Greece and the Rape by the Rentiers, by Marshall Auerback(*)

A must-read piece for readers of this blog and beyond. My only caveat concerns the last sentence: Defaulting within the eurozone is the optimal strategy, as it allows Europe one last chance to rejig the euro. Most likely, Europe will not take this chance and then the euro will disintegrate anyway. Greece has no reason to leave the euro before that and thus to destroy, by exiting, Europe’s last chance at a rational solution.  [Originally appeared here on the New Economic Perspectives website.]

Here’s the draft of the supposed agreement to “sort out” the Greek debt problem once and for all. According to Bloomberg, here are the essentials:

  • Greece’s 2012 GDP will shrink by as much as 5%.
  • Greece is expected to return to growth in 2013.
  • Greece will cut 15,000 state jobs in 2012.
  • Minimum wage will be cut by 20 percent.
  • There will be no increase to sales tax.
  • The government will cut medicine spending from 1.9% to 1.5% and merge all auxiliary pension funds.
  • It will also sell stakes in six companies—in particular, energy companies and refineries.

Of course, the current thrust of fiscal policy will almost certainly guarantee that there still will be a default, involuntary or otherwise, in spite of this agreement. If you don’t have a mechanism to allow growth, then how can the Greeks service their debt, even with the reduced debt burden?

Perhaps that’s the idea. Make the deal so miserable for the Greek people that the Spanish, Portuguese, Irish and Italians don’t even begin to think of trying to get a similar haircut on their debt.

Certainly, the deficit reduction won’t come. It can’t when you deflate a rapidly declining economy into the ground. Common sense suggests that a drop in private income flows while private debt loads are high is an invitation to debt defaults and widespread insolvencies.

Even with all of the concessions, the euro bosses have not officially signed off on the agreement:

* Finance ministers of the 17-nation euro zone arriving for talks in Brussels warned there would be no immediate green light for the rescue package and said Athens must prove itself first.

* “It’s up to the Greek government to provide concrete actions through legislation and other actions to convince its European partners that a second program can be made to work,” EU Economic and Monetary Affairs Commissioner Olli Rehn said.

* German Finance Minister Wolfgang Schaeuble, whose country is Europe’s biggest paymaster, told reporters: “You don’t need to wait around because there will be no decision (tonight).”

* Greek Finance Minister Evangelos Venizelos flew to Brussels after all-night talks involving Prime Minister Lucas Papademos, leaders of the three coalition parties and chief EU and IMF inspectors left one sensitive issue – pension cuts – unresolved.

It is also worth pointing out that Greece’s pension payments on a per capita basis are amongst the lowest in Europe. Still, apparently, this plunder hasn’t gone far enough The Greek people must feel like Sabine Women right now.

Game, set and match to the Troika.

While we’re at it, let’s address this “Greeks as tax cheats” canard once and for all. Greece’s tax revenue from VAT collapsed by 18.7pc in January from a year earlier. As Ambrose Evans Pritchard noted:

“Nobody can seriously blame tax evasion for this. It has happened because 60,000 small firms and family businesses have gone bankrupt since the summer.

The VAT rate for food and drink rose from 13pc to 23pc in September to comply with EU-IMF Troika demands. The revenue effect has been overwhelmed by the contraction of the economy.
Overall tax receipts fell 7pc year-on-year.”

We’re one step closer to ensuring that the birthplace of democracy becomes a form of national indentured servitude. That is of course, unless Greece regains some modicum of self-respect and tells the Troika to take a hike and leaves the euro zone.

(*) Marshall Auerback is portfolio strategist with Madison Street Partners, LLC, a Denver based investment management group, a Fellow with the Economists for Peace and Security, and a Research Associate for the Levy Institute.


  • Right facts, wrong conclusion.

    Under no circumstances Greece leaves the euro. No, sir! This would be the equivalent of handing the keys to the enemy.

    No, you stay in Europe and you make it most uncomfortable and injurious for Germany as it can possibly be. An eye for an eye, and a tooth for a tooth.

    It’s in the Old Book; check it out.

    • Let´s revise this statemtn briefly after the French election. Then Greece will exit at the latest.

    • well, as far as i can see, noone in germany is really interested in wether greece stays or leaves…we gonna pay either way

    • Yup. Most people just optimize their own finances. The willingness to pay taxes greatly decreaed. Why should people in Germany be honest with their taxes? OK, it is difficult to cheat in Germany, but the room for optimization is used more than 2 years ago.

      I do not have qualms anymore to invite my family to a EUR 500 dinner and declare it as a business dinner.

  • “MR. RICE: What I would say is that as in all our programs, broad political support for the program is crucial. And that’s why we, the IMF together with our partners in Europe, have been taking this time to discuss the measures of a possible new program with the political leaders in Greece. We will seek assurances as we often do that whatever changes to economic policies after elections that those policies will remain consistent with the objectives of the program. And again, that’s not something that’s just unique to Greece. It’s a common feature in a number of our programs.”
    Transcript of a Press Briefing by Gerry Rice, Director, External Relations Department, International Monetary Fund
    Washington, D.C.
    Thursday, February 9, 2012

  • A friend of mine who shopped in Greece said that shopowners are VERY reluctant to give written receipts, which in my country means tax evasion going on.

    How’s the gray economy doing?

    • You are mistaken. In most shops in Athens, you will get a receipt without asking. Sometimes, because the VAT here is outrageous, I have asked them if they will sell it without a receipt — and they usually did because I am a foreigner (although these days, they might suspect me of being an IMF spy…).

      In contrast, I have frequently been refused receipts in Vienna and the UK, when making small purchases (such as 20 euros) in a small shop. What does that tell you?

      The real problem in Greece lies not with small shopkeepers who struggled to keep afloat with overtaxation and state corruption — and it is far worse now, after the Troika poked their collective nose in — but with the rich, most of whom are also part of the political elite. The so-called reforms being demanded by the Troika will have no effect on these people, other than through the general collapse of the economy. The retail sector, and all the small family businesses, is what has been damaged by the austerity nonsense; its sole result has been to make businesses bankrupt, people unemployed and property vacant (not to mention lost taxes for the state).

      Furthermore, you are trying to imply that the cause of Greece’s woes is the informal economy; there is no evidence to support that claim, and I am prepared to argue that the informal sector was essential to protect private economic activities from the corruption of the state.

    • Dear Guest,

      Having lived for most of my life in Greece I can assure you that the rush to offer a receipt is a very recent development. I am with you that the rich do the same and that they do it on a massive scale, however, the problem with tax evasion is endemic and not limited to transactions at a shop (try to hire someone for repair work at your home and check the price with or without FPA as the VAT is called in Greece).

      Fear is perhaps driving compliance right now and hopefully Greece will stay at this mode of operation but in reality little has been done on this issue. The fiscal criminality of the rich is no excuse for the very similar behaviour of the middle and lower classes. Moreover, the corrupt, extorting state you mention is not an impersonal entity. It is the rest of us, who do not work in the private sector. It is 700.000 people if I am not mistaken who do anything from issuing permits for illegal construction (at any level, small or corporate), collecting taxes, manning customs positions, running banks and so on. The afflicted shop owner has a relative in a state position with whom s/he regularly break bread.

      That said, yes, let us tax the untaxed rich, let us seek to unmask their links to politicians, let us trace their money abroad. I am just fed up with the idea of the victimized poor Greek, the same person who in the 80s and 90s flocked the central squares of Athens like a maenad to celebrate the mercurial leaders of both large political parties (I am not even speaking here of our morally defunct and nearly criminal left and of the fascists of LAOS). We created this mess, and for as long as the money was there we were happy to see the rich get richer aspiring to a bit of the pie ourselves (How very American of us!). Now the bill lies on the table.

      And yet, despite all that, the German response to the crisis is immature, dangerous for europe, and catastrophic for Greece. As neoclassical buildings burn (a stark symbol of our crumbling pro-western aspirations), the west itself is shooting itself in the foot for the sake of a few Länder.

  • While Marshall’s analysis/opinions are rational and prudent he has failed to consider one critical point. The Greek government, its leaders, and its parliament will not take any accounatbility for their role in bringing Greece to the abyss and won’t vote against any such austerity because they lack conviction and frankly are less than legitimate to the Greek people. In simple terms, they don’t want to be fed to the dog’s when chaos breaks out after a default and deal with the consequences of such a decision. Its the consequences that no one can adequaltely quantify for themselves and for their country. It is NOT possible for Greece under these conditions to function as a viable economic concern. As Paul Krugman wrote months back, greece remains in a deflationary spirale – ” a death spirale” and this before the latest austerity measures being forwarded. Greece lost its opportunity to default with maximum impact when the EU was ill prepared for such an event 2 + yrs ago. Today, the EU leadership has had time to better insulate any contagion risks to the point that they can now gamble on just how bad contagion might be on a Greek default. Of course no one fully knows the impacts of such a default to European banks and capital mkts but the Europeans have not entirely sat on their hands for 2 yrs waiting for Greece. They have made other plans and now those plans don’t entirely include Greece. This explains why Germany in particular has pushed Greece to the point of humiliation in pressing Greece to accept measures that produce economic depression. Its their way of setting up Greece for an eventual default and allows Europe to “gracefully” lead Greece to the exit whilst Greece has signed its political and economic soveriegnty away now government by laws outside of Greece. I learned a very important lesson in one of my undergraduate International Relations courses, “morality is for the weak” …this is no time to debate what is morale or not but to act on principles of both National self interest and National security for Greece. These measures remain counterproductive in what they are intended to produce for both Greece and Europe. Its time for Greece to call the German card and tell them to take a hike as Marshall so concisely puts it.

  • Dear Yanis,

    A Greek default may actually be a horrible scenario for the Greek political elite who – for numerous reasons – will no doubt be held responsible for the Greek drama. As a result there is a good chance that some of the Greek leaders will end up in behind bars.

    Do you suppose that – in having this kind of scenario in mind – the Greek political elite does not have the ‘balls’ to tell the troika to take a hike?

    Why would the two big parties go along with the so called agreement knowing Greece is heading straight for the abyss anyway?

  • Greece’s pension payments may be low per capita, they need to be seen, however, in the context of Greece’s disbursement of small pensions to tens if not hundreds of thousands of people who never paid into the pension funds (see farmers for example) or others, like my mother for example, who retired at age 50 (a peculiar arrangement that allowed women with an underage kid at age 50to retire) with a significant percentage of her pension, and yet is expected to draw benefits for (bless her heart and may she be healthy) for up to 40 years or more, having worked 25. So please do take the full picture into account when making such impressive and yet incomplete statements. That may not justify the current euro-suicide as promoted by the Germans, but it speaks to the problems of Greece’s finances, and may explain the freakout of the outsiders coming in with austerian approaches to the reform of the Greek state, when they come into contact with Greek numbers.

    • I think you are making a mistake here, farmers do pay in order to be eligible for a pension.

    • Elisabeth hello,

      Thanks for the comment. I am afraid, however, that things are more complicated. People who had never ever paid any contributions were inducted in the rolls as a form of social security measure (with all the characteristics of electoral caciquismo of course). We are talking about thousands of people (and it works of course for couples – say the wife of the farmer. I guess after all she would be part of the farm’s activities, in a way it makes sense). Now, I can see why a society has to care for its elders, but that does not mean that the way this was done was sustainable:

      for a relevant article. There is I think an emendation to that was passed recently that stipulates a requirement of a minimum of 15 years of contributions. Let us see how this plays out.

  • It appears that Yanis you have more fans outside of Greece than within – a pity really given that your ideas are not only rational but practical remedies to the unfolding Greek tragedy. Marshall is correct in his assessment of Greece and the role of the troika and in particular, Germany’s position in its management of Greece. Unfortunately, in Greece for a very long time, the country has lacked political will and frankly leadership to tackle on paramount issues such as the present that impact not only Greek financial management but I would argue all facets of Greek identity and ultimately the way of life in Greece. Nevertheless, the issue at hand is an unfolding tragedy because Greek parliamentarians/leaders have duly lost the command of the Greek people. Sure there are political affiliations that exist today but I wonder just how many Greeks find themselves disoriented, confused, and mistrusting of their elected representatives. Frankly, with few exceptions, most have failed to lead, advocate for Greece in ways that transcends party lines and self interests. Greece finds itself at a most critical junction that requires real leadership even if it means political suicide in the end. As a proficient Financial Professional, I shake my head wondering how can Greece accept current measures that serve only to ensure that a default becomes the end state while the Greek economy gets ravaged into a depressionary state. While its obvious that cutting wages, eliminating the workforce, increasing taxes, and frankly further killing the patient, as Yanis would argue, cannot have any positive impacts both for the economy and for the EU as a means for repayment of current debt obligations, they why is the country advocating suidide on so many levels? The problem is that no one wants to take the fall upon a default scenario and no one is able to navigate the country in a post default environment. I would argue that the responsibility is enormous, complications many, and outcomes largely unknown. Yet, I wonder is death by a thousand cuts a more reasonable solution ? As Paul Krugman stated months ago, “Greece finds itself in a death spirale” …and this was before these new austerity measures have even taken hold of an already sick economy. What are the benefits to remaining in a Union where even the least sophisticated observers can see that there are no benefits, perhaps only short term one’s, if that … At what point does Greece cleary tell the troika to take a hike as Marshall has eloquently stated and move on while she deals with the implications that are known and largely unquantifiable …? At what point does it make sense to call the card that the German’s seem to be holding and simply tell them that Greece will default now and not when its conviennient for Germany and the EU. Unfortunately, Greece did loose the grand opportunity to equate maximum influence and impact 2+ yrs ago when the EU was disoriented and unprepared for a Greek default. Today, the EU is better prepared to address a Greek default? Even that is questionable but for the moment it appears that they have convinced the Greeks that they are and a default for Greece at this time would cripple the economy for years …How much different is that today with the pending austerity measures ? At this point, its a matter of brinkmanship in the highest order and only history will tell whether Greece lost a second opportunity at what will end up at a default regardless ….except on timelines that suit Greece?

  • Yannis,

    Can you clarify since when you have been advocating that Greece default within the Eurozone? Has “someone” put their thumb firmly in the back of your neck? Do you risk exclusion and relevance by stating the obvious?

    “Greece has no reason to leave the euro before that and thus to destroy, by exiting, Europe’s last chance at a rational solution.”

    C’mon man!… Talk about Eyes Wide Shut! Have some stones and say exactly what needs to be said. Their is NO future for Greece within the EU! None… except perpetual servitude and humiliation. Do you condone this as a Greek?

    For sure, defaulting within, or from, the Eurozone is essentially two painful sides of the same coin – stay in the EU and be Germany’s “bitch” in perpetuum, or terminate this “one-sided experiment”, default, and suffer the consequences… Either way, there is suffering. However, the right side comes with DIGNITY and REDEMPTION.


    Mr. Auerback has it right:

    “We’re one step closer to ensuring that the birthplace of democracy becomes a form of national indentured servitude. That is of course, unless Greece regains some modicum of self-respect and tells the Troika to take a hike and leaves the euro zone.”

    • I don’t see any real argument though, why Greece should leave at this particular moment. Let Germany take the first step.

      Since you use emotion-evoking arguments, consider this:
      Realization of Greeks on Greece has come the hard way. Has Germany or France spoken words of truth? Have they confronted their real problems? Are they banks solvent? What must over is hypocrisy about the real issues. But this is not a greek problem.

      Greeks should leave euro when their interest is due. No more “solidarity”.

    • In Yanis’ defence, he’s been advocating a default within the Eurozone for a while. And personally, I’d love to see it. That way we can end this arrogance that infests Greece with this whole “we can make it in spite of Europe (& ourselves)” attitude. 76 defaults in 150 years.

  • The Cost Of The Combined Greek Bailout Just Rose To €320 Billion In Secured Debt, Or 136% Of Greek GDP:

    “Some of our German readers may be laboring under the impression that following the €110 billion first Greek bailout agreed upon and executed in May 2010, the second Greek bailout would cost a “mere” €130 billion. Alas we have news for you – as of this morning, the formal cost of rescuing Greece for the adjusted adjusted adjusted second time has just risen to €145 billion, €175 billion, a whopping €210 billion, bringing the total explicit cost of all Greek bailout funds to date (and many more in store) to €320 billion. Which incidentally is a little more than Greek GDP (which however is declining rapidly) at 310 billion, only in dollars. So as of today, merely the ratio of the Greek DIP loan (Debtor In Possession, because Greece is after all broke) has reached a whopping ratio of 136% Debt to GDP. This excludes any standing debt which is for all intents and purposes worthless. This is secured debt, which means that if every dollar in assets generating one dollar in GDP were to be liquidated and Greece sold off entirely in part or whole to Goldman Sachs et al, there would still be a 36% shortfall to the Troika, EFSF, ECB and whoever else funds the DIP loan (i.e., European and US taxpayers)! Another way of putting this disturbing fact is that global bankers now have a priming lien on 136% of Greek GDP – the entire country and then some now officially belongs to the world banking syndicate. Consider that when evaluating Greek promises of reducing total debt to GDP to 120% in 2020, as it would mean wiping all existing “pre-petition debt” and paying off some of the DIP. Also keep in mind that Greece has roughly €240 billion in existing pre-petition debt, of which much will remain untouched as it is not held in Private hands (this is the debt which will see a major “haircut” – or not: all depends on the holdout lawsuits, the local vs non-local bonds and various other nuances discussed here). If you said this is beyond idiotic, you are right. It is not the impairment on the Greek “pre-petition’ debt that the market should be worried about – that clearly is 100% wiped out. It is how much the Troika DIP will have to charge off when the Greek 363 asset sale finally comes. This is also what Angela Merkel will say tomorrow when Greece shows up on its doorstep with the latest “revised” agreement from its parliament to take Europe’s money ahead of the March 20 D-Day. Because finally, after months (and to think we did the math for Die Frau back in July) Germany has done the math, and has reached the conclusion that letting Greece go is now the cheaper option.”

  • Brussel diploment is setting the stage for a separation from Greece: “Die Wahrheit sei schlicht, dass Portugal ein anderer Fall als Griechenland sei, speziell in einem Punkt: „Die Portugiesen haben immer Wort gehalten.”

    Translation; “The truth is simply, that Portugal is a totally different case thean Greece. The Portuguese have always kept their word.”

    Many have started to differentiate between Portugal and Greece, even though the root cause of the issues is the same. The only reason to start to make differences is that they want people to believe that Portugal is “worth saving” and that they will let Greece default and exit the “one size fits none Euro currency”.

    • And again. Now Schäuble: “Die Griechen sind ein Sonderfall. Die portugiesische Regierung macht einen ordentlichen Job”

      Greece is a special case. The portoguese government is doing a good job.

    • If so, why does it also need a second bailout? Let me tell you why: Because no matter what a good job one does at implementing mad policies, the result is mad, sad and bad.

    • The result inside the Euro will always be the same. No recovery, no jobs, more debt.

      The second bailout might be “agreed”. The flow of money needs more than that. So they might send tranches until the French election and then cut ties loose.

      Greece exiting the Euro zone within the next 6 months is too likely, that I would keep more than a few thousend Euros in a Greek bank.

    • @Yanis

      It won’t be long that you will need to address the Portuguese situation a lot more. Not only as a comparative study to the Greek “fiasco” but also as to why there is a well orchestrated campaign to show that Europe’s totally incompetent and disastrous policies have any merit and lead to success….
      At that time, if you need any info from an “insider” feel free to contact me.

    • Take a look at how these matters are REALLY conducted (if you haven’t already)

      Subtitles are in Portuguese, but I’ll roughly translate:

      – If afterwards we need to make an adjustment to the program (Portuguese)…
      – after all the big decisions regarding Greece are taken…
      – that is key, but then if there is a necessity for an adjustment…
      – of the Portuguese program, we’ll be ready to do it.

      – That’s much appreciated!

      – You’re welcome.

      – As long as … my internal members of parliament
      – and public opinion in Germany
      – doesn’t believe our decisions are serious
      – because they don’t believe in our decisions on Greece

      – But we have made quite substantial progress on the European framework

      – You have, you have

      – That we have! And now we must work today.

      So, take what you will out of it. There are several interpretations here in Portugal already, ranging from the usual subservient shit , glancing on worries of listening to private talks, to outrage.
      As for the German fellows, I’d also be quite pissed off. This preety much is an admission of political chicanery towards its own people.
      What makes me really mad, is the stupidity of all this. What does it all matter, if the simple arythmetics of the situation don’t add up?

  • yes, why leave Euro now – I do hope that the EU disintegrates, hopefully in some spectacular manner, with special effects, smoke, fireworks, and stuff, since 1990s the EU has been just an evil ideological project, it was an the attempt of the Reich (and indirectly its American masters who encouraged it because they were to gain most whether the abomination fails or succeeds) to move eastward to the front line of about 1942 and by securing Reich’s grip of the southern and western Europe, this time by relatively peaceful means through enlargement and inclusion of Eastern European ethnofascist statelets and ultimately the monster of euro. Besides can a currency with a phony name like that possibly succeed.

  • The fact that RT gave Varoufakis a platform kinda-sorta undermines the whole idea that RT is a platform for Russian propaganda. It’s not Russia’s fault that its economy has a raging consumer boom and little debt.

  • Seems the prior goal is to pressure Greece to let key assets like energy utilities go to private hands BEFORE the inevitable default. God forbid the Greeks let this happen. Have they forgotten their own tyrant/demos struggles from 2500 years ago?

  • If this is what Marshall Auerback has understood as the “essentials” of the new MoU, then I would love to see the kind of advise he dispenses –as well as the results of his advise.
    We hear a lot of talk about the failure of the first MoU. There is nothing new there, all IMF programs have suffered such critisism. Yet, no one can escape the fact that out of the 250- odd actions that Greece had agreed to undertake under the terms of the first MoU and of the Medium-term Economic Program, we implemented all of the 50-odd actions that concerned tax revenues (increases in taxes etc), about 30 structural reforms and did nothing on the remaining 170 actions — and of course all of them were serious structural reforms that went right at the heart of the client system and of the economic growth model we adopted after 1974.
    Europe is lending us money and the troika is not here to defend our interests but to safeguard the interests of the lenders. So stop blaming the troika and engage in some self critisism — it is a good dialectic tool and very useful sometimes. Had we implemented structural reforms from the very beginning of the crisis, then the pressure to reduce wages, salaries and pensions would have been much less.
    In the last analysis all of the reforms set out in the 1st MoU and the MTEP were reforms that successive governments had promised to carry out –but never did — reforms that had been advocated by successive governors of the Bank of Greece, all of the OECD country reports and most of the yearly EU reviews of the Greek economy.
    The representatives of the client state (a significant number of deputies and academicians all of the trade unionists, state-dependent entrepreneurs etc) purposely cast the country as facing the following dilemma: default and die now or default and die later– after you have suffered some more. naturally, people tend to opt for less pain. Yet the real issue is different: default and die now or grab at the straws that are still being offerd to you and try to avoid defauld and death in three year’s time.
    There is no doubt that structural reform in the face of internal devaluation is a very harsh medicine to swallow. But, it is the only game in town — and WE are to blame for bringing things to an impasse.

    • “Europe is lending us money and the troika is not here to defend our interests but to safeguard the interests of the lenders.”

      Allow me to disagree: the Troika, and the lenders (I’m talking about the sovereign countries who fund the support, not the epidemic plague euphemized as ‘finance industry’ which reaps obscene profits thanks to this this support) is trying to do exactly this: defend the interests of the main street Greeks.

    • I do not believe in the altruism of those who are willing to lend us more than 200 bil. in toto. The troika is defending the interests of the “main street” Greeks only indirectly– in the sense that it is telling us to do what we should have started doing twenty years ago. Any one who has the patience to read the Annual Reports of the Bank of Greece over the last 20 years will discover that successive governors — of all political persuasions– said the same thing:
      reform. And they all laid out the reforms that we should carry out. The same with OECD country reports. So, let us stop looking at the troika for excuses, let us stop concocting dark schemes of conspiracies againsta us. THe legendary (cartoon character) Pogo once said: “I had a look at the enemy and I am terrified. It is us”.
      PS By the way– when we say “,aim street Greeks” what do we mean???

    • Anthony, you’re a rarity among your countrymen (& women). And a credit to them. This debacle is Greece’s own doing & everyone knows that, except Greece and most Greeks.
      I like how the problem of tax collection was neatly swept under the carpet in preferring to blame 60,000 business failures in the last 6 months. Like the entire problem is only 6 months old (& is due to just 60,000 small biz failures).
      Disgraceful article likening fiscal responsibility to “rape”, no less. Sickening.
      No wonder Greece is poison.

    • Fair warning: I shall not tolerate again a post of this sort. This blog is for reasoned argument. No country, in its entirety, is or has been ‘poison’. Not Greece, not even Nazi Germany. Lift your game or find another blog to participate in.

    • Yanis, I also want to extend to you (and your readership) a sincere apology.
      It seems that a word I used carries with it a connotation among some people that invokes a comparison with Nazi Germany, which however extreme, is most unfortunate and unintended.
      I have always been a great supporter of yours, so I’m most disappointed that you feel my comment must draw such a rebuke and comparison.
      You are most correct: reasoned argument must be the way. So I must wonder, if my remark is or was so offensive, why didn’t the moderator simply notify me personally? I’ve provided all my details (name, email, etc). My post was “awaiting moderation” for some time. I don’t wish to be reprimanded publicly for what was otherwise a factual post and brought into question a key assertion of the author.
      Maybe that was the real problem.

      Nor do I wish to be told by a person I respect and hold in high regard – and whom I’ve endorsed to many colleagues and friends – to “lift [my] game”.
      Please email me personally if you wish to counsel me on the merits of my comments as, like you, I don’t want to be perceived as biased or one who incites anger.

      Thanks again and kind regards.

  • Gianni, please build a political party with trustworthy people for the upcoming elections. You are the only one we do trust these days. You might think that I am kidding, but actually I am not.

    However, I do agree that academia of course is by far more interesting than politics. 🙂

  • As for the plundering of Greece by her rentiers, Auerback is right. He misses, of course, the plundering of Greece by her grotesquely overblown public sector and by her so called ‘elites’.

    Auerback has in the recent months written some incredibly stupid anti-german pieces, bordering to rascist hooligan rants. His habit to let his personal likes and distastes blur his assessment of reality prohibits to take him serious.

    • Good post.
      Some of his work severely lacks context.
      Good to read, but I make it a point to check all his claims.
      The 60,000 small biz failures’ impact on VAT collection is speculation at best (and mis-quoted as a tax issue of entirety rather than part).

  • Dean is right, Greece needs to absolutely not leave the EZ. After all, Greece is simply the véhicule du jour to funnel euros from the troika into mostly French and German banks. This dishonesty has been unremarked by all media except on a few blogs like this one and zerohedge. Auerback’s recommendation to exit Euro is worst possible idea. Only when Europe’s Big Banks feet are in the fire will Germany, France and the troika do the right thing. Or even attempt to do the right thing.

  • BTW, is it even possible in practice for Greece to leave the euro, even if it wished to?

    If I was a Greek hotelier on the islands I’d keep a bank account/payment terminal from the mainland eurozone, keep the room and menu prices in euros, and agree to pay my local suppliers in euros. When it comes to pay taxes I’d just do a forex transaction the day before it’s due (or afterwards if I feel it will devalue more than the fines for late payment). And that could be contagious enough to the non-tourism sector…

    • There is no legal or political mechanism for a country to leave the euro voluntarily or to be expelled from it. Despite that, the Germans (along with the fat idiot of a Greek finance minister) are insisting that Greece would be expelled from it, if she defaulted.

      For this reason, the European Commission has stated that Greece would have to quit the EU in order to be allowed to leave the euro. i have even seen some cretinous researcher in Brussels stating that Greece would have to quit the EU and then re-apply… The whole debate is ludicrous and quite unacceptable. Europe is supposed to be managed by the rule of law.

      Basically, Greece is under no obligation to do anything. Anyone listening to the crooks and morons who occupy the local lunatic asylum (which was once the Royal Palace) might think otherwise. The rioters in the streets have more understanding of both economics and law than those who are professionally employed to deal with these things. This is, of course, typical of Greece…

    • If the hotel next door priced in New Drachma, you would go out of business and take your interesting ideas of how to manage a business with you.

  • Greece is expected to return to growth in 2013

    Is “2013” a typo — or the Troika’s idea of a cruel joke?

  • in continuation of the comments by guest [xenos].i take it by your name that you are a visitor here or have just arrived. i too am a ‘xenos’ here but for the last 36 years [xenos meaning foreigner]. you as the rest of greeks have been given receipts because theyhave to be used in your tax forms i.e. the lowest wages that could be tax free last year if i remember rightly was 8000 euros. you could file your return with no problems anything more you had to have a % of the difference in receipts, so even if the shopkeeper wasn’t too keen on giving you a receipt,you as the customer would demand it because if you didn’t cover the required percentage , you would end up paying taxes on the diference.this year the ‘tax-free amount’ is down to 5000 firstly that s one of the reasons why you were being handed receipts. secondly doctors very rarely issued receipts so this got them doing so. thirdly – even now you can be given quotes with or without tax which means with or without receipts/invoices and you decide. and this example is only one of numerous ways that got greece in the position it is now in.the ee knew that greece wasn’t keeping up with payments and that we were contiunuing gettng more loans, so why answer – they [mainly germany but france as well] were getting orders for their companies i.e. siemens. the list of reasons is endless…after living here and learning the language it helps a lot to understand the greeks p[to say nothing of their recent history and how they have been treated by the different nationalities over the last couple og centuries
    didn’t they do something abut it before it got to this state?

    • @GRNZ
      The tax-exemption limit was 12000 euros until 2011, when it was lowered to 5000, and this will be further reduced to zero for individual enterprises.
      The receipt scheme you describe was instaured in 2010 and was invalidated in 2011 due to ineffectiveness. In fact it caused an increase in tax refunds which was not the desired (by the revenues office) effect.
      By now, the troika deal has also nullified the beneficial to the consumer effect of asking for receipts, as tax exemption on these receipts has been entirely recalled.
      This will certainly contribute to the economy sinking even further underground on a massive scale.
      Good luck to the finmin in raising meaningful taxes again before 2020…

    • Actually, I wrote a thesis on the Greek economy in 1989 and have been a researcher and university professor since 1990, working in the UK, Italy, Austria and Greece. My point was that the informal sector exists in all countries, mostly for good reasons, and is not specific to Greece. On the other hand, the degree of informal (untaxed) activities by the very rich in Greece — doctors, lawyers, popular singers, big business, politicians — is extremely high by European standards, and is a disgrace.

      Papandreou’s pitiful attempt to reduce informal activities — by requiring apodekseis for the basic tax allowance — is a clear indicator of the low IQ and limited grasp of Greece that he and his advisors possess. Tax evasion or avoidance by those on the breadline is something that should be tolerated — especially by a so-called “socialist” government. It is no accident that the income and wealth of most of these crooks running the Greek polity is very high indeed — especially people like Papandreou, Papadimas, Samaras, Bakoyianni, Karamanlis….

  • While I agree with you in theory that default within the Eurozone would be preferable (offering at least some currency stability), I think what Marshall was getting at is that in practice, this simply wouldn’t pan out. Presumably, one of the goals of default would be for Greece to retain ownership of its various state-owned industries and resources, using them as a basis for subsequent recovery, but I suspect that the price for Greece staying in the Euro would include transferring legal control of its bankruptcy to Brussels. Were that to happen, of course, you could probably kiss those assets good-bye.

    Note: I read those supposedly offensive posts by Marshall. I’d suggest those who have found them so might re-read them, as I suspect they are reading into them what they want to see, and not that which is actually there.

  • Το ηθικό των Ελλήνων

    Ν. Λυγερός

    Το ηθικό των Ελλήνων δεν πρόκειται να σπάσει. Και δεν είναι αυτή η κρίση που θα τα καταφέρει. Οι δυσκολίες υπάρχουν, σίγουρα, αλλά συνηθισμένα τα βουνά απ’ τα χιόνια. Όσον αφορά στην αντοχή μας, η ιστορία την έχει αποδείξει. Κι αφού είμαστε οι απόγονοι των ανθρώπων του ελληνισμού, της αρχαιότητας, του βυζαντίου, της επανάστασης και της ελευθερίας, τίποτα δεν θα μας βάλει κάτω. Όσο πιο δύσκολα παρουσιάζουν όλοι τα πράγματα, τόσο μεγαλύτερη αντίσταση έχουμε. Κανένα επιχείρημα οικονομικό ή όχι δεν μπορεί να εμποδίσει τη στρατηγική μας και την εξέλιξή μας. Και τα κομματικά τερτίπια δεν εντυπωσιάζουν παρά μόνο τους μαλθακούς, και βέβαια τους ραγιάδες. Οι δικοί μας είναι από άλλη πάστα και δεν μασάνε. Για τους δικούς μας, για τους παλιούς, για τους γέρους και για τα παιδιά μας δεν πρόκειται να εγκαταλείψουμε τίποτα. Ο προορισμός μας είναι ξεκάθαρος, διότι βρισκόμαστε στη γη της θάλασσας και ανήκουμε στο λαό του χρόνου. Δεν θα παραχωρήσουμε τίποτα από το ελληνικό έδαφος παρά μόνο τάφους στους εχθρούς μας που νομίζουν ότι είναι η ευκαιρία να μας χτυπήσουν και να μας αρπάξουν τα νησιά μας. Το όραμα είναι απλό και ξεκάθαρο. Όσο πιο γρήγορα θεσπίσουμε την Αποκλειστική Οικονομική Ζώνη και κάνουμε συμφωνίες με τα κράτη που είναι γύρω μας, τόσο πιο γρήγορα θα αναδείξουμε την πραγματική μας αξία, ως γεωπολιτική μας δύναμη. Έτσι, θα αποφύγουμε και τη μιζέρια μερικών αλλά και την ηττοπάθεια των άλλων. Δεν θέλουν να βγουν από το βούρκο, αλλά εμείς θα τους βγάλουμε κι αυτούς. Θέλουν δεν θέλουν, η πατρίδα μας έχει μια σημαντικότατη Αποκλειστική Οικονομική Ζώνη μέσα στη Μεσόγειο. Κι αν το διαχειριστούμε αυτό το θέμα στρατηγικά, κανείς δεν θα μας σταθεί εμπόδιο. Γι’ αυτό το λόγο, πρέπει να αντέξουμε αυτές τις αντίξοες συνθήκες, διότι όταν μας θέλουν κάτω εμείς παραμένουμε όρθιοι. Είμαστε ξεροκέφαλοι, γιατί έχουν ζήσει πολλές μάχες οι δικοί μας και γι’ αυτό έχουμε το μέτωπο ψηλά. Τα βάσανα είναι κομμάτια ζωής για μας. Σπάνιοι είναι οι λαοί που άντεξαν τόσα δεινά και βρίσκονται ακόμα στην πατρίδα τους, δίχως να έχουν χάσει το ηθικό τους. Δεν κοιτάζουμε τις εικόνες, όπως κάνουν οι επικοινωνιολόγοι. Εμείς τις εικόνες τις προστατεύουμε εδώ και αιώνες για να μπορούν οι δικοί μας να προσεύχονται την ώρα της ανάγκης, όταν δεν είμαστε κοντά τους. Δεν έχει σημασία πώς μας βλέπουν οι άλλοι και τι λένε για μας. Ξέρουμε τι είμαστε, γνωρίζουμε την αξία μας και ο χρόνος που είναι μαζί μας το αποδεικνύει στην πράξη. Είμαστε το πεπρωμένο μας, διότι δεν περιμένουμε από τους άλλους να μας καθοδηγήσουν. Τόσα χρόνια ζούμε όχι επειδή το επέλεξαν οι άλλοι, αλλά διότι η Ελλάδα ποτέ δεν πεθαίνει. Είμαστε τα παιδιά της θάλασσας και του ουρανού γιατί μόνο αυτόν τον πλούτο έχει η γη μας. Είμαστε η ίδια μας η αξία, οι πρώτοι άνθρωποι, γιατί δεν έχουμε τίποτα άλλο. Οι δικοί μας, μας δίδαξαν το φιλότιμο και την ανθρωπιά, γιατί πίστευαν στις αξίες και όχι στις αρχές. Οι αξίες των Ελλήνων είναι διαχρονικές και γι’ αυτό έρχονται να δουν πώς μάχονται οι ήρωες. Κανείς δεν πρόκειται να μας κάνει να σκύψουμε το κεφάλι εκτός από τους νεκρούς μας και τα παιδιά μας. Γεννηθήκαμε με τις θυσίες, πεθαίνουμε με την αντίσταση, για να ζήσουν οι επόμενοι δικοί μας και να προσφέρουν στους άλλους. Τίποτα δεν άλλαξε.

  • In his FT column, Wolfgang Munchau, states that a sustainable debt-to-GDP ratio for Greece is 60%, not the 120% by 2020 which is the present goal (agreeing with Yannis, I believe). He also says:

    “Some say it would be better to force Greece out of the eurozone right now, and use the funds to save Portugal. I disagree. I personally believe it would be best to recognise the desolate state of both countries, let both default inside the monetary union, and then use a sufficiently increased rescue fund to help them to rebuild themselves, and to ringfence the rest at the same time.”

    Sound familiar?

  • From this morning’s Eurointelligence blog:

    Merkel and Schäuble are looking for a Plan B on Greece

    According to Der Spiegel Angela Merkel and Wolfgang Schäuble have both come to realize that the strategy on Greece has so far produced close to no results and is not likely to lead to any success. At the same time the chancellor and the finance minister are both trapped in their past decisions and policy mistakes. As the Ifo Institute has calculated, there may be as much as €71.7bn at stake for Germany alone should there be a 100% default of Greece. Merkel and Schäuble have both taken the strategic decision not to push Greece out of the Euro because they both believe the consequences are entirely uncalculable, the magazine writes.

  • One Greece’s rapists — the IMF — is demanding good ol’ fashion fiscal stimulus for China. From The Wall Street Journal (via from a MIke Whitney article):

    China should be prepared to sharply stimulate its economy if Europe’s growth falls more than anticipated, the International Monetary Fund said, adding to expectations that Beijing could turn to spending if conditions significantly worsen.

    In its China economic outlook report released on Monday, the IMF urged China to run a deficit of 2% of GDP rather than looking to reduce the country’s deficit as planned, given the uncertainty in the global economy.

    . . . China should hit the fiscal gas pedal harder.

    You see that? Massive fiscal stimuls for China. No deficit reduction. Why? Because the IMF is not stupid (when they don’t pretend to be, of course). They know their history: There has NEVER been a case in modern times where a country has gotten out of a recession/depression without massive government stumulus.

    So, its basically free money for the banksters (via LTRO), Keynesian economics for the Chinese . . . and rape for Greece.

  • I’m gonna to say that the Greeks might consider themselves lucky. Why? They (Germany, France, UK, US) do not have intention to turn Greece into stone age as they did that in ex Yugoslavia. German were instrumental in destruction of the country. All this talk have nothing to do with “economy”, and everything to do with plundering so-called peripheral countries, i.e. imperialism and neocolonialism regardless if targeted country is in EU or not. It is, literary, politics of “Scorched Earth” at economic front which means who control national resources has all the power.
    Again, all this has noting to do with “economy”.

  • Greece is no longer a sovereign nation state; it is no longer a republic. Greece is a client state of the EU ECB IMF Troika and has a technocratic government which is promising to institute structural reforms and austerity measures. Obviously it cannot be helped by any Neoliberalism nation building initiatives.

    What if John the Revelator, who wrote the Book of the Seven Seals, has it right when he foretold that a seven headed and ten horned beast regime of statism and totalitarian collectivism, will rise from the Mediterranean Sea to rule mankind, Revelation 13:1-4.

    Zero Hedge presents a video of silk-tie-and-suited MEP Nigel Farage bombarding his peers with the Red Pill …. “If they don’t get the Drachma back, you will be responsible for something truly truly horrible!”.

    Yes horrible indeed, something horrible is coming. The Apostle John relates that ”the beast which I saw was like unto a leopard, and his feet were as the feet of a bear, and his mouth as the mouth of a lion: and the dragon gave him his power, and his seat, and great authority.” The leopard’s skin is camouflaged, and as such, blends in with the background so it can not be seen by its prey. It operates furtively and prefers the darkness, and then at dusk, or at night, strikes to ensare, enslave, destroy and consume. The bear’s feet are padded for running at great speed to ruthlessly pursue its prey and for maintaining its footing in any adversity; its claws root out its meal and rip apart its meal. The lion’s mouth opens wide to choke it’s prey, and then crush and shred its victim. The monster that God is now unleashing on mankind combines the most terrible elements of nature’s most fierce animals. The Beast’s characteristics make it the perfect predator for destroying all economic and political life. God’s intention is to reveal the sovereignty and kingship of his Son’s rule over the entire planet, Revelation 2:26-27.

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