The anniversary of the troika-imposed capital controls on Greece and the struggle to save Europe

Screen Shot 2016-06-30 at 11.44.05.pngOn the anniversary of the troika imposed capital controls on Greece, the struggle of the Greek people has become the struggle to save Europe – from the DiEM25 site

A year has passed since the troika and the ECB closed the Greek banks and imposed capital controls. During the same time, the same culprits are trying to lay the blame for their blatant violation of a monetary union’s logic on the Athens Spring and the Greek people’s determination to escape from the five-year long debt-bondage.

Let we forget,

  1. More than a month before the general election of January 2015, in mid December 2014, opinion polls were suggesting a Syriza victory. At that point the ECB triggered began a slow-burning bank run through its Greek representative (the Governor of the Greek Central Bank) who, astoundingly, warned of a “liquidity shortage” about to afflict Greek markets (a word first statement for any central banker in history). It was the first salvo fired against the oncoming Syriza government and a precursor to the capital controls that were always going to be the troika’s weapon against Greece’s anti-troika government.
  2. On 30th January 2015, three days after the new finance minister, Yanis Varoufakis, took office, the President of the Eurogroup, Mr Jeroen Dijjselbloem, told him in no uncertain terms that the Syriza government’s choice was clear: Either sign up to the troika plan, that Syriza had just won a mandate radically to re-negotiate, or the banks would close within a month.
  3. On 4th February 2015, without any tangible rationale, the ECB cut Greek banks off, referring them to the Central Bank of Greece’s ELA. It was the precursor to the bank closures and capital controls (the ‘Cyprus solution”, as it was called) with which the troika would attempt to subdue the Greek Prime Minister, Alexis Tsipras.
  4. By mid-April, a high-ranking official of the ECB, and a few days later the Governor of the Central Bank of Greece, encouraged Yanis Varoufakis to introduce capital controls. Naturally, he refused on the grounds that: (a) capital controls contradict the whole point and logic of a monetary union, and (b) the circumstances demanded an honourable agreement without capital controls or other so-called ‘solutions’.
  5. By December 2014, the small team around Alexis Tsipras who would (after 25th January 2015) form the core of the new government’s negotiating team had agreed (following written proposals by Yanis Varoufakis) to three counter-measures, against the ECB, when/if the ECB moved to shut down Greece’s banks and impose capital controls. Those three counter-measures were: (a) Signalling to the ECB that any move to shut down Greece’s banks would trigger the Greek government’s unilateral restructuring of the Greek government bonds owned by the ECB (a move that the ECB would want to avert at all cost, given its repercussions on the legal standing of its OMT and QE programs), (b) Setting up a parallel euro-denominated digital payments system, and (c) Changing the Law governing the Central Bank of Greece to regain national sovereignty over it.
  6. At some point, between March and end of April, against the recommendations of Yanis Varoufakis, PM Tsipras began to drift toward the view that the above three counter-measures (see 5 above) should not be activated. Thus, the troika, having received word that the Athens government would not react to bank closures in a manner that would hurt the ECB, gave the green light to the ECB to proceed with them – and with the imposition of capital controls.
  7. Despite the hardship, uncertainty and liquidity asphyxiation caused by the bank closures and the capital controls, the Greek people courageously backed the government, with that remarkable 62% OXI vote. They said, in other words, NO to the troika’s blackmail and ordered the government to continue to fight, with all available means, for an honourable agreement.
  8. On the night of the referendum, PM Tsipras decided to throw in the towel. From that moment onwards, the troika and its Greek (local) ‘associates’ began the attempt to blame the troika-inspired and implemented capital controls on Yanis Varoufakis and all those who continued to remain faithful to the principles and spirit of the Athens Spring.
  9. A year later, in the wake of an already failed 3rd Bailout Greek ‘program’, capital controls remain in place for the sole purpose of reminding PM Tsipras that he remains under the troika’s thumb.

Today, a year after the ECB-led coup d’etat against Greece, the EU is disintegrating. The struggle of the Greek people for an honourable agreement with Brussels has now become the struggle for all European democrats to save Europe from its incompetent, authoritarian and historically challenged administrators.

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  • Το πρόβλημα Γιάνη είναι οτι στην Ελλάδα τα Capital Control αποδίδονται σε σένα. Ολα τα media προσπαθούν να ρίξουν το βάρος στους χειρισμούς σου, είτε από τα δεξιά, “έπρεπε να κάνουμε το χατήρι της τρόικας απ’ την αρχή”, η λεγόμενη τρόικα εξωτερικού, είτε από αριστερά, “έπρεπε να μη φτάσουμε στη συμφωνία του Φεβρουαρίου”. Υπάρχουν βέβαια και οι αντιευρωπαϊστές της ακροδεξιάς, που είναι βέβαια η ναζιστική ΧΑ. Αλλά και της αριστεράς, που δεν θεωρούν οτι είναι δυνατή μια θέση της χώρας σε μια Ε.Ε. αυτού του τύπου, άρα ένα Grexit είναι απαραίτητο, προκειμένου να ανακτήσει η χώρα έλεγχο της νομισματικής της πολιτικής (όπως η ΛΑΕ του Λαφαζάνη π.χ.), ή μικρότερες δυνάμεις όπως ο ΑΝΤΑΡΣΥΑ που προτείνουν παντελή έξοδο της χώρας από την Ε.Ε. Οπως επίσης και το ΚΚΕ, με πάγια στρατηγική την αποδέσμευση από την Ε.Ε. που την αποκαλεί πάγια επίσης “λυκοσυμμαχία” με αναγωγή σε κάποια απώτερη “λαϊκή εξουσία”, που τοποθετείται κάπου μακριά στο μέλλον.
    Με όλ’ αυτά, και με το Brexit φρέσκο ακόμη, η αντι-ΕΕ στάση του λαού έχει κερδίσει έδαφος, χωρίς όμως να εκφράζεται από κόμματα, απλά για συναισθηματικούς λόγους, “η ΕΕ είναι υπεύθυνη για όλα τα δεινά μας”, άρα καλά να πάθει με το Βrexit. Ομως τα χαρακτηριστικά του Brexit είναι κατά βάση στήριξη από ακροδεξιά, ξενοφοβικά στοιχεία στη Βρετανία, τα αντιευρωπαϊκά αισθήματα των Βρετανών δεν περνούν από καμιά αριστερά. Αντίθετα βρήκε ευκαιρία το δεξιό τμήμα των Εργατικών να διώξει τον Κορμπυν, αν και τα πιο προοδευτικά του στοιχεία, τα πιο αντι-ξενοφοβικά τον υποστηρίζουν. Με τα δεδομένα αυτά, στην Ελλάδα μεν το Brexit εισπράττεται σα Νέμεσις μετά την Υβρι κατά της Ελλάδας και δεν έχει ακροδεξιά χαρακτηριστικά (τουλάχιστον όχι απααίτητα, αν κρίνουμε τη γενική θετική στάση του ελληνικού λαού απέναντι στο προσφυγικό δράμα μεχρι τώρα, γιατί δεν ξέρω τι θα γίνει αν η Τουρκία σπρώξει κι άλλους προς το Αιγαίο), ενώ στη Βρετανία έχει πάγια αντιευρωπαϊκά, ξενοφοβικά και ρατσιστικά χαρακτηριστικά.
    Στά Capital Control φορτώθηκαν όλη η κακοδαιμονία της χώρας. Μια μορφή CC όμως ήταν ένα στοιχειώδες μέτρο άμυνας της Εθνικής οικονομίας απέναντι στο bank run που από χρόνια έπληξε το τραπεζιτικό της σύστημα. Δεν είναι απαραίτητα ο δαίμονας, η προστασία της οικονομίας είναι στοιχειώδες καθήκον σε μια οικονομία με αποβιομηχάνιση και ουσιαστικά κατάρρευση του τραπεζιτικού της συστήματος από το 2009-10 και μετά. Η επάνοδος των κεφαλαίων μάλλον τοποθετείται στο απώτερο μέλλον. Οπότε ποιό άλλο μέτρο προστασίας υπάρχει;.
    Σε κάθε περίπτωση, επειδή έχουμε ζήσει και σε εποχής πριν από την ΕΕ και σε περιόδους προστατευτισμού, δεν είναι απαραίτητα κακό. Ποιούς κυρίως πλήττει; Τις επιχειρήσεις. Εκεί έπρεπε να δοθεί το βάρος, εκεί έπρεπε να δοθούν κίνητρα να μην εξάγουν τα κεφάλαιά τους, και σε κάθε περίπτωση εκεί είναι και “ο κόμπος”. Γιατί για το μέσο μισθωτό, το μέτρο αυτό δεν είναι δα και σπουδαίο, ποιός εκτός από τους πολύ πλούσιους μπορεί να έχει περισσότερα το μήνα; Πάντως επανεξέταση του μέτρου, με κατά περίπτωση άσκησή του έχει μεγάλη σημασία. Δεν υπάρχει εξ άλλου μια του μορφή μόνο. Μπορεί επίσης να δοθεί κίνητρο σε κάποιους που επαναφέρουν τα κεφάλαιά τους να έχουν ειδικά πλεονεκτήματα ως προς την πιστοληπτική τους ικανότητα κλπ, επι μέρους μέτρα υπάρχουν. Τελικά, με την αυξημένη μηχανοργάνωση, την παροχή κινήτρων, στη διακίνηση από τράπεζα σε τράπεζα εντός της χώρας, με το e-banking και τη χρήση καρτών, που πριν ήταν σε εμβρυϊκή κατάσταση, καταπολεμείται η φοροδιαφυγή σε αρκετό βαθμό, πλαστικοποιείται το χρήμα και επιπλέον συνδέονται οι ασύμβατες Β.Δ. μεταξύ τους. Τέσπα, ουδέν κακόν αμιγές καλού.
    Οσο για τα media, είναι ζήτημα καλής διαχείρησης της επικοινωνιακής σου πολιτικής. Δεν αρκεί βέβαια μια από καιρό σε καιρό διάλεξη σε φοιτητές κάποιου κολλεγίου. Είναι πανευρωπαϊκής εμβέλειας το ζήτημα βέβαια, αλλά κανένας δεν ξεκινάει χωρίς πατρίδα να “κατακτήσει” την Ευρώπη 🙂

  • Signs of Trouble for Deutsche Bank
    July 1, 2016 A crisis in Germany’s largest bank would be felt by financial markets worldwide.
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    By Jacob L. Shapiro and Lili Bayer

    The International Monetary Fund (IMF) issued a damning 63-page report on the German banking and insurance sector yesterday. It is a long and thorough report, with the key point buried on page 42: “Deutsche Bank appears to be the most important net contributor to systemic risks in the global banking system.”

    Then, the U.S. Federal Reserve said that the U.S. subsidiary of Deutsche Bank was one of two banks (the other was Santander) that failed an annual stress test. Deutsche Bank failed the same test last year, and while the Fed noted that the U.S. subsidiary had strengthened its capital position since its previous failure, it said there was still much more work to be done. The markets punished Deutsche Bank, already reeling from Brexit, forcing shares down at one point to their lowest level in 30 years.

    With all the news surrounding volatility in the markets due to Brexit, there is a temptation to dismiss this as more of the same. But in reality, these two developments, particularly the IMF report, are of far greater importance. If Deutsche Bank really is on the verge of a crisis – and we believe it is – the implications will be felt worldwide and the global financial system will shudder. First, however, the effects will be felt by Germany, and before we can explain why, Deutsche Bank’s unique and important role in Germany’s history and development must be placed in context.

    Deutsche Bank is not merely Germany’s biggest bank. The political role it plays in Germany is unique when compared with other countries. There is no good historical antecedent with which to compare it in the U.S.; Deutsche Bank’s importance to Germany is many times greater than that of an investment bank like Lehman Brothers to the U.S. in 2008. Deutsche Bank is technically a private bank, but it is tied to the government informally and to most major German corporations formally. Its fate will be shared by all of Germany.

    Deutsche Bank is technically a year older than Germany itself, having been founded in 1870, a year before Prussia declared that the German Reich had succeeded the Holy Roman Empire. It is one of the Big Three German banks – the others being Commerzbank (also founded in 1870) and Dresdner Bank (founded in 1872 and bought by Commerzbank in 2009) – that played the role of both capital provider and master puppeteer in the development of the German industrial machine over the last century and a half.

    After its founding, Germany was extremely poor. Deutsche Bank provided short-term loans and in return received equity shares in the companies it bankrolled. By the mid-1980s, according to a German government study, the Big Three were estimated to control the voting authority of over three-quarters of the shares of most major German companies. A 1995 report by the U.S. Congress’ Federal Research Division estimated that the Big Three by themselves, not counting the shares they held for their clients, held 30 percent of the seats on the advisory boards of all German companies. Disaggregating Deutsche Bank from the German government’s political goals or the structure of German corporations is impossible. They are all inextricably linked.

    In the 1990s and early 2000s, Deutsche Bank tried to maintain its unique role while at the same time taking advantage of financial globalization. That meant operating more and more like a typical investment bank. Deutsche Bank began prioritizing short-term gains and investing in risky assets, including securities backed by subprime mortgages in the U.S. real estate market. In Germany, the significance of the 2008 financial crisis was not just the loss of money, but the fact that Deutsche Bank, for so long a symbol of the German economy, was delegitimized and implicated in high-risk behavior. Besides the problems with its bottom line, it still faces a battery of investigations, legal troubles, scandals and potential fines to be paid in the coming years. The bank has fallen quite a way from its beginnings.

    Fast forward to today, and Deutsche Bank, Commerzbank and indeed most German banks have been able to stanch the bleeding from 2008 but not to heal the wound. These banks are struggling in large part due to the ultra-loose monetary policy put in place by the European Central Bank (ECB) to attempt to stimulate the European economy. The ECB has cut interest rates, moved deposit rates to negative territory and embarked on an ambitious asset buying program in an attempt to boost inflation and stimulate economic growth across the bloc.

    Low interest rates, however, cut into German banks’ profit margins and have already forced some banks, most notably Deutsche Bank, to introduce new fees and implement job cuts. In fact, Germany’s financial watchdog, BaFin, estimates that about half of Germany’s banks have a heightened exposure to interest rate changes and as a result may have to hold more capital. Another side effect of low interest rates has been that, according to the IMF, some German banks have turned to riskier Spanish and Italian sovereign paper. With southern Europe experiencing its own banking problems, boosting investment in Italy and Spain is clouding the outlook for German banks even further.

    Back in May, we published a study of the German economy entitled “Germany’s Invisible Crisis.” We pointed out Germany’s dependence on exports, and how it is simply not feasible for Germany to maintain its current levels of exports in a global economy that is stagnant at best, and in many places around the world is in varying degrees of crisis. Should the U.S. enter a cyclical recession, what remains of the demand propping up the German economy will collapse, and what was once invisible will become clear as day.

    In our report, we also noted that the most analogous problem for Germany’s current predicament is Japan in the late 1980s and early 1990s. The first warning of the collapse of the Japanese miracle was the Bank of International Settlements’ warning that Japanese banks would be suspended from international transactions because of low reserves. We cannot help but view yesterday’s events, and particularly the publication of the IMF study, as a similar red flag.

    The analogy is not watertight because capital reserves do not (yet) seem to be a problem for Deutsche Bank and for German banks on the whole. The IMF report makes it clear that there are “substantial capital buffers” across the board for all German banks, including Deutsche Bank (though it bears noting that Deutsche Bank’s ratio of Tier 1 capital to assets dropped precipitously in response to the 2008 financial crisis). One thing that caught our eye though was the fact that compared to peer banks, German banks’ ratio of risk-weighted assets to total assets was only 31.2 percent – barely a third of the ratio for U.S. banks, and 25 percent less than other eurozone peers. So overall, German banks are minimizing losses by avoiding riskier enterprises. This betrays the fact that there must be a weakness in the system that is forcing German banks to be extremely stingy.

    Deutsche Bank is showing signs of that weakness more than any other German institution right now. Last year, Deutsche Bank posted a net loss of roughly 6.7 billion euros, or $7.4 billion. Deutsche Bank’s chief financial officer told CNBC that he did not expect Deutsche Bank to find its way back into the black until 2018 at the earliest. Deutsche Bank’s first quarter report for 2016 said revenue was down 22 percent year-over-year – and that’s compared to a year when the bank took a 10-figure loss.

    In just the last year, Deutsche Bank has laid off tens of thousands of workers and has seen rating downgrades from both Fitch and Moody’s on its long-term debt and its deposit ratings. Deutsche Bank is also sitting on $41.9 trillion (not a typo) worth of derivatives, an inheritance no doubt from its pre-2008 activities, and perhaps even its post-2008 activities. The crisis is no longer invisible. The IMF, Germany and the markets all see it.

    This is one of those situations where it brings us no pleasure to say that yesterday was a good day for our forecast. It was also a bad day for Deutsche Bank, and by extension for the global economy. If developments continue to unfold as we expect, it won’t be the last.