Wednesday 28 January 2015

Tsipras gives a big hint of the stitch up on Day 2

"We don't want to go to mutually assured destruction [with the eurozone] but we won't continue being subservient"

So already of the Greek nightmare and already the enormity of the situation facing the Syriza Government has dawned on its hapless leader, Alex Tsipras. Greece won't default on its debts nor exit the Eurozone....but nor will it be subservient according to reports of his first cabinet meeting.

If I was a more cynical person I would think this is all a set up.

Last week The ECB announced QE, €60 billion a month of Government bonds to be bought. Then Syriza is elected and now they are already moving towards just asking for a bit of debt forgiveness to placate the populace.

The QE until July will push $240 billion of debt onto the ECB balance sheet - the holdings of Greek debt by Eurozone countries are, err, $240 billion. What a strange co-incidence!

It is almost as if Merkel has stitched up to accept QE in exchange for only forgiving Greece say 30% of its debt and it continuing in the Euro. This 30% will allow for a little more spending to keep Tsipras happy.

Life is good in the democratic Eurozone. Less so for Greek people trapped in the Euro nightmare perhaps, but hey, they are only little people after all?

Will this dastardly plan work...

 ....There's many a slip 'twixt the cup and the lip


BE said...

Meanwhile German outriders are publicly saying that they don't mind if Greece defaults and as a result leaves the EU. Which makes perfect sense from their point-of-view: why should a tiny bankrupt country destroy the economy of the rest of the continent?

As soon as the ECB stops accepting Greek paper the game is up. Tsiparas is stuck between reality and his electorate's bizarre desire to stay in the Euro.

With the benefit of 6/6 hinsight (oh wait, loads of people said this at the time) would it not have been better to allow the Eurozone to grow in membership slowly, rather than shoehorning in dodgy tinpot corrupt countries from day one?

Until Greece joined the EU, it was classed by the US State Department as a third-world country. I reckon Morocco would have fared better in the Eurozone.

BE said...

Oh, and as to being "subservient", who exactly racked up the debts in the first place? Show me a Greek voter who claims not to have known what was going on, and I'll show you a liar.

The Greek electorate thought they could get a free lunch. Fuck 'em.

AndrewZ said...

BE, the Euro was always a political project first and an economic one second. The goal of the EU is the creation of a single European state therefore it had to have its own currency. That's why they tried to get as many countries as possible into the Euro in order to promote closer European political integration, regardless of the economic realities. That's also why they are so determined to stop anyone from ever leaving.

BE said...

Ja, und?

Malcolm Tucker said...

I think we have all learned by now that the EU is indestructible.

As is the Euro.

It will just soldier on until the debt,default crisis is over. Probably around 2025

Or 2125

The EU doesn't care when. Just as long as the project stays on the tracks, that is good enough.

andrew said...

Show me a Greek person who has not moved as much of his/her liquid assets as possible abroad by now and I'll show you someone who is a bit thick.

The counterpoint is that after a 20% recession there are a lot of Greeks who don't have liquid assets anymore.

If you have no savings, can only just support yourself, you don't care if you have that months wages/benefit in Drachma or Eur.

It reminded me that Letter to Brezhnev was released in '95 - 20 years ago.
And that was about us.

Budgie said...

The Greeks will not leave the euro.
The Greeks will not leave the EU.
The euro will not break up.

The Greeks could not afford to leave anyway. If they did they would have to pay their euro debts in devalued new drachmas. Or default - and who would lend to them when they need money now? The most obvious compromise is for the Greeks repay their debts but only when their economy resumes growth.

Most Greeks, and most Europeans, much prefer the euro to their own currency. They do not view the euro as British eurosceptics do. And as AndrewZ said the euro is primarily a political project. I can't see the Greeks making the same financial mistakes again for example, which means they will modify their political behaviour in the future.

Steven_L said...

EZ QE being put in place to remove dodgy PIGIS debts from EZ financial sector balance sheets is one possibility.

But then again, who is going to step into the breach and keep Franco-German bond yields down now the Swiss National Bank has had enough?

Then the official explanation - deflation - is persuasive. As is that it's a simple ploy to weaken the Euro and help EZ exporters hit by poorer commodity producers and an emerging markets slowdown.

Perhaps it was the combination of all this was enough to persuade the ECB.

Diogenes said...

Why does it all work in the US?

The explanation I was given was that when capital flowed from one part of the US to another then populations followed. So when the rust belt rusted, they all got on their bikes (trucks really) and moved to Arizona or California or New Mexico.

Now why can't the Greeks just leave Greece, or the Portuguese leave Portugal or the Spanish, Spain? Then it would all work out.

Capital would get its labour with the skilled workers competing for jobs. For example, Poland has some excellent plumbers.

Only xenophobes would stand in the way of the market working effectively.

BE said...

Diogenes: indeed. No doubt many Greeks, Spaniards, et al. have already moved to the more dynamic parts of the union. It's strange that we don't hear more of it, really.

Electro-Kevin said...

Diogenes - "Only xenophobes would stand in the way of the market working effectively."

Or people worried about their own standard of living. Which is the truth of it.

Perhaps what they feel and think doesn't count. Perhaps 'xenophobe !' is the one way of shutting them up. It's certainly worked thus far, because xenophobic is actually the last thing they are and the last thing they want to be.

Scrap welfarism, the NHS and free public services then we can't talk about 'free' markets working effectively in this country.

While we're at it we could even allow the people to have a vote on what they want.

The US has a lot more space, more natural resources and is one country. They are xenophobic when it comes to migration from South America despite the 'free market' opportunities that region must offer.

Anonymous said...


When Norman Tebbitt suggested such a thing happen in this country the Tory party became 'the nasty party'

Why do people still live in Port Talbot ? What do they think is going to happen ? Are they waiting for coal to come back into fashion?
Do they think KIA or HYUNDAI are going to one day say -"Blimey - there are lots of idle workers in that town. More than in any other place in northern Europe..That's got to be the place for a new car assembly factory."

andrew said...

You could always give all Citizens of the UK a basic income (like the greens propose).

And then remove all jobseeker type benefits - and if it was set high enough, the minimum wage.

No more jobcentres, jobcentre staff etc etc.

No more people making sure the min wage is matched.

Everyone who is not a citizen will be entitled to nothing.

Something in there to upset just about everyone - so there must be something good about it.

On the difference between the EU and the US, they generally speak english in the US, so there really is free movement of Labour
Also culturally they all come from a group of people who were willing to move and who identify freedom with the ability to move
Wheras the EU is full of people who did not move and speak different languages and (still) has different standards for many jobs.

A bus driver cannot move from Bristol to Bordeaux and start work the next Monday.

CityUnslicker said...

Diogenes - You make the point well.The failure of the euro is becuase the EU is not suitable for a singel currency.

It is not one state with one language and a general single culture like the USA is. It does not have unlimited space.

It is also full of scoialists who think jobs should move to them and not vice versa.

You can wring your hands and wish this were not so, or perhaps realise the Euro is doomed in the long-term.

Then ther eis the finanical union bit too, but that is for another day...

Diogenes said...

"A bus driver cannot move from Bristol to Bordeaux and start work the next Monday."

But a Welsh rugby player from Port Talbot who votes Labour and has deep socialist principle can - if he is good enough.

Its a skills issue. Failing to engage generation upon generation of your citizens.

My family of highly qualified immigrants have spent 2 generations here. The next 2 are spending it in the Far East. I'm just here to sweep up and turn off the lights

hovis said...

So yes, the Euro is and always has been a primarily a political project, but shiow me a currency that does not have polticakl aims. It was predicated on the belief (in hindsight wishful thinking or something more ideaogical?) that economies would converge under it.

The "lazy wog" theory expounded earlier in the thread is in itself lazy thinking, as to why structural problems occur in an economy can be fixed and how they can be fixed. It is similar to the vilification of British workers that you see in the press periodically.

This fetish for viewing the situation through some Manichean lens (good Germany vs evil Club Med) is part of the problem. The illiteracy of the austerity and so called bailout(s) (of the French and German banking system) has lead us to this point.

I have alot more time for Varoufakis as finance minister than Venislos, it will be interesting to see what he comes up with. It is obvious that neither side will likely have a complete victory but I am waiting events before talking of stitch ups.

CityUnslicker said...

Hovis ,

The greeks borrowed the money and spent it though. They did not collect taxes. European Union membership led to them getting billions a year in subsidy too.

The German and french bankers already took a 50% haircut in 2011. They will feel they have done thier bit.

PLus as noted, the IMF simply will not allow you to default on it - see Argentina.

The Euro failed as a project when it let Greece in; there are plenty of valid reasons that it is not a sinlge currency area( have I ever mentioned my 1996 Master's thesis that explained why...). Greece fulfills most of them.

The crazed lefties are going to have a party and a shout and a scream. What next I know not what - but there is no happy way out for Greece. I happen to think this will dawn on Tsipras very quickly, but then again, I am an optimist.

K said...

I was really surprised at how frequently an American friend moved around the US at the peak of the recession. I don't think he stayed in the same state for more than six months and was so broke every trip had to be done by car with all of his and his wife's stuff in the back. It's not like he's even in construction or anything that would normally require moving, he's just a boring IT desk guy.

Suffragent said...

When working in Norway the biggest immigrant population was the Swedes. This group have now been dwarfed by both the Spaniards and the Portuguese.
CU In European industry there is a common language (and lucky for us ) its English. They speak and write it to a higher standard than is currently taught in English schools.
Budgie-Agreed nothing will change in Europe or Blighty.
Just as a talking point. When everybody is slamming the Greeks for having borrowed and spent all that money. Who actually borrowed it? The Government. But they live in a democracy so they should have just voted for a more responsible bunch?
So lets consider Britain (or any other country in the west) going bust tomorrow and what the worlds press would be saying about us. With National debt spiralling out of control. Where could all that money have gone?
“Each consecutive government increased its spending. Giving money away to friends in ring fenced foreign countries. They poured money into a health service, police and surveillance while opening the borders to make sure these services were utilised. Every deal the government did must have been corrupt because they made no sence. From nuclear power plants, carbon taxing, giving away the fishing rights, computer systems………….someone must have been getting a back hander or a seat at the top trough.
Well the British are just lazy. They thought it was better to quit work and borrow huge amounts of money and spend it on houses creating one of the largest bubbles in history. They closed down all the productive part of the economy through regulation and instead employed half the population in easy public sector jobs and if they found that too difficult they could leave with stress on full pay until early retirement. For the rest they tweaked the benefit system with housing and other benefits so it would be financial suicide to go to work (so much so, they had to import a lot of eastern Europeans to do anything practical). Their banks lent huge amounts on credit cards to people with no or poor credit history……………………………
OK to stop this lunacy just which responsible, honest, party do we vote for? All party members from the same Universities, none of which have done a proper job, all caught with their fingers in the expenses till and still in office and all handing out tax payers (debt) to their family and friends.
The purpose of the EU is not some political dream. It’s to centralise the power (read wealth confiscation) out of reach of the voting populace. Regardless of the financial history, Greece did something unacceptable, they voted out the usual cronies and will be beaten down to the extreme because of it. It will be a relatively cheap example to convince the rest to tow the line.

Peter Whale said...

Suffragent you have hit the jackpot that is the whole art of politics in your comment. The only way out of this parasitic group is to fragment them through the ballot box. Anyone but the Liblabcon.

CityUnslicker said...

great comment suffragent. The only reason it will never come to pass is that the UK kept the Pound so can always devalue ourselves to avoid official bankruptcy.

I have to agree to with Peter Whale, a vote of UKIP (inspite of some of their more loony ideas) is a vote for difference. Toriex and Labour are both continuity Brown policies.

Steven_L said...

have I ever mentioned my 1996 Master's thesis that explained why

Didn't you conclude Spain will break the Euro? Well they look likely to elect a eurosceptic left wing government in October.

hovis said...

Suffragent: good analogy, and yes the reason for the faux outrage is the votes were to someone who has the temerity to eeven question the party line (even if nothing comes of it.)

CU: you are ignoring the truism that what cant be paid wont be paid.
It is acknowledged that the "bailouts" have simply managed to increase debt to GDP levels, that the IMF are and were fantastists.
RE French and German banks, I disagree, they would have gone bust if the de facto socilisation of their risk hadnt happened, they would be dead, so the idea that "done enough" when they shouldnt exist, doesnt wash with me.
I don't think anyone is suggesting that there ia a happy way out or an easy one, merely that contining a failed course of action in lunacy. Of couse there is alot of hot air espcially from creditor side.
Of course the interesting thing about this is is really now the power play of who has the power, a sovereign government (whether you think they are 'mad lefties' or not) or unelected supranation bodies and corporate interests. Remeber If this situation wer applied to the UK, no parliament can be bound by a previous parliament, so the 'but they borrowed and spent it' argument wouldnt hold here especially - and yes Britain has defaulted n its debt before anyone gets into trivial point scoring at that level.
For me free markets yes, but the individual over the corporate everytime, freedom of action and thought of a flesh an blood human being rather than a dead legal person(s).

DJK said...

I assume some of the comments here are being made ironically.
All power to the Greeks in fighting against the EU. There will be many casualties, and they will probably lose, but we must wish them well since they are fighting for us too.

There seems to be a common belief amongst the rulers of most countries that all barriers to the free movement of capital and labour should be removed. This is fine for the 0.01% owners of large amounts of capital, but it is less hard to see what's in it for people here in Britain. Globalization means that you are competing for work with a desparate person on the far side of the world who will accept 1/10 of what you receive in wages and work twice as hard. Whether your job goes to him or he comes here is irrelevant; we are in a race to the bottom on wages. And no, it's not a comfort to me that lifting a billion Chinese peasants out of poverty increases the sum of human happiness, if it comes at the expense of families in Britain --- selfish though that is.

And soon there will be a race to the bottom on healh and welfare. How are pensions, tax credits, free education, NHS, etc. compatible with the free movement of people?

The Greeks are victims in a drive for globalization. The fact that the EU are quite willing to see the pauperization of Greece shows that whoever else the EU leaders are serving, they are not serving the interests of the people of the EU.

Go, Greece, go!

BE said...

Without wishing to sound like a raging racist, I think the comparison between Greece and Ireland is instructive.

The Irish have just put their heads down and go on with it. Their economy is now booming again.

Spain won't break the Euro. The Spanish voters have been telling pollsters they are going to vote Yes We Can, but the difficult reforms have been going through, and their economy is starting to recover.

It is France I am worried about, as I have been for some time. Still, the cheap wine bonanza has yet to arrive, much to my personal disappointment.

BE said...

DJK this "race to the bottom" phrase is such shit. Globalisation is about specialisation and comparative advantage. Globalisation crushes only those without marketable skills, it empowers everyone else.

Fatties in Wigan or Port Talbot have some of the best opportunities in human history to succeed. If they choose not to, well is that the fault of "globalisation"?

Timbo614 said...

Suffragent & DJK : +100

DJK said...

BE: David Ricardo explicitly assumed immobility of capital in the theory of comparative advantage. Quoted in Wikipedia: " ... if capital freely flowed towards those countries where it could be most profitably employed, there could be no difference in the rate of profit, and no other difference in the real or labor price of commodities, than the additional quantity of labor required to convey them to the various markets where they were to be sold."

We live in a world where capital flows freely and --- certainly in the Eurozone --- there is no mechanism to stabilize the resulting trade imbalances. You may call it shit and trot out morality tales about fatties in Port Talbot but look around you; the race to the bottom is happening.