Posts Tagged ‘Budget’

Zeno’s Endgame in Greece

Friday, April 17th, 2015

It’s appropriate that Zeno (the paradox Zeno) was Greek, since Greece appears to have entered Zeno’s Endgame. The country edges ever closer to default, without actually defaulting. Or without the Greek government actually ceasing to spend radically more money than it takes in, because the ruling left-wing Syriza Party would rather destroy the Greek economy than give up their bloated welfare state. Their latest plan is to raid pension funds to keep that welfare state going just a little longer. “This is the last bit of cash that the Greek state has.” “Honey, let’s cash in our 401K so we can buy some heroin!”

Sorry if this sounds like every other update on the Greek debt crisis over the last six years. It’s a vitally important story, which is why I keep covering it, but it’s also the story of a host of people making the same stupid, easily avoidable mistake again and again rather than making the hard choices necessary to deal with the problem.

A few other links of interest on the Greek debt endgame:

  • So Greece went hat-in-hand to the IMF: Can we put off making some debt repayments? IMF: (Laughs) Oh wait, you’re serious! Let me laugh harder!
  • Speaking of the IMF, this should be good for a laugh.
  • Greece’s phony baloney budget surplus disappears.
  • Looks like Greece’s creditors have finally reached the depression phase of the Kubler Ross grief cycle. “Greece’s international creditors signaled they are losing hope that Athens will do what is needed to unlock bailout funds before it runs out of money.” Do tell.
  • A timeline of Greece’s bills coming due. “Debt interest payments are piling up. It has to pay off an €80m interest bill to the European Central Bank (ECB) on 20 April and €200m to the International Monetary Fund (IMF) on 1 May. But the one that is stirring jitters around Europe is a €760m (£550m; $810m) interest payment to the IMF that is due on 12 May.”
  • Gameplanning a Grexit.
  • Tune in next week! Same bankrupt time! Same bankrupt channel!

    Texas vs. California Update for April 15, 2015

    Wednesday, April 15th, 2015

    Hope you’ve finished your taxes already! Time for another Texas vs. California update:

  • Detroit and Stockton’s bankruptcies may signal further problems nationwide, says New York Fed President William Dudley. “While these particular bankruptcy filings have captured a considerable amount of attention, and rightly so, they may foreshadow more widespread problems than what might be implied by current bond ratings.”
  • The Texas senate approves a $211.4 billion biannual budget, which will need to be reconciled with the $209.8 billion House budget. Both budgets offer tax relief, but of different kinds.
  • The senate also zero funds two rogue agencies the Texas Racing Commission and the Travis County Public Integrity Unit. Expect Texas House Speaker Joe Straus, with deep ties to the gambling industry, to go to the mat to save the Racing Commission.
  • The Texas senate has also passed signifcant spending limit reform in Senate Bill 9.
  • CalPERS raises contribution rates by 6%.
  • California senate OKs yet another restrictive energy policy bill. Yet another in their continuing “Let’s send as much business to Texas as possible” acts…
  • Los Angeles Unified School District extends lavish employee benefits package another three years, despite existing underfunded liabilities. (Hat tip: Pension Tsunami.)
  • California sets aside $261 million for cost overruns on its already pricey high speed rail boondoggle.
  • California’s drought is something environmentalist liberal elites have brought on themselves: “Those who did the most to cancel water projects and divert reservoir water to pursue their reactionary nineteenth-century dreams of a scenic, depopulated, and fish-friendly environment enjoy lifestyles predicated entirely on the fragile early twentieth-century water projects of the sort they now condemn.”
  • More on the same theme.
  • San Diego builds a desalinization plant (Hat tip: Moe Lane.)
  • Central California is already starting to suffer water-related thefts.
  • In the wake of the Vergara ruling, California Republicans want to overhaul how teachers are hired and fired. Naturally teacher’s unions are opposed…
  • Judge rules that California must pay for sex change operations for prisoners on Eight Amendment grounds. “To contend that ‘forcing’ a prisoner to continue as a man violates the Constitution is absurd…It is nonsensical to grant imprisoned convicted felons health-care ‘entitlements’ that many law-abiding, hardworking taxpayers don’t enjoy.”
  • California prostitutes demand prostitution be legalized. You’d think they’d get a sympathetic hearing from California’s Democrat-controlled legislation, what with all they have in common… (Hat tip: Instapundit.)
  • Stanford student council candidate grilled over Colleging While Jewish. This could go in the regular LinkSwarm, but I noticed that both of these recent incidents took place in California.
  • Greece Buys Time By…Buying Their Own Debt?

    Wednesday, April 8th, 2015

    Although Greece was slated to run out of cash on April 9, they seem to have “scraped together enough cash to meet the I.M.F. payment, in part by extracting liquidity from quasi state entities.”

    One of the ways they did that was raising 1.1 billion Euros from bonds, all sold to domestic investors. And who would some of those “domestic investors” be? Would you believe Greek banks?

    These short-term bonds, which have been issued by the country’s largest banks and carry the guarantee of the Greek government, are not being sold to foreign investors. They are being issued to the only entity that would dare buy them: themselves.

    In the last four months, some of Greece’s largest banks, including Piraeus, Alpha and Eurobank — have self-issued more than 13 billion euros’ worth, or $14.3 billion, of these government-guaranteed bonds.

    Wounded by vanishing deposits and bad loans, Greek bank bonds are about as toxic an investment as can be found. The banks are on life support via an emergency lending program overseen by the European Central Bank, via which they have access to short-term loans from their own central bank.

    But to secure this credit line, about €71 billion (more than half the deposits outstanding in Greece), these banks need to provide collateral to the Greek central bank.

    In essence, what Syrizia has done is carried out a similar maneuver to that the EU insiders have been carrying out since the European Debt Crisis broke: Dumping their bad bonds onto taxpayer-funded entities. But the problem for Greece is that their maneuver is like a Ponzi scheme that depends on getting more funds from people already in the Ponzi scheme.

    That doesn’t strike me as a sustainable model.

    No wonder Greece is drawing up plans to nationalize banks (rather than, of course, stop spending money they don’t have). That’s rather like selling your seed corn to buy heroin. (That piece also notes that “Greece spends a larger portion of its GDP — 17.5 percent — on pensions than any other country in Europe.”)

    Hell, even recently bankrupt Cyprus is saying that Greece is screwed unless they implement actual reform. As opposed to Syriza’s current “reform” proposals, which include “no wage or pension cuts.”

    Oh, and they’re flogging reparations from Germany yet again. Because it worked so well the last five times they floated the idea.

    But Greek Prime Minister Alexis Tsipras seems to have only the faintest grasp of reality as it is:

    Consider the case of a household whose members chronically live beyond their means. They have no savings and their bank account is constantly in overdraft. Rather than cutting back, they obtain multiple credit cards by hiding their true financial situation, but those credit cards are soon maxed out. In desperation, they turn to financially responsible cousins to help them through, again hiding the true scale of their spendthrift ways. Finally, the family defaults on its loans, triggering loss of home, car and other possessions. But instead of recognizing that they were the architects of their own misfortune, they consider themselves victims of the mortgage, car loan and credit card companies. And they even vilify their generous relatives for refusing to lend more money.

    Greece’s problems have not been caused by austerity, but by decades of irresponsible spending and corrupt behaviour. Expecting that a debt problem will be solved by more debt simply defies common sense and reality. Believing this myth will only make the debt hole that Greeks have dug themselves even deeper, and the challenges of climbing back out ever more unlikely.

    Chicago Is Detroit Is California Is Greece

    Sunday, April 5th, 2015

    National Journal has a piece up by moderate lefty John B. Judis on all the problems plaguing Chicago.

    Perhaps more than any other major city in America, Chicago is facing a truly grave set of problems—problems that are essentially more extreme versions of the challenges confronting city governments across the country.

    But there’s a vital piece of information omitted from that sentence: “problems that are essentially more extreme versions of the challenges confronting city governments across the country run by the Democratic Party.” Though Republican cities are not immune to such problems, make no mistake that the very worst examples are cities run by the Democratic Party, most for a very long time (Detroit hasn’t had a Republican Mayor since 1962, Chicago since 1931), and most are in states with solid (if not overwhelming) Democratic Party majorities.

    The failure of America’s bankrupt cities is a microcosm of the failure of the Blue model of big government liberalism. And the reason I have spent so much time on covering California and Greece is that they are part of the same story: The failure of American liberalism is a microcosm of the bankruptcy of the welfare state, and the bankruptcy of the welfare state is a subset of the failure of socialism.

    The quandaries begin with Chicago’s dramatic social divide. To an even greater extent than is the case in, say, New York or Philadelphia, Chicago has become two entirely separate cities. One is a bustling metropolis that includes the Loop, Michigan Avenue’s Magnificent Mile, and the Gold Coast, as well as the city’s well-to-do, working-class, and upwardly mobile immigrant neighborhoods. The other Chicago consists of impoverished neighborhoods on the far South and West Sides, primarily populated by African-Americans. These places have remained beyond the reach of the city’s recovery from the Great Recession.

    As we have known since Charles Murray’s Losing Ground in 1984, welfare programs don’t lift the poor out of poverty, but keep them ensnared in it. Indeed, a cynic might observe that welfare programs are designed to create a voting clientele for the welfare state and the liberal party that runs it.

    The problem, as Mark Steyn put it, is that “the 20th century Bismarckian welfare state has run out of people to stick it to. In America, the feckless insatiable boobs in Washington, Sacramento, Albany and elsewhere are screwing over our kids and grandkids. In Europe, they’ve reached the next stage in social democratic evolution: There are no kids or grandkids to screw over.”

    As Steyn further noted:

    A government big enough to give you everything you want isn’t big enough to get you to give any of it back. That’s the point Greece is at. Its socialist government has been forced into supporting a package of austerity measures. The Greek people’s response is: Nuts to that. Public sector workers have succeeded in redefining time itself: Every year, they receive 14 monthly payments. You do the math. And for about seven months’ work – for many of them the workday ends at 2:30 p.m. When they retire, they get 14 monthly pension payments. In other words: Economic reality is not my problem. I want my benefits. And, if it bankrupts the entire state a generation from now, who cares as long as they keep the checks coming until I croak?

    The story of Detroit’s current bankruptcy is the story of Chicago’s coming bankruptcy, and the similar problems of California. All are dealing with bloated public sector pensions that are making their cities insolvent. All promised and spent money they didn’t have against their decedents, not realizing (or not caring) that the debt burden will ruin the worlds of those decedents before they could ever pay it off.

    The theme with all is that deficit spending destroys, and the only cure is to force governments to pare back the welfare state and stop spending money they don’t have. As the example of Greece shows, there reaches a point in welfare state dependency at which actually curtailing welfare state spending, even at the point of financial ruin, is politically impossible. The looting of the public treasury cannot be stopped because that looting is the only thing that holds left-wing coalitions in power anymore.

    One of the many reasons the Tea Party exists is to hold American politician’s collective feet to the fire to make sure the terminal phase of the welfare state Greece is now enjoying never gets that bad in America. (To this end, they’ve had the tiniest little glimmer of success.)

    Chicago is Detroit is California is Greece is, eventually, America. It’s all part of the same story, and one any voting public ignores at its peril.

    (Hat tip: Instapundit.)

    Texas vs. California Update for March 26, 2015

    Thursday, March 26th, 2015

    Time for another Texas vs. California roundup:

  • Forget all those snide liberal cracks about Texas’ public education system, since we have some of the highest graduation rates in the country.

  • “San Bernardino has defaulted on nearly $10 million in payments on its privately placed pension bond debt since it declared bankruptcy in 2012.”

    The missed payments illustrate the trend among cities in bankruptcy to favor payments to pension funds over bondholder obligations, which has increased the hostility between creditors and municipalities.

    San Bernardino declared last year that it intends under its bankruptcy exit plan to fully pay Calpers, its biggest creditor and America’s largest public pension fund with assets of $300 billion.

    The city continues to pay its monthly dues to Calpers in full, but has paid nothing to its bondholders for nearly three years, according to the interest payment schedule on roughly $50 million of pension obligation bonds issued by San Bernardino in 2005.

    If you’re a bank, a retirement fund, or a hedge fund, why on earth would you buy California municipal debt when there are safer alternatives? (Hat tip: Ace of Spades HQ Doom roundup.)

  • So how’s that San Francisco minimum wage law working out? Exactly like everyone who understands economics expected. “Some restaurants and grocery stores in Oakland’s Chinatown have closed after the city’s minimum wage was raised. Other small businesses there are not sure they are going to survive, since many depend on a thin profit margin and a high volume of sales.” Plus this: “Low-income minorities are often hardest hit by the unemployment that follows in the wake of minimum wage laws. The last year when the black unemployment rate was lower than the white unemployment rate was 1930, the last year before there was a federal minimum wage law.”
  • California’s Legislative Analyst’s Office suggests phasing out state health care for workers entirely.
  • California is dead last in spending transparency among the 50 states, with an F rating and a piddling score of 34. Texas ranks 13th with an A- and a score of 91. (Hat tip: Cal Watchdog.)
  • “North Texas gained an average of 360 net people per day from July 2013 to July 2014, a testament to the job-creating machine in the Lone Star state, according to the U.S. Census Bureau…North Texas and Houston were the only metropolitan areas to add more than 100,000 people during that one-year period.”
  • Just because California has some of the highest taxes in the nation doesn’t mean that the state’s Democratic legislature doesn’t want to add still more.
  • Meanwhile, the Texas Senate just passed a $4.6 billion tax cut.
  • California is rolling out more subsidies for Hollywood.
  • The Los Angeles Department of Water and Power not only has the highest employe costs in the country, it also ranks last in customer satisfaction. (Hat tip: Pension Tsunami.)
  • While Texas is certainly in much better shape than California on public employee pensions, things here are not entirely cloudless either. “The Texas Employee Retirement System is reporting unfunded liability of $14.5 billion in 2014, compared with liability of just $6.3 billion in 2013. By comparison, all of the state government’s general obligation debt as of 2013 was $15.3 billion. The Texas Law Enforcement and Custodial Officer Supplemental Retirement Plan is reporting unfunded liability of $673.1 million in 2014, compared with $306.7 million in 2013.”
  • Unlike California, Texas looks to get ahead of the curve on pension concerns with House Bill 2608, which restores control of pension funds to the local level by eliminating legislative approval for pension changes. I”nstead of locking up significant benefits in state statute, HB 2608 would allow city pension systems, like the Houston Firefighters’ Relief & Retirement Fund, to solve pension problems at the local level by changing benefit structures, if they so chose.”
  • “Support for the “bullet train” is ebbing across California, except, perhaps, in the Governor’s mansion.”
  • California raisin packer West Coast Growers files for Chapter 11.
  • American Spectrum Realty, a real estate investment management company that operates self-storage facilities under the 1st American Storage brand, has somehow managed to file for bankruptcy in both California and Texas. I think it’s safe to say that financial shenanigans are involved…
  • Lawsuit over misappropriated funds in a Napa Valley winery leads to a murder/suicide. It’s one of those stories that sounds too strange not to link to…
  • Eurocrat Summarizes Greek Problem

    Monday, March 23rd, 2015

    Sure, Jose Manuel Barroso, the former president of the European Commission, is a self-interested Eurocrat, but here he provides a nicely concise statement of the obvious concerning Greece’s problems

    Greece’s problems can be laid at its own door and the country needs to provide a clear commitment to reform to reach an agreement with its creditors, Jose Manuel Barroso, the former president of the European Commission, told investors in Hong Kong.

    “The Greek people went through extremely difficult moments, hardship. But these difficulties of Greece were not provoked by Europe,” Barroso said in an address at the Credit Suisse Asian Investment Conference in Hong Kong.

    “It was provoked by the irresponsible behavior of the Greek government.”

    “The situation of Greece is the result of unsustainable debt that was created by the Greek government, mismanagement of their public finances, huge problems with tax evasion and tax fraud [and] problems of the administration,” he said, noting that the country had also misled the European Union by filing false figures on its economy.

    A nice statement of the problem. To which I can only add: And Greece continues to compound the problem, because it refuses to reduce government spending to match receipts. And it refuses to do because it’s welfare state is unsustainable.

    All this talk of bailouts, relief, reparations, agreements and grexits is just filigree on the essential problem: Greece’s government spends more money than it takes in and refuses to change its ways.

    Greece: Turning and Turning in a Narrowing Gyre

    Thursday, March 19th, 2015

    It appears we may finally be reaching the endgame of the endgame on Greece.

    Greece is suffering a bank run and owes just over $2 billion in debt payments due Friday, but shows no signs of having the money or meeting the Troika’s conditions for obtaining more. Quite the opposite. Greece’s left-wing Syriza government is increasingly acting like an erratic heroin addict refusing to check into rehab and howling through the streets at night in search of an angry fix, heedless that there’s an arrest warrant out in his name.

    “The International Monetary Fund, one of Greece’s main three creditors, was reported to have called Greece ‘the most unhelpful client’ the Fund has dealt with in their 70-year history.”

    “During the teleconference, the Greek representative said his government wasn’t prepared to talk about the country’s finances with technical experts and instead wanted European Union leaders to discuss the issue at a summit in Brussels, one of the European officials said.”

    I’m sure telling your bank that you’re “not prepared to discuss my finances” when asking for your fifth bridge loan would go over really well.

    Also this: “There was a general feeling that the Greek side is completely out of touch with reality.”

    You think? How about the fact that Greek parliament just passed a raft of anti-austerity spending measure, which is rather like a man with stage 4 lung cancer lighting up a couple of stogies in route to the operating room.

    Some are wondering if Syriza wants to see Greece kicked out of the Euro.

    EU institutions seem far more ready for what lies ahead. “The European Central Bank (ECB) is preparing for a possible Greek exit from the euro zone.” Conversely, EU insiders have also floated the idea of imposing capital controls to prevent Greece from leaving the euro.

    And the one person whose opinion matters the most? “German Chancellor Angela Merkel said Thursday that Greece has no choice but to carry out economic reforms if it wants to receive more financial aid, dashing any hopes Athens might have had for a softening in Berlin’s stance.”

    Carrying out real reforms (like stop spending more money than the government takes in) is what Greece in general, and Syriza in specific, has steadfastly refused to do. And the reason they refused is that the European cradle-to-grave welfare state has become more sacred to voters than the capitalist economics and fiscal discipline necessary to support it.

    This is not a recipe for happiness.

    There’s a chance that all of this is posturing on both sides, and that a kabuki compromise involving small reforms in exchange for still more loan extensions may yet kick the can a few more feet down the road. But there is every sign that EU institutions have finally tired of Greece’s show, and are willing to see the final curtain drop. And the Greeks are about to learn that the vengeance of the gods of the copybook headings cannot be delayed indefinitely…

    Groundhog Day on the Aegean

    Monday, February 23rd, 2015

    Greece two weeks ago: “We will not negotiate this people’s pride and dignity.”

    Greece today: “Yes, Master! We’d love to grovel some more if you continue tossing pennies into our cup!”

    “As far as we can tell, the Greek government hasn’t achieved even a single one of its aims so far. The bailout was extended by four months, but in spite of a few cosmetic changes to the wording accompanying it (e.g. the ‘troika’ has been renamed ‘the institutions’), it is still precisely the same bailout agreement as before.”

    This is an event completely unforeseen by everyone except anyone paying the slightest bit of attention to previous installments of Greek Bailout Kabuki. For all the bluster, it’s not like Greece had many options other than to get down on all fours and really lick boot, since it was slated to run out of cash tomorrow.

    Naturally anyone who was foolish enough to believe Syriza’s promises (the technical term for such people is “rubes”) is hopping mad. “It’s as if [Greek PM Alexis] Tsipras, [Greek Finance Minister Yanis] Varoufakis and the others are telling me: ‘We believe that you are stupid…and you will believe whatever lie we tell you.’” The fact Syriza was elected at all is pretty much testament to the well-grounded accuracy that belief. That, and, oh, every single piece of news out of Greece since the Euro debt crisis struck, as long as that lie involved Greece continuing to spend money like drunken sailors with a stolen credit card and never having to pay their debts back.

    The open secret, of course, is that Greece will never repay its debt. “We have to be realistic here. Greek debt is now 175 percent of gross domestic product (GDP); it’s higher than it was when this whole business first started.” (Well, by one measure. Another puts Greek debt at 317% of GDP.) Yeah, that’s what happens when you continue to run huge deficits even under your “austerity” budgets.

    As I previously wrote:

    I’m sure Syriza would love to implement their pie-in-the-sky big spending socialism, but their real goal is to lie to the Greek people long enough for the EU to write at least one more check, and lie to the EU about implementing reform long enough to cash it. Since Syriza only recently came to power, they probably want keep the farce rolling long enough to feather their own nests with Euros before engineering a grexit. After all, center-right parties got their turns at the public graft trough; why not the far left?

    And back on December 29 I wrote:

    So we’ll see another election, and if Syriza wins we’ll see another round of demands for more bailouts and debt writedowns, with Greece threatening yet again to exit the Euro. We’ve seen this movie before. The most likely outcome is that another cabal of EU-phillic insiders in the Greek government will engineer a last-minute cave-in to demands from Brussels and Frankfurt, ram another toothless austerity measure through parliament in exchange for still more credit (and perhaps even a small symbolic measure of debt forgiveness), dissolve the government again following the inevitable public outrage, then have the Greek bureaucracy ignore even those woefully inadequate reforms, setting the stage for the farce to repeat itself in another 12-18 months, or until mean old Aunt Angela finally cuts up the credit card.

    Behold The Amazing Person’s uncanny powers of prophecy! Like Groundhog Day, it’s gotten remarkably easy to predict exactly what’s going to happen. Different people may occupy the Prime Minister’s office, but all them invariably wake up to the political equivalent of Sonny & Cher singing “I Got You Babe.”

    It looks like the only I thing I was off on was the piddling four month extension rather than twelve, and the fact that Syriza didn’t even get the tiny fig-leaf of symbolic debt reduction. I guess that request for reparations from Germany rubbed Angela Merkel the wrong way. Too bad Greek PM Alexis Tsipras failed to heed Basil Fawlty’s eminently sensible advice…

    Highlights from Governor Abbott’s State of the State Address

    Wednesday, February 18th, 2015

    Texas Governor Greg Abbott gave his State of the State address yesterday, and there’s plenty to talk about. Some highlights:

  • “Last week, Comptroller Hegar reported that sales tax revenue in January increased by 11 percent, surging to an all-time record. It’s the 58th consecutive month of year-over-year sales tax growth.”
  • “But the best way to create more jobs is to permanently reduce the business franchise tax.I will reject any budget that does not include genuine tax relief to Texas employers and job creators. I will also insist on property tax reduction. It’s time for property owners – not government – to truly own their property. My plan calls for a $2 billion reduction in the business franchise tax and a $2.2 billion reduction in the property tax burden.”
  • “To keep Texas the premiere model for opportunity, we must constrain the size of government and maximize the liberty of individuals. To protect taxpayers from government growing too big, we need a constitutional amendment that limits the growth of the state budget to population growth plus inflation.”
  • “To keep Texas the premiere model for opportunity, we must constrain the size of government and maximize the liberty of individuals. To protect taxpayers from government growing too big, we need a constitutional amendment that limits the growth of the state budget to population growth plus inflation.”
  • “Many of us have ridiculed states like California and Illinois as bastions of failed big government. You’ll be surprised to learn that Texas has more full-time state employees per capita than California and Illinois. That’s shocking – it must be changed. That’s why my budget requires most state agencies to reduce their general revenue spending by three percent.”
  • “I will expand liberty in Texas by signing a law that makes Texas the 45th state to allow Open Carry.”
  • So far it seems that Abbott is serious about governing as he campaigned…

    Greece Declares Independence From Reality

    Monday, February 9th, 2015

    Newly installed Greek Prime Minister Alexis Tsipras gave a speech in which he basically declared “Screw your stupid economic reality! We’re still giving everyone a free unicorn!”

    Remember that Greece is not just broke, but deeply in debt, has a declining economy, only a few weeks of money left, and the specter of a possible bank run for of people wanting to get ahead of a Euro-exit.

    So naturally Tsipras is promising Greeks a T-bone in every pot.

    “Syriza’s pledges to the electorate include a freeze on pension cuts, a property tax overhaul, free electricity to those who have been cut off, reinstating jobs and raising the minimum wage.”

    “‘The (bailout deal) has been abolished by popular mandate,’ Tsipras said. I’d love to see someone try that “abolished by popular mandate” as a reason to stop making their car payments.

    “We will not negotiate this people’s pride and dignity.” Yes, because spendthrift wastrels can have all the pride and dignity they can eat.

    The EU is is not amused. How can they, when Syriza’s policies seem completely disconnected from reality?

    In a lengthy list of policy actions, Tsipras also said the government plans to restore the tax-free threshold for individual workers to 12,000 euros a year and gradually raise the minimum wage to 751 euros a month through 2016. Both measures would breach the conditions of the bailout.

    Tsipras said he’s committed to maintaining balanced budgets and wants to negotiate terms that will make Greece’s debt sustainable.

    That’s like saying “I’m absolutely committed to eating eating a 72 oz steak every day, and to losing weight!”

    Oh, and he’s also demanding reparations from Germany for World War II. Good luck with that.

    Is Tsipras really that disconnected from reality? Well, he is a far-leftist (which in the context of Europe and Greece means that he probably makes Obama look like Dick Cheney). But a little further down in that Bloomberg piece, you get this:

    Behind the public rhetoric, the Greek government has shifted to a more cooperative tone in recent conversations with the troika, according to an official representing the creditors. Greece has been told it needs to ask for a formal extension of its existing bailout deal in order to receive financing, said the official, who asked not to be named because the discussions are private.

    It’s probably your classic “Clevon Little holding a gun to his own head” bluff. I’m sure Syriza would love to implement their pie-in-the-sky big spending socialism, but their real goal is to lie to the Greek people long enough for the EU to write at least one more check, and lie to the EU about implementing reform long enough to cash it. Since Syriza only recently came to power, they probably want keep the farce rolling long enough to feather their own nests with Euros before engineering a grexit. After all, center-right parties got their turns at the public graft trough; why not the far left?

    Will the EU call their bluff? The whole purpose of the bailout regime was for insiders and bankers to dump their exposure to Greek default onto the taxpayer, something that’s largely been accomplished. These days I suspect very few of Europe’s banks hold much Greek debt (some of whcih may have ended up in various pension funds, where unrealistic promises and chronic underfunding may force managers to chase extremely risky bonds for the high yields). A grexit would put an economic hurt on Europe, but probably not one that would last terribly deep or long. A Greek economic collapse following leaving the Euro would be terrible for Greece, but would probably prod the other PIIGS into continuing to get their economic houses into something resembling order.

    How bad would a grexit be for Greece? Really, really, really bad. The modern European cradle-to-grave welfare state is unsustainable, and attempts to keep the goodies flowing even after the state is bankrupt will ruin more than one nation. It’s just that Greece managed to get there first.

    The farce is going to end very, very badly for average Greeks, but it always was. The only question is just how many bodies will be on the floor at the end of the final act…