Greek debt crisis [update: 3rd Bailout deal reached]

[Thanas]

Eastern European countries make their people work for less than 5000 British pounds a year. The EU is a colonial empire of massive inequality, with Elysium-like places in Luxembourg, parts of Belgium, Germany, Netherlands and Austria etc. on one side and rather grim places like Greece, Hungary, Romania etc. on the other side. Portugal, Spain are somewhere inbetween.

Thanas, you said further culling. Your backtracking is evident. Now you seem to have realized this.

Not really, for example the state television is completely unnecessary expense for a bankrupt country. It could be culled.

Greece is fucked. But Europe is also fucked. The EU is not the paradise people thought it would be. Central powers drain the impoverished periphery of talent, because it is logical to make money abroad. Periphery can no longer support the handouts meant to placate the passive remainder of their citizens, and so will have to accept lower life standards for a long period, forget about "convergence".

That does not follow, periphery countries are growing at faster rates than the centre, especially the Eastern Europeans. Over long, it will balance itself out.

[Thanas]

Meanwhile, thanks to the timetable and today bringing no deal, it is highly unlikely national Governments can approve it by Tuesday - unless Greece and the creditors approve it very, very soon.

[K. A. Pital]

Not really, for example the state television is completely unnecessary expense for a bankrupt country.

ERT had, like, 2000 employees.

[Thanas]

Not really, for example the state television is completely unnecessary expense for a bankrupt country.

ERT had, like, 2000 employees.

Kleinvieh macht auch Mist.

[Starglider]

For individuals, direct FX comparisons of income are highly misleading, due to the vast disparity in living costs.

[K. A. Pital]

That does not follow, periphery countries are growing at faster rates than the centre, especially the Eastern Europeans. Over long, it will balance itself out.

Actually, that is what I was talking about. In 2000-2007 the growth rate for CEE countries real wages was high (on the average) and they enjoyed a substantial and swift increase in their life level. This is no longer the case, as real earnings are no longer growing so swiftly. The wages in many CEE countries had a shock collapse in 2007-2009, and with some notable exceptions, the 2009-2014 period saw them barely making up the lost distance. In some nations, real wages even continued to decline in this period as well. Hungary, for example. Czech Republic wages have not yet fully recovered from the shock decline and in general are now growing much slower.

The idea of a quick universal convergence, welfare and "harmonious development" suffered a severe blow. It became even more obvious after the massive wage declines in the PIIGS countries, who were periphery but still closer to the core nations. Many joined the EU earlier than CEE countries.

I am sure the EU has many redeeming qualities, but this is not one of them. Freedom of movement and freedom of capital flows are real and tangible achievements. But equality in incomes and decent life level for all - no.

[Thanas]

That does not follow, periphery countries are growing at faster rates than the centre, especially the Eastern Europeans. Over long, it will balance itself out.

Actually, that is what I was talking about. In 2000-2007 the growth rate for CEE countries real wages was high (on the average) and they enjoyed a substantial and swift increase in their life level. This is no longer the case, as real earnings are no longer growing so swiftly. The wages in many CEE countries had a shock collapse in 2007-2009, and with some notable exceptions, the 2009-2014 period saw them barely making up the lost distance. In some nations, real wages even continued to decline in this period as well. Hungary, for example. Czech Republic wages have not yet fully recovered from the shock decline and in general are now growing much slower.

The idea of a quick universal convergence, welfare and "harmonious development" suffered a severe blow. It became even more obvious after the massive wage declines in the PIIGS countries, who were periphery but still closer to the core nations. Many joined the EU earlier than CEE countries.

I am sure the EU has many redeeming qualities, but this is not one of them. Freedom of movement and freedom of capital flows are real and tangible achievements. But equality in incomes and decent life level for all - no.

Hungary is not a good example as it is led by idiot fascists who wrecked a lot of the progress and the Czech Republic is not a member of the Eurozone. In general though, I would agree with you - but keep in mind that it costs way less to live in those poorer countries than it does in Germany.

[K. A. Pital]

I understand that Hungary and Czech are not in the Eurozone (it does not seem like they are willing to join in the future too, after seeing the PIIGS crisis unfold before their eyes). But all larger EU-CEE countries had their own currency, had they not? I think that the good times when everyone wanted to be a part of ERM and join the currency union certainly are over.

As for the cost of living, you should realize that with the customs union, the difference in price of consumable goods is, shall we say, not an order of magnitude, and the savings that a person with a low monthly income can make is likewise limited. The cost of living differences are manifested in lower rent and public services prices (train, bus, etc.).

An illustration of this stall in convergence:

EU-9 convergence is flat, for some it is actually worsening. Finally, there is this chart, which shows that convergence indeed has slowed down dramatically even for Central and Eastern Europe countries due to the crisis. They are still converging, at least, but this slow convergence is hardly some ground to celebrate, as the same period is marked by massive Southern Europe divergence:

[Crown]

Plebiscite has been called for the 5th of July.

[Thanas]

So the Greek Government asked for an unconditional bailout extension for a month, while announcing to campaign for the no vote. Little surprise that this was rejected. The Bailout will expire on Jun. 30th. I think capital controls are going to be likely happening at that point, with Greece probably having to pull a Cyprus and robbing their citizens.


Meanwhile, Tsipras is a bit of a liar, this is what he said about the attempt of the former PM to introduce a referendum on the bailout terms:

I guess it doesn't matter much once you are in power.

[Thanas]

Q&A with Eurogroup head:

What would a yes vote mean?

Many ministers asked our Greek colleague that, Dijsselbloem replies. And he said that if the people voted yes, then he and the government would immediately implement it.
But there is a “great” problem of credibility. We have found that such programmes only work if the government supports the measure being implemented.

It is not clear how the Greek government will survive without funding, Dijsselbloem adds.


Is there anything the Greek people can do to stay in the eurozone?

Right now, a referendum on this problem, with a ‘negative advice’ is in the Athens parliament, Dijsselbloem replies.
Greek MPs need to understand that the package wasn’t completed - there is no comprehensive package from the eurogroup - and need to understand the risks that are ahead in the coming weeks.
I regret those risks, but they are there.
The Greek parliament needs to consider where we are in the process, if they’ve been properly informed about the programme, and what is ahead.
Only then can they take a ‘wise decision’.

If the programme expires on 30 June, what are the Greek people going to vote on?
You should ask the Greek government, says Dijsselbloem. I cannot answer it.

Will Greece be in the room when you reconvene in a few minutes? And did you discuss the implications of Greece defaulting on its 6.7bn euro payment on July 20?
Dijsselbloem declines to speculate, but confirms that Greece won’t be in the room when the other ministers discuss what steps to protect themselves.


A final question about the consequences if the Greek people were to vote Yes vote in the referendum (ie, to accept the creditors offer)
Dijsselbloem: Much to our regret, the Greek authorities have rejected what was on the table even though it wasn’t finished. In the meantime there are already major risks for the Greek government handle. And if they vote yes, the question is ‘who are we working with to implement the programme?”

So, doom and gloom all around.

[Purple]

Am I the only one who thinks that Europe is basically backing Greece into a corner? Their options right now are to bend over and suffer as their country is gutted to pay the EU what it wants or refuse to bend over and suffer anyway. Has the point not come where we need to realize that irregardless of whose fault this originally was and who is legally in the right the EU is morally in the wrong for allowing things to get to this point? And that it will be even more in the wrong irregardless of which of these two options occur.

[Thanas]

Hyper-Capitalist take on it.

[Thanas]

Eurogroup statement:

Since the 20 February 2015 agreement of the Eurogroup on the extension of the current financial assistance arrangement, intensive negotiations have taken place between the institutions and the Greek authorities to achieve a successful conclusion of the review. Given the prolonged deadlock in negotiations and the urgency of the situation, institutions have put forward a comprehensive proposal on policy conditionality, making use of the given flexibility within the current arrangement.

Regrettably, despite efforts at all levels and full support of the Eurogroup, this proposal has been rejected by the Greek authorities who broke off the programme negotiations late on the 26 June unilaterally. The Eurogroup recalls the significant financial transfers and support provided to Greece over the last years. The Eurogroup has been open until the very last moment to further support the Greek people through a continued growth-oriented programme.

The Eurogroup takes note of the decision of the Greek government to put forward a proposal to call for a referendum, which is expected to take place on Sunday July 5, which is after the expiration of the programme period. The current financial assistance arrangement with Greece will expire on 30 June 2015, as well as all agreements related to the current Greek programme including the transfer by euro area Member States of SMP and ANFA equivalent profits.

The euro area authorities stand ready to do whatever is necessary to ensure financial stability of the euro area.

Also:
https://twitter.com/SpiegelPeter/status ... 56/photo/1

[cosmicalstorm]

Shit is it actually happening now or will there somehow be some last minute shady deal to toss the can down the road?

[Crown]

EuroClowngroup statement:

Fixed it for you.

Tsipras goes for referendum on 5 July
Greek PM Alexis Tsipras has just called a referendum on 5 July. This after spending most of the week locked in discussions with creditors, in which no deal emerged. Here’s a quick recap — and why its likely Greece will vote no.

1. Last Sunday the Greek cabinet agreed the biggest ever compromise with lenders over short-term fiscal targets. Instead of trying to split the difference between 1bn and 2bn in 2015 they agreed to do 2bn austerity and more the next year. Their aim was to force the lenders to throw in debt relief, without which a short term budget deal is meaningless. Their argument to their own base was: this is redistributive austerity.
2. On Monday, even as their own supporters reeled at the climbdown, President Hollande got behind the now €8bn austerity plan. But it quicly became clear the IMF would not sign it off. As I blogged, it was economically illiterate of the EU to agree to a massive tax hike in a depressed country, and so the IMF nixed it.
3. From midweek onwards the IMF tried to reinsert minor details that would make it less redistributive — which the Greek government could not deliver. Even the Greek centre, called to Brussels to be moulded into an unelected government of national unity, expressed concern over it.
4. By yesterday, what proved the clincher, the Greek side were saying: after all this, we get to the latest documents and we’re prepared to consider agreeing it with the institutions if they can give us something on debt relief — and then the Eurogroup signalled the deal was “too soft” and the voters of Finland, Germany etc would not accept it.
5. So Tsipras has called the referendum on the Troika offer. This is the masterstroke he has been waiting to play. The question will be: will you sign up to the economically illiterate, forever indebted plan offered by the IMF/EU or give us a democratic mandate to resist it, even if they crash our banks. Whaterver you make of this logic sitting outside Greece, it is primed to deliver the no camp a victory.
6. Even the word no has meaning. Oxi is a big act of resistance in Greece going back to the Italian occupation. Ne is not such a powerful word.
7. Tsipras also had to deal with the social democratic wing of Syriza who wanted to sign a deal and stay in power at any cost. He has effectively put them back into a box: they were offered nothing to sell by the Troika in the end — the institutional deal was not backed by the Eurogroup.
8. Where now? The ECB cannot pull ELA unless Greece is out of the programme. They will likely extend the programme to 5 July, but some will push to end it Monday. The Greek right on twitter is even now trying to spark a bank run.
9. So the question is: does the referendum take place in an atmosphere of calm and democratic functioning, or is there chaos outside parliament enough for people to panic and vote Yes, even if there are enough mainstream parties prepared to vote yes?
10. If Greece votes no to a quasi-Troika deal, the north European electorate are staring at the loss of €320bn taxpayers money, and the ECB will be seen as non-credible, and the IMF will have lost the biggest amount of money in its history.
    If the ECB pulls ELA early, I have no doubt Greece will immediately default on €27bn SMP bonds issued under Greek law.
    It may come down to: who has the biggest social power on the streets — the Greek left, inclduing the KKE, Syriza, the unions etc — or the right. Which is what Greek history has always tried not to ask since 1974.

[Thanas]

EuroClowngroup statement:

Fixed it for you.

Can we stop descending to this childish level or shall I start the Varoufake and Thievas talk now?

[Thanas]

Finance ministers (minus Varoufakis who left) have issued the following statement, all but calling for capital controls:

We stress that the expiry of the EFSF financial arrangement with Greece, without immediate prospects of a follow-up arrangement, will require measures by the Greek authorities, with the technical assistance of the institutions, to safeguard the stability of the Greek financial system.

The Eurogroup will monitor very closely the economic and financial situation in Greece and the Eurogroup stands ready to reconvene to take appropriate decisions where needed, in the interest of Greece as euro area member.

[Crown]

EuroClowngroup statement:

Fixed it for you.

Can we stop descending to this childish level or shall I start the Varoufake and Thievas talk now?

Do what you like; they're fucking clowns who want to INCREASE taxes in a DEPRESSED economy. This is beyond stupid.

[Thanas]

Do what you like; they're fucking clowns who want to INCREASE taxes in a DEPRESSED economy. This is beyond stupid.

You mean unlike Tsipras and Varoufakis whose proposal was to increase even more taxes - and all just business taxes - in a depressed economy? How was their proposal better?

[Crown]

Do what you like; they're fucking clowns who want to INCREASE taxes in a DEPRESSED economy. This is beyond stupid.

You mean unlike Tsipras and Varoufakis whose proposal was to increase even more taxes - and all just business taxes - in a depressed economy? How was their proposal better?

Because they weren't targeting the +60 year olds; they're gonna die soon anyway, the quicker the better eh?

[Thanas]

Do what you like; they're fucking clowns who want to INCREASE taxes in a DEPRESSED economy. This is beyond stupid.

You mean unlike Tsipras and Varoufakis whose proposal was to increase even more taxes - and all just business taxes - in a depressed economy? How was their proposal better?

Because they weren't targeting the +60 year olds; they're gonna die soon anyway, the quicker the better eh?

So wait, putting all the burden on the economy is going to help the elderly how? That will just collapse taxes (not that this has ever been a strength there) even further, meaning even less money for the elderly. Unless the idea was to tank the economy further and hope Europe just pays more, it makes even less sense.

[Crown]

Because they weren't targeting the +60 year olds; they're gonna die soon anyway, the quicker the better eh?

So wait, putting all the burden on the economy is going to help the elderly how? That will just collapse taxes (not that this has ever been a strength there) even further, meaning even less money for the elderly. Unless the idea was to tank the economy further and hope Europe just pays more, it makes even less sense.

The IMF VETOED a €400 million cut to military spending earlier in the year and want to go for the pensions (source and in German). This is a neo-libralism agenda seeking to fuck over a populous, not sound economic decision making.

[Vendetta]

You have to remember that austerity economics is just as driven by ideology as the denial of anthropogenic global warming.

It is literally 100% immune to all evidence that it doesn't work and does the exact opposite of what it is claimed to do, and basically no economists not in the pay of major financial institutions even think it's slightly credible. It is literally as fringe as climate denial, but it is the way that major European economies are run and there is no question to it in the media here.

The package of cuts offered by the troika would inevitably further damage the Greek economy and inevitably leave them even less able to pay off their debts, meanwhile the "bailout" package they offer mostly doesn't even actually go into the Greek economy it goes back to their international creditors

[Thanas]

Because they weren't targeting the +60 year olds; they're gonna die soon anyway, the quicker the better eh?

So wait, putting all the burden on the economy is going to help the elderly how? That will just collapse taxes (not that this has ever been a strength there) even further, meaning even less money for the elderly. Unless the idea was to tank the economy further and hope Europe just pays more, it makes even less sense.

The IMF VETOED a €400 million cut to military spending earlier in the year and want to go for the pensions (source and in German). This is a neo-libralism agenda seeking to fuck over a populous, not sound economic decision making.

You are not answering the question, I note. How was Tsipras plan going to improve business?

Besides, Pensions and VAT are directly implementable by the central government. Trying to collect more revenue from pressed business and charging the notoriously incompetent/corrupt tax collection to come up with it will not result in anything except lost revenue.