When I say it it is dismissed as another Greek begging. When Der Spiegel says it…

Stop the Second Bailout Package!

EU Should Admit Greece is Bankrupt 

A Commentary by Christian Rickens 

Der Spiegel just published this apt and honest piece. I reproduce it below with thanks to the German magazine:

Greece is bankrupt and will need a 100 percent debt cut to get back on its feet. The bailout package about to be agreed by the euro finance ministers will help Greece’s creditors more than the country itself. EU leaders should channel the aid into rebuilding the economy rather than rewarding financial speculators for their high-risk deals.

First things first: this commentary isn’t directed against Greece. It’s got nothing to do with all the talk in Germany about Greek citizens not paying their taxes, Greek civil servants who don’t work or Greek politicians who break their promises. This commentary has a clear and simple message: The second Greek bailout of €130 billion ($172 billion) that euro zone finance ministers are expected to agree on Monday afternoon should not be paid out.

Sure, Greece will need help from the other European Union member states for years, possibly even decades, and Germany shouldn’t refuse that help. Europe will likely end up pumping far more money into Greece in the coming years than the fresh aid now being discussed in Brussels.

The mistake isn’t the size, but the construction of the bailout package. It isn’t geared to the requirements of the people of Greece but to the needs of the international financial markets, meaning the banks.

How else can one explain the fact that around a quarter of the package won’t even arrive in Athens but will flow directly to the country’s international creditors? The holders of Greek government bonds are to get some €30 billion as an incentive to convert their old paper into new bonds. The aim is to keep alive the illusion that Greece isn’t bankrupt — after all, the creditors are voluntarily forgiving part of the debt. The financial sector is cleverly manipulating the fear that a Greek bankruptcy would trigger a fatal chain reaction.

That leaves €100 billion. But that too isn’t geared to what Greece needs in order to get back on its feet. It’s linked to an estimate of how much debt the Greek economy can bear without collapsing. International technocrats agree that with debts amounting to 120 percent of gross domestic product, the country can just about go on servicing its debt. That’s the level at which the cow can go on supplying milk without dying of exhaustion. So 120 percent became the goal.

Surreal Forecasts

In the last few days there has been a surreal political debate about whether the €130 billion will get Greece down to the desired debt ratio of 120 percent of GDP or if it will be stuck at 129 percent — in 2020, let’s not forget. Predicting the debt level of an economy eight years down the road to within nine percentage points: that’s usually not even possible in Germany. In Greece, with its collapsing economy and not especially reliable statistical system, such forecasts are deep in the realm of black magic.

Equally outlandish are the calls by Greece’s creditor nations for a rise in Greek budget savings to €3.3 billion from €3 billion as a precondition for paying out aid. If only the solution to the Greek problem hinged on €300 million more or less! Given the many spurious pledges and creative accounting measures the Greek austerity program consists of, that sum can surely be dismissed as irrelevant.

In truth, Greece has of course been bankrupt for a long time. The country doesn’t need debt forgiveness of 70 percent, it needs a 100 percent debt cut if it is ever to recover. This sick cow won’t be producing any milk for years to come.

Most of the countless officials dealing with the Greek problem in the euro zone are well aware of this simple truth. Some of them, including people in the German government, privately admit that the €130 billion won’t solve the problem. It’s only about buying time, they say. Time until the financial markets have stabilized to such an extent that they can weather a Greek default without a disastrous chain reaction. Without bank insolvencies, without domino effects through credit default swaps and without an explosion of bond yields in the euro zone’s other ailing economies.

Marshall Plan Needed

But when will that moment be reached if not now? Since last autumn, the European Central Bank has been showering banks with liquidity. Spain and Italy, the two wobbling giants of the euro zone, have new government leaders who have made credible pledges to reduce debt. Most of the other EU states are similarly committed to budget discipline through the EU’s fiscal compact. And the problem with the credit default swaps isn’t as serious as the banking lobby keeps claiming.

If the European politicians have a shred of faith in all the work they’ve done in the two years since the breakout of the euro crisis, they should now admit what everyone already knows: Greece is bankrupt and all the country’s debts should be forgiven.

Greece should nevertheless get the €130 billion. But the money should be paid in another form. Instead of rewarding financial speculators for their high-risk deals, the money should flow into the reconstruction of the Greek economy. A new Marshall Plan is needed, rather than a manic insistence on debt repayments.

 

 

60 Comments

  • Thank God there’s at least one German (presumably) who understands what is happening and writing openly about it!

    • A huge number of Germans understand exactly what is happening, and is writing openly about it.

      Unfortunately, our political ‘elite’ doesn’t care because it is to busy with transfering mountains of taypayers money to the finance industry in Germany and elsewhere, directly or via Greece et al.

    • @Very serious Sam

      Undoubtedly,a growing number of Germans is starting to understand whats happening.This can be seen in the partial “climate” change towards Greece.But lets not exaggerate.Most Germans have been complaining because they dont want to “bail out the lazy greeks” and not because they dont want to save the bankers.

  • At last! Some common sense! Do you think The Frau Merkel might bother to read (and understand!) Der Spiegel? We can only hope so. As to this ridiculous surreal business of forecasting the Greek Debt to GDP ratio in 2020… Finally someone has screamed (someone other than Greek commentators that is) that for God’s sake! The King has no clothes! Thanks very much for relaying this very welcome article.

  • This is correct. Greece is bankrupt.
    But a 100% haircut would not be enough; the budgets are still on the deficit side.
    As the situation is, It is extremely difficult to balance the budgets without “blood”; either the jobs of thousands of public sector workers or state “business” with certain cycles which are in turn the “blood donors” of the corrupted political system.

  • I assume you all know what the Marshall Plan was? It allowed Germany to buy mainly American products (mainly raw material) for their new currency. In exchange they delivered machinery to European countries and prototypes to the US, both for free.

    • The Marshall plan wasnt an aid for Germany only.Greece received aid via the Marshall plan too.USA needed clients in order to maintain its economy at a high level…Germany will soon realize it will need clients too.

    • Well, it was more complex than that, but all in all, it was win/win, sure. However, the conditions were very different. Post war Germany had a totally new leadership, on the national, state and municipal level. And it was under the supervision of occupying powers. The country had a lot of experience as a successful industrial nation, but huge demand, both on the investment and the domestic demand side. Imho that was quite different from the situation of the Greeks.

      And when all is said and done, there’s still the fact that nobody has much, if any confidence in the Greek government putting credits for economic recovery to the best use. Not even the Greek people. The political landscape hasn’t changed much yet, and those politicinans have proven in the past that they managed to waste most of the EU’s subsidies and bond credits. Where is there any reason to believ they would manage to create better results this time?

      No, sorry, but there has to be serious change first before any Marshall plan has a chance to lead to a sustainable recovery. Creating yet another short lived bubble now ain’t a solution!

    • It sounds like a Marshal for Greece as some here want it would be: Send money for nothing in return to Greece for ever. As we have seen over the last 30 years… The result is known…

    • The whole point about the Marshall plan was to fund development without incurring debts in the recipient country. It was the reason Germany recovered after the war. In the case of the EU, Greece accumulated debts while Greek industry was deindustrialised, with the active connivance of German multinationals and EU policies.

    • Well, Prof Varoufakis, with a lot of respect towards your opinions, but the Marshall Plan moneys were credits, not gifts! And do you want to deny that such a stimulus would only have a long term effect (instead of creating a short term bubble) if reforms ensure that those Euros really create new businesses? Once it lands in the greedy hands of the administration, it’s simply wasted.

    • “The Marshall Plan money was in the form of grants that did not have to be repaid.[77] In addition to ERP grants, the Export-Import Bank (an agency of the U.S. government) at the same time made long-term loans at low interest rates to finance major purchases in the U.S., all of which were repaid.”
      From wikipedia.

    • Greece has had a Marshall plan since it joined the EU 30 years ago. Does not look like it was a good investment.

      Just dumping money will not help. The money will just dissapear in the inefficient and corrupt structures. So step one is 10 years of pain to reinvent the country and build up administration that at least has the level of a emerging country, maybe even a Western industrial country.

    • Hard work and restructuring will come to naught if investment is kept at bay.Perhaps you do not care about this. But you may care about Spain that is falling in the same hole. In the end, the pain will be all that is left and will be shared by all.

    • To be honest, I do not even care about Spain. The system needs a reset. Defaults are the most social element of capitalism. It means a distribution of wealth from the top to the bottom (technically by reducing the debt of the bottom).

      A default is much mor efficient than recue packages engineered by politician and their 2nd tier advisors.

      To put it positively. At least this time politicians avoided the war when the wrecked the monetary system.

    • @Gray
      “The proportion of Marshall plan loans versus Marshall plan grants was roughly 15% to 85% for both the UK and France.”
      In general with these figures you should call it a grant and not a loan..After all if you still want to call the Marshall Plan a “loan” you should consider the interest rates and the conditions that came with it…maybe then we can compare it to other loans (or grants)….

  • At the risk of sounding more naive than I am (or I hope I am), isn’t this what we did back in 2008, here in the US, with TARP followed by QE1 + QE2. Seems we are getting good at it, socializing losses while keeping profits private, all the while transferring huge amounts of wealth.

    Everybody let’s go work for Wall Street, City, etc….

    • It’s pretty much as you say. A pro-Wall street approach that left noone with any doubts that that’s what it was.
      In our case, they raped us and called us sluts to top it off.

    • TARP worked, but was too small. The QE dollars, on the other hand, never trickled down and only helped the bankers. And austerity by the municipal administrations and the states’ governments had a negative impact on domestic demand and thus hurt the economy. It’s a mixed bag.

      Anyway, the European Union isn’t the United States! No European president here and no European IRS. And even within the US, the money is distributed very unevenly, with political leverage trumping economical and social reason almost every time. How else to explain Alaska profitting so much, despite all its oil riches? And how to explain Puerto Rico, with an average income of less than half of the US standard? That’s a member of the dollarzone that is almost ignored by most Americans! Where is the big program to improve the situation for those folks, where is the public solidarity?

      So, excuse me please, but the Americans aren’t really a shining example of how to overcome the crisis. You have high unemployment, and struggling states, too. We Europeans had our own stimulus programs (cash for clunkers was a German invention, remember?), but not all members equally profitted from this. The truth is, the US and the EU both didn’t manage to react on the crisis with a convincing solution. Neither side can claim to have the upper hand.

  • Although I keep seeing it over and over again, I still find it hard to believe that the most obvious solutions are not embraced as quickly as they should be, if they are ever embraced in the first place.

    The one benefit we can take from this is that at least there are more people acknowledging this solution and with a little bit of momentum, perhaps the right decisions can be taken and Greece and Europe can move forward.

  • Yianis I don’t have a twitter account, but reading your twitter page this morning there seem to be a lot of people ‘baiting’ you with phoney debates. The fact this is occurring so soon after your commentary on Greece’s ‘neoliberals’ is no coincidence. You seem to have struck a raw nerve. Be careful…..there is only one of you, and many of them.

  • Mr Rickens indeed shows plain common sense, something quite rare these days, but I have two remarks:
    1. I wouldn’t be so optimistic about a true new “Marshal plan” happening in Greece, anytime soon. And if will happen, I don’t have doubts about who will benefit from it, certainly not the Greek people. There has to be a “cleansing” of the political system in Greece first.
    2. This is just a commentary! I doubt that this kind of mentality has any resemblance to the official “line” of the magazine…
    An a question to Prof. Varoufakis : The article states: …“Since last autumn, the European Central Bank has been showering banks with liquidity. Spain and Italy, the two wobbling giants of the euro zone, have new government leaders who have made credible pledges to reduce debt”…
    My question is: Why didn’t they follow this paradigm in the case of Greece, two years ago, and started the current madness of troika and “memorandum 1 &2”? If this kind of approach is not sufficient for Greece, why then they thing that is sufficient for Spain, Italy etc?

    • Regarding your point 1., I think the new “Marshal plan” will come but only when they have brought the Greek economy down to the level they want. Then they will flood the country with money that will go, for the most part, back to their pockets via Siemens et al. And the domino effect will do its work all around Europe and its peoples (even Germans and Dutch) at the cost of the hard fought social rights of the 20th century. I believe this is one reason why Yanis always talks about 3 things (government debt, bankrupt banks and money for growth) and not just a new “Marshal plan”.

    • Pkars, nobody here is interested in bringing the Greek economy down. Why should we, really? That’s totally against our interests, because it would make it even less likely that we ever see the huge credits for that nation be paid off.

      And your point of flooding Greece with money to boost the German export industries doesn’t make much sense, neither. Come on, most of that money would land in the “pockets” of other EU nations, and a big part would go to China! At the same time, an impoverished population is very unlikely to buy expensive German cars, if a tall, they could only afford Dacias (produced in comparatively low wagfe Romania for French manufacturer Renault). Really, even if you are under the impression that we Germans are greedy and unscrupulous folks who wouldn’t shy away from virtually enslaving people for our own good, where’s the profit in your alleged exploitation? More intelligent conspiracy theories, pls!

    • @ Thalys

      Why are you concentrating on Greece?
      Suppose Greece gets his debt erased 100% and gets a marshall plan as well. What about the other countries ( almost all the countries inside Eurozone, see their sovereign and individuals debt), is it fair? You think that the other countries don’t want to be treated the same way?

      Unless you believe that Greece is an exception, you must start considering what’s wrong in Euro design and how to fix it, once and for all, for all countries inside Eurozone.

  • Yes, since some only a few months, they have been increasingly welcoming voices that oppose the usual economic paradigm in Germany, especially since they host regular comments of Wolfgang Münchau. But this article, why do they publish it, only in the english version? Because they know, Germans won’t read it? I hope they will. I sure will quote it in my circles.

  • If one excepts that there’s a clear and present danger that the Eurozone banking system could collapse, then the Eurozone leaders have a clear and present duty to do all they can to prevent that happening.

    If it did happen there wouldn’t just be 11 million Greeks teetering on the edge of abject poverty; there would be the other 320+ million Eurozoners, plus tens of millions of non-EZoners in East and Central Europe, and 70+million Turks would be feeling the pinch etc etc.

    So is Greece the sacrificial lamb – well sort of – but one has to assume that the danger of a banking collapse in the Eurozone will diminish over time. Only then could Greece get a “Marshall Plan”, by then one hopes Greece would have implemented the reforms needed to make it competitive – along with Spain, Italy and France.

    There’s no point forgiving Greece its current debt mountain, if mechanisms are not entrenched in enforceable law with serious penalties that will prevent Greece rebuilding another debt mountain.

    RP

    • It’s not about forgiveness. Most of this debt is paid again and again and again to its creditors. Greece is paying loans almost a hundeds years old.It’s actually paying interest rates not the loan itself.

      It’s the faulty design of Euro that created this mountain of debt to most of the eurozone countries. As long as you don’t get this, i am afraid you are far away from a realistic solution.

      Greece had a huge debt before entering Eurozone. And so had most of the countries that entered Eurozone. Greece didn’t go bankrupt before though. Why?

      And you are saying that the reforms imposed by EU are not implemented in Greece? To which one are you referring? Greece is in such bad condition exactly because all these reforms are taking place.

      To what kind of reform are you referring to?

    • “Greece is paying loans almost a hundeds years old.”
      That seems rather unlikely to me, since Greece defaulted in 1932.

    • Its not unlikely.I dont remember the exact year,but some years ago Greece completely repaid a loan that GB had granted to us for the Greek Revolution in 1821.Just because Greece defaulted doesnt mean the debt was written off 100%.
      I dont know the whole story,but my guess would be that the likes of GB were excluded from the write off,just like certaint creditors are excluded from the PSI now….

    • Gray,

      Germany defaulted in the 1930s, in 1953. Furthermore, it restructured its debt in 1922, 1929 and in 1990.

      Nonetheless, the WWI debt of Germany was fully paid in 2010 (!). Thus, when a country defaults, does not mean all of its debt is deleted.

      For instance, Greece paid loans of 1830 in the 1950s (although it had defaulted in 1893, some years after Greece joined the Latin Monetary Union, which was dissolved some years after).

    • jctergal,

      I don’t think Germany restructured their debt in 1990. Can you please provide a source for that statement?

  • To be honest, a vast majority of the northern Europeans (the French included) were deeply schocked and astonished when they discovered the truth about the current state of Greece 30 years after the country joined the EU. A dysfonctional state, an incredibly corrupt society, tax collectors owning several luxus villas, and so on. A bite like finding out your favourite neighbour is a thief and his wife a messie. There is NO trust anymore. So while I can understand that the Greeks would like to stay in the eurozone and get as mulch financial help as possible over the next decades, my guess is that Europe will prefer do offer Greece a divorce with a nice package to start a new life on its own…

  • This only shows that there’s a lively debate in Germany about the Greek crisis and the best solutions. The article you llink to is just one aspect of that, and imho not the majority view. Most people here simply don’t have any confidence in the Greek government’s ability to create a turnaround, and so they see the bailout money as wasted. And contrary to what the author pretends, there’s no public support for long term subsidies on a grand scale, afaics. Increasing the German contribution to EU funds for struggling nations, ok, that’s debatable. But most Germans don’t see any ethical or political obligation to subsidize the standard of living in the south. In Germany, we have such a transfer process between the states, and it did nothing to equalize the economic difference between the north and the south (about the same as in Italy, for instance). It’s a political reality here that can’t be easily changed, but there would be huge resistance against “promoting” this failed model to the European level! So, all solutions that are based on a big “transfer union” are delusional. The solution can only be improvements inside the southern nations, not any artificial “balance” with huge money flows year after year after year.

    • Right! Let’s stop immediately all money transfers from the South to Germany and its allies. Let’s stop immediately all military spending as well as all payments to the corrupt German businesses. Let’s also stop bying anything German. At least until they pay the WWII reparations with the appropriate interest of course.

    • Dear Gray,

      how about if Germany gave back the amounts it owes to Greece (such as the war loan)? Is there any ethical obligation in that? According to French and other European historians, this loan alone is more than 100 billions.

    • How about Greece pays back the interest it saved over the last 10 years when interest rates dropped?

  • The voice of another Germany (DIE LINKE)
    The Democracy of Debt Collection

    According to the federal government, the Greeks may elect who they want provided that they continue to apply the dictates of the troika. Never before has it been so clearly stated that the ruling classes renounce fair-weather democracy when it comes to the money of the banks. Chairman of Die LINKE, Gesine Lötzsch explains further:

    The federal government is behaving like a debt-collection company. Regardless of whether the debtor survives, it is crucial that the creditors get their money back.

    The Democracy of Debt Collection that Schäuble wants to introduce in Greece hurts all of Europe. First, the heads of governments are appointed by a decree of the troika and now a common election manifesto is prescribed for all parties. This manifesto intends the Greeks to “voluntarily” drink the hemlock to its dregs. Yes, the so-called aid programs were bad for the Greek economy. They have resulted in Greece experiencing the second worst economic crisis since World War 2. Pension and wage cuts as well as tax increases have driven the country deeper into crisis. The new reduction requirements are economic insanity. Clearly the federal government wants to set an example. All other countries should see what can happen to a debtor who does not follow the will of the Chancellor.

    Die LINKE calls for a debt reduction that gives Greece the opportunity to emerge from the crisis. At the same time, we need an effective program for the future of Greece, so that the country can recover from this absurd shock treatment. The additional costs which are thereby incurred shall be financed through a financial transaction tax.
    http://www.die-linke.de/nc/dielinke/nachrichten/detail/zurueck/selected-news-and-documents/artikel/the-democracy-of-debt-collection/

    “Οχι” θα ψηφίσει η γερμανική Αριστερά
    Αριστερά – Σάρα Βάγκενκνεχτ, πρώτη Αντιπρόεδρος Κοινοβουλευτικής Ομάδας
    http://www.sahra-wagenknecht.de/en
    “Αλληλεγγύη με την Ελλάδα σημαίνει “όχι” στο δεύτερο πακέτο σωτηρίας των τραπεζών.
    Η Αριστερά δεν θα υπερψηφίσει το νέο πακέτο σωτηρίας των τραπεζών στο γερμανικό Ομοσπονδιακό Κοινοβούλιο.
    Ούτε ένα σεντ από αυτό δεν θα καταλήξει στον ελληνικό λαό, όπως ακριβώς συνέβη και στο πρώτο λεγόμενο πακέτο βοήθειας για την Ελλάδα.
    Συνολικά, δόθηκαν από αυτό 73 δισεκατομμύρια. Τα 70 από αυτά πήγαν μέσω αποπληρωμής χρέους και τοκοχρεολυσίων
    απευθείας στις τράπεζες και τους ιδιώτες πιστωτές. Ο ελληνικός λαός αναγκάζεται να πληρώσει για αυτή τη σωτηρία των τραπεζών
    με άνευ προηγουμένου κοινωνικές μειώσεις και μειώσεις μισθών.
    Στο δεύτερο λεγόμενο πακέτο σωτηρίας προβλέπονται δάνεια ύψους περίπου 100 δισεκατομμυρίων ευρώ, για να διασφαλιστεί
    και να υλοποιηθεί η λεγόμενη εθελοντική συμμετοχή πιστωτών.
    Αυτό σημαίνει: το ελληνικό δημόσιο χρέος δεν θα μειωθεί με αυτόν τον τρόπο.
    Παράλληλα επιβάλλεται συνέχιση της πολιτικής περικοπών,
    η οποία είναι εχθρική προς την ανάπτυξη. Έτσι δεν μπορεί να αποτραπεί η χρεοκοπία της Ελλάδας.
    Η απόρριψη του πακέτου σωτηρίας των τραπεζών είναι προς όφελος του ελληνικού και του γερμανικού λαού.
    Καμμία κυβέρνηση δεν μπορεί να δεχτεί να της αρπάζεις το σύνολο των κρατικών εσόδων
    και να τα βάζεις σε έναν ειδικό λογαριασμό, στον οποίο μόνο οι πιστωτές έχουν πρόσβαση.

    Η Αριστερά απαιτεί αντ΄αυτού η χρηματοδότηση των κρατικών προϋπολογισμών στην Ευρωζώνη να διασφαλιστεί
    μέσω μίας δημόσιας ευρωπαϊκής τράπεζας, η οποία θα παίρνει δάνεια με ευνοϊκά επιτόκια από την Ευρωπαϊκή Κεντρική Τράπεζα.
    Με αυτό το μέτρο, θα απελευθερωθεί η χρηματοδότηση των κρατικών προϋπολογισμών από την δικτατορία των οικονομικών αγορών.
    Τα δημόσια χρέη πρέπει να μειωθούν δραστικά μέσω μιας σκληρής περικοπής χρεών και ενός πανευρωπαϊκού φόρου περιουσίας για εκατομμυριούχους.
    Στην περίπτωση της Ελλάδας, πρέπει το κράτος να απελευθερωθεί από το 75% των χρεών του.
    Η χρηματοδότηση των κρατικών προϋπολογισμών πρέπει να μπει σε στέρεη και μόνιμη βάση, μέσω μιας υψηλότερης φορολόγησης των πλουσίων
    και των μεγάλων πολυεθνικών. Η Γερμανία πρέπει να λάβει τα απαραίτητα μέτρα για την ενδυνάμωση της εσωτερικής ζήτησης.
    Μόνο έτσι μπορεί να ξεπεράσει την προσήλωσή της στις εξαγωγές, οι οποίες είναι μια αιτία για το γεγονός
    ότι η οικονομία της Ελλάδας, μέσω του ανταγωνισμού, ισοπεδώθηκε.”
    (76 βουλευτές, επί συνόλου 622)

  • For months now, i have read many opinions from Greeks posted here, discrediting greek mentality and being absolutely suspicious to any form or type of plan suggested.
    They show their conviction in any way possible that at this point, where things are totally messed up, nothing can save Greece.
    They consume hundreds of hours narrating their own past experience dealing with corrupt state and so forth and so on.
    They propose things like if we had done this or that, then we ll probably have a chance and so forth and so on. Buy now … Greece is doomed.

    I am not going to write my own counter-arguments to all these. But i would like to pose a few questions to all them.

    What is the most important thing that a Greeks must not lose and that it is absolutely necessary in order to continue fight for a change?

    What is a point in criticizing past events if at this point there are no such options?

    If everything is doomed why don’t we all commit suicide? 2012 is notorious as the date on which the world is destroyed. But again, if what we say to be done don’t really apply to us, we can say whatever we want. Would you have the same opinion if all these government measures were imposed on you?

    Have you ever seen a change without a fight. A cosmogonic change designed on paper? If things are to be done, what don’t we start doing them? Are we expecting a savior? Are we expecting someone to be crucified for us?

    Not to mention people who consider themselves as experts and members of intellectual elite. A fighter is the one who fights now, not in the future. We can all behave civilized and humane in a civilized and humane ideal society. But what about now? I guess we can wait and let somebody fight our fight and then live in this “ideal” society.

    And that goes to our friends in this blog who live away from Greece. To our fellow europeans. Are you expecting that what’s happening in Greece, won’t happen to your country? Your government has already signed your destiny, except England and Czech. And if you think that you are not Greek. Think again. See the sovereign debt of your country.

    • If you think that Greece can not be saved then STEP AWAY or go live somewhere else!

    • If you think that Greece can not be saved then STEP AWAY or go live somewhere else!

      Unfortunately, the Greeks ARE going to live somewhere else. In a NYT piece (if I am not mistaken) Yani posted last month, it mentioned that there were for the year 2011 over 12,000 visa applications for Australia as compared to only a few dozen applications for the year 2010. Of course I can’t be sure of this, but I’ll hazard a guess and say that most of these 12,000 prosepective future citizens of Australia, let alone the tens of thousands of other visa applicants to other western destinations, are young and university educated. Young and university educated. You think that bodes well for a country with a declining birth rate such as Greece?

      Anyway, we’ll see what the next Greek elections bring. Let’s hope it’s not the same old same old — tweedle dee (PASOK) or tweedle dum (ND).

  • There is apparently only an English version of the article, but some weeks ago the “Bild Zeitung” expressed the same views in German as well (http://www.bild.de/politik/inland/griechenland-krise/bild-sagt-nein-teil-1-22845526.bild.html), of course without the “First things first” – part…Its article attracted 1748 (!) comments. The madness of the Greek bailout packages is indeed very eloquently demonstrated by the fact that even “Bild” is right in disapproving it…

  • This comment from Eurointelligence blog makes me think Sarkozy anticipates defeat in upcoming election and is doing all in his power to lock-in neoliberal, unelected governance for the EZ:

    Mersch gets the ECB job, Mirow will have to leave the EBRD

    According to Reuters, France changed its position in the battle of the succession to Spanisch ECB board member José Manuel González-Páramo and now supports Luxembourg’s central bank governor Yves Mersch. Nicolas Sarkozy had previously promised to support Spain’s claim to have a permanent seat on the board. However Spain nominated the ECB’s chief councel Vitorio Sainz de Vicuna who was seen by most government’s as a light weight candidate compared to the experienced Mersch. The Luxembourg central banker has built himself a reputation of a monetary policy hawk in the tradition of the Bundesbank. As a quid pro quo for supporting Mersch, France seems to have gained the assurance that a Frenchman will succeed to the German social democrat Thomas Mirow at the helm of the EBRD, Financial Times Deutschland reports. One of the potential French candidates is Philippe de Fontaine Vive Curtaz, currently vice president at the EIB.

  • Just came from the travel association:

    German bookings for Greece down by 25%.

    Only 1/3 as many as normal plan a vacation in Greece in 2012.

    Looks like they are afraid of strikes and riots and/or get more value (the same for less money) elsewhere..

  • Credit-Default Hypocrites
    How Wall Street is gaming the Greek bailout.
    By Eliot Spitzer

    A funny thing happened on the way to the Greek bailout: Credit-default swaps involving Greek debt—the same kind of financial instruments that triggered the 2008 fiscal cataclysm—were set aside, once again protecting big financial institutions from their own irresponsibility.

    As the negotiations over the write-down of Greek debt unfolded, one of the critical questions that seemed to be hovering over the markets was: Who bought credit-default swaps on Greek debt, and who would owe big sums to cover the CDS obligations if there were a default. Remember that back in the housing crisis of 2008, it was largely the inability of AIG to make payment on the credit-default swaps it had sold that triggered the cascade of incipient failures that required enormous government intervention. Remember the $182 billion investment taxpayers made in AIG—$12.9 billion of which went straight to Goldman Sachs?

    In Greece, any such problem was magicked away. A special committee that governs credit-default swaps got together and said: The Greek bailout—a write down of 50 percent of the value of Greek debt—is voluntary and thus does not trigger the contractual terms of credit-default swaps. That means the companies that sold the CDSes will not have to cover the losses they had insured—the decline in value of the Greek bonds. Who votes on this committee? This will shock you: the very banks that issue, and often purchase, the CDS’s at issue: Goldman, JPMorgan Chase, Citibank, UBS. No government entity at all. Just the same players who have an enormous interest in whether or not the CDS obligations are enforced. And this special committee votes in secret, with no public accountability.

    The Greek write-down was about as voluntary as a confession obtained at Guantanamo. Nobody accepted the terms because they wanted to: They accepted the terms of the write-down only because they had a governmental gun to their head, with an implicit threat that only worse options awaited. Still, the propriety of the committee’s decision, conflicted and perhaps aberrant as it appears to be, is not the issue I want to pursue right now. I will grant that the committee—the International Swaps and Derivatives Association Determinations Committee—had the power to make the decision it did, and that it will be upheld if challenged in a court of law.

    Rather, let’s use the occasion of this sleight-of-hand involving Greek CDS to remember the grotesque resolution of the 2008 bailouts. During the AIG bailout, the Treasury Department and financial-services industry insisted on the need for taxpayers to pay 100 cents on the dollar for every CDS obligation that AIG had sold. Treasury argued that these CDS agreements were sacred contracts, and if we did not uphold them, the entire foundation of our economic structure would crumble.

    (Leave to one side the fundamental issue that we, as taxpayers, were never a party to these contracts. We stepped in to pay for the AIG mess and the Treasury Department, acting on our behalf, had every right and obligation—as every other entity extending credit to a bankrupt entity has—to negotiate the best deal it could with creditors.)

    Now let’s come back to the present. These CDS contracts—declared so sacrosanct in 2008—are being violated and voided at will by the very parties who have entered them! The self-interested parties that created credit default swaps are happy to benefit from the sale, manipulation, and payment on these instruments—until they decide unilaterally that they aren’t. With a simple meeting of a secret committee and the wave of a wand the obligation to pay on CDS obligations simply disappears.

    So why, back in 2008, didn’t Treasury demand that the secret committee get together and agree to some negotiated resolution? Why is it that when the taxpayer is there with an open wallet, the idea of voiding the contracts was never even raised?

    A simple truth seems hard to escape: Treasury has too long been acting as a simple front for Wall Street in the way it has structured every one of these deals. If there isn’t an honest investigation of what happened with the AIG bailout very soon, justice will have been fundamentally denied. We the public are the big losers. As always.

    http://t.co/hMsIhis7

  • I have read many of the articles in this blog and recently bought and start reading the “Global Minotaur”. The idea of a “new marshal plan” make sense to me from an economical point of view, even though I’m far from being an expert. I’m merely someone forced to try to understand some basic economics in an attempt to understand why the world is falling apart and who’s to blame.

    The idea of the “new Marshal plan” doesn’t make sense to me from a political point of view though. My impression is that the EU has already funded growth of Greece, I remember for example Delor’s package from 2000-2006, however the Greek economy hasn’t been made competitive.

    Having spend the majority of my adult life in Greece and comparing it with my current life in the UK I can see that corruption is a major problem in Greece as is a non-transparent, inefficient and archaic state mechanism. All these kill, to a major extend, both domestic inovation as well as foreign investment as they create an unpredictable and hostile environment. Also tax evasion is a major problem for self-employed workers in Greece, as almost everywhere else in the world, but in Greece they account for the 35.4% of the work force (the number from Doxiadis talk in Yale http://brandgreece.blogspot.com/2011/12/greeks-behaving-badly-micro-origins-of_07.html, I reference it just for the number doesn’t mean I agree with it). It’s also true and obvious to any one that has lived in Greece that the hirings in the public sector are based on a heavily clientelistic system, despite attempts to introduce meritocracy. Even if I can be convinced that these factors didn’t create the current debt crisis, they do put a strain to productivity in Greece that has made it the weakest link the Eurozone. That’s despite the fact that Greeks do work as much, or more than the rest of the people in the Eurozone.

    How do we expect the rest of the European governments and their electorates to fund a country with those kind of problems that doesn’t seem to get better on its own without having any say on how the money are spend?

    The supervisor solution is of course appalling as it lacks democratic accountability. I think however that without further political integration and state integration in Europe it’s imposible to talk for long term funding schemes that will transfer money from the rich North to the poor South. I find this kind of political integration difficult to happen, especially now.

    My deepest fear is that if a “new Marshal plan” actually happened, without any terms and without any changes on the previously mentioned factors, then it would further establish and fund the current ruling cliques. These cliques are fed by and are feeding the present problematic situation. And that in x years of time the grandson of Mr. Pagalos, that will be in the parliament, will have again the nerve to publicly say: “We plunder the money together”. The worse thing is that he will have a point as we would have done anything to stop them…

    I would be really interested to read your thoughts on these matters in a future post.

    Regards.

    • The idea of a Marshall Plan for Greece may well be inappropriate. But it is good that it gains currency in a country like Germany – the greatest beneficiary of the original Marshall Plan. Our Modest Proposal incorporates not a Marshall Plan but the IDE of a New Deal for Europe as a whole. The difference is significant: the New Deal did not give money away. It simply shifted idle savings into productive investments.

    • If what you say is right, why the rest of Europe, including UK are suffering from underinvestment and their banking system is on the verge of… .
      In these countries where corruption “does not exist”, why are they in such a bad condition as well?
      Have you seen the sovereign and individual debt of England? You honestly believe that UK is going to get away with this with no consequences?
      What will your arguments be when tens of thousands of people are going to be fired in England in one night. You know how easily you can be fired in UK. Where are you going to live then? Back to your ruined country?
      Your deepest fear is that more money will be consumed by the corrupt state of Athens?
      What about the genocide already taking place in Greece? Don’t you fear that? And i literally mean that. Take the suicides rate figure. Take the unborn children due to financial conditions. What couple is going to decide to have a child in Greece at this moment. Population in Greece is aging rapidly. If you project the figures in 30 years from now, we will be half.
      But your biggest fear honestly is an inefficient marshall plan?
      Why the modest proposal of Mr Varoufakis has these parts?

      You don’t have to worry about the corrupt political system in Greece. It’s going to be over soon. I am not saying because i have information that a revolution is going to take place. I am just saying due to the measures that are going to be imposed this year. There is no way for those measure to be implemented without a full-scale revolution. It’s not a matter of ideology anymore.

    • Ilia my post had two questions:

      – How do we make sure that the money given are going to be effective on making a change in the economy – something that didn’t happen in Greece in the past while it has happened for other economies.

      – How do we expect to have a permanent mechanism of surplus recycling without further political integration in Europe – This question makes me sceptic about the modest proposal.

      I agree with you that the situation is so bad in Athens now that warrants proper crisis response – this doesn’t solve the problem in the longer term or addresses any of my questions.

      I also agree on the international dimension of the crisis. Of course even though the UK doesn’t have out-front public servant bribery, other problems and skewness in economy exist. The UK is faced now with extended public budget cuts and, on the same time, Osbourne is considering reducing the tax at the tax top bracket…

      I still believe though that there are concrete reasons that Greece lags behind in competitiveness, that are far more important than the minimum or average wage. At some point we need to face them, because they actually are in the way of the majority, or at least I want to believe, of Greeks.

      About the current political system, I hope you’re right as I hope that something better will emerge.

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