Solidarity Euro-Style: Finnish loans, ECB bond purchases, EFSF tough love and assorted horror stories from the postmodern Euro-Workhouse

The world seems convinced that Europe, perhaps under duress, put together a large Solidarity Fund (the EFSF) for the purposes of helping the fiscally-stricken Eurozone member-states avoid bankruptcy once they were frozen out of the money markets. The criticisms waged at this type of ‘solidarity’ centred on two issues: First, that the Fund’s size was not large enough (and thus unable to help Italy and Spain). Secondly, that this Fund resembles more a Victorian Workhouse whose real purpose was not to show solidarity to its residents but, rather, to make their life so unpleasant as to deter able-bodied workers from ever seeking its assistance.

The first criticism, about the EFSF-ESM’s size, is true but irrelevant. As I have argued from day one of the EFSF’s creation, its problem is not its size but its CDO-like structure. Turning to the second criticism, that it resembles a Dickensian Workhouse, Spain’s current predicament is instructive: To get money to give to its decrepit banks, the nation must be humiliated and undergo further fiscal waterboarding so that Italy and others are deterred from turning to the EFSF for help. In this sense, when Europe’s functionaries say that there is no need for further action on Spain since the EFSF is available to help, they are inviting the Spanish to enter the Workhouse for a life of undeserved misery on behalf of their bankers. And they have the audacity to call this ‘solidarity’ with the Spanish people.

Still, many commentators are prepared to give Europe’s leaders the benefit of the doubt. To think of the EFSF-Workhouse like the Victorians did: better than the alternative of being left on the street to perish; a place where ‘tough Victorian love’ is practised in order to refresh Europe’s puritan ethic. Well, be that as it may, I invite those who would like to think this way, to consider the following two examples with a view to establishing whether they are consistent even with this Victorian view of ‘solidarity’. 

‘Solidarity’ Exhibit A: Forcing more loans upon the bankrupt

As I wrote in a Le Monde article recently, the bankrupt Greek state was recently forced, by the troika, to borrow  4.2 billion from the EFSF so as immediately to pass it on to the European Central Bank (ECB) so as to redeem Greek government bonds that the ECB had previously purchased in a failed attempt to shore up their price. This new loan boosted Greece’s debt substantially but netted the ECB a profit of around 840 million (courtesy of the 20% discount at which the ECB had purchased these bonds). Is this ‘solidarity with the fallen’, even of a Victorian Workhouse type? 

‘Solidarity’ Exhibit B: Taking money from the bankrupt to invest on behalf of prosperous countries

When the 2nd Greek ‘bailout’ was agreed, you may recall that the Finnish government asked for guarantees, for collateral, that would reduce its exposure to Greece. The Greek government conceded, promising collateral of  925 million in value. One might have expected that the said collateral would come in the form of some assets (e.g. Greek government owned real estate). But no! Helsinki would have none of that. Instead, they demanded… cash! And cash they received. Last month, in May 2012, Athens wired  311 million to the Helsinki government, as a first installment. My sources here in the United States tell me that the Finnish government is now seeking to invest this money in joint ventures with US and other European firms. Now that is what I call solidarity with Greece…

To conclude on a sad and desperate note, I would like to call upon northern European governments to cease and desist from more ‘solidarity’ offerings to our fiscally-stricken, fast impoverishing nations. Your ‘solidarity’, your ‘tough love’ is killing our proud nations and, in the process, destroying Europe’s moral, political and economic fabric.


  • Nobody forced Greece to take the loans. Greece should have returned to the Drachma already two years ago. That would have been the cheapest solution for every country. Now the bottomless pit is going to return to the toilet pap… I mean, Drachma, in times of chaos and at the expense of the rest of Europe and the world.

    But maybe it is worth it: The rest of Europe will learn what it means to behave like a spoiled brat and accelerate reform efforts. I wonder if you Greeks still dare to look people from the Baltics or Slovakia in the eyes. They implemented much harsher austerity to be able to join the Euro, they were honest, they have lower incomes and now they must bail out the cheaters. It’s a shame!

    • I am not a Greek (I am 100% British) and I trained as a political economist in the UK and have taught in universities since 1991. In my professional opinion, the Greek economy has been a problem for many decades and should not have been admitted to the eurozone. This occurred because of the cynical and low quality management of the eurozone by Germany and France, who rejected the expert report on the euro drafted in the late 1990s. They deliberately included countries like Greece, to drag down the euro rate for the benefit of German exports. They also flooded southern Europe with cheap credit to trick everyone into getting into debt, and run up balance of trade deficits as well as debts.

      In recent years, the tendency of Germans to proclaim their cultural (= racial) superiority over Greeks and others is nothing less than a reinvention of the Nazi ideology. The economic arguments put forward are at best foolish, and at worst malicious, manipulative and arrogant. The people of Greece can hold their heads high about their conduct in this period, whereas Germans should be ashamed to open their mouths. Of course, the German propaganda machine has been spewing its vomit across Europe, so many well-intentioned citizens in northern Europe have been temporarily fooled. This will not last, and is already beginning to end. Truth will out.

    • Well, you seem to forget something about the Baltic States. Latvia for example, closed down something like 40% of their hospitals due to your beloved austerity and now they see their life expectancy is falling. So, take “your” money and shove it dude. The EU sponsored Greek Quislings that signed these treaties don’t count for much anymore, so shove ’em as well.

      Come on mates, let’s bet. What will be the spanish spread the day after greece exits? The winner gets free eurobonds

      Yannis i ‘m sorry. It was a spontaneous response to a racist.

    • Alex

      “What will be the spanish spread the day after greece exits? The winner gets free eurobonds”

      What is Greece’s now maybe.
      Can i get a bicycle? 🙂 Please ,pretty pleeease?

    • Ok tmk, so if the bank gives me a home loan, only I bear the responsibility? No need for the bank to do due diligence? Absolute codswallop. The corruption in Greece was well known to all before the loans were made. A country with no modern history of institutions, a history of regular bankruptcy, and political instability. And in global economic terms, the relative importance of a pimple on a pumpkin’s backside.

      On a related point, are you suggesting that Italy’s, Spain’s, and (soon) France’s problems are all as a result of Greece? Are you really living on planet Earth?

      You are a most ignorant fellow. There is a clear structural problem in the Euro which is exacerbated by severely high leverage in the banking system overall. To blame that on Greece you really must be blind!

      And the reason the oh-so-honest Baltics were accepted in the Euro, are surprise, surprise, political. Germany would much rather have some influence over the Eastern European corridor to create a geographical buffer from which any potential Russian threat that would arise in the event of a disastrous war. On the economic side, Eastern Europeans also just happen to be – a source of very cheap labour. Just a happy coincidence I guess, if like the Germans, you’re running a military-industrial complex dependent on competitive exports.

      You should also be aware that the utter lack of reliable information in your post and its heavily emotive character would lead many to perceive your comments as being racist. Myself included.

    • Dear Guest (xenon):
      Tmk’s comment isn’t very, well, charming.
      But how do you come to the conclusion that Germans think their “race” was better than Greece’s?
      Sounds a bit odd to me. I think many Germans are pretty fed up with this whole Greek mess – but it’s got nothing to do with the “race”.
      Also, your theory Germany and France “tricked” Greece into too much debt by asking too low interest rates for the loans is a bit unusual. Of course the interest rates for loans to Greece were too low. But that was hardly due to the intention of “tricking” Greece into debt. It was more of a mslfunction of our wonderfully efficient Market system, helped by the stupid setup of the Eurozone.

    • I am not a Greek (I am 100% British) …

      Yes, xenos, but are you an Englishman, Scotsman, Welshman, or Irishman? Just sayin’ because a Scotsman, for example, at least the ones I know, would never refer to himself as “British.” 😉

      Btw, Eleutherios Venizelos was once asked what his definition of a “Greek” was. Do you know what he replied?

      The people of Greece can hold their heads high about their conduct in this period …

      I see the point you are making, xenos, and I agree with the gist of it — but why exactly should the people of Greece be holding their heads high? Was it not the people of Greece who kept voting for the same corrupt politicians — Tweedle Dee (ND) and Tweedle Dum (PASOK) — election after election?

    • @Martin

      My comments are a simplified version, of course. But it is fairly clear that there is no solidarity across Europe, and the German line is insisting on national superiority over others. The economic reality is equally clear — that the German model has little to commend it: Germany’s current satisfactory condition is the structural consequence of the eurozone operation. If you had retained the DM, Germany would now be in crisis. In this context, for German politicians to assert a superior German way of managing things is a fraudulent claim; the German press is engaged in mass propaganda of the same sort; and the whole German public has been manipulated into thinking along nationalistic lines, instead of understanding that all of Europe is in crisis, and Germany is temporarily excepted. Nationalism (and ultimately war) is the only avenue open to failed politicians, and Merkel has gone down that road.

      As far as creating debt is concerned, this was a cynical way of concealing the long-term economic decline of all Europe — through creating debt and promoting consumption spending. Germany was the beneficiary and southern Europe the victims.


      Welsh, but my legal nationality is British so I say that. The Scots are very reluctant to do so, because historically they had their own country and remain proud of that. Wales never had a state of its own, and was rather like Yunanistan under the Ottomans. The political organisation of the UK is more federalised these days, with a Scottish Parliament and a Welsh Assembly — but still…

      As far as the conduct of Greek people in recent years is concerned, I do insist that the majority of people have reason to be proud about their fortitude over the crisis. The corruption of politicians and rulers here has been known for a long time, but was an historical and regional fact for centuries. Greek voters knew this, but the voting options between the large parties made no distinction about corruption, As I have said for 15 years to Greek friends, who used to ask me if I was not disturbed by not having a vote in Greece: “what would I vote for? The green shit, the blue shit, the red shit? It’s all shit to me, just with different colours.” In that sense, the only meaningful relation between party and voter was clientelist — handing out jobs and favours in return for votes. This is in marked contrast to the role of political parties in the older democracies, where they represented functional cleavages in society (at least, at their inception).

      Moreover, the level of corruption in other European countries’ politicians is quite high and rapidly increasing. This is as true in Germany and the UK as in France and elsewhere. MY view is that the rapidly increasing levels of corruption in northern Europe are far more shameful and worrying than the traditional corruption of Greece — even though the latter is more extensive.

  • …‘Solidarity’ Exhibit C: Squeezing deposit accounts that rich people maintain at under-capitalized banks of the bankrupt member-state to borrow short-term at near zero rates driven by massive inflows in advance of expected currency appreciation.

  • I notice that Martin Wolf seems to be coming out of his rabbit hole and embracing 1) Eurowide bank recap, 2) Eurobonds, and 3) Fiscal stimulus. Sounds familiar to your readers. Is it too late? The Germans still seem to be saying “Nein. Nein. Nein.” Sounds like 1933.

    • Sorry I missed this comment till now. I am not a full time blog reader. Actually, it is a bad analogy. I withdraw it! Is “Martin” Martin Wolf? If so, pardon the flippant tone. I very much appreciate that Martin’s work at the FT, even if I would have loved to see have seen more “Global Minotaur” than “spender of last resort” ove rthe last few years.

  • The professor is once again lying bluntly: The only conditons which Spain must accept for loans concern the banks, there won’t be “fiscal waterboarding” conditions.

    But hey, your absolutely anti-economcal and populistic opinion piece here serves its purpose: You tell your self-pitying audience exactly what they want to hear. You should have become a journalist for the yellow press, you have more talent for that. It is clear that economists cannot take you serious.

  • Ende Mai sorgte eine kurze Bemerkung von Christine Lagarde für Furore in Griechenland: Die Griechen müssten eigentlich nur ihre Steuern zahlen, sagte die Chefin des Internationalen Währungsfonds (IWF), dann wäre die Krise schon erledigt. Alle Politiker des stolzen Hellas spuckten daraufhin Gift und Galle, allen voran der als Ex-Finanzminister besonders betroffene Sozialistenchef Evangelos Venizelos. Frau Lagarde, sagte er, beleidige die Griechen.

    Jetzt erhält die IWF-Chefin jedoch Schützenhilfe von dem Griechen, der es am besten wissen muss: Nikos Lekkas, Chef der griechischen Steuerfahndungsbehörde SDOE. “Ich stimme Frau Lagarde vollkommen zu!”, sagt er im Gespräch mit “Welt Online”, so leidenschaftlich, dass das Ausrufezeichen hörbar ist.

    “Die Steuerflucht in Griechenland erreicht 12 bis 15 Prozent des Bruttosozialprodukts. Das sind 40 bis 45 Milliarden Euro im Jahr. Wenn wir davon auch nur die Hälfte eintreiben könnten, wäre Griechenlands Problem gelöst.” Das verlange natürlich politischen Willen. “Unsere Politiker haben begonnen, das zu verstehen”, sagt Lekkas.

    © IHT/laif
    Top-Steuerfahnder Nikos Lekkas
    Seit 2010 ist der Chef-Fahnder im Amt. Erst seit jenem Jahr, so sagt er, beginne man in Athen, Steuerbetrug nicht mehr als Sport zu betrachten, sondern als Verbrechen. “Die nötigen Gesetze haben wir schon seit 1996, sie wurden nur nie angewendet”, sagt er. Dabei hänge das Schicksal Griechenlands davon ab, Steuerbetrug und die Unberührbarkeit der Eliten in den Griff zu bekommen.

    Wenn die “systemische Korruption, die die ganze Gesellschaft durchdringt” nicht aufhöre, und vor allem wenn die Eliten weiterhin ungestraft blieben, während das Volk geschröpft werde, dann “wird es eine soziale Explosion geben”.

    Mai 2012 ist der erfolgreichste Monat

    Lekkas wirkt dynamisch, glaubwürdig, ein Macher. Auf seinem Schreibtisch hat er ein kleines Schild mit einem Zitat aufgestellt: “Ich will einen Spalt öffnen, in der Hoffnung, eine große Tür aufzustoßen.” Der Spruch stammt von einem Politiker aus der ersten Generation der sozialistischen Pasok-Partei, die für viele Missstände verantwortlich ist.

    Lekkas zählt auf, was die SDOE bisher erreicht hat: “2009 konnten wir geschuldete Steuern und Strafgelder in Höhe von 1,7 Milliarden ans Finanzamt melden. 2010 waren es schon 4,1 Milliarden, und für 2011 sogar 4,5 Milliarden. Für Januar bis Mai 2012 stehen wir bei 1,5 Milliarden.” Mai 2012 ist der erfolgreichste Monat seit dem Bestehen der Behörde, sagt Lekkas: 500 Millionen waren es.

    Mehr als elf Milliarden Euro seit 2009 – das klingt so lange überwältigend, bis Lekkas erzählt, wie es weitergeht. “Wir geben diese Angaben an die Steuerbehörde weiter. Was tatsächlich in die Kassen kommt, hängt davon ab, welche Bußgelder das Amt verhängt und wie es sich mit den Betroffenen einigt, und was davon eingetrieben werden kann.”

    Die Banken kooperieren nicht

    Etwa 65 Prozent der Beträge würden eingetrieben – in jenen Fällen, die zum Abschluss kommen. Das sind bislang die wenigsten. Denn die Banken kooperieren nicht – obwohl sie gerade mit Milliardenbeträgen von Athen und Brüssel gerettet werden.

    “Gegenwärtig muss ich leider sagen, dass es keine gute Kooperation mit den Banken gibt”, sagt er. “In über 5000 Fällen haben wir beantragt, die Konten von Verdächtigten einzusehen.” Nur in 214 Fällen sei das gelungen. Das ergab 650 Millionen Euro an Bußgeldern.

    Prügelei in griechischer Polit-Talkshow
    Insbesondere in 500 Fällen, die Politiker verschiedenster Herkunft und Parteizugehörigkeit betreffen, wartet die SDOE schon seit fünf Monaten auf Auskunft. Bis zu einem Jahr könne es dauern, bis die Informationen kommen, und bis dahin sei das Geld vermutlich weg.

    Normal wären Verhältnisse wie in Schweden, sagt Lekkas, wo die Behörden innerhalb einer Woche von den Banken Auskunft bekommen. “Was wir aber wirklich brauchen, sind Konten, die wir online einsehen können”, sagt er. “Wir sind nicht an Spuren interessiert. Wir wollen das Geld beschlagnahmen. Dafür muss man schnell sein.”

    Eine bewährte Methode der Behörde ist es, Immobilienbesitz mit verfügbarem Einkommen zu vergleichen. Wo beides nicht zusammenpasst, wird Konteneinsicht beantragt. Oft geben Hinweise aus der Bevölkerung den Anstoß.

    Neue Software gegen Bestechlichkeit

    Das größte Problem der griechischen Steuerfahnder waren bislang freilich sie selbst – genauer: ihre eigene Bestechlichkeit. Bisher war es ein offenes Geheimnis, dass viele Steuerfahnder Geld einsteckten, das dann dem Staat fehlt.

    Eine neue Software soll dem ein Ende bereiten. Das Programm heißt Elenxis und wird derzeit im Distrikt erprobt. “Mit diesem mobilen System können wir Inspektoren entsenden, die beispielsweise eine Firma vor Ort durchleuchten. Durch Elenxis können wir in der Zentrale jederzeit sehen, was der Inspektor macht. Bis September wird hoffentlich die ganze SDOE damit ausgestattet sein. Dann ist hoffentlich Schluss mit Bestechungsgeldern an Steuerfahnder, und schmutzigen Deals.”

    Sogar Geschäftsleute könnten das System gut finden. Nicht wenige von ihnen klagten in der Vergangenheit über regelrechte Schutzgelderpressungen durch Steuerfahnder.

    Mandatsträger sind immun

    Aber die Politiker, die Lekkas besonders wichtig sind, kann man bisher nur schwer zur Rechenschaft ziehen. “Mandatsträger, Abgeordnete etwa, sind immun. Wenn wir etwas entdecken, müssen wir den Fall ans Parlament weiterleiten. Ende der Geschichte.” Ein Politiker, so Lekkas “regte sich darüber auf, dass wir seine Konten in Schweden eingesehen hatten.”

    So denken Europäer über Europa
    Politischen Druck, um Ermittlungen gegen Politiker zu stoppen, will er aber nie bekommen haben, und bezeichnet die Ernennung des zuständigen Staatssekretärs im Finanzministerium Ioannis Diotis, ein früherer Staatsanwalt, als besten Beleg dafür, dass neue, weniger bestechliche Zeiten angebrochen sind.

    Aber echten Rückenwind wird Lekkas erst spüren, wenn er mehr Geld und Personal für seine Behörde bekommt. “Wir müssen uns vollständig computerisieren, und wir brauchen viele neue, junge Leute, für die elektronisches Arbeiten selbstverständlich ist.” Was er nicht ausspricht, schwingt dennoch mit: Junge Leute, die nicht der alten Kultur der amtlichen Bestechlichkeit entstammen.

    Zum Schluss sagt noch, dass er gerne zum Wohl des Staates arbeitet, “aber wer weiß, vielleicht werde ich diesen Job in einem Monat nicht mehr haben.” So ganz vertraut er offenkundig nicht auf den neuen Geist.

    • Don’t addle our Greek friends with facts, especially not in German language. Maybe you better ask who Nikos Lekkas is and what he said about the Greek tax evasion syndrom. And what would be achiedved by the Greeks themselve rapidly, w/o any ‘Modest Proposal’ or other scheme to get more money from elsewhere, if it could be cured.

    • @Very Inserious Sam:

      Did you read my response to SchönSchön or did you just play with your PS3?

    • In a nutshell: “Head of Greek tax authorities says that Mrs. lagarde is right”

    • German SchönSchön:

      Ask yourself why your cookie-monster politicians insist that the same corrupt political parties will get elected instead of new ones in Greece???

      Just in case you can handle more than one critical questions:

      Also ask yourself why the prevention and punishment of tax evasion hasn’t been high on the agenda of the Troika from the very beginning???
      (I guess because it didn’t fit neoliberal theory 🙂 )

      Last but not least fixing the tax evasion won’t solve the problem with the trade deficits! In order to solve the trade deficits and surpluses the Eurozone needs to implement a common economic policy so that it balances the inequalities in the trade balances!

      But of course then one must admit that Germany and its allies are also part of the bigger problem because of their mercantilistic economic policies!

    • @Aristoteles:
      You say fixing Greece’s problem with tax won’t bring the trade deficit down.
      Which believe is factually correct. But it’s a bit like saying: “drinking water doesn’t help against being hungry. So I stop drinking anything!”
      The better choice would be to do both (eating and drinking – not to dismiss both).
      Some with Greece’s economy, I’d say. In order to get the budget under control, Greece needs to urgently implement a tax collection mechanism that works. That is certainly not easy because nobody (especially in Greece, it appears) likes to pay taxes.
      Nevertheless it has to be done – or you go under. Other countries have tax collection systems that more or less work, so Greece can do it, too.
      I’d say start taxing the rich properly and collect the taxes owed energetically. This would help a lot and would lessen the need to do cruel things such as reducing pensions or welfare to a too low level.

      Fixing the tax system will not fix everything. But that is not a good excuse for not sorting it out. The whole world is watching your efforts so try a little harder. Managing to collect tax from its citizens is one of a few preconditions that need to be met in order to sort Greece out.

      The trade balance will not immediately be massively affected. But a bit it will be: collecting tax and channeling these resources away from private consumption into the state will reduce individual consumers’ hunger for imported goods, reducing imports.
      Don’t worry too much about the trade balance now. It will gradually become healthier as Greece’s private consumption goes down. Also, one of Greece’s strengths is tourism. If Greece manages to grow that part of the economy as Greece becomes more competitive versus e.g. Turkey, a significant part of your negative trade balance due to importing foreign goods can be balanced by the cash coming in through foreign tourists.

      One step at a time – starting to collect taxes would show your creditors that there is some hope you finally start to sort the mess out – and it’s one of the issues that need fixing in any case.

    • “One step at a time – starting to collect taxes would show your creditors that there is some hope you finally start to sort the mess out – and it’s one of the issues that need fixing in any case.”


      I don’t have a problem with collecting taxes and punishing tax evaders and no decent Greek is against such a measure BUT

      as I mentioned in another response to you already here:

      The mess for Greece has started already in the 90’s when our useless/brainless politicians started preparing for the EMU as Greece was part of the ERM 2. That led to an increase of trade deficits and current account deficits already at that time. Economics 101 tell us that if you have continuing trade and subsequently current account deficits you need to borrow foreign exchange! And so it happened and was even becoming worst after Greece joined the EMU!

      Second problem for Greece now after M1 and M2 is the unsustainable debt to gdp ratio!
      Without fixing this all the rest is just drops in the ocean!!!
      If the EU wants to save Greece and not just their own banks than they need to do a second haircut which will lead to a sustainable debt to gdp ratio!
      If the EU doesn’t do this than they are just trying to to take us for a fool!

      Last but not least why isn’t anybody in Germany mentioning how much Greece is spending for defence purposes???

      Are you and all your other misinformed compatriots aware that Greece is spending probably around 8 percent of GDP per year on defence!

      Why is that? Because Greece has a big fat “friend” just around its corner. This friend is not just challenging Greek sovereignty with hostile flights over Greek teritory but they even threat that they will inflict war upon Greece if we extend our sea borders!!!

      Now having said that you would think that’s already more than enough friendliness but they even channel many illegal immigrants towards the Greek boarders and produce even more trouble for the Greek state.

      The solution could be very simple to solve the last problem: More solidarity from the other EU states and a common EU defence force for its external boarders!

      Is the EU and the other nations prepared to do that? NO!

      So for me I don’t see any reason for Greece to stay in this Eurozone and in this EU alltogether! This is not a Union this is a club of sharks or as you so rightly say a Union of creditors and not of partners or friends!

    • @Martin I will have my say here about greeks and taxes.

      1) Greece was under occupation for 400 years. Part of it came out 190 years ago . The last region to be freed, Crete, was freed about 100 years ago.

      2)As regions of Greece were continually under rebellion, it was considered a patriotic duty to evade tax as much as possible, by hiding produce and goods.

      3) The system of “oiling” , i.e. paying something to the tax collector so that he turned a blind eye was going strong, and successfully, particularly if the tax gatherer were greek.

      The government was our enemy.

      This mentality, though watered down due to long years of independence in certain regions, has not been educated out of the national character. It served us well in WWII when the farmers knew how to hide their produce from the occupiers. It was only the cities that starved. That unfortunately was a positive reinforcement of the habit and it is only 70 years ago.

      What do you do when a doctor you know for thirty years and consider a friend, does not give you a receipt?

      There should be a psychologically correctly planned system of educating the new generation on how we depend on each other and paying taxes is something we owe ourselves.

      In short term the VAT should be abolished and replaced by a different tax system for Greece. When somebody tells you : this will cost you 650 euro without receipt and 850 euro with a receipt, the temptation is great, there is an incentive not to ask for a receipt. Even for small amounts; and this is getting worse with the crisis.

      That is my two lepta.

    • Martin

      First we kick the liars out.

      First democracy.

      We do something. Do not believe the media.

      Time for EVERYBODY to WAKE UP.

    • anna v

      You nailed it. In my book this is the biggest problem of the Greek society.
      The human nature in Greece ,was molded to act too individually and the people didn’t get how interconnected we all are. This goes for voting the same parties again and again too.

      It is ofcourse true for the rest of the countries as well ,as today we see the shallow reactions without any effort whatsoever to understand the deepest reasons and interconnections.

      Let’s just say ,that a magical solutions appears for today’s problems. If education doesn’t start to support human development and economy evolves ,everything will be repeated ,some other time ,some other place.

    • What is this?

      Don’t you know that the only reliable measurement of a country’s GDP is the one in constant prices? In other words only the REAL GDP counts and not the nominal GDP?

      Don’t you understand that you can not compare countries with different inflation rates?

      This is the very crap that the Turks do trying to promote their wretched economy amid inflation rates similar to the Republic of Congo. Turkey’s GDP is hardly above $5000 per capita and they are trying to use inflation GDP numbers showing it like Romania’s figure you show and then ask why they are not in the EU.

      Don’t you get it? You can’t compare apples and oranges. You can’t compare countries with vastly different rates of inflation. Get your per capita GDP on constant prices from a serious site:

      The Romania per capita GDP you claim is not even close to $2600 in real GDP(in other words 6 times lower than what you claim it to be):

      Enough of punctuated ignorance. Talking to Germans everyday here is enough to destroy half of one’s brain cells and now we have to deal with your wikipedia revelations?

      And what is really the purpose of such? to show what?

    • Sorry but not even Real Gdp is usefull to show how rich or poor a population is…if theres an economy comprised by 2 people.One produces 1 bil…the other one nothing…..Gdp per capita is half a bil…go figure…..

    • Ok Robert, here we go. Your list, but according to Dean Plassara’s points.

      GDP per capita adjusted:
      Germany $25,329
      Spain $15,458
      Greece $13,574
      Poland $6,575
      Romania $2,636

      If I’ve understood Dean’s points correctly, Robert your original list based on PPP accounts for the relative effective DOMESTIC purchasing power of the average producer or consumer within an economy. Whereas Dean’s point on GDP per capita (currency adjusted) is to compare INTERNATIONAL purchasing power and relative economic strength instead.

      Which does raise the question. What is the point you’re trying to make?

      Thanks to Dean Plassaras for the links.

    • JM:

      You got it! It also shows how Germany(a traditionally low inflation country) is way ahead of everybody else in Europe.

      Which ought to ease some of the German complaint that actually all other Europeans have similar per capita wealth as Germany without actually working.

      Your numbers prove how much Germany is ahead of the pack, so Germany might show a bit more restrain at criticizing others because such criticism is not founded based on real numbers. Inflation driven GDP numbers erroneously show all EU countries clustered together, which is not the case at all.

    • The ppp adjustment is rather better than crude GDP per capita, but is still a poor indicator. First of all, it gives no information about income distribution — and we do need to know something about that. The Gini coefficient would do. Greece has high inequality in comparison with western Europe.

      Secondly, the Greek GDP figures are now artificially inflated (since a decision by that crooked finance minister of ND) by 15%, supposedly to allow for the black economy. This was one of the statistical tricks of ND to pretend to be within the euro debt criteria, and also knocked Greece out of eligibility for some EU funding. You might think it reasonable to try to estimate black or grey economic activity; the problem is that they don;t estimate anything at all (unlike the Italians who have a methodology) and no other country than Italy does inflate its GDP this way.

      Thirdly, GDP does not measure ownership of wealth or capital, This matters in the sense of having available capital for investment. The free movement of capital idea is seriously flawed, since investment requires knowledge of local conditions and language: native capital is preferable, and Greece has very little of it, even if some Greeks possess large amounts in Swiss and German banks.

  • There is an almost ancient joke in Greece that says:

    Just when I learned my donkey how to live without eating ,it died.

  • Yanis

    It is all too evident that they only want power and nothing else.
    But their greed is blinding them and although i may sound evil ,
    i will gladly wait for the boomerang effect ,which is reaching completion.

    These people have no honour ,no pride ,no principles ,they have nothing.
    Except the sick audacity to pass the blame for their own crimes elsewhere.

  • There was never any solidarity, except a solidarity of unbelievable lies fabricated for cheap propaganda purposes spewed by Berlin on a daily basis and repeated by all the well known suspects (aka countries which during WWII were on the opposite side of the Allied victorious side).

    • Yes, it is remarkable how Europe is becoming divided along similar lines to those preceding WW II. Let’s hope that France will escape occupation this time; it seems that Holland has already been occupied for some time by the neoliberal Germanic breed.

    • Xenos:

      I am surprised that you even consider Holland as friendly territory during WWII.

      Holland had been infested with German agents running counter intelligence operations against your equivalent MI6 today. The British intelligence section known as section N of SOE committed some of SOE’s worst blunders in security, which allowed the Germans to capture many agents and much sabotage material, in what the Germans called the “Englandspiel”. SOE apparently ignored the absence of security checks in radio transmissions, and other warnings from their chief cryptographer, Leo Marks, that the Germans were running the supposed resistance networks.

      At least 50 British agents were captured and lost in the supposedly “friendly” Holland. Holland has always been a willing Nazi collaborator, a fact quickly affirmed today every time the pork-faced Dutch Minister of Finance opens his mouth.

    • “There was never any solidarity, except a solidarity of unbelievable lies fabricated for cheap propaganda purposes spewed by Berlin on a daily basis”

      Correct. And on top of that it was specifically outlawed by the Maastricht treaty!

  • Unfortunately, Europe’s constituents have seized to see a Europe. There are lots of people who sill feel European, but most are feeling German, Dutch, Finnish, French, etc. Not European. And the more the money a country has, the less Europe-inclined it tends to be. Logical in a way, why share with others what I see as mine? Of course it might be so that my poor neighbour’s demise will ultimately lead to my demise, but that’s for the next generation. It’s actually come to a point where half of europe despises the other half. I really wonder if it’s feasible holding this thing together. My feeling is it will all fall apart, not because it cannot be saved, but because people lack the energy and will to stay together. It’s really like those gangster movies, where the criminals try to knock each other off to get a bigger peace of the loot. The two wars are not something newer generations really know anything about, they cannot appreciate what has been accomplished within the EU. This is being exploited by some “elites” who wish to see EU disinegrate, and with the, mayby unknowing, help of some politicians they’re driving Europe to the ground. I hope it won’t end like this. I fear it will.

    • Dear G.M.
      It could all go wrong – and the mood is definitely less friendly than five years ago.

      But sooner or later, a crisis had to happen. Nations or unions of nations (like the EU) have to be able to through a crisis, otherwise they’ve just not passed the test and will disappear. And in a way it is good that way.

      I still believe that the EU will hold together and even the Eurozone (though, maybe, without Greece).

      But the kind of EU we have seen since Maastricht ultimately is not what the peoples within the EU want:

      The south only wanted it because it was subjected to a flood of money from the north (EU subsidies, cheap loans, investments from northern EU companies). They would have been foolish not to want this.

      The north was not so sure but as long as the south seemed to be genuinely catching up, it made some sort of economic sense in that the richer the southern countries get, the more northern products they would buy, etc. Plus, it seemed the right thing to do – as long as Spain, Portugal and Greece were drastically poorer than, say, Germany, one Euro spent there had more effect than spending it on, say, repairing German motorways even more frequently when they were actually still just fine.

      Oversimplyfying a bit, but you get the picture.

      Up to 2007, this model seemed to work well: The south cought up. Greece and Spain for example were drastically less poor compared to e.g. Germany in 2007 than they were in 1990.
      Almost to an extent that Germany felt exploited still transferring funds when Spain and Greece (to keep with these two as examples) were not much behind anymore at all, with a nicer lifestyle.

      This has now proven to have been an illusion of wealth: The livings standard in e.g. Spain (and most extremely Greece) had been inflated way beyond the actual economic base, due to the various money inflows that had been received by the North.

      The North has become less willing to infinitely carry on with this. For one, it just doesn’t make sense to support your southern neighbour forever, when he’s reached a wealth level very close to your own.

      Sencondly, the North feels less rich. Germany had it’s own “Greece” in the form of the former communist, economically extremely run-down Eastern Germany that it was supporting to get on a level similar to what Western Germany had.
      This pushed Germany deeper into debt. Furthermore, demographics don’t look good – Germany has been shrinking over the last few years. Not massively so, but still. Not a situation where you want to throw around with money.
      Plus from around 2001 to 2006, Germany was undergoing its own austerity phase, when everyone else was having a party, fuelled partly by German transfer funds and partly through financial crazyness such as real-estate bubbles and domestic debt.

      All of this has made the case for transfer from the North to the South less convincing.
      When the financial crisis struck in 2008/2009, Germany was among the most hit.

      Now, Germany is holding up remarkably well – but still it feels shaky from within. At the same time, people in Germany are asking themselves what kind of European Union they want. Of course we want to be friends with our neighbours. Of course we want to help when these neighbours are in deep trouble.
      But there is a limit. We don’t want to follow you on your path to self-destruction. That’s too much solidarity to ask for.

      So when e.g. Greece has such drastically different ideas about how you finance your government, how you implement austerity in times of a national crisis, this is fine and your choice. But it cannot mean that we have to pay for the results.

      Not because we are evil and want to see you suffer. But because ultimately, everybody is in charge of his/her own life. If you insist to crash into a wall, all we can do is warn you that it will hurt. And help you after you’ve suffered your injuries – but only if you are not using our help to get another car and crash it again!
      We are not that strong either. As pointed out above, Germany is (gently) shrinking and the demographics look bad.
      We have competitors such as China that are already a threat and will be even more so in the future.
      We need to keep our strenght together and not waste it on some people we don’t have a common understanding with about the basic of prudent economic management and some decency in politics and keeping to agreed rules.

      If you continue to behave like you did (irresponsible and finger-pointing when the outcome is bad), then you will still get emergency aid, but not much more.

      A full union of nations, such as was the idea in Maastricht to happen at some point in the mid- to long-term future, would be absolutely foolish.

      What can still work though is the UK idea of the EU: A common market where the participants allow money, people and trade to flow freely. This can also be supplemented by as much common politics in other fields as everybody in the EU can agree on (maybe foreign policy, etc).
      There is some common interest in the EU to keep it together. Germany or France alone, for example, will find it very difficult competing with the US and, say, China. But if we – and as much others as possible find some sort of common understanding, we can defend our common interests better than everybody on his / her own against these giants we are competing with.

      But we can’t be blackmailed into infinitely supporting an economic model that does not work (such as in Greece) and, if the funds we transfer are seen as inadequate or the conditions attached as too harsh insulted and hated. Ultimately, you have no right to behave like this – and you probably know it and are aware this is coming to an end which is why everybody is so angry with Germany.

    • @Martin:

      Very simple Martin if Greece leaves the Eurozone than you will see all this paper-union fall apart and Germany will end up with a lot of worthless paper in its hands!!!

      Germany has planted the wind and will harvest the whirlwind.

      Within a just few years the CCCP broke up and the same will happen to this German dominated EU!

      Enjoy the EU’s last few months with a nice glass of wine from the P.I.G.S. 🙂

    • Martin

      Martin noone had a party in Greece except those that made the deals with German and French multinationals.

      We were far worst in the euro.
      And we the people certainly didn’t ask for your money.

      Cut the hypocritical kindness.
      Cut the crap.

      Also get it in your head that we live in a debt – based system that ,although some try to delay its endgame ,will collapse.

      And we are the primary shock absorbers so that the crisis hits you smoother. Because you are made from sugar obviously.

    • Actually, the North (especially Germany) saw the South as a market for its products, not as partners. And don’t even get me started on the way Germans see Southern Europeans – I don’t want to start reminding our German friends of what the German media were spewing when Fiat SpA was bidding to acquire Opel (while Steinmeier – after having received serious kickbacks from Putin-backed Russian oligarch Oleg Vladimirovich Deripaska – wanted Deripaska’s Magna to get the brand). Don’t even get me started on the European North’s (and especially Germany’s) delusion that they are some sort of a “master race” that is genetically superior to the Southern “subhumans”. With the benefit of hindsight, it’s Germany that should have been the recipient of “Little Boy” and “Fat Boy” back then, not Japan.

    • @Heretic:

      No my friend, the Germans don’t deserve a Fat Boy or Little Boy!!!

      At the end of the day this time the Germans fight just an economic war and not a physical war!

      So they deserve a monetary Fat Boy so to speak!

      Here is a powerfull economic nuclear bomb for this damned Euro scam system:

    • @ Martin
      I appreciate your posts, mostly they contain moderate and logical analysis and some fair and valid points. Allow me if you will to address several points that I think you get wrong and add some relevant points of my own.

      You seem to be under the impression probably from comments on this blog and elsewhere that most people in Greece blame Germany for the horrible economic condition of the country. We do not. We blame our horribly inadequate politicians and the economic elite of this country. They are the ones that drove it into the ground. Mrs Merkel got that one right when she pointed it out the other day.

      We blame correctly if I may add the European powers responsible for several aspects of the policies forced upon our country. Most people in Greece agree with balancing the government budget ASAP. Most people agree in trimming down the public sector. Most people agree with selling public assets and using the funds to promote growth. Most people agree with most market reforms. What people had a seriously hard time accepting (if at all) was the labor reform and especially the abolishment of collective bargaining and cutting wages in the private sector up to 30% even if wage cuts at some reasonable level were necessary. And of course people hated being taxed to death at the same time. You see it was the internal devaluation aspect of the program that people had the most trouble accepting and correctly in my point of view. It simply did not make sense to them. Sure it could work in booming times as it worked for Germany when it was implemented there during the times that you mention but it is absolutely deadly when it is implemented in times of severe recession like the times we live in. People did not understand this aspect of the program and could not accept it. All the powers that be that insisted on it and forced it are naturally blamed by the people who suffer by it. People also considered the severity of the program as punishment and some as “fiscal waterboarding” as Yannis calls it. I consider myself among the second group. In an interview with Bloomberg I think mr Papandreou basically validated this thought by saying that Mrs Merkel had mentioned to him that the program must be so hard that basically nobody else would ever want to follow Greece’s path. One can feel justified for blaming Germany after that.

      People also feel angry with the constant rhetoric about “saving” or “helping” Greece. Very little percentage of the bailout package went towards easing the path towards balancing the budget. About 80% of it went towards basically bailing out all the banks that had purchased Greek bonds in the past. We did not read anything about that in the international press. Sure, Greece would have to balance the budget on the spot had the country defaulted in 2010 on its foreign creditors. I do not think that this was the best solution. I think that Greece should have negotiated with them right away and restructured its debt towards a viable level while implementing a fiscal adjustment program towards a balanced budget. Greece was never given the chance. Institutional banks threw their weight around and forced a course for Greece that would ensure they would limit their exposure as much as possible within the time limit they had until Greece inevitably defaulted. This aspect that I have read very little about in foreign press (except a piece by Bloomberg recently) is very far from being called “Saving Greece”.

      Finally you are absolutely right when you say that no country should ever feel like it is being blackmailed by another. Germany or any other country should never feel like it is being blackmailed into supporting the economic model of another country. Especially if said economic model is unsustainable. I would like again to point out that this is not what most people in Greece want. Most people feel like they made a tremendous effort, they have suffered enormously, that they have reached a fairly good point in the process towards balancing the budget and simply want to see the light at the end of the tunnel. They do not want a handout. They are saying “Enough, no more”. They are asking when does this stop? Personally being able to evaluate several macroeconomic numbers I felt that the goals set in the new program after the PSI deal weren’t offering any relief. Far from it, they were so out of touch with reality that I thought it was a joke. Mind you the IMF thought of that as well since in its report after the PSI has effectively written that it would take a miracle for the program to work. So now we are at this deadlock. People are exhausted and can take no more and somehow this is interpreted abroad as blackmail and forcing others to pay for an unsustainable economic model. This is very far from the truth and makes me suspicious of a blame game in order to sell politically a possible Greek exit from the eurozone and continue the “waterboarding” process this time as a warning towards other nations.

      You are also right when you say that the last years have poisoned the process of European unification. This is my main concern. I do not know what a sort of EU we are heading into, I do not like the shape of things to come. I see too many national name calling and fighting. A lot of blame going around, propaganda and lies. This can easily turn into dislike and hate. Hope I am wrong but your comment about people from the South cannot help but wanting the EU of transfer payments make me fear that I am right. No union can possibly stand in place if several members feel that they are being cheated for supporting others. A perfect union where no transfer payments are needed is a thing of theory alone so I do not have high hopes for EU as it stands. You see I too have supported some of my fellow citizens in Greece my whole life. Greece like any other country has surplus regions and deficit regions. My taxes have supported transfer payments of some kind (say the building of a university, unemployment benefits or infrastructure investment – all in deficit regions) since the day I was born. I do not feel cheated though for that fact, this is what it means to live practically in any country in the world. Surplus regions support deficit regions in some way. If we feel cheated in the EU because of this simple economic truth then I think some people should reconsider things very, very fast.

    • @Tasos: I appreciate your comment.

      @the gentleman who commented before Tasos: I think you are confused (at best) or pretty evil. So you regret Germany did not become subject to nuclear bombing? How disappointing that must be for a friendly, peace-loving guy like you! And this whole race nonsense that you keep bringing up. Disgusting and without too much foundation in the German reality. Greeks have not traditionally been seen as culturally so different that they were a liability when living in Germany. They tend to be successful and I am not aware of any significant percentage in the German population that would see that differently.
      And “race” is completely out of the picture in German-Greek relations. Or are you still living in 1945?
      There are enough problems in 2012 – focus on them and don’t get confused mixing the past with aspects of today that you don’t like and then claiming it’s an actual reality.

    • Aristoteles

      It is a very good proposal.
      Really if anyone conducts even a basic research will find more than a dozen proposals with many different kicks that can be implemented.


      The proposal is not about a silver standard.
      It is about a free floating silver coin/drachma based on weight and in parallel circulation with the euro or paper drachma.

    • @Demetri:

      The initial problems of a new Drachma are going to be:

      – Speculation against it and too high devaluations!!!
      – Lack of confidence in the new currency and subsequent bank runs!!!

      A new Greek Drachma or Solidus/Nomisma will need to allow for healthy devaluation (around 30 percent initially) and at the same time build trust in its stability!

      Ie a new currency will need to be pegged to something else!

      Silver is an alternative which expresses at the same time a deep distrust in a paper Euro!

    • Btw on a side note, the greatest scandal in Greece in the last decade was financed by Siemens. Just a coincidence ?

    • Btw on a side note, the greatest scandal in Greece in the last decade was financed by Siemens.

      Who took the bribes from the corporation?

      Answer: The Greek government.

      I wonder if there is a statute of limitations in Greek Law for accepting bribes.

      Btw, that VIcki Stamati is a quite an attractive woman. What could she have possibly seen in that old manTsohatzopoulos who is 35 years older than her? Money? Siemens money, to be precise.

    • @lastgreek

      Yes it was the Greek gvt.If we want to be precise,it was people who through the government were able to participate in such a deal.I (as an avg citizen) dont have to do anything with it and i didnt profit from it either,let alone steal German money.As a matter of fact if there is one out of the two economies (German and Greek) that profied from the deal that must be the German.Be it through job creation or through corporate income taxation.At worst none of the 2 economies profited from it.

      But Germany has all the info about the deal,Christoforakos talked to the German DA, didnt he?And not only that but now he is hiding in Germany too!If Germany (and im talking about the government,im not like them to blame the people) cared so much about corruption,they should at least demand the case to be examined,with the same pressure they demanded all the hardship that has been imposed to the avg people in Greece.

    • Big differemce. One country one demos. As you know there is no European demos. Vaclav Klaus even said that in the European Parliament:

    • The principles that allow an economy to function have nothing to do with demos,solidarity or whatever.Capital flows dont give a fuck if Greece and Germany are considered a “demos” or not.Either you like it or not,all regions that function under the same currency become part of the same economy (i repeat either you like it or not.I wasnt pro-Euro either).
      I know you dont like it,in fact i know you hate it.
      i just happen to believe that at this point,abandoning the euro is disastrous.Im expressing my opinion based on the FACTS of how an economy works.Not based on whether i like Germans or French.You dont…thats the BIG DIFFERENCE.

    • The more we wait to abandon the Euro the more disastrous it will be.

      You cannot have transfers to a huge extent between sovereign countries. This will lead to hate and eventually war. This is the difference between transfers in one country (e.g. USA, but no bailouts there).

    • n eu d

      Wrong. It is a bailout in the US. A bailout of the financial system in general. A HUGE one. A HUMONGOUS ,GIGANTIC ,MONSTROUS BAILOUT. A BAILOUT OUT OF CONTROL.

    • The only reason it will lead to hate is if politicians dont tell the truth, which is the case now.Has any politcian in Germany ever told you that it was the transfers (through loans) that allowed the south to expand its imports and equally allow Germany to expand its exports?

      Its all good really if they want to stop the transfers.But they should again tell the truth about what will happen to your own economy when they stop.You seem to not really care now because China has managed to partly absorb the loss of your european exports,but China definitely wont be able to absorb all the loses that will definitely come.China itself is slowing down…

      But i guess they will once again blame Greece, for everything, right ?

  • Dear Yanni,
    Unfortunately, we live in an age in which European politics is divisive instead of unifying.
    thank you once again for your insights

  • Some say there is a way to use the EFSF to recapitalize spanish banks with “light” conditions attached. See this (from the FT Brussels Blog):

    In talking to senior officials about plans for a Spanish bailout for our story in today’s dead tree edition of the FT, several steered us to the seemingly overlooked bank recaptialisation guidelines for the eurozone’s €440bn rescue fund that were adopted last year.

    Those six pages, available for all to see on the website of the rescue fund, the European Financial Stability Facility, make clear European leaders were contemplating exactly the situation Spain now finds itself in: having done the hard work on fiscal reform, but suffering from a teetering banking sector that needs to be recapitalised.

    The important thing to note in the current context is that the EFSF guidelines, adopted after more than a year of fighting over whether the fund should be used for bank rescues at all, allow for a very thin layer of conditionality for bailout assistance if the aid goes to financial institutions – notably, it foresees no need for a full-scale “troika” mission of monitors poking around in national budget plans. That’s something the government of Mariano Rajoy has been demanding for weeks.

    The EFSF guidelines are pretty explicit in this regard. The “recapitalisation tool” was set up, the document says, so that a country can quickly get bank aid without a complete “macroeconomic adjustment programme” – euro-speak for the kinds of intrusive overhauls now underway in Ireland, Portugal and Greece:

    The objective of the new instrument is to provide financing to Member States in order to specifically support financial institutions against appropriate conditionality, i.e. not necessarily in the context of a macroeconomic adjustment programme but under another more focused form of conditionality.

    Elsewhere in the guidelines, they are even more specific:

    [T]he request for and control of this instrument needs to be “lighter” than in the case of a regular programme in order to increase the speed of funding as well as to reflect the sectorial nature of the loan.

    What conditions would be applied instead of quarterly visits from “troika” monitors? The guidelines merely talk about abiding by EU laws governing state aid for financial institutions and giving regulators more authority over how to wind up failing banks.

    There is also some general discussion about “additional conditionality” that could be applied on “financial supervision, corporate governance and domestic laws relating to restructuring/resolution” – which is the area EU officials appear to be headed. They want to see a speeding up of what Spain is already doing to restructure the sector and finally rid it of the political cronyism that once dominated the cajas, the regional savings banks that are at the core of the crisis, having loaded up on mortgage debt at the height of the Spanish housing bubble.

    Here, the European Commission and other EU regulatory bodies are given a bit of leeway to poke around into Spain’s banks:

    These [EU] institutions must be granted the right to conduct on-site inspections in any beneficiary financial institutions in order to monitor compliance with the conditions. They have to be authorised to involve other relevant experts, such as external auditors or monitoring trustees.

    The big question that is now being debated is whether Spain qualifies for such a narrow programme. Here, the guidelines are equally clear:

    [A] beneficiary country will have to demonstrate that it has a sound fiscal policy record, such as the respect for its [EU] commitments, and sufficient capacity to reimburse the [bailout] loan even in cases where such a beneficiary country would not be able to recover the capital injected according to the timing agreed in the state-aid decision.

    This is why Rajoy’s recent austerity programme to get Spain to the EU-mandated deficit target of 3 per cent of economic output by next year is so important. Several officials said it demonstrates his government is living up to its EU commitments – so much so that the European Commission is actually urging Rajoy to slow down a bit with its austerity plans.

    As a result of Rajoy’s good record on the fiscal front, there is a growing consensus among eurozone countries – particularly France and Italy, but also in recent days Germany – that Spain does indeed fit the criteria for EFSF bank bailout aid.

    Berlin’s seeming acquiescence was made pretty explicit yesterday by Chancellor Angela Merkel’s spokesman, who when asked about what conditions might be applied to Spain said: “These conditions would be specifically tailored for the banks which are to receive help. They could also possibly apply to the whole banking sector for that country.” The sentence could have been read verbatim from the EFSF guidelines.

    The mechanics and size of such assistance are still being worked out, but one thing is clear: despite the urging of the new French government and the European Commission, the EFSF will not be allowed to inject the money directly into the Spanish banks. Germany has opposed this, and the guidelines make clear that the aid must go through a national government so that national authorities – and not bank executives – are held accountable for repaying the loan:

    The initiative to request support shall come from the government, which will indicate the financial institution(s) in distress, which eventually will receive the loan. This loan will be channelled through the national authorities, which ultimately bear the liability of the loan.

    EU officials are currently working on how, exactly, that would work. One idea being evaluated right now is having the EFSF inject its triple-A rated bonds directly into Spain’s existing bank bailout fund, known by its Spanish acronym Frob. Because the Frob is a sovereign entity, some officials believe it would be adequate to loan the money directly to the fund, a strong signal that the aid is about Spanish banks and not the Spanish sovereign, which they are desperate to keep in the sovereign debt market.

    But one senior official involved in the discussions said there are doubts this would be legal: “In a sense, the sovereign would function as a transfer account and political guarantor, while the Frob would do the concrete job.”

    Officials said the rescue isn’t likely to happen until the International Monetary Fund and the outside advisors already hired by Spain give the banks a final once over to decide, once and for all, how much new capital they need – not unlike Irish banks, which at long last did the same last year. That process is unlikely to be completed for a couple weeks, but probably before the end of the month.

  • This is precisely what we have been saying about Greece over the last 2 years; so let’s reveal Germany’s errors again in the rapidly unfolding Spanish case.

    1. Spain’s public debt will shoot higher.

    2. Germany has not blinked at all. It has refused to mutualise EU bank debt. Nothing has changed. We are not one inch closer to eurobonds or debt pooling or any form of fiscal union.

    3. All Germany has agreed to do is treat this as a precautionary credit line for Spain with less draconian strings attached than for Greece, Ireland, and Portugal, but how could this be otherwise? Spain is not the sort of country you can push around lightly. (but in Greece’s case Frau Satan could do as she pleases).

    4. Any bail-out has to be overwhelming once started. That of course creates its own huge problems. Eric Dor from IESEG School of Management in Lille says that Italy’s share of the EFSF guarantees will rise from 19pc to 22pc once Spain steps out (since it does not fund its own rescue), and Germany’s share will rise from 29pc to 33pc.

    5. The credibility of the guarantees given to EFSF bonds would collapse.

    6. As for Spain, the country has been more sinned against than sinner in the last eighteen months of this crisis, and perhaps before. It was pushed over a cliff by completely unjustifiable ECB tightening last year, and by the EU’s contractionary mix for the whole region. Spain did not violate the Maastricth Treaty. It never conformed to the bogus Merkel-Schauble morality tale of fiscal excess. It had a primary budget surplus of 3pc of GDP in 2007.(The UK had a 3pc deficit. The UK was the real sinner, but that is another story)

    7. Spain was the victim of negative real interest rates in the middle of the last decade (minus 2pc for year after year) when the ECB committed its opposite error of loose money. It was flooded with cheap capital from northern Europe that was hard to control. The whole eurozone was complicit in this. So were the EU authorities at every level, and so were French, German, British, and Dutch banks. So were the Asian central banks and wealth funds mopping up Club Med debt during the bubble.

    8. This was a global debacle. Yet the reality is that Spain is being left to fend to for itself. (That’s real EU solidarity for you).

    Now, let me ask you this simple question: Especially you, the German audience which is so quick to pull out the race card when accused of sheer stupidity. How else would you describe your responses to this crisis? Why would you ensure that the eventual costs to Germany be astronomical and then some? Is this another condition or some sort of Deutche-morony so pervasive in your neck of the woods that has become a natural part of your daily habitat? What planet are you people from?

  • What about the bigger picture? What about the recent Merkel mumbles about a ‘political union’ and multi speed Europe? Is this attainable at this stage, is it feasible and is it sustainable? I believe that the process of transforming the problem of a currency union with no political union to support it into a problem of political union with neither a coherent nation state or democracy to support is is already under way. What are the prospects?

    1. Europe is transformed ‘forcibly’ into a Pax Germanica with the periphery in a permanent state of depression requiring transfer payments and/or ‘violent’ repression in eternity.

    2. As above, but some of the periphery is let loose in the process

    3. None of the above, everybody packs it up and goes home.

    Any other options?

  • Getting to the unavoidable end as fast one can envision, YAProposal

    Measure 1

    Reform the Eurosystem so that it comes

    1. A multi-currency system of national sovereign currencies with

    2. The Euro becoming a frozen value reference currency for inter-national debt settlements and savings conversions.

    Measure 2

    Keep the ECB as the steward of the Eurosystem and its operation as a European bank of settlements.

    Measure 3

    Keep the EU institutions and steer them to drive the EU as a Community centred on the four main common interests:

    – the common market

    – security (self-sufficiency)

    – energetic self-sufficiency

    – cooperation in research and development

    • “Measure 1

      Reform the Eurosystem so that it comes

      1. A multi-currency system of national sovereign currencies with

      2. The Euro becoming a frozen value reference currency for inter-national debt settlements and savings conversions.”

      Care to elaborate?
      1 is pretty straightforward and clear, but what about # 2? If the Euro becomes a frozen value reference currency this means that for example the new Drachma exchange rate with the euro will be locked.At the same time all rest-of-the-world currencies will be locked against the euro and thus the drachma will also be locked against them.So if im not misunderstanding, you are proposing fixed exchange rates between the rest of the world and the eurozone members?And what is this supposed to solve?Fixed exchange rates is what brought us here in the 1st place…

    • If I understood well he didn’t say anything about fixed exchange rate.

      This way Euro may become something like those old currencies which are used as reference in transactions. Was it the old Southafrican?

    • @Αιρετικος

      Exactly thats what the ECU was.Not a real currency but all EU currencies were semi pegged to it.But this might not be what he is saying.


      Im probably missing something.But . “The Euro becoming a frozen value reference currency for inter-national debt settlements and savings conversions.” is not very clear to me.Maybe he is talking about settlements of existing debts only.
      But i wonder why not just redenominate the debt in the new currencies.After all the euro will be gone.Similarly when we entered the euro,all drachma denominated debt was redenominated in euro.

  • Professor, why don’t You write a (not so scientific) article on Valve and the virtual economies you are working on? Where can we find more info on that subject? I heard this during your interview on RealFM yesterday.

  • The Finnish government did the right thing to demand colatoral. They were elected to serve the interest of the Fins, not any other country, banks or institutions.

    No wonder Fins rank very good in corruption indeces.

    • Dimitry before the AOZ/EEZ comes the war with our “friendly” neighbours.

      Did Tsipras forget the Turkish Casus Belli which they posed?

      If you say AOZ you need to be prepared for war first!

    • To Dean and Dimitris.
      AOZ is surely the way to go. The problem is that it’s a necessary and important move in a chess game which will take years to actually produce wealth. I am saying that because this wealth must check several stages like research, estimates, investigation drilling, real world samples of the wealth, infrastructure, provide global market. At each stage, this wealth is going to be re-assessed at a higher price assuming that there is such wealth. At final stage, where we are going to sell energy and make profits.
      Each step takes time and serious effort. The profits of the final stage that we all wish for, is going to take long. What i am saying is that AOZ is not a solution to our problems in the immediate future. But if we want this future we must act now.

      The timing to declare AOZ is definitely now and it’s crucial. Don’t get me wrong.

    • Nonsense Aristotle.

      Declaring the EEZ is nothing more than a legal framework.

      What war and the Anatolian nonsense you are talking about?

    • Ilia:

      You are right. The benefits of the AOZ will be mainly felt by the next generation. But it’s the only way out. Because like with any cash flow proposition there is nothing preventing you from calculating an imputed Net Present Value and then monetizing it.That’s how every business works.

      The Net Present Value (NPV) of future benefits is immediate.

      All we have to do is: Step 1. Declare it (Thespisis) and Step 2. Delineate it (oriothetisis). The Declaration is immediate. The delineation will take a few years but this has not stopped neither Cyprus nor Israel.

    • Aristoteles

      Indeed they have threatened. This i nothing new. We must do it anyway. We can’t accept to be attacked from all sides ,just for some to have parties and then blame us too. Enough is enough.


      Yes ,it will take time. We have to begin as soon as possible.
      There are already some researches ,and old ones from the US.

    • @Demetri et al:

      I am not at all against AOZ/EEZ!

      What I want is that we are all prepared for what will happen undoubtedly after we declare the AOZ!

  • What if the minds behind the MoU all that they want is to buy cheap a whole country?

    They give some money as loans and get back the whole country in return. Not a bad deal for them!!

  • Interesting point professor but I think that you are taking your “fiscal waterboarding” metaphor too far in the case of Spain. This metaphor works perfectly well in the cases of Greece-Ireland and Portugal and especially Greece but it cannot possibly fit the case of Spain. Quite simply Europe cannot impose upon Spain or Italy a fiscal adjustment program like the one imposed upon the already fallen member states. Spain’s problems are on a completely different scale. The problem in Spain is simply too big to handle with the conventional methods exhibited until now by EU. Everybody knew what went wrong with Spain and its enormous toxic banking sector with its gigantic house loans, made even worse by a rate of unemployment up to 23-24%. Everybody knew and simple kept on pretending that everything was “manageable” over there hoping for a miracle while the spotlight in Europe was on Greece with its ridiculous political problems.

    Well this is the wake-up call. Europe cannot pretend any longer. This is the hour of judgment. Either the EU takes the necessary steps or it is breakup time. Either everyone realizes that budget problems like the ones plaguing Greece (but are manageable, Greece is 18 millions shy of a primary surplus) are a small problem compared to the problems of the European banking sector or it is Game Over. This is a good thing, no matter the outcome the situation has been dragging on for too long.

    I do not know what will happen during the weekend. I hope we will not have a decision along the lines of what was decided for the previous fallen countries. By now one should hope that the powers that be in Europe have understood that you cannot buy time with decisions like this. You only waste time. Either do something significant or let’s call it a day.

  • The “European idea” of some seems to be to replace work and effort with consumption and debt. If the european idea is to live at the expense of others, it has failed.

    Spain imports EUR 190 Mio. more per day as it exports. Greece EUR 110, Mio. Portugal EUR 60 Mio.

    That translates into EUR 4 per capita and day for Spain, 10 for Greece, and 5 for Portugal.

    • n eu d

      You really are pathetic. Instead of trying to understand economy and the real problem you keep using racist media propaganda.

      You really do suck. Instead of you paying for your failed banksters you want others to do it for you.

      The “European idea” of some seems to be enslaving other nations to keep their elite happy. If the european idea is to live at the expense of others, it has failed.

    • Demetri please. Let’s keep our language civil. You can make your point forcefully without swearing.

    • Demetris, I frequently said here that I am against the “bailouts”. This includes that I am against the guarantess and also gainst the reforms etc. I do not care what you do in Greece , Spain etc. I am just not willing to guarantee for you and others or pay any money. Be it wxplicitly or through the back door.

    • “…what strikes me about Crete are its contrasts. The sharpness of light and shade ,something bright and sharp in the characters of the people in contrast with the darkness of their history.” 1:11:40

      You can say that again. The story of all Greece. And it continues.

      “Any disease that is not cured with raki (tsikoudia) ,is serious.” 1:32:25

      Hell ,yeah!

  • “To get money to give to its decrepit banks, the nation must be humiliated and undergo further fiscal waterboarding”

    Jesus wept! If Spain wants or needs, thanks to her failures, to build up further debt, she has to accept the -sensible- rules of the lenders, or find the credit elsewhere.

    When will you ever grow up instead of sounding like a whining teenager who complains that there are no endless free lunches paid for by the parents?

    • Why not let the banks fail then? Would you be more happy if the irish, portuguese, greek, italian and spanish banks failed? A financial institution in the US failed (Lehman Brothers) and all the goverments in the world came to the rescue of the financial system. Do you really believe that the failure of the spanish banks is a spanish problem? Do you even believe the problem of the spanish banks was created by the spanish people? Do you believe that german or dutch banks are immune? Please make your point clear. And of course tell us please if you believe that northern countries are better off in euro or outside of it.

    • For Very Serious Sam, you don’t sound serious at all if you still claim is Spain’s fault (a country with fiscal surplus and low debt to GDP ratio )…maybe you play a lot of Serious Sam, it’s time to stop

    • Time passes ,situations change ,vss repeats the same old stuff.
      No originality whatsoever.

      There is still hope though.

    • Spain has had a low debt / GDP ratio until 2007. Which is why even now, after years of substantial deficits, the debt/GDP ratio is still “only” at around 80%, roughly the same as Germany.

      To say Spain has been a “surplus country” is a bit misleading: actually, Spain has been running a big current account deficit.
      The government had not taken on loads of debt – but the rest of the economy had (banks, needing money to sell mortgages, consumers getting into debt, etc). Which is why Spanish banks are now in the mess they are: in retrospect, they handed out mortgages way too easily, sometimes lending 100% of the assumed property value. So now, with property prices fallen and a lot of house-“owners” without a job, the banks have a major problem.
      Spain was not a surplus country, it’s borrowed massively from abroad and the part of the money that went into the now popped property bubble or consumer spending is now partly lost.

  • Yanis, I am horrified by what the Finns have done. And how could our government agree to this? Unless of course they had no choice. And since the Finns wanted to invest, why didn’t our government say: “Here’s your cash, but you have to invest it in Greece?”

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