Greeks vote to reject incumbants, austerity

[LondonJohn]

Given that US Treasury secretary Jack Lew has lined up behind the IMF in support of Varoufakis' long-held position on the necessity for debt relief then perhaps V is not such a clown after all?

OF COURSE bodies such as the US Treasury and the IMF do not want to see a Grexit. The ECB and the powers behind the Eurozone don't want to see a Grexit either. But effectively they have no choice now.

That's one of the naked dichotomies of this whole fiasco. The people/institutions on the other side of the negotiations with Greece have every philosophical and practical reason to keep Greece in the Euro and to (somehow) sort out its debt problem. It's just that in practice there's now pretty much zero chance of this happening.

It's very much analogous to a bank manager who's lent an unsecured loan to a man who cannot now meet his repayments. The bank manager wants to keep the man as a customer of the bank, and to find some way to sort out the debt problem to the best outcome for the bank. The bank manager doesn't want to have to write off the loan and throw the man out as a customer of the bank. But if the man consistently raises the middle finger to the bank manager and shows no appetite whatsoever for any kind of reasonable programme of action, then there comes a time when the bank manager has no other option.

And that time has now come for the ECB and the Eurozone politicians, in respect of Greece. They're not going to like doing it. And they will, to a large extent, be humiliated themselves by doing it. But they basically have no choice now (since it's now inevitable that Greece - following the "no" vote - has no chance of a sufficient volte face in its negotiating position). Greece is going to exit the Euro, and Greece's Euro-creditors are going to have to write off most (of not pretty much all) of the debt. The only thing to sort out now is a careful timetable which will a) minimise the chance of civil unrest in Greece, b) cause the least possible adverse impact to the stability of international money markets, bond markets and equity markets, and c) make the ECB, EC, Eurozone politicians and the IMF look as least-stupid and least-incompetent as possible.

 

[Childlike Empress]

Expanding on the PCR article, here's the Russian Propaganda (no scare quotes for once, which doesn't mean it isn't true) POV:

 

[McHrozni]

But the editor of a major German newspaper, Die Zeit, believes Tsipras’ “very clever game of chicken” will almost certainly pay off.

It's silly. Even if Germans do blink all this does is kick can down the road, and Greece will be facing another bailout down the line. Germans know that, and would like to prevent that from happening.
Furthermore, if Tsipras does "win", this will inspire the Spanish to follow the same tactic. Spain is a much, much bigger problem, that can't be simply written off.

As a result, Tsipras may well be playing a game of chicken. The thing is he's using a ribber dingy against a battleship ... in treacherous waters in which the battleship can't maneuver.

McHrozni

 

[Amazer]

OF COURSE bodies such as the US Treasury and the IMF do not want to see a Grexit. The ECB and the powers behind the Eurozone don't want to see a Grexit either. But effectively they have no choice now.

That's one of the naked dichotomies of this whole fiasco. The people/institutions on the other side of the negotiations with Greece have every philosophical and practical reason to keep Greece in the Euro and to (somehow) sort out its debt problem. It's just that in practice there's now pretty much zero chance of this happening.

It's very much analogous to a bank manager who's lent an unsecured loan to a man who cannot now meet his repayments. The bank manager wants to keep the man as a customer of the bank, and to find some way to sort out the debt problem to the best outcome for the bank. The bank manager doesn't want to have to write off the loan and throw the man out as a customer of the bank. But if the man consistently raises the middle finger to the bank manager and shows no appetite whatsoever for any kind of reasonable programme of action, then there comes a time when the bank manager has no other option.

And that time has now come for the ECB and the Eurozone politicians, in respect of Greece. They're not going to like doing it. And they will, to a large extent, be humiliated themselves by doing it. But they basically have no choice now (since it's now inevitable that Greece - following the "no" vote - has no chance of a sufficient volte face in its negotiating position). Greece is going to exit the Euro, and Greece's Euro-creditors are going to have to write off most (of not pretty much all) of the debt. The only thing to sort out now is a careful timetable which will a) minimise the chance of civil unrest in Greece, b) cause the least possible adverse impact to the stability of international money markets, bond markets and equity markets, and c) make the ECB, EC, Eurozone politicians and the IMF look as least-stupid and least-incompetent as possible.

I sure hope that your a) and c) do not figure as high on the list as your point b).... but realistically it's probably c) which is the primary concern for ECB, EC, Euro-zone politicians (especially for these) and the IMF.

 

[McHrozni]

I sure hope that your a) and c) do not figure as high on the list as your point b).... but realistically it's probably c) which is the primary concern for ECB, EC, Euro-zone politicians (especially for these) and the IMF.

I think the order of importance is reverse to what he wrote, with c) being the most important and a) being the least important. A humanitarian crisis in Greece would be welcome, since it would reduce the change of Spain falling to Podemos.

McHrozni

 

[bit_pattern]

A humanitarian crisis in Greece would be welcome,

Are they "human garbage" now too?

 

[GlennB]

News coming out of Athens and elsewhere suggests a Grexit might be avoided entirely, bringing d) into the equation. However, as I understand it, The Bundestag and other parliaments have to ratify any proposed deal, which involves a large dose of c). Might Merkel approve personally, yet 'allow' her Parliament to reject a deal?

e) is that a bunch of Greek marxists were intending, all along, just to **** up the EZ so much that that whole insane plutocratic-capitalist experiment keels over and dies. This of low probability

 

[McHrozni]

Are they "human garbage" now too?

No, but I think it's preferable to have a humanitarian crisis in Greece to a economic disaster on the continent, followed by a humanitarian crisis in Spain, Italy, Portugal and Greece. Don't you?

McHrozni

 

[bit_pattern]

No, but I think it's preferable to have a humanitarian crisis in Greece to a economic disaster on the continent, followed by a humanitarian crisis in Spain, Italy, Portugal and Greece. Don't you?

McHrozni

Classic loaded question. Textbook execution. Well, played.

 

[McHrozni]

Classic loaded question. Textbook execution. Well, played.

Thank you

If Greeks have their way, this is powerful signal to all others they should follow their unsustainable business model of extortion by threatening to exit the system. As such the exit should be discouraged, and a humanitarian crisis in Greece is how that is done.

Don't like that? The solution is simple - don't vote hardline leftards in power.

McHrozni

 

[Oystein]

Question / Invitation to all to speculate:

Imagine, Syriza had not won the election in January and that instead some sort of "moderate grand-coalition" government had run the country since.

What would/could they have done differently?
Would Greece be able today to pay loan rates out of internal revenues?
Would she be fit to prosper and generate growth under the Euro?
Would Germany and the rest of the EU favour a third bailout?
Would Greek wages and retirement payments be nice and safe?
Would capital stay in the country?

What options did the Greek government actually have that would have made a real difference with the troika and all while not crumbling the economy further?

 

[Ts4EVER]

These "leftards" might be the only ones able to save your precious system. At least that was, according to Varoufakis, the plan:

A Greek or a Portuguese or an Italian exit from the eurozone would soon lead to a fragmentation of European capitalism, yielding a seriously recessionary surplus region east of the Rhine and north of the Alps, while the rest of Europe would be in the grip of vicious stagflation. Who do you think would benefit from this development? A progressive left, that will rise Phoenix-like from the ashes of Europe’s public institutions? Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? I have absolutely no doubt as to which of the two will do best from a disintegration of the eurozone. I, for one, am not prepared to blow fresh wind into the sails of this postmodern version of the 1930s. If this means that it is we, the suitably erratic Marxists, who must try to save European capitalism from itself, so be it. Not out of love for European capitalism, for the eurozone, for Brussels, or for the European Central Bank, but just because we want to minimise the unnecessary human toll from this crisis.

 

[McHrozni]

These "leftards" might be the only ones able to save your precious system. At least that was, according to Varoufakis, the plan:

Wait, what? He brought Greece on the brink of exiting the Euro with the purpose of keeping Greece in Euro?

McHrozni

 

[McHrozni]

Question / Invitation to all to speculate:

The questions are really easy.

What would/could they have done differently?

I can't say what "would" be done, but "could" is easy - improve tax collection, reduce the most generous retirement conditions, rise taxes on shipbuilders are three such options.

Would Greece be able today to pay loan rates out of internal revenues?

It would receive bailout money, so probably yes.

Would she be fit to prosper and generate growth under the Euro?

Yes.

http://www.tradingeconomics.com/greece/gdp-growth-annual

Syriza got a moderately growing country and threw it back into a recession. Regardless of what happens now, they already destroyed at least 2% of Greek GDP.

Would Germany and the rest of the EU favour a third bailout?

They're basically pushing Greece to take it, under adequate terms. I find it unimaginable they wouldn't favor it.

Would Greek wages and retirement payments be nice and safe?
Would capital stay in the country?

Better than what they have now, that's for sure.

What options did the Greek government actually have that would have made a real difference with the troika and all while not crumbling the economy further?

Accepting the austerity, improve tax collection and argue some debt should be written off again. Don't demand your debt is written off as Tspras did, demonstrate you're serious about paying back as much as possible and then ask the load to be reduced as a sign of solidarity.

Anyone but Syriza seems to understand that.

McHrozni

 

[Oystein]

Thanks, McHrozni.

...improve tax collection, reduce the most generous retirement conditions, rise taxes on shipbuilders are three such options.

There is a history of reasons why taxes weren't collected properly. Would a moderate government had a real shot at succeeding here, given a pretty ingrained system of inefficiency?
(I understand that there is a significant difference between trying and failing, and not trying in the first place)

It would receive bailout money, so probably yes.

That avoided the question.
I asked "out of internal revenues".

Yes.

http://www.tradingeconomics.com/greece/gdp-growth-annual

Syriza got a moderately growing country and threw it back into a recession. Regardless of what happens now, they already destroyed at least 2% of Greek GDP.

I see the development, but am not sure that trends can be extrapolated. You however provide at least prima facie evidence to support your opinion; those with other opinions would have to do at least as good.

They're basically pushing Greece to take it, under adequate terms. I find it unimaginable they wouldn't favor it.

Ok

Better than what they have now, that's for sure.

That's somewhat avoiding my question, which wasn't in relative terms ("better or worse") but absolute: Would significant amounts of capital flee the country or not? I suspect it would no matter what.

Accepting the austerity, improve tax collection and argue some debt should be written off again. Don't demand your debt is written off as Tspras did, demonstrate you're serious about paying back as much as possible and then ask the load to be reduced as a sign of solidarity.

Anyone but Syriza seems to understand that.

I agree that there will eventually be a debt write-off, and agree that the lenders' side cannot very well say so up-front going into negotiations, but all agree that eventually there must and will be another debt cut, right?
I understand that Greece already was under some measures of austerity that Syriza hasn't rolled back. I do favour austerity as a good practice generally (even and perhaps especially in good times), but understand that there are practical and humanitarian limits. The big question, for real politics, is if a moderate government truly would have had the means and opportunity to push through these measures.


Anyway, looking forward to other opinions.

 

[McHrozni]

There is a history of reasons why taxes weren't collected properly. Would a moderate government had a real shot at succeeding here, given a pretty ingrained system of inefficiency?
(I understand that there is a significant difference between trying and failing, and not trying in the first place)

That's why I said "could" and not "would". Realistically Greece can do a whole lot better at collecting taxes. I don't know enough about Greece to say how that would be done, or whether a realistic 2014 government could do a whole lot better.

That avoided the question.
I asked "out of internal revenues".

I missed that
Eventually though, that's an empathic "yes". Probably not in 2015, but most likely in 2016 or 2017 at latest.

That's somewhat avoiding my question, which wasn't in relative terms ("better or worse") but absolute: Would significant amounts of capital flee the country or not? I suspect it would no matter what.

Perception is a major, often deciding, factor in capital flight. If there was a general perception that capital is reasonably safe and the situation is improving, then the flight would be much smaller. Furthermore, a different government could argue for a package of European investment, bringing in badly needed foreign capital. Syriza, on the other hand, is probably The Worst Option for capital flight. They made capital fear the country even more, make the country even less attractive to foreign investors and likely consider foreign investment as some sort of evil scheme to subjugate the country anyway.

Would "significant" amounts of capital flee the country under a sane government? I don't know. What are "significant" amounts?

I agree that there will eventually be a debt write-off, and agree that the lenders' side cannot very well say so up-front going into negotiations, but all agree that eventually there must and will be another debt cut, right?

Not necessarily, IMF report says Greece can manage without debt cuts, if it passes the needed reforms to make the economy more competitive. They will find it easier to do so with some cuts though.

I understand that Greece already was under some measures of austerity that Syriza hasn't rolled back. I do favour austerity as a good practice generally (even and perhaps especially in good times), but understand that there are practical and humanitarian limits. The big question, for real politics, is if a moderate government truly would have had the means and opportunity to push through these measures.

Of course there are practical and humanitarian limits. However, since employed or retired Greeks still live better than many of their financiers, neither has been reached. Especially humanitarian limits are very, very far still ... except under a Grexit scenario.

Could a moderate government still do it? I don't know, but we do know Syriza won't.

McHrozni

 

[Oystein]

Thanks for the clarifications, McH!

 

[dudalb]

Wait, what? He brought Greece on the brink of exiting the Euro with the purpose of keeping Greece in Euro?

McHrozni

I am more interested in that Varoufakis admits he is an out and out Marxist. Not good news, consideirng how Marxism has worked when in a position of power..

I think it is becoming clearer that Tsipriis and company are pretty much Neo Marxist masquarading as "reformers".

 

[dudalb]

WHat is also amusing is the implicationby Varoufakis that massive misery and suffering would be fine if the result was some kind of left wing revolution in the EU,but are bad if the result favors the right. Nice.

Voroufakis is another example of a person who spends their entire life in Academica and then does poorly outside an Academic enviorment.

 

[Ts4EVER]

WHat is also amusing is the implicationby Varoufakis that massive misery and suffering would be fine if the result was some kind of left wing revolution in the EU,but are bad if the result favors the right. Nice.

No, the implication is that misery and suffering are bad and left wing politics are a better way to stop it than right wing politics.