Posts Tagged ‘Euro’

Greece Shuffles Deck Chairs

Tuesday, April 28th, 2015

Greek Finance Minister Yanis Varoufakis has been demoted, evidently because the EuroCrats he was negotiating with hated his guts (a significant drawback when you’re trying to convince creditors to pour more money down the rathole that is the Greek economy).

Will it make any difference to debt negotiations? Maybe, maybe not. It depends on which of two reasons he was fired for:

Option 1.) Varoufakis was the designated Bad Cop in negotiations, and now he’s the symbolic sacrifice. “Golly, that Varoufakis guy was sure a jerk when he asked you to give us more loans without getting any reform in return! Now that I’m here as Mr. Good Cop instead, I’m sure you’ll give us give us more loans without getting any reform in return because we’re asking really, really nicely.”

Option 2.) A lightbulb (or at least a dim, flickering candle) has finally gone off above the heads of the ruling far-left Syrizia Party that they will, in fact, actually have to implement real reforms if they want to shake more dough out of Mean Aunt Angela, and that implementing reform will only mean they’re really boned, while defaulting and leaving the Euro would mean they would be completely and utterly boned.

Arguing for Option 2 is Reality and Logic, which have had very little to do with Syriza policy heretofore. Arguing against it is every single action of the Greek ruling class over the last five years. Best case, probably-too-optimistic scenario is that they’re going to try the God Cop Con first, then, when it fails (and it will), they may actually be dragged kicking and screaming to Option 2. Or at least appear to do so as part of the extend and pretend strategy that has characterized the entire Greek debt crisis since the beginning.

None of it changes the underlying problem: The Greek welfare state is unsustainable, they’ve run out of other people’s money to pay for it, and they refuse to reform it, even at the point of impending national bankruptcy.

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…

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…

Greece’s Insoluble Problem

Thursday, February 5th, 2015

Greece’s left-wing Syriza party was swept into power by promising voters they could have their cake and eat it too. The problem is that not only is there no cake to eat, but Greek already owes more money than it can repay on all the cake they’ve already eaten.

The European Central Bank announced that it will no longer accept junk-rated Greek bonds as collateral. That may be why Greece’s new finance minister is already backtracking on election promises:

His party, Syriza, told voters it would demand a debt reduction; now Mr. [Yanis] Varoufakis says it will settle for a debt restructuring. Syriza said it would end austerity; Mr. Varoufakis now says he will run a primary budget surplus even if that means dropping other commitments in the party’s campaign manifesto.

Will Syriza keep promises made to the EU and the ECB any more than they kept their promises to Greek voters? Of course not. Greece is addicted to excessive government spending the way a junkie is addicted to heroin. In this sense, Syriza’s willingness to shamelessly lie to both voters and Eurocrats is what makes them the embodiment of modern Greece.

Running an actual budget surplus, as Varoufakis is almost pledging, would go a long way toward solving Greece’s problems. (My understanding is that he means Greece will have a budget surplus before debt payments are taken into account, which means they’ve really slowed down the rate at which they’re digging their own grave…) But neither Greece’s voters nor its ruling class want the nation to live within its means. As I have noted time and time again, Greece has never practiced real austerity, which is cutting government outlays to match receipts. Greece’s budget deficit was 12.2% of GDP in 2014. (If it seems like I repeat a lot of this information in many of my updates on Greece’s debt crisis, it’s because I do, mainly because MSM reports seem to omit mention of these centrally crucial facts…)

Greece’s participation in the Euro has harmed it by distorting its economy and making its export uncompetitive. That’s a problem, but that’s not Greece’s central problem, which is a dogged unwillingness to live within its means. It’s that addiction to deficit spending that has Syriza talking of defaulting on its debts. And it’s addicted to deficit spending because the modern European cradle-to-grave welfare state is unsustainable.

But here’s the kicker: Neither leaving the Euro nor defaulting solves Greece’s central problem, or even provides temporary relief.

Leaving the Euro doesn’t solve the problem, because Greece’s debts will still be denominated in Euros. Creditors who hold Greek debt won’t be content to be paid in devalued drachmas, so Greece will still be on the hook for what they’ve already spent.

Defaulting will only make their predicament worse, because then no one will be willing to lend Greece money to continue their ruinous deficit spending.

Doing both and printing drachmas to continue spending will only result in hyperinflation. The Greeks can ask Venezuela how that’s working out for them.

If any Greek political party pledged to undertake real reform, reign in the Greek welfare state and end deficit spending, it’s escaped my attention. I suspect Greeks will have to experience a lot more economic pain, and no small measure of ruin, before undertaking the only obvious path to fiscal stability.

Greece Inches Closer to the Endgame

Monday, December 29th, 2014

Just because the European Debt Crisis hasn’t been in the headlines much as of late doesn’t mean it’s gone away.

Greece’s government has fallen again and they’ll be holding general elections next month. “Opinion polls point to a victory by the radical leftist Syriza party, which wants to wipe out a big part of Greece’s debt, and cancel the terms of a bailout from the European Union and International Monetary Fund that Greece still needs to pay its bills.”

The problem is that Greece wants to continue spending other people’s money to prop up a bankrupt welfare state, and the rest of Europe has decided they would really prefer to stop pouring money down that particular rathole. Syriza is against “austerity,” which is to say they oppose the Greek government even pretending to practice fiscal restraint. Because pretending is all they’ve done.

Remember, real austerity is reducing outlays until they match receipts. All those “austerity” street protests were over lowering Greece’s budget deficit from 9% of GDP to 7.5% of GDP. The rest of Europe didn’t ask them to stop digging their own grave, they just asked them to dig more slower. And this year, Greece’s budget deficit stood at 12.2% of GDP. Evidently even fake austerity is too much to ask of them; even the illusion of fiscal restraint is intolerable. This is why all news that Greece has “balanced” next year’s budget should be taken with several grains of salt.

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.

Europe has had several years to acclimate itself to the fact the Greece might exit the Euro, and the possibility of a “grexit” has been priced into the markets for some time now. I do not pretend to understand the intricacies of the European banking system, but my impression is that much of the “stress testing” of European banks this year was to prepare for one or more of the PIIGS leaving the Euro. I suspect that the European elite have minimized their own exposure to a Greek default (which is really all they care about), and that the EU and the European Central Bank has found new, sneaky ways to put taxpayers on the hook for any possible sovereign defaults, strengthening the banking system without addressing Europe’s long-term economic problems (unsustainable levels of debt to support cradle-to-grave welfare states for shrinking populations).

It would be great if Greece actually undertook real structural reforms of their bloated, dysfunctional government, but I see precious little evidence that they’ve actual done so. Expect more pain ahead, and at least one more bailout…

Pat Condell on the European Union

Friday, August 15th, 2014

Have another Pat Condell rant, this one on why Europe needs a revolution against the anti-democratic EU:

Walter Russell Mead Visits Europe

Thursday, October 17th, 2013

The indomitable Walter Russell Mead has been traipsing around Europe, and has much of interest to report from various countries there regarding the continuing slow-motion Euro crisis.

The Italians? Not happy.

The Italians feel caught in a cruel trap; the euro is killing them but they don’t see any alternative. When a German visitor gave the conventional Berlin view (the southern countries got themselves into trouble by bad policy, and austerity is the only way out; budget discipline and cutting labor costs are the only way Italy can once again prosper), a roomful of Italians practically jumped on the table to denounce his approach.

The Italian position is basically this: it’s crazy to blame Italy or the other southern countries (except Greece, which nobody seems to like very much) for the euromess; Germany played a huge role in designing the poorly functioning euro system in the first place and remains its chief beneficiary. When German banks lent billions to Spanish real estate developers and hoovered up the bonds of southern countries, where were the German bank regulators? German politicians, say the Italians, don’t want to admit to their voters that incompetent German bankers and incompetent German bank regulators wrecked the German financial system by making stupid loans worth hundreds of billions of euros. In a “normal” world, German politicians would have to go to their taxpayers to fund a huge bailout of insolvent German banks thanks to their cretinous euro-lending. Pain would be more equitably distributed between borrowers and lenders.

From an Italian point of view, much of Europe’s austerity isn’t the result of German moral principles; Italians think that a cynical absence of moral principles led the German political class to scapegoat garlic-eating foreigners in a desperate attempt to prevent the voters from noticing just how recklessly incompetent the German elite really is. Germany is using the mechanisms of the euro to force southern governments to bail out German (and French and other northern) banks at immense social pain and economic cost. The Italians, even sensible and moderate ones who want to cooperate with Europe, totally reject the logical and moral foundations of the German approach to the crisis, and they feel zero gratitude or obligation to make life easier for Germany as the drama unfolds.

The French? Not happy.

In France, the people I spoke with worried about the rise of the National Front. According to some polls the ultra-right could emerge as the biggest party in France in the next round of regional and European elections. The French Socialists under the increasingly unpopular President Hollande don’t seem to have much idea about how to move forward; their most popular politician at the moment is a Minister of the Interior who is trying to compete with the National Front for the anti-immigrant vote by breaking up encampments of Roma and denouncing them as immigrants who don’t want to assimilate.

Also they, and the rest of Europe, seriously misunderstand the Tea Party:

One of the reasons Europeans are so fearful of the Tea Party is that they assume that because it is right wing and populist it is like the National Front in France or Golden Dawn in Greece. Today’s small government American Tea Partiers are much farther from Huey Long and Father Coughlin in their political views than some European right wingers are from the darker demagogues of Europe’s bloody past, and until the European establishments understand this, they will likely continue to misjudge the state of American politics.

The Germans? It’s complicated.

There are Germans who sympathize with the Italian critique of EU austerity policy, but Germans on the whole seem to feel that in pushing a tough reform agenda in Europe, and linking further payments and bailouts to that reform agenda, they are doing their neighbors a favor. They sincerely believe that their own relatively strong economic performance is the result of their willingness to accept some liberalizing reforms coupled with a commitment to fiscal prudence. They think that by exporting this model they are helping other European countries on the path to lasting prosperity, and they believe that with some patience, the other European countries will soon begin to experience the benefits of German-style economic reform.

Europe, of course, has a very unhappy history with things labeled “German-style.”

Mead feels that Europe is rich enough to continue subsidizing it’s Euro-folly for the immediate future, but it comes at a cost:

The bitter public feelings generated by the euro crisis and its long, painful aftermath are still working their slow and ugly way through the European political system. In country after country we are seeing steady gains by political movements that bear a superficial resemblance to the American Tea Party, but in fact flirt much more with the kind of dangerous nationalist and chauvinist ideas that have proven so destructive in Europe’s past.

It’s a sobering, moderately lengthy read, and I commend all of it to your attention.

European Debt Crisis Update for July 22, 2013

Monday, July 22nd, 2013

It’s shaping up to be another busy week, so here’s a quick update on the European Debt Crisis front:

  • EU Debt burden hits an all-time high.
  • Greece shuts down its bloated, money losing ERT public television/radio network. “Problems with Greek democracy are not the reason that ERT was shut down. ERT was an extravagant public company. Many, though not all, employees were hired under suspicious conditions, due to favoritism and nepotism, and receiveddisproportionately large wages (8000 Euros per month through the financial crisis and 13000 Euros per month before).”
  • Taki (who is Greek) offers some pungent assessments of his home country’s continual crisis.
  • In Europe, the law is seen is “an obstacle rather than a foundation.”
  • Spain steals from tomorrow’s retirees to pay for today’s retirees.
  • Portugal refrains from blowing up for a little while longer.
  • Germany’s finance minister tours his vassal state.
  • Don’t expect the EuroZone to explode before German elections on September 22. Plus calls for an “EMU Truth and Reconciliation Commission.”
  • First review of UK’s relationship with EU comes to the conclusion that everything is just hunky dory.
  • European Debt Crisis Update for July 10, 2013

    Wednesday, July 10th, 2013

    The ongoing European Debt Crisis hasn’t ended, it’s merely undergoing a summer hiatus while the various bankers and Eurocrats involved in the shell game take their customary 8 week vacations. As such, expect a new round of crisis headlines to come rolling in during the fall.

    Remember: The purpose of the shell game is to let insiders unload their bad debts onto taxpayers. (Look how it was done in Ireland for pointers.) The shell game will continue as long as the insiders can get away with buying off restive electorates with an unsustainable cradle-to-grave welfare state.

    Europe’s present is our future.

  • Once again, Greece is being given money to pretend to reform. Look for more fake austerity, and another bailout in six months.
  • “Greece will never repay the money it’s been lent to ‘save’ it. The current debate over whether Greece has done enough by way of reform, tax hikes and spending cuts to have earned the next tranche of bailout funds is largely beside the point. If Greece is cut loose, or walks away, its euro-zone creditors will lose their money. The Greeks and the Germans are surely both aware of this. They’re also aware that Greece’s external debt position is far worse than when the bailouts began—when its debt stood at a mere 129% of GDP—and that any talk of debt sustainability in Greece has become a joke.” It’s now at 157% of GDP.
  • Predictably, Greek unions respond to more fake austerity and staff cuts by extending strikes.
  • Europeans realize that their governments are corrupt. Those who think they’re not corrupt? “In Spain that number is just 8 percent. In Italy, it’s 13 percent. And Greeks and Portuguese have the least trust in the world regarding their governments’ efforts: Just 1 percent of respondents say their government is making strides against corruption.”
  • And just how corrupt is Greece? “Politicians and journalists are viewed as on the take by most Greeks with 50 percent also saying they’ve had to bribe public officials to get services.”
  • Eurozone unemployment hits all time highs.
  • The EU is preparing a banking union bill. No word on whether it will require depositors to take haircuts like those in Cyprus in the event of a bank failure.
  • And speaking of bank failures, there are rumblings that Slovenia will require a bailout.
  • Portugal is still trudging through their own bank bailout…
  • …despite which they may still need another bailout.
  • Italy could be forced to beg for a bailout in six months.
  • UK actually proposes to roll back some 35 EU laws. This may be the first sign that Cameron’s wet Tories have actually noticed how effectively Nigel Farge’s UKIP is eating into their base…
  • UKIP itself says it’s a threat to the entire political class Well, let’s hope so…
  • Latvia is now set to join the Euro on January 1, 2014.
  • LinkSwarm for June 28, 2013

    Friday, June 28th, 2013

    It’s supposed to hit a 106° in Austin today. Sadly, not all of these links will help you keep your cool…

  • 12 different IRS offices targeted conservatives.
  • Over 1,100 patients were starved to death at NHS hospitals in the UK. Funny, I don’t remember that being mentioned in the Olympic tribute to how awesome NHS is…
  • Marco Rubio aide: We need illegal alien amnesty because American workers suck.
  • Blue collar Americans having trouble finding jobs. I’m sure that has nothing to do with our ruling political elite’s decision to allow unlimited illegal immigration of unskilled workers…
  • Every Republican voting for amnesty better get ready for a primary challenge.
  • Obama camapign workers convicted of voter fraud in Indiana. This was for the 2008 Democratic primary, so it will likely be many years before see starting seeing convictions for the Obama campaign’s various 2012 voting fraud efforts…
  • Noam Chomsky attending the opening of Hezbollah’s “Death to Israel” theme park.
  • People told me that if I voted for Romney, the U.S. military would start blocking access to liberal news sources. And they were right!
  • The Atlantic says that Obama “succeeded” in Libya but is failing in Syria. If Benghazi was success, I’d hate to see what failure looks like.
  • And speaking of Benghazi, Libya just let one of the suspected attackers walk. Thank God we have Obama’s smart, sophisticated diplomacy in the Middle East…
  • Beer now unaffordable in Greece. And you thought they had riots before…
  • Second Colorado Democrat faces a recall election over gun control.
  • Magpul to give away 1,500 30-round magazines just two days before Colorado outlaws them.
  • By the way, there’s a Facebook page to show support for bringing Magpul to Texas. But most of the rumors I hear have them moving to Wyoming.
  • The Amarillo Globe-News has a message for gun manufacturers thinking of relocating to Texas: Come on down!
  • Texas executes its 500th murderer. Don’t mess with Texas. Or we will end you.
  • Speaking of ending you: Don’t try to commit armed robbery in a concealed carry state.
  • Nurse Bloomberg continues to underwrite anti-gun ads, shoot himself in the foot. (Hat tip: Alphecca.
  • In order to prove vegans aren’t a creepy cult, website seeks to out and harass lapsed vegans.
  • The Onion channels Jay Carney: “Well, Time To Go Out In Front Of A Bunch Of People And Lie To Them.”
  • The mystery of Lori Ruff, AKA Becky Sue Turner. No one know who she actually is…