the monthly minimum wage in the private sector from €586 (or €510 for under-25s) to its 2011 level of €751 by 2016.
• Restore collective wages bargaining with the advice of the International Labor Organization (ILO).
• Extend the existing ban on foreclosures of primary residences.
• Stop new privatizations, but extend concessions when in the national interest.
• Introduce legislation enabling the Hellenic Financial Stability Fund (HFSF) to exercise its full voting rights with no restrictions in recapitalized banks.
• Repel legislation providing immunity to the members of the boards of the HFSF, the Hellenic Republic Asset Development Fund (HRADF) and the Bank of Greece.
• Introduce a new ‘stable, simple and fair’ tax system and fight corruption and tax evasion.
• Introduce a comprehensive reform of Greece’s public sector.

[R K]

http://www.theguardian.com/business/live/2015/feb/09/greek-bailout-crisis-tsipras-bridging-loan-live-updatges

Tsipras plans:

Sort of policies UK needs.

[pipllman]

Am I the only one that hasn't seen anything in Tsipras' plans that would help Greece create wealth / grow?

Is he suggesting that without the debt, Greece would be OK - that it is running a balanced / slightly positive budget?

What about plans to attract investment, encourage exports, create jobs etc. etc. Where can I read about those things? Adding additional cost and jobs in the public sector doesn't sound like the right thing to me. But then, I don't have a democratic majority...