Thoughts on Greece 60


Greece’s debt renegotiation talks seem to have been rumbling on forever. Today we have a “crisis” as talks break down. That is the nth time this year, and it is easy to pall.

I have not blogged about it much because it is an issue of such complexity that attempting to characterise it in a short article invariably involves trivialisation. It is also difficult to dive into a debate which has polarised into two distinct sides which are both horribly wrong.

I have witnessed IMF prescriptions in developing countries which have had abysmal results. Forcing African countries to break up their electricity utilities between producers and distributors in order to favour private electricity producers, has been an absolute disaster. It has simply meant that disproportionate percentages of electricity revenue – and effective tax subsidy of electricity prices for the majority population – has been diverted into the capacious pockets of international financiers and bankers. I have no doubt the result has been less electricity generated. I don’t even want to discuss the IMF’s immoral insistence that in Africa the very poor have to pay for clean drinking water.

The IMF’s attempt to insist that Greece privatises ports and railways is just plain wrong. It will not help the Greek economy, it is pure dogma and aimed at delivering Greece’s national assets into the hands of speculators and more financiers and bankers.

And yet we must not get starry-eyed about Greece. Greece should never have been admitted to the Euro in the first place. It very plainly met none of the convergence criteria, hidden by a number of risible accounting fixes. I do in fact have a great deal of common ground and agreement with the idealists who have driven forward the European project. But their idea that European momentum will eventually overcome all obstacles, and the detail is not important, has come back to bite them. We see it with Greece’s admission to the Euro. I predict we will see more problems in the next few years arising from the admission of Romania and Bulgaria to the EU itself when they very plainly did not meet the acquis communitaire. These examples relate to separate institutions – the Euro and the EU – but were indicative of the same “expansion at all costs” attitude.

We should not pretend that Greece is or was a socialist paradise. It has been a very corrupt country with elite tax impunity and a focus for money laundering for decades. Membership of the euro did indeed lead to lifestyle subsidy by the German taxpayer, there is no point pretending it didn’t. It also led to Greece being internationally uncompetitive.

My own view is that it would be much the best solution for Greece to default, exit the Euro and then negotiate a debt write-off of approximately 60% based on repudiation. It is a complete nonsense to pretend that after default Greece would never be able to function or indeed to borrow again. Bankers will always be on the lookout to make money, and the massive risk premium will last about two years, if that. There will quickly be those prepared to go against the market and argue that a Greece minus a mountain of repudiated debt is actually less of a risk.

Greece will be able to benefit from a realistic currency enhancing competitiveness. There will be pain but it will be their own pain, not enforced by gauleiters. They won’t have to sell their national assets, and the pensions they pay in their own currency will be their own business.

If a few irresponsible international banks go bust that will finally perhaps pound some sense into the international financial system about irresponsible lending. The most important thing is that never again is taxpayer money thrown at the bankers to maintain their corrupt lifestyle and socially irresponsible business practices.

The Euro will survive. In fact, I predict the value of the Euro will suffer very little negative effect, and the problems within the Euro from Greek exit will be isolated much more speedily and effectively than is generally believed. The demise of the Euro has been predicted for years, but it is in fact the strong currency of the world’s largest economy. It will still be so.


60 thoughts on “Thoughts on Greece

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  • Ba'al Zevul

    Overall, in financial terms, Greece is actually in better condition than the UK.

    I’ll buy that. But it is important to the ‘stability’* of our wonderful markets and Mr Osborne’s credibility that I pretend I don’t.

    *ie dividend-creating capacity of a chaotic system which is actually and in hard fact uncontrollable.

  • giyane

    OK I declare Peace. There was no decent response to Craig’s piece about Lords Carlile and Janner except simply to wish that the noble Peer faced justice in court for the crimes he was accused of. That would have given any potential victims some solace unless he had unfairly got off. The troll-twain were off on another planet.

    From now, I’ll stop rubbing their noses in it ( because in reality they are too stupid to be educated ).

  • MJ

    “I have not blogged about it much because it is an issue of such complexity that attempting to characterise it in a short article invariably involves trivialisation”

    It also involves taking a long hard look at how the EU really works when the gloves are off. Those who still think the “European Project” is driven by idealists may find this an uncomfortable exercise.

    “It is a complete nonsense to pretend that after default Greece would never be able to function or indeed to borrow again”

    If Greece left the Euro, restored the drachma and maintained an independent central bank it would not need to borrow again. It could print its own currency rather than pay private banks to do so.

    “My own view is that it would be much the best solution for Greece to default”

    I think Greece should have defaulted first and then entered into negotiations. It would have had a much stronger hand.

  • Phil

    Bevin
    “Nor is Greece the only European country with these sorts of problems, which can only be laid at the feet of the populace in the sense that they failed to make a revolution and replace capitalism.”

    Carnyx
    “The Euro is abject disaster”

    Giyane
    “It’s a bit rich UK citizens telling Greece what to do.”

    I agree with these comments.

    Craig’s claim to be the reasonable middle ground is just more same old same old that tries to reframe a problem in favour of the elites. As if there were two coherent sides to take equal blame. As if the victims had any say whatsoever.

    Maybe Craig’s inability to identify with the genuinely powerless is a reflection of his own victim mentality. Does he really thinks he is the same boat as the poor and powerless?

  • nevermind

    Thanks for your ‘thoughts’ on this EU splitter. The issue is live and could harm Greece, as well as the EU, still.

    The IMF should/could start here in London, were the crisis and acute peril of the Greek economy is measurable by the lavish and extortionate real estate that is purchased by rich Greeks who now feel that their money is not safe in Switzerland anymore. But overuling Osborne and telling/sanctioning him to stop harboring tax dodgers from all over the world.

    Greek deposits in offshore tax havens such as London could have extinguished much of Greece’s debts and still lived comfortably on their assets.

    Trying to squeeze money out of shepherds and olive growers, now that the fruit markets to Russia has been sanctioned to nil, is indulging in fancy vodoo economics.

  • Mark Golding

    Comparing IMF demands to Greece and to Kiev is an interesting correlation and begs the question why the I.M.F. gangsters and its allies cannot get money to the Kiev government quickly enough.

    So why the difference? The answer of course is within Craig’s thoughts and conveyed in his words ‘immoral insistance’ -far too painful to expound.

    Furthest from the mind of the ventriloquist dummy Yatsenyuk is why the I.M.F., the E.U., the banksters et al. aren’t demanding that Kiev recover some of the roughly $1 trillion stolen over the past two decades, except that some of the thieves are central to the current illegal government one way or another. Even if they recovered 10 percent that would be three times the total public debt of $35 billion, of which they now want to force lenders and especially Ukrainians to swallow 50 percent.

  • Mary

    Do Strauss Kahn’s successor, Madame Lagarde, and her cohort want Greek blood? There is nothing more to give.

    ‘In the early hours of Friday morning, according to the British paper, the Daily Telegraph (DT), five key players in the Syriza government, meeting in the Maximus Mansion in Athens, took an important decision. They decided that the government would not pay the IMF its debt repayment instalment due that day. Apparently, the IMF’s Christine Lagarde was caught badly off guard. IMF officials in Washington were stunned.’
    [..]
    ‘The Syriza government has only been able to pay its government employees their wages and meet state pension outgoings by stopping all payments of bills to suppliers in the health service, schools and other public services. The result is that the government has managed to scrape together just enough funds to meet IMF and ECB repayments in the last few months, while hospitals have no medicines and equipment and schools have no books and materials; and doctors and teachers leave the country.’

    Ten minutes past midnight
    https://thenextrecession.wordpress.com/2015/06/06/ten-minutes-past-midnight/
    June 6 2015

    Here Gideon oversees a national debt of £1.5 trillion but hey! we have the printing press down at Threadneedle Street, so no worries chaps.

  • Ouzo

    As former foreign Minister Pangalos once said, to much abuse, “we all had our snouts in the trough”.

    The person you refer to is one of the most bigoted politicians in Greece and the reason the press still quotes him, after his “retirement” from politics, is testimony to the fact that they themselves are part of the rot that has brought Greece to this point.

    As for the man on the Athens omnibus they have no choice but to go along with the corruption the elite and their politicians has created.

    Imagine this:
    Your child (your mother, wife/husband, you yourself) need an emergency operation and in the overcrowded and understaffed hospital, the surgeon comes up and tells you that there is no way for the operation to go ahead in the foreseeable future:Huge queues!
    But,he hints (always indirectly!) that something can be done, if certain procedures are followed involving the infamous “envelope” (brown or any other colour).

    How do you react to this shameless blackmail?

    a)You beat the crap out of him?
    b)You call the police and report him?
    c)You pay (if you have the money) and have the operation?

  • willyrobinson

    Some observations about Greece:

    1. We hear about it every day, yet we never hear anything about arms, arms spending or debts outstanding for arms procurement. Austerity is only talked about in the context of education, health and pensions. Blame is only doled out for overspending on education, health and pensions. Recently Spanish online rightwing rag El Confidencial ran a piece about how Syriza hated Spain so much they were willing to procure clapped-out US military transports rather than state-of-the-art (partly made in Spain) European equivalents. http://www.elconfidencial.com/mundo/2015-04-14/grecia-se-gasto-200-millones-mas-con-tal-de-no-contratar-los-servicios-de-airbus-espana_758706/

    The article asks why more money is being spent on a supposedly lesser product, but the mind boggles that the green light is being given to any kind of defence spending of this nature at this time. Or that no journalists can be fucked writing about it.

    2. The EU and its institutions make a whole lot of noise every day, spinning how they’re doing all that can possibly be expected of them and more. Syriza either havent bothered fighting spin with spin, or else The Guardian and others are choosing not to pass on their message. I have no interest in engaging with this ‘spin-war’ but anyone can see it’s being lost by Syriza, and that public opinion must take the side of the EU no matter what outcome.

    3. Future generations may have difficulty understanding a Europe-wide bond-buying QE scheme that specifically excludes Greece. If we get Grexit followed by a total financial Fuxit, that’s one decision that for me will always be impossible to justify.

  • Simon

    I’m sorry but I’m sick of hearing that Greece should not have been let in to Europe. This springs to the lips of all those who want to sacrifice the real country for the fraudulent ideal. The problem was never the fact of their entry, but the inevitable, forseeable, foreseen “destabilising capital flow” that followed the creation of the euro.

    Tsipras and Varoufakis appear to be smart, honest and Greek, so I’m happy to leave to them the unenviable choice : to stay at the mercy of schauble and the IMF, or default and facing the vulture funds and an atavistic political culture. To begin with, their refusal to prepare or threaten the return to the drachma seemed to indicate their belief, mistaken, that Europe was a good-faith exercise. The longer they refuse to do this, the more we see how much they fear the atavistic politics.

    The bigger point is surely that half the euro countries could fall in to the same spiral. Finland is flatlining. France, Belgium, Ireland, Portugal, Spain, etc. With Germany, fully 8 years later, doing nothing about it’s trade surplus, and Europe completely refusing to force it, the mechanism becomes inexorable. Pressure on rates, coming from a recovering US, speeds things up.

    And all the while, the dangerous zealots who constructed this trap, who saw nothing coming, whose faith remains unshaken, use every crisis to ratchet through “more Europe”, taking time out only for the Free Trade agreement. Their inability to cop on will mean that the inevitable backlash, when it comes, is going to wipe away achievements that it would have been nice to keep. Cooperation between states, transparency in awarding public contracts, gender equality, free movement, who knows ?

  • Mattias

    Do you really think the Euro will survive long term if it turns out Greece makes a real recovery after leaving, while the countries that stay within the Euro continue with the current abysmal economic performance?

  • Geeks bearing grits

    [mods-cm-org – spam filtered at 10:04]

    Out of the €400b debt, half may be repaid by seizing the untaxed Greek funds stashed away in Swiss banks. If such UK deposits are anything to go by (Osborne has an arrangement with the Swiss to receive £500m annually being WHT on the undeclarable interest on such deposits), they could even be higher. Varofoukis must show some good intention by trying to recover the untaxed moneys, but then he also has to maintain the long tradition of Greek Finance Ministers !!

  • Salford Lad

    The “solutions” implemented by the IMF, ECB and EU politicians to solve an insolvency crisis created by too much debt have been to introduce austerity on the targeted Nation, Greece , while issuing trillions in debt, and protecting bankers and billionaires at all costs.
    Why anyone with an ounce of mathematical ability would think that driving your national debt to GDP ratio from 113% to 175% in the space of five years would solve a debt solvency dilemma, is beyond comprehension.
    But if your true purpose was to keep your insolvent banks from going bankrupt, protecting the rich and powerful vested interests, and refusing to accept the consequences of your reckless lending, than the “solutions” make perfect sense.
    This is just predatory loan-sharking/pawn broking on a humungus scale, with the intent of looting and plundering a Nation by means of privatisation and sell-off of its assets at fire –sale prices.
    The only means to repay a Sovereign debt is to create wealth in the particular country by investing in its productive industry. The surplus created ,services the debt while creating employment.
    QE issued to banks is money vanishing into a bottomless cess-pit of casino capitalism, there is no trickle down to create wealth or employment as the media propaganda tells us.
    REAL MONEY IS RELATED TO PRODUCTIVE LABOUR.
    That is why QE issued to the private sector banks has failed to revive any economy where it has been implemented but created stockmarket and commodity bubbles.
    The EU is exposed as a totalitarian bureaucracy , with the aim of stripping each country of its democratic freedoms, and by means of Financial monopoly of the Euro currency consigning the population to debt serfdom into perpetuity,
    Scotlands pursuit of Sovereignity and Independence will all be for nought should they shackle themselves to the Euro. A country is not free ,independent or sovereign unless it controls its own currency and uses it productively to generate employment and wealth.

  • Macky

    Habbabkuk (la vita è bella); “I am somewhat of an expert on what the Greeks themselves sometimes humorously call “the Greek reality” and on that basis find your latest excellent.”

    No, you are an obnoxious ignoramus, a charlatan, who can only dupe members of the Axis of the Dim & other assorted cerebrally challenged dimwits.

  • Mary's Nemesis

    Macky

    I see you’re not above a bit of plagiarism….of me, to boot! 🙂

    “The Egregiousness of Excellences” – “The Axis of the Dim”

    “and other Useful Idiots” – “ither assorted cerebrally challenged dimwits”.

    Must try harder, Macky!

  • eddie-g

    Arguably the biggest risk the European centre faces is this: if Greece exits the Euro, and follows the path many expect (instant devaluation, short-term pain, but before long, a rapid economic recovery), then that becomes a credible strategy for other peripheral European economies. And so the Greek drama will get replayed elsewhere.

    However, that may happen anyway.

    So whatever decisions are made in the next few weeks, they come with huge risks.

  • RobG

    Economics, ay. It’s a bit like snorting a line of coke, dropping a tab of acid and drinking a bottle of whiskey. Alternate realities.

    I’m amazed that the BBC still employs Peston, because most times he does actually speak the truth…

    According to the updated analysis, the UK’s total debts – the aggregate of household debt, business debt, banking or financial debt and government debt – was equivalent to 484% of GDP, or national output, towards the end of last year.

    Only Japan was more indebted, with debts equivalent to 514% of GDP, among a group of 10 rich large economies.

    22 April 2014
    http://www.bbc.com/news/business-27108059

    The UK is way, way more bankrupt than Greece, as the citizens of the UK will discover over the coming years, with massive cuts to public services.

    It’s all the fault of the immigrants, innit (cue the Daily Mail headline).

  • RobG

    @Salford Lad
    12 Jun, 2015 – 3:47 pm

    Whilst I take on board your points, I would add that in fact the Euro is the strongest currency in the world (because it’s used by the most powerful economic block in the world). Unfortunately, the markets operate more on confidence than fact. Hence, unbelievably, the US dollar is still touted as ‘the’ currency, despite the fact that the USA is completely, totally and utterly broke.

    The fact that the dollar still reigns supreme might have something to do with the fact that the USA has the largest military machine ever seen on this planet; many times larger than those of Russia and China combined.

  • lysias

    Some authors liken the “loans” other countries make to the U.S. with no hope of being repaid to tribute.

  • Phil

    The idea that the US or UK economies are set to collapse is ridiculous. To say they are “broke” is measuring them by their own meaningless voodoo.

    Recession is politics. It’s a robbery.

  • nevermind

    @ Matias, Greece is not Iceland. Greek corruption is one step ahead of ours, its open and part of societies fabric. I have worked in Greece to keep myself busy traveling through Europe in 1981, dispersing military brainwashing, I have seen, heard and spoke to Greeks debating the accession into the EU coming out of the Kafenion, the vast majority, the labouring class, was opposed to it and the big land owners fruit growers and shipping magnates already engaged in Europe were for it.

    I’d rather see Greece inside Europe, seeing a socialist Government expelling these excesses, their lavish pension arrangements of the public sector, the attitudes that say public sector is best and deserves perks.

    If such attitudes are rubbed out by Syriza, showing the captains of industry and Governments, hallo BAE and Mr. Osborne, what is important to people, dare I say the TTIP debate and uproar in Parliament already underlines such demands, then this might be a way of determining and eradicating our own forms of corruption. Jersey, Guernsey, London, Turks and Caicos, british Virgin Islands, Hong Kong,Singapore, Mauritius, Cayman Islands, Panama, Luxembourg, and Bermuda, the preferred home of captive insurance industries world wide, all these should be targeted by the IMF and international tax authorities so they have something to discuss at the next Bilderberg meeting.

  • Herbie

    “The idea that the US or UK economies are set to collapse is ridiculous. To say they are “broke” is measuring them by their own meaningless voodoo.

    Recession is politics. It’s a robbery.”

    Austerity is robbery, yes.

    The US and UK remain very wealthy, yes.

    But, their economies are broken.

  • Leonard Young

    The vast majority of Greek people are hardworking and resourceful. Hardly any of them had the slightest connection with the causes of mounting Greek national debt, which arose for the same reasons the massive debts of the UK and other Euro nations accrued: squandering public assets, shifting wealth to market manipulators and the already fabulously rich, and above all (just like the UK, Ireland, Spain etc)creating a fluff economy based on property speculation while ignoring vital infrastructure requirements and productive growth. In that regard I fail to see why Greece is being singled out as a failed economic state. There are important social and political reasons why Greek should stay as part of the EU and they trump ANY financial consideration. What Greece needs now is not the bully boys (and girls) of the IMF or Germany, but a sound and sensible re-investment in infrastructure. The UK avoided the same fate as Greece by the skin of its teeth and we are in no position to lecture.

  • PhilE

    It’s true that UK has large debts but at the moment we can afford to pay them. The Greeks can’t afford to pay theirs however they came by them. It’s difficult for UK to go bankrupt as having some control of our own currency we can QE to borrow and put up interest rates to pull cash in. The Greeks can’t because they were seduced by the vision of the euro trough. Cash is flowing into UK if only because there is a wall of global cash looking for a home in the coming financial crash. It is flowing out of Greece. Craig is right the Greeks will need to bite the bullet, default, bring back the drachma and work their way out. So it goes. Who knows what the next 50 years will bring: nobody.

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