Greece Says No
61% of the Greeks who voted on their referendum to accept or reject terms of the EU Troika's latest offer of financial support said No, Thank You to further austerity.
The past several weeks have been an exercise in Brinksmanship between Alex Tsipras (and the Syriza party which controls the Greek government), and Angela Merkel, Chancellor of Germany (and the entire EU-IMF-ECB Troika structure). It's been a contest between the Troika's demands -- that further economic assistance from the EU will only come with additional Austerity measures -- and the Tsipras government's rejection of those terms as a continuation of Greece's untenable economic condition that began after the Crash of 2008.
You remember the Go-Go, "Lil' Boots" Bush years -- an expansion if the "finance sector", with aggressive lending, leveraging to the max, and no real government oversight. In America, that ended in a financial crisis at least as great as the Wall Street Crash of 1929. But it also ended with our government bailing out the Banksters. And that is exactly what happened in other European economies -- and most obviously in Greece.
To say it again, what's at issue is 267 Billion Euros in bailout loans, made by the EU to Greece after the 2008 crash forced their economy to implode. Most of those loans came through German banks. The Greeks can't meet further payments on the loans -- and the Syriza party's election victory was a bellwether of how ordinary Greeks felt about the austerity terms that came with those loans.
Yanis Varoufakis -- until yesterday, Greece's finance minister -- said today in a blog post (as noted by Barry Ritholtz in his Bloomberg News column) that " 'the Greek "bailouts" [after 2008] were exercises whose purpose was intentionally to transfer private losses onto the shoulders of the weakest Greeks, before being transferred to other European taxpayers.' "
(It's worth repeating that one of the most serious charges made against the Bush-era TARP program, and the Relief Act under then first-year President Obama, was that it turned private business losses -- the results of stupid, greedy decisions by a handful of men -- into public debt, to be borne by all Americans.
(And that was done in order to ensure that the Casino stayed open, that our Masters Of The Universe could remain BSD's, and be honored, and have Treats. Any number of Loyalists have said Hey, if the government didn't do that, the whole banking system would have collapsed! Everywhere! Game Over!! Others have said America's Investment Houses/Banks should have paid the price for their own greed and been allowed to fail, like any other business.)
Note: Ritholtz also mentions, "This astute (albeit little known) insight has been echoed by a small number of insightful analysts... [such as] Steve Randy Waldman. His take on the Greek bailouts includes an in-depth discussion of the [EU's financial assistance to Greece] as 'largely a bailout of European banks, initiated to prevent a wider banking crisis.' ".
A number of payments are due to the IMF/ECB in the month of July -- primarily interest payments on the bailouts, and on maturing Greek bonds. Tsipras was clear that it wasn't his government's intent to pull a "Grexit" -- Greece would remain a member of the EU and participate in the single-currency Euro; they just wanted to renegotiate and restructure the debt, curbing the austerity measures.
Through at least four rounds of negotiations in June, Merkel and the Troika said no. Greece had to accept its terms without reservation: More funding for your economy? You take more Austerity. If Greece refused, there would be no funding -- and that meant Greece would be forced to leave the EU, abandon the Euro, destabilize the European Union itself and potentially bring down the world economy.
This was a high-stakes gamble on the part of the EU's financial leadership, and Merkel -- and seemed an act of arrogance, even cruelty. They were willing to make life even harder for ordinary Greeks if it forced the Lefties to accept their demands, or leave office -- no doubt to be replaced by another Center-Right coalition that would humbly accept the Troika's terms.
Modern European politics are rarely played so openly at that level, and it backfired: Tsipras countered by calling for a referendum on the Troika's financing offer = Austerity Yes, or Austerity No. High Noon on the Acropolis.
That, too, was a high-stakes' gamble (Tsipras had said if the country voted to accept the Troika's terms, he would resign as Prime Minister and call for new elections). I think Merkel and company were surprised, but expected the Greek population would not only reject Tsipras' position but the Syriza party's coalition government as well.
That didn't happen. What will happen next? Well, we'll all get to see, won't we?
 |
| I Just Really Like This Graphic. |
The past several weeks have been an exercise in Brinksmanship between Alex Tsipras (and the Syriza party which controls the Greek government), and Angela Merkel, Chancellor of Germany (and the entire EU-IMF-ECB Troika structure). It's been a contest between the Troika's demands -- that further economic assistance from the EU will only come with additional Austerity measures -- and the Tsipras government's rejection of those terms as a continuation of Greece's untenable economic condition that began after the Crash of 2008.
You remember the Go-Go, "Lil' Boots" Bush years -- an expansion if the "finance sector", with aggressive lending, leveraging to the max, and no real government oversight. In America, that ended in a financial crisis at least as great as the Wall Street Crash of 1929. But it also ended with our government bailing out the Banksters. And that is exactly what happened in other European economies -- and most obviously in Greece.
To say it again, what's at issue is 267 Billion Euros in bailout loans, made by the EU to Greece after the 2008 crash forced their economy to implode. Most of those loans came through German banks. The Greeks can't meet further payments on the loans -- and the Syriza party's election victory was a bellwether of how ordinary Greeks felt about the austerity terms that came with those loans.
Yanis Varoufakis -- until yesterday, Greece's finance minister -- said today in a blog post (as noted by Barry Ritholtz in his Bloomberg News column) that " 'the Greek "bailouts" [after 2008] were exercises whose purpose was intentionally to transfer private losses onto the shoulders of the weakest Greeks, before being transferred to other European taxpayers.' "
(It's worth repeating that one of the most serious charges made against the Bush-era TARP program, and the Relief Act under then first-year President Obama, was that it turned private business losses -- the results of stupid, greedy decisions by a handful of men -- into public debt, to be borne by all Americans.
(And that was done in order to ensure that the Casino stayed open, that our Masters Of The Universe could remain BSD's, and be honored, and have Treats. Any number of Loyalists have said Hey, if the government didn't do that, the whole banking system would have collapsed! Everywhere! Game Over!! Others have said America's Investment Houses/Banks should have paid the price for their own greed and been allowed to fail, like any other business.)
Note: Ritholtz also mentions, "This astute (albeit little known) insight has been echoed by a small number of insightful analysts... [such as] Steve Randy Waldman. His take on the Greek bailouts includes an in-depth discussion of the [EU's financial assistance to Greece] as 'largely a bailout of European banks, initiated to prevent a wider banking crisis.' ".
 |
| House O' Cards: Primary Exposure To Greek Debt Rests With Five EU Core Economies |
Through at least four rounds of negotiations in June, Merkel and the Troika said no. Greece had to accept its terms without reservation: More funding for your economy? You take more Austerity. If Greece refused, there would be no funding -- and that meant Greece would be forced to leave the EU, abandon the Euro, destabilize the European Union itself and potentially bring down the world economy.
Last Tuesday, Greece defaulted on a $1.7 B interest payment on the original bailout loans to the Troika -- which responded by refusing to extend funding to Greek banks. The Tsipras government had no choice but to close the banks and impose capital controls: No more money could be transferred out of the country (some 2 Billion Euros had been moved out of Greece in the previous week); cash withdrawals at bank ATMs were limited to 60 Euros per account per day.[The Austerian's] story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice.But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.
This was a high-stakes gamble on the part of the EU's financial leadership, and Merkel -- and seemed an act of arrogance, even cruelty. They were willing to make life even harder for ordinary Greeks if it forced the Lefties to accept their demands, or leave office -- no doubt to be replaced by another Center-Right coalition that would humbly accept the Troika's terms.
Modern European politics are rarely played so openly at that level, and it backfired: Tsipras countered by calling for a referendum on the Troika's financing offer = Austerity Yes, or Austerity No. High Noon on the Acropolis.
That, too, was a high-stakes' gamble (Tsipras had said if the country voted to accept the Troika's terms, he would resign as Prime Minister and call for new elections). I think Merkel and company were surprised, but expected the Greek population would not only reject Tsipras' position but the Syriza party's coalition government as well.
That didn't happen. What will happen next? Well, we'll all get to see, won't we?
_____________________________________________________
Und Mehr, bei Herr Krugman:
A “yes” vote in Greece would have condemned the country to years more of suffering under policies that haven’t worked and in fact, given the arithmetic, can’t work: austerity probably shrinks the economy faster than it reduces debt, so that all the suffering serves no purpose. The landslide victory of the “no” side offers at least a chance for an escape from this trap.But how can such an escape be managed? Is there any way for Greece to remain in the euro? And is this desirable in any case?The most immediate question involves Greek banks. In advance of the referendum, the European Central Bank cut off their access to additional funds, helping to precipitate panic and force the government to impose a bank holiday and capital controls. The [European] central bank now faces an awkward choice: if it resumes normal financing it will as much as admit that the previous freeze was political, but if it doesn’t it will effectively force Greece into introducing a new currency.Specifically, if the money doesn’t start flowing from Frankfurt (the headquarters of the central bank), Greece will have no choice but to start paying wages and pensions with i.o.u.s, which will de facto be a parallel currency — and which might soon turn into the new drachma.Suppose, on the other hand, that the central bank does resume normal lending, and the banking crisis eases. That still leaves the question of how to restore economic growth.In the failed negotiations that led up to Sunday’s referendum, the central sticking point was Greece’s demand for permanent debt relief, to remove the cloud hanging over its economy. The troika — the institutions representing creditor interests — refused, even though we now know that one member of the troika, the International Monetary Fund, had concluded independently that Greece’s debt cannot be paid. But will they reconsider now that the attempt to drive the governing leftist coalition from office has failed?
No comments:
Post a Comment