Posts Tagged ‘Greece’

IMF Gives Up on Greece

Thursday, June 11th, 2015

The IMF just said to Greece “Screw you guys, I’m going home.” (Note: For the full effect, you have to say the preceding in the voice of Eric Cartman.)

The International Monetary Fund said it was halting bailout talks with Greece in a stark signal of its exasperation about a lack of progress toward a deal needed to avert a Greek default, as European leaders suggested the negotiations were nearing their endgame without an agreement in sight.

And keep in mind that these are transnational bureaucrats whose entire job description is long, drawn-out economic negotiations. And they’ve finally had enough of talking to Greece.

That’s not the fat lady warming up, that’s the fat lady striding boldly on stage and waiting for the cue to open her mouth.

The Greek debt crisis was always going to come to a bad end. The least bad alternative was introducing real austerity when the crisis hit, paring back their welfare state, reforming their economy, and living within their means for several years until their economy started growing again.

But by electing the far-left Syriza party, Greece has ended up opting for a far worse fate: They’re going to end up absolutely broke, absolutely in debt, and they won’t even be able to fund the day-to-day operations of their bloated welfare state. Unless the Greek parliament can somehow force a snap election and replace Alexis Tsipras’s lying, farcical government with one actually capable of recognizing reality, Greece is in for a level of economic pain that’s going to make the Great Depression look like a picnic…

(Hat tip: Zero Hedge.)

Greece to Receive It’s Final Final Final Final Final Final Final Offer

Wednesday, June 3rd, 2015

Looks like all of Greece’s creditors have finally decided it’s put up or shut up time for reform. “Greek Prime Minister Alexis Tsipras is expected to face demands for tough reforms of Greece’s pension system, labor laws and other areas, as well as creditors’ insistence on painful budget measures to ensure that Greece runs a fiscal surplus before interest.”

At this point Greece seems completely and utterly broke, unless there’s more upfront money in that still unsigned Russian pipeline deal than reports indicate (doubtful, given Russia’s own financial straits), or Tsipras finds yet another hidden money reserve to tap (“We can can pay pensions from the children’s bone marrow fund!”). So despite Tsipras’ insistence that they be allowed to keep spending other people’s money on their bankrupt welfare state, this time the jig may finally, finally, really, we mean it this time, for sure, be up.

Here’s a piece that explains in terms of game theory why Tsipras overplayed his weak hand:

Now, as long as the EU keeps Greece in the Eurozone then the Tsipras administration will find itself forced to either exit the Eurozone or apply the austerity it promised to end. Not only would such an outcome send a clear signal to other Eurozone nations that exiting was foolhardy, it would also indicate that radical, nationalist, anti-establishment and anti-austerity parties cannot deliver on their promises.

The EU won’t force Greece to exit the Eurozone but it won’t offer anything to keep Syriza in power, either. The EU simply needs to keep negotiating without offering anything but strict compliance with what was already agreed upon, which is continued austerity in return for loans. In effect, to use a sports analogy, the EU just needs to “run out the clock.” In the end, it appears that Tsipras will either be forced out of office or forced to break up his coalition and form a new government with the mainstream parties, the outcome that EU and Germany have been angling for all along.

(Though make no mistake: that “primary surplus” was always illusory.)

A few more Greek debt crisis links:

  • Now Greece is threatening not to pay this week’s debt payment to the IMF unless a deal is agreed on. Once again, Tsipras is playing chicken with a Yugo, while his opponents are driving a Tiger tank…
  • Tsipras needs to stop making empty promises and get a clue. “He cannot expect Germans to volunteer the money Greece needs, so he can spend it on the kind of leftist economic fantasy that was discredited all over Europe in the 1970s and 1980s. Just ask Argentina where default followed by populist economics leads.”
  • Germany has good reason to stop subsidizing Greece, namely their own crashing demographics: “Germany’s birth rate has collapsed to the lowest level in the world and its workforce will start plunging at a faster rate than Japan’s by the early 2020s, seriously threatening the long-term viability of Europe’s leading economy.” (Hat tip: Powerline.)
  • “A Greek exit is already priced into the euro.”
  • Greece Debt Crisis Update for May 14, 2014

    Thursday, May 14th, 2015

    Greece managed to make its scheduled IMF loan repayment of around €750 million ($837 million) which “buys the country a few more weeks to reach a deal with creditors on fresh financing.”

    Greek finance minister Yanis Varoufakis said “Greece must escape the ‘strictness trap’ of budget measures that might hurt the economy and so prevent the country from reducing its debt mountain to manageable levels.” In other words: “We absolutely refuse to stop spending other people’s money to prop up our welfare state.”

    So the farce will continue on a little longer, at least.

    In other Greek debt news:

  • Greece is “back” in recession. Assuming you believe it ever actually left it.
  • Europe wants €3 billion in budget cuts from Greece.
  • “The German Finance Ministry is supporting the idea of a vote by Greek citizens to either accept the economic reforms being sought by creditors to receive a payout from the country’s bailout program or ultimately opt to leave the euro.” Hmm, recognize economic reality or exit the Euro. Decisions…
  • And if you thought Greece had abandoned their stupid “German war reparations” idea, think again: “Archival video footage highlighting Nazi atrocities in Greece is being shown to commuters on the Athens subway as part of a campaign demanding war reparations from Germany.” I’m sure that will get them on Angela Merkel’s good side.
  • The Two Greeces: “Official Greece is dysfunctional; unofficial Greece works quite well. The official, theoretical Greece has checks and balances. The unofficial, reality-based Greece turns a blind eye when people break rules and dodge taxes.” I’m not nearly as positive as the author that the corrupt one can be swept away, or that Syriza wants to.
  • The Ghost Factories of Greece.
  • Another Greece Update: Back to the Shell Game

    Friday, May 8th, 2015

    And the Greece shell game over implementing reform (or, since it’s Greece, “reform”) continues.

    Greece’s finance minister Yanis Varoufakis (who’s evidently still doing the negotiating, reports to the contrary notwithstanding) has handed the Eurocrats a proposal that doesn’t match what was discussed in negotiations. It’s like a cheap farce, or a con game to see how long they can keep string Europe along without actually agreeing to anything.

    Greece Syriza government has said to their creditors: Economic reality? We don’t need your stinking economic reality! “Greece defied its international creditors on Thursday, refusing to cut pensions or ease layoffs to meet their demands, dimming prospects of progress next week towards securing desperately needed financial aid.”

    Greece’s government also rehired public sector employees they previously laid off. What’s giving the engine a little more gas when you’re headed for the wall at full speed?

    Other Greek debt crisis tidbits:

  • Greece introduces mandatory surcharges on tax withdrawals above €1,000 Euros.
  • Plus an 18% hotel and restaurant tax. Extra bonus: It will hit some tourists who have already prepaid for vacations. “It’s catastrophic.”
  • Living life under the threat of default. “I’ve got a bad feeling we’re not going to get a good ending.”
  • European “Commission President Jean Claude Juncker said that if Greece left the single currency area, the ‘Anglo-Saxon world’ would try everything to break it up.” Hey Jean Claude: Reality is doing a great job breaking up the Eurozone all by itself, between its unsustainable welfare state, its aging population, and the insistence of Euroelites on cutting those filthy commoners from having any say in the matter. And as for the “Anglo-Saxon world” trying to break up the Eurozone, have you seen whose in charge of things these days?
  • Greece’s Blazing Saddles act is wearing thin. (I seem to remember having made this exact comparison before…)
  • 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: Contagion Watch

    Monday, April 20th, 2015

    Amidst word that other European banks are urging Greek banks to dump Greek securities, and continued mutterings of Greek contingency plans to nationalize banks, Zero Hedge just tweeted this:

    Not seeing confirmation yet, but if true, those quiet bank runs in Greece are about to stop being quiet…

    Update: Here’s Zero Hedge’s post, citing an (unlinked) Bloomberg piece citing internal Greek decree, saying it’s the start of capital controls. If so, bank runs are all but assured…

    Update 2: Now seeing news reports saying that Greece is “The Greek government is forcing the country’s municipalities to transfer cash reserves to the Bank of Greece in a bid to shore up its short-term finances, according to officials…The decree on Monday mandates the transfer of cash that is not needed to cover spending in the next 15 days, as Athens continues negotiations with creditors to unlock bailout funds.”

    So, no forced bank funds transfers.

    Yet.

    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!

    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.)

    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.