Welcome to the new version of European Tribune. It's just a new layout, so everything should work as before - please report bugs here.

High Drama: Greece under the "troika"

by talos Fri Feb 18th, 2011 at 09:10:40 AM EST




Image: Translation of a poster by the king of Greek web agit-prop, Antista-chef

A couple of weeks ago a rather obscure dairy company, Neogal, based in the town of Drama, near the Greek-Bulgarian border, received a phone call from a representative of the troika (Greece's de facto governing authority, comprised of representatives of the IMF, the ECB and the EU Commission) - others say that they actually visited the town, but that's probably not true. They wanted to ask a few questions regarding the wage deal it had agreed on with its workers.

from the diaries - Nomad


A month earlier Neogal was the first company to announce that it would take advantage of the special company contracts mandated by the troika, a blunt instrument of destruction of Greece's supposedly stringent, but in practice rather laxly enforced, labor laws, and cut wages 9% beyond the collectively bargained levels. In return it promised not to cut back on any jobs. This was, after all, what the neoliberal programme to further depress Greece's laughably low (private sector) wages was all about...

Anyway back to Drama: Neogal soon found out that the uproar against its wage decrease in the broader area of Northern Greece and the negative publicity it was receiving, was bad for business, so they redrew the agreement, especially after the Labour Inspectors [in Greek] noticed that they were a profit-making company with an improving balance sheet. Despite the fact that it could unilaterally impose it's "agreement" with the terrified workers (based as it was in an area where unemployment is over 30%), the company decided to keep wages at current levels (which is a wage-cut anyway in real terms since inflation thanks to our IMF overlords is running at 5% annually - possibly more on a bare necessity budget) and promised to not fire anyone for the next two years, anyway.

This worried the IMF/ECB inspectors, whose main duty here seems to be overseeing the impoverishment of as great a slice of the population as possible, so they went calling to find if this was a result of some form of government pressure. It turns out that it wasn't, the Greek government was not subverting the troika's carefully planned disaster. All was well - but actually, no, all was not well, because those damn wages wouldn't free-fall fast enough. Apparently the troika members (known as "i troikani" - "troikans" - in Greece) had some other aces up their sleeves: It seems that they first demanded cutting private sector wages across the board by 2/14 (Greek annual salaries are paid in 15 installments - one extra during Christmas and 50% of a salary on Easter and before summer leave). These they dismissed as "bonuses" when they demanded and achieved their elimination in the public sector last May, but really are part and parcel of already meager annual wages. This would have been a government mandated wage cut in the private sector across the board. So much for state intervention in the economy.

We haven't escaped that danger yet. However it seems that the government has managed to appease the troikans: They are planning instead to abolish what little is left of collective bargaining (shreds of bargaining on a company level mainly) after their latest attack last autumn, and are aiming for generalized individual labor agreements, fewer and cheaper layoff remunerations (2d round), and diminished overtime pay. These measures they hope, will have the same effect...

Boldness


The Commissioner [Olli Rehn] said Greece, Sweden and Latvia were examples of countries that have managed to promote bold reforms without consideration of any political costs.

Lets see what the reforms they're praising actually mean for the populace and what it is that makes them "bold". Here are some of the results that their implementation has inflicted over a very brief period of time:

  • Recently, the Greek Statistical Authority (NSA) published its unemployment data for November 2010: Unemployment reached 13,9%, the highest level I can ever remember it at, up from 10,6 in November 09, and from 13,4 in October 2010. Youth unemployment in the country has reached 35,6%. At this pace, unemployment might reach 15% in 2011.

  • Yesterday the NSA also published some more data:

Greece's economy slumped more than expected last year and will stay in recession for a third straight year in 2011 with economists seeing little hope for a strong recovery even after that.
The 230 billion euro economy shrank at an annual 6.6 percent pace in the last quarter of 2010, as the austerity-induced recession deepened from a revised 5.7 percent decline in the previous quarter, data showed on Tuesday.
Flash Eurostat estimates showed the downturn in economic activity for the whole of 2010 was 4.52 percent, worse than the government's forecast decline of 4.2 percent, as it struggled to cut deficits and tackle debt

The IMF's yearly forecast last May was at 4% and the government's forecast last June was for an under 4% contraction (the low 3% range being hyped up by various banks' economic analysts).

All of this had the, expected, result of pumping up the spreads (again):


The Greek/German 10-year bond yield spread widened by 26 bps to 860 bps as the outright Greek yield climbed to 11.93 percent.

The Reuters report includes the following assessment regarding Greek economy prospects:


"We expect the economy to bottom out in the second half of 2011 but after that we do not see a strong recovery taking hold, rather stagnation with growth rates around zero," said Christian Melzer, euro zone analyst at DekaBank.
"The growth figures are miserable, the situation in the real economy is bad -- 2011 and 2012 are going to be difficult years for the Greek economy," he added

This should be seen in the context of the IMF's original forecast (which the Greek government subscribed to) that stated:


Real GDP growth is expected to contract sharply in 2010-11 and recover thereafter. Growth is expected to follow a V-shaped pattern: the frontloaded fiscal contraction in 2010-11 will suppress domestic demand in the short run; but from 2012 onward, confidence effects, regained market access, and comprehensive structural reforms are expected to lead to a growth recovery. Unemployment is projected to peak at nearly 15 percent by 2012

Note that the 15% unemployment mark seems likely to be reached a year earlier than the IMF said it would and that the Unions' analysts expect that number to surpass 20% in a year at most.

The Governor of the Bank of Greece (Greece's Central Bank) expects contraction in 2011 at -3%. This is down from last May's government forecast of 2,6% and is already considered by many to be very optimistic.

- 188.000 jobs were lost during 2010 [in Greek] while one in four Greek businesses (225.000) are in the red, at the brink ready to shut down. Most shopping areas around Athens are full of shops vacant, closing or empty of customers



"70% off, the crisis is shutting us down"

  • A quarter of those that do work in the private sector, work uninsured. Thus no benefits, unemployment or otherwise, no pensionable work years, no health coverage. This, in the context of the depression and the undercutting of the economic capabilities of the Greek family which has served as a societal safety net in hard times so far, is slowly creating a new underclass...

  • Unrelated to the troika, but indicative of the unfairness of the austerity policies it is imposing through the "Socialist" government, is a story in Spiegel that made the rounds in the Greek press, apparently claiming that the total of (mostly untaxed and unreported) deposits of Greek nationals in Swiss banks reach 600 billion Euros, or 2,5 times the country's GDP. The number might be a bit high, but this is only Switzerland we're talking about. There are estimates floating around stating that total deposits of Greeks in banks around the world (tax and banking havens mostly) might be close to 1 trillion Euros. I note that a 10% tax on the 600 billion would solve most of the country's fiscal problems at a stroke - and we can't have that now, can we...


Sell, sell, sell

This was the situation, until a couple of days ago, when the troika gave a press conference at the end of its latest inspection round, their "Third Review Mission to Greece". In it they suggested, or announced depending on who you ask, that Greece should raise 50 billion euros over the next 5 years by selling assets it owns, including land. Mr. Thomsen of the IMF was also kind enough to inform the Greek public that some of the groups protesting the IMF-inspired "rationalization" measures are doing this only to protect their privileges. In fact his appearance was quite prime-ministerial.

This provoked an angry reaction from the Greek government, it's first ever against the trio. They sounded upset:


Government spokesman Giorgos Petalotis told reporters early Saturday  that the comments were unacceptable and amounted to interference into  Greece's domestic affairs...
Greek Prime Minister George Papandreou also issued a statement  Saturday saying he has expressed his dismay about the comments in a  phone call with IMF managing director Dominique Strauss-Kahn.
Spokesman Petalotis said Saturday that while Greece is in need, it  also has its limits.  He said the Greek government only takes orders  from the people of Greece and that no state land would be sold.

One would deduce from this fierce reaction, that was met with ostensible contrition by the triadic overlords themselves, that the Greek government was absolutely not willing to give up a shred of its sacred territory to the fiendish imperial scum who finally made one demand too many.

Well. No:


There is no divergence of views between the Greek government and the European Union/International Monetary Fund/European Central Bank ("Troika") regarding the essence of an agreement, which includes a EUR50bn privatization program.

In fact:


Greece's harsh criticism of the EU and the IMF over its comments on the need for privatization is unlikely to affect Athens' austerity plans as it was mostly aimed at placating a sensitive domestic audience.
Government officials said on Saturday that the EU and IMF had interfered unacceptably in domestic affairs by announcing a high privatization target for Greece and criticising strikes after its review of progress on the country's 110 billion euro bailout deal.
Greece lashes out at EU/IMF but will stick to reform
Selling public assets is a sensitive issue in Greece, especially for the ruling Socialists. No privatisations have been completed in the party's 16 months in office.
But Athens' harsh comments appear to have been mostly a response to a media outcry and to some ruling socialists being caught out by EU, IMF and ECB officials -- dubbed the 'troika' -- telling a news conference on Friday that Greece should target 50 billion euros in privatisations over the 2011-15 period.
"I don't think this showed any difference on substance between the troika and the government," said Yannis Stournaras, head of the Athens-based Foundation of Economic Research.
"It was a communication error," Stournaras said.
"Perhaps the government did not expect the troika to come out and specify things in detail before parliament, or at least the ministerial council, have been informed."
Indeed, the government admitted in a note circulated shortly after the IMF/EU news conference that it had agreed to the higher target, which became the focus of the week-end uproar.

And then the government went on to claim that the 50 billion sale was its own idea after all, but they were not willing to sell land, actually, but "utilize" it somehow, unless of course the parliament authorized a sale, yet the details pertaining to this miraculous utilization have not been leaked yet. But anyhow they're not going to give up the majority share in DEI, the public power utility. Or water services. Nor sell coastlines.

Now the total value of privatizations over the past 12 years in Greece was around 10 billion Euros. The total value of Greek government land and building assets might be around 300 billion (no one knows for sure yet) but that is assuming someone is willing to buy at nominal values, which is unlikely. Thus, raising 50 billion Euros in 5 years is not feasible really, despite the Greek government's claims, without the intervention of fairies and benevolent deities, unless we are talking about fairly extensive asset stripping. Yet even if a government managed to pawn everything, and indeed raise against all expectations 50 billion in 5 years, this - given the size of the national debt - will barely equal the amount paid as interest alone by the national government to its lenders between 2011 and 2013. Since this will be a one-off payment, it won't go very far.

So what we saw was theater. And rather poorly acted theater at that. The only explanation for such a spectacular plunge into empty rhetoric, is that the Papandreou government is preparing for elections, since it knows that it cannot carry out this agenda of wholesale plunder and misery by itself much longer. Already cabinet members refrain from appearing in any unpoliced public space for fear of their safety. There seems to be a general acceptance of the idea that only  a grand coalition ("socialists" and conservatives) might be able to pass through the increasingly painful measures needed to satisfy the troika's need for blood. In the meantime, Greece is sheepishly supporting Ms. Merkel's plans in the summit and has shown no interest in resisting even the most wildly irrational of the policy choices that are being rammed down people's throats, as the mantra "we are all to blame" plays increasingly unconvincing in the background.

Yet as unions have failed up to now to demonstrate convincing muscle (here the president of the Greek Confederation of Labor is portrayed as "missing"), society is far from calm, its temperature reaching feverish heights, as demonstrated in actions of political disobedience and outright clashes and in the increasing frequency of strikes and labor actions against employers and government policies. At the same time the socialist government is reverting to a law and order agenda flirting with the far-right and xenophobia, while controlling or being in cahoots with practically all of the mainstream media (owned by government contractors and other IMF beneficiaries). Thus the cocktail of personal despair, anger, misinformation, racism and futurelesness, is ominous. In my next post, I'll discuss the faces of public anger, fight-back, despair and moral morbidity that the IMF/ECB/EC is presiding over...
Cross posted at Histologion

Display:
European Tribune - High Drama: Greece under the "troika"

"70% off, the crisis is shutting us down"
Nice detail that the epsilons are € signs...

I don't think Brussels understands what they're doing to the European Union.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Thu Feb 17th, 2011 at 05:38:54 AM EST
I don't think Brussels understands what they're doing to the European Union.

Well, they could look and see. The question is of the extent, if any, to which they care.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Feb 17th, 2011 at 11:23:10 AM EST
[ Parent ]
Maybe they can't see because their salary depends on them not seeing.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Feb 17th, 2011 at 11:26:16 AM EST
[ Parent ]
Surely that is the answer for those who could see.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Feb 17th, 2011 at 01:36:54 PM EST
[ Parent ]
Has there been any talk in Greece of making common cause with Portugal, Ireland etc. and setting up a debtors Union to negotiate better terms?

How did the €600 billion get to Swiss bank accounts, and how, in practical terms, could it be taxed?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Feb 17th, 2011 at 06:18:28 AM EST
Talk about common cause with the other peripheral countries is coming basically from the left, economists and some, marginalized now, socialist politicians. The government is selling the line that says that this current crisis is first of all due to internal pathogenicities and "we are all to blame" thus we should "manage our own house" according to our debtors dictates, and never mind the others  - and on the other hand seems to pursue a n EU strategy of being an obedient poodle of Merkel's, thus hardly likely to participate in any sort of peripheral disgruntlement.
Perhaps behind the scenes there is some sort of communication with the other debtors, but it certainly isn't part of the rhetoric or the official policy of the Greek government.

Regarding the Swiss bank accounts, the government has gone on record saying that there is a lot of Greek money in Switzerland but not that much (perhaps 40 billion, they say). It seems likely that the 600 million might be some sort of total amount of transactions through Swiss banks. I would trust Spiegel (the alleged source of this information) over the Greek government on such matters however. The government has suggested that it might pursue a German-style deal with Switzerland regarding tax-evaders, perhaps by imposing a one-off 10% tax on any deposits by Greek citizens not declared to the tax authorities already (I reckon that 2-3 billion Euros of all Greek Swiss bank accounts are properly taxed in Greece). However it has also been rumoured that after the Swiss-German deal a lot of Greeks moved their deposits from Switzerland to other, ostensibly "safer" tax havens. So I'm not sure how large a part of this stash can be taxed. But any part would help.

As to how it got there: Political corruption, bribery, crime, shady bookkeeping and no effective watchdogs...  a lot of money changed hands in Greece over the last couple of decades, money that was not invested in the real economy, or money extracted from the demolition of the real economy

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Thu Feb 17th, 2011 at 06:44:11 AM EST
[ Parent ]
I have to wonder if a lot of that money comes from asset sales by people in shipping whose main companies are not subject to anything but a tonnage tax. When they redeemed company shares, where did this take place? In what country, in what market? Seems to me that the Greek shippers could easily and legally launder their money out of the country even while maintaining Greek citizenship.
by Upstate NY on Thu Feb 17th, 2011 at 09:21:54 AM EST
[ Parent ]
+1.  I have also come to the conclusion that a common front of 'the periphery' is the only way to get more than token changes from the controlling interests in the EU.
by Pope Epopt on Thu Feb 17th, 2011 at 09:04:16 AM EST
[ Parent ]
But first the periphery needs to accept the idea that the core is screwing them.

There's too much Stockholm Syndrome here, stemming from feelings of inadequacy over being excluded from "Europe" for decades (mostly as a result of dictatorship persisting into the 70's).

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Thu Feb 17th, 2011 at 09:10:09 AM EST
[ Parent ]
As Adam Smith put it:

a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.

To be poor is shameful, maybe this also holds when it comes to representing an indebted nation. Sure sounded so when Persson talked about sneering twenty year olds and woved to pay down the swedish debt (and embrace the third way).

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Fri Feb 18th, 2011 at 04:00:59 AM EST
[ Parent ]
For Smith this was an observation. I suspect that he would have been horrified at the thought that elites would try to manipulate downward the perceived standard, though it is certainly part of the tool kit of today's elites.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 18th, 2011 at 10:11:13 AM EST
[ Parent ]
personally I dont think anyone will even think about turning the ship around till one of the big three begins to spiral the plughole.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Feb 17th, 2011 at 09:17:36 AM EST
[ Parent ]
How did the €600 billion get to Swiss bank accounts, and how, in practical terms, could it be taxed?

Repatriating funds from flag-of-convenience countries is reasonably straightforward, as long as the funds are in bank accounts, not in cash, diamonds or products.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 02:18:28 AM EST
[ Parent ]
Looks like Greece is paving the way for future Enrons.
Sell public entities, reap the whirlwind. I may be able to understand selling chronic problems (as I have had difficulty with some modes of transport in Greece) but things like utilities and public lands should never be sold.
by Upstate NY on Thu Feb 17th, 2011 at 09:18:41 AM EST
"Never" is, perhaps, going a little far. The government can buy land when it makes sense, and it can sell land when that makes sense.

It shouldn't do so just to please the money markets, though. It should do it (or not do it) if and when it makes social and economic sense. The money markets need to be taught that they are servants, not masters, to the state.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 02:23:24 AM EST
[ Parent ]
The money markets need to be taught that they are servants, not masters, to the state.

That will only be possible when is clear that the markets are the servants, not the masters. Today, that, along with the whole concept of popular sovereignty, is not so clear.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 18th, 2011 at 10:21:16 AM EST
[ Parent ]
Can't imagine what kind of economic calculation will make it make sense. This land is three for future generations, so it's hard to calculate that presently, especially since we're talking about beachland in a heavily touristed country.
by Upstate NY on Fri Feb 18th, 2011 at 10:38:40 AM EST
[ Parent ]
Upstate NY:
Can't imagine what kind of economic calculation will make it make sense.
Replace "economic" with "plunder" and it makes a lot of sense.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 10:49:47 AM EST
[ Parent ]
It depends on the plot in question, and the specific circumstances. Most public land is public for excellent reasons - such as being beaches, forests, parks, historical sites or the location of public businesses. Some public land is public just because it used to be the site of a public business, that is no longer judged to be required to run a well-governed state.

Denmark, for instance, has a lot of public land that is public because far-sighted infrastructure planning 50 to 100 years ago left us with a number of rail and road corridors for future use. Usually a number of different routes are available to cover the same connection, so once a route is decided upon, it frees up public land that there is no longer any particularly compelling reason to hang on to (and private land is freed from codes prohibiting development, as well as the risk of having it seized for a transit corridor).

Selling public land or businesses just to sell - or to absorb private fiat currency savings - is silly, of course. Selling in order to release land that the public has no interesting use for... not so much.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 12:11:15 PM EST
[ Parent ]
Eurointelligence: Berlin opposed to Draghi - and ready to dump Juncker
Bastian on the Troika's privatisation claim for Greece

In a thoughtful article for Kathimerini Jens Sebastian writes that the sharp reaction of Greek government to the troika's public announcement of privatisation targets should not come as a surprise. As the reform agenda is to become much more delicate, focussing on tax increases and structural reforms, the government risks outright refusal among the parties and constituencies. Also in practical terms, it is also not realistic to achieve asset sales in the range of €50bn by 2015. The central government does not yet have a fully operational and transparent property registration system, and land/real estate sales are still subject to controversial valuations.



Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 12:21:01 PM EST
[ Parent ]
This is just infuriating. After total failure of neoliberal economic policy, the IMF and the ECB and even the Commission are even more into it, and all governments fall over themselves to follow the advice even at the cost of losing elections. And one has to notice the political colour of most countries under attack, and how all centre-left-led countries are hit without exception, and how all these "Socialists" (of Greece, Portugal, Spain, to some extent Iceland, and until recently Hungary) do the bidding of the Right on the economy rather than stand up for their people. We have the ironic situation where it is Hungary's right-wing government that alone tries something different, but may well discredit that route of action before a Socialist-not-only-in-name would attempt it elsewhere...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 18th, 2011 at 01:34:35 AM EST
one has to notice the political colour of most countries under attack, and how all centre-left-led countries are hit without exception, and how all these "Socialists" (of Greece, Portugal, Spain, to some extent Iceland, and until recently Hungary) do the bidding of the Right on the economy rather than stand up for their people

Spain is holding elections next year, and Greece and Portugal in 2013 (if not earlier). Will we find no PES government anywhere in the EU in 2014? It's a definite possibility.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 01:51:02 AM EST
[ Parent ]
Methinks PES governments in at least Germany and France are more likely, then again, if that means the return of the Schröderites resp. Mr. IMF, what have we won.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 18th, 2011 at 08:29:09 AM EST
[ Parent ]
Really? You think the SPD still exists next election?

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 09:07:05 AM EST
[ Parent ]
It's true that now that the FDP is back at the 5% limit in the polls, Red-Green has no majority, but it's still ahead of the government parties combined, and I'd think the result would be another Grand Coalition.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 18th, 2011 at 02:14:20 PM EST
[ Parent ]
Oh, and this Sunday Hamburg will hold elections, in which the SPD is predicted to win big and the CDU lose big, which could be another trend-setter at national level.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 18th, 2011 at 02:16:44 PM EST
[ Parent ]
Default. Now.

Greece should default on all sovereign debt owed to entities that are not individuals, and all sovereign debt in excess of € 100.000 owed to individuals.

Then Greece should present the ECB with an ultimatum: Either the ECB carries Greek debt at the Frankfurt overnight rate until Greek GDP has recovered to the pre-crisis peak level and the hysterical children in the international money markets have stopped throwing their infantile hissy fit. Or Greece will leave the €, and convert all debt owed by Greek citizens and government agencies to the new currency, without compensating the creditor. Greece could then conduct its economic policy without consulting the markets that have failed so completely.

As an ardent supporter of the European project, it gives me no pleasure to make a recommendation that may result in a breakup of the €-zone. But I can no longer in good conscience watch Greece commit economic suicide for the sake of the failed economic doctrines at the core of current €-zone policy. Enough is enough.

None can dispute that Greece has serious economic problems. But those problems are not caused by the public debt; the problems are what is causing the debt. Attempting to solve Greece's problems by paying down the public debt is akin to bathing a fevered man in cold water to lower his temperature: It does not cure the problems, and it causes new damage in the process.

As citizens of Europe, we all have to endure occasional misguided policies from the European Union. Just as we as citizens of our countries have to endure occasional misguided policies from our national governments. But enough is enough. By imposing devastating austerity policies on Greece, the European Union has signally failed the first duty of any government: To serve and protect its citizens and the common weal. If these policies made economic sense, the matter would be debatable. But they do not. Austerity represents a triumph of dogma over thought - it has never worked to resolve a crisis like the Greek, and it never will work. Not in Asia, not in Latin America, not in Hoover's America, not in Europe.

It is time to say no to this insanity, in the only language that will get through to the financial parasites who propagate it. Enough is enough.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 02:59:51 AM EST
I will translate and publish the above (starting with my blog), somehow in a Greek newspaper (just send me how you want your name to appear!), and I am open to suggestions as to how it might reach a reputable english language publication; however one question:

Should Greece present the ECB with an ultimatum, will the ECB and the Commission take it lying down? Is there no punitive countermeasure they can resort to? This is a question that applies to Ireland as well, but even more so in Greece where the real economy is weaker. Isn't this really an extortion by the ECB/EC?

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Fri Feb 18th, 2011 at 04:33:38 AM EST
[ Parent ]
Both ECB and the Commission are way out of their mandated zones of action, so I do not think there is much they formally can do (like taking Greece to court). Informally the Commission can not do much if the Greece government is willing to use its veto to fight back. Maybe Greece does not get an EU institution, but that is about it.

There has been speculation as to what the ECB might do, which I understand as boiling down to messing with the monetary system. However, as long as the police and military gets their paychecks from the government, not ECB, there is in the end little ECB can do.

Just issue notes saying "this bill is good for paying 100 euros in taxes to the goverment of Greece" and stop paying your debts. First problem solved.

Since Greece runs (or did run) a trade deficit, some imports need to be slashed if trading partners are not found of collecting future opportunities for paying taxes in Greece. I would suggest starting with government imports of advanced weaponry.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Fri Feb 18th, 2011 at 08:05:54 AM EST
[ Parent ]
Should Greece present the ECB with an ultimatum, will the ECB and the Commission take it lying down?

No, they will probably refuse. That's why this recommendation would have been impossible half a year ago: Back then, it still looked like the costs to Greece of leaving the € were larger than the costs of playing ball with the deficit errorists. But unless things begin changing posthaste, leaving the € will be preferable to continuing to appease the deficit errorists.

Is there no punitive countermeasure they can resort to?

They have a variety of creative ways to screw Greece over. They can refuse to carry Greek bonds, thus leaving Greece at the mercy of the markets. But if Greece quits the €, Greece can tell the markets to go and commit unnatural acts with farm animals. They can refuse to release EU funds for Greece (which is a net recipient). They can sue Greece in the European courts (but that takes years and years). Greece will lose prestige, standing and political capital in Bruxelles (but political capital only matters if you have an actual policy to push in the first place...). And a variety of other innovative forms of mean-spiritedness.

But the point of the Greek situation is that, short of sending a naval task force or ejecting you from the EU altogether and putting up punitive tariffs, they can't do anything worse to you than they already are doing with this AusterityTM crap. Having your back firmly pressed against the wall is enormously liberating in terms of policy options.

Now, it's important to note that leaving the € won't make the pain go away completely. Following a default, it will take a year or two before Greece is able to borrow at anything resembling reasonable rates in the international money markets. What leaving the € will do for Greece is restore Greek government control of the domestic money markets. That means that domestic Greek economic activity can be funded at reasonable interest rates, but hard currency will have to be rationed, presumably by explicit import quotas and capital controls, as well as activist ForEx policies to rapidly build foreign currency reserves.

The question you should be asking yourselves is whether the inability to import Siemens and Samsung for the next two years is better or worse than AusterityTM.

Isn't this really an extortion by the ECB/EC?

"Extortion" is such a crude word. I believe that the internationally recognised term is "foreign policy."

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 09:28:14 AM EST
[ Parent ]
Followup diary to your The "Euro Crisis" - Both more and less than meets the eye? That was just three months ago, not six... The rot is accelerating...

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 10:27:18 AM EST
[ Parent ]
And is leaving the Euro a good idea even as a threat. Michael Hudson warned against it some weeks ago:

For a left government leaving the euro would be a major strategic error. The new currency would be devalued as that is, after all, the desired objective. But that would immediately open up a space, which the financial markets would immediately use to begin a speculative offensive. It would trigger a cycle of devaluation, inflation and austerity. On top of that, the debt, which until that point had been denominated in euros or in dollars would suddenly increase as a result of this devaluation. Every left government which decided to take measures in favour of the working class would certainly be put under enormous pressure by international capitalism. But from a tactical point of view it would be better in this test of strength to use membership in the euro zone as a source of conflict.


The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Fri Feb 18th, 2011 at 04:42:09 AM EST
[ Parent ]
But that would immediately open up a space, which the financial markets would immediately use to begin a speculative offensive.

Then you cut their balls off, by identifying the aggressive market participants and cutting off their Greek credit lines. You can't short a currency without access to its domestic credit market. And the Greek government controls access to the Greek credit market.

The Commission will scream bloody murder, and the banksters will sue in the European courts. But by the time the case reaches the last judge, everybody will have forgotten about it.

It would trigger a cycle of devaluation,

A real risk.

inflation

Potentially. Beats austerity.

and austerity

Nothing short of a foreign naval task force in Aegean can force the Greek government to engage in austerity policies if they don't want to. They may have to live with a patch of inflation. But that still beats austerity.

On top of that, the debt, which until that point had been denominated in euros or in dollars would suddenly increase as a result of this devaluation.

Convert the debt at some more or less fictional official exchange rate when you do the  currency swap. The bits you haven't defaulted on explicitly, that is. Nothing short of a naval task force in the Aegean can force Greek residents to repay debts that the Greek government is unwilling to enforce.

Every left government which decided to take measures in favour of the working class would certainly be put under enormous pressure by international capitalism.

So you cut the banksters' balls off. Capital controls, bank confiscations, confiscatory taxes on wealth, unilateral repatriation of Swiss and Cayman Islands bank accounts. And all the other little dirty tricks that aren't used in polite company, but which a country with nothing to lose can indulge in to its heart's content.

The point here is that Greece is being pillaged and burned. And not even necessarily in that order. You have options other countries don't, because all the bad things that will or might happen if you leave the € are still less bad than what the IMF is doing to you as we speak.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 09:42:40 AM EST
[ Parent ]
Don't talk about "leaving the Euro" - talk about "instituting capital controls and issuing scrip as in the Wörgl experiment" until such time as the ECB starts doing its job.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 04:51:46 AM EST
[ Parent ]
That was six months ago.

If policy does not change, leaving the € altogether will be the superior alternative for Greece. They have nothing to gain by beating around the bush about this. Six months ago, it looked like the € might still, overall and in the long view, be a good idea for Greece. Back then, circumspection was indicated.

And six months ago, you could have made the case for the Greeks to be circumspect out of a sense of European solidarity. But enough is enough. If the creditor nations want to play every country for itself, then the debtor nations can only continue to take the high road for so long.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 09:48:42 AM EST
[ Parent ]
A sad end for the European dream.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 10:21:22 AM EST
[ Parent ]
At least it stands to die not with a bang, but with a whimper. Considering that the number of fatalities from the last time Europe went "bang" are counted in nine figures, I think we should be grateful for small favours.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 12:19:01 PM EST
[ Parent ]
The problem is that the idea with the EU is to prevent further bangs. The end of the EU is not itself a bang. It is what comes after that might be, as it where, bang-inducing.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Feb 18th, 2011 at 07:27:45 PM EST
[ Parent ]
ATinNM:
I think the Internet's ability to increase global frustration by informing people what is available, and what they do not have, is underrated.

you can definitely make that point, but how else can a head of steam big enough to change anything fundamental build up?

history shows the printing press and its effects on peoples' desire to overthrow oppression, the internet can do orders of magnitude more, it's barely begun.

maybe frustration is just the beginning of empowerment, certainly it beats apathy and ignorance, which have been the meat and potatoes of european public economic/political awareness since? WW2?

i had never connected the dots before, but the wave of rage and yearning in these latest uprisings in n. africa and the middle east may well be the thread that will unravel the plunderers' plans to keep milking us europeans all'americana, captured governments, finance 'riding bareback', institutionalised ponzi pyramids et al.

certainly any major interruption/price rise of the oil supply will accelerate the pace of change, hopefully educating many hitherto untroubled by serious crises, just how we are all in similar -if not identical- lifeboats.

frustration is the first twitch in the moribund, learned-helpless, shock-doctrined populace. even as we are introduced to the sting of the IMF lash here, we can relate better to what is happening in the arab world, whose corruption has much -if not all- connection to our greedy meddling and peddling too long.

we are fortunate indeed that the mass of the arab street is not directly blaming us for their plight, and hope this continues, it seems like only the rabid irani theocrats have a hate-on for the west, and that's not even their people, the other maghreb and ME countries want to join with our youth and have a life not that different than the youth here or anywhere else they can have a FB page and chat away...

the internet makes it all seem so tantalisingly just out of reach, it must be infuriating.

as we see...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Fri Feb 18th, 2011 at 03:19:26 PM EST
[ Parent ]
I see above however that some have said that moving to a new currency will improve the Greek import-export dynamic. Every country is different however, and Greece doesn't have much in the way of manufacturing. A new currency might improve the level of its valuations in the future, but two of Greece's biggest industries are tourism and shipping. In both, you have external euros coming into the country. one might argue that two of Greece's economic brightpoints are actually forms of export (inasmuch as Greek tourist goods are sold to tourists from other countries) and also a service industry (shipping) that deals almost exclusively with foreign clients. Presumably, there may be a way to keep the level of Greek tourist prices what they are, but I don't see how you can do it without artificial controls. Also note that though the Greek tourism industry can surely improve and become more efficient, the switch to the Euro (and the rise in tourism prices which is undeniable) did not decrease the numbers of tourists to Greece. In the last decade, tourism increased year over year until the crisis.

Finally, about reducing Greek debt to the level that it was prior to the crisis, it's important to remember that creditors fled Greece when it's level of debt to GDP was at 110%. It had been at 95-105% for at least a decade if not more.  So, presumably, a reduction to that level would not improve things as far as credit goes because those levels are the levels which spooked the credit markets in the first place (after several hedge funds made huge short bets against the country).

Finally, it may be that Greek banks are repatriating Greek debt by having the ECB back them in their purchases of Greek bonds, thereby paying off outside creditors while the EU and Greek banks take on more EU debt. In other words, the longer these austerity measures continue, then we come to the point when the totality of the debt has moved from private hands to EU taxpayers and Greek banks.

by Upstate NY on Fri Feb 18th, 2011 at 11:29:58 AM EST
[ Parent ]
Finally, it may be that Greek banks are repatriating Greek debt by having the ECB back them in their purchases of Greek bonds, thereby paying off outside creditors while the EU and Greek banks take on more EU debt. In other words, the longer these austerity measures continue, then we come to the point when the totality of the debt has moved from private hands to EU taxpayers and Greek banks.

I could live with that. Then all you have to do is shaft the Greek banks and the ECB, which is if nothing else politically easier than shafting German pension funds.

But unless the ECB is moving massively in this market, it's mostly cosmetic anyway, because these buybacks will be matched by Greek interbank debt to the rest of the €-zone. So shafting the Greek banks will still shaft the creditor countries.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 12:24:57 PM EST
[ Parent ]
But unless the ECB is moving massively in this market, it's mostly cosmetic anyway

We know the ECB has bought under 80bn of Euro sovereign debt. That's no more than 1/3 of Greece's outstanding debt.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 01:49:40 PM EST
[ Parent ]
Somehow the IMF should be mentioned, too -- after all, the ECB is hiding behind international 'consensus' when pursuing this policy as part of the troika.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 18th, 2011 at 08:37:44 AM EST
[ Parent ]
The IMF is irrelevant to this discussion. Bringing in the IMF in the first place is yet another charge to be laid at the feet of the ECB, but this letter isn't about laying charges at the feet of the ECB. It's about power, not justice, at this point. And the IMF can't do anything to Greece that the ECB and Commission can't do worse.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 09:53:38 AM EST
[ Parent ]
!? in Greece, currently they are doing it with the IMF as nominally equal partner in a troika.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 18th, 2011 at 02:22:46 PM EST
[ Parent ]
The IMF was, reportedly, the sane partner in the negotiations. Plus, there is no reason whatsoever (other than ECB insanity) for the IMF to lend to a country in its own currency - the IMF is there to provide access to hard international currency.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 02:34:48 PM EST
[ Parent ]
That's what I think an LTE should indicate, after all, the public row involved Mr. Thomsen of the IMF, not Trichet or his minions.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Feb 19th, 2011 at 04:37:04 AM EST
[ Parent ]
Actually Mr. Servaas Deroose of the EC was equally blunt. It's just that Thomsen was the most vocal. It might be because they put him out front so that the IMF catches most of the grief in these press conferences.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sat Feb 19th, 2011 at 05:02:27 AM EST
[ Parent ]
From the link:

"The purported statements of the European Commission representative in Sunday newspapers are at the very least off target, and certainly inaccurate," Papaconstantinou said in a press statement midday Sunday.

The three international lenders--the IMF, EU and ECB commonly know as the "troika" in Greece--held a very controversial press conference Friday. It was their third review of the debt-laden Mediterranean state's progress on austerity, fiscal consolidation and economic restructuring reforms. And while they approved the fourth EUR15 billion aid tranche, they also ratcheted up expectations on reforms.

...Greek Prime Minister George Papandreou midday Saturday called the head of the IMF, Dominique Strauss-Kahn, and Olli Rehn, the European Commissioner for economic and monetary affairs, to complain about the tone of Friday's joint press conference of the international lenders of last resort. Papandreou also criticized the statements as "unacceptable." Other government ministers have talked about a breach of the country's sovereignty and underlined the cabinet only takes orders from the Greek people.

That's now even worse: both the IMF and the Commission catching the fire before the ECB.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Feb 19th, 2011 at 06:28:31 AM EST
[ Parent ]
Well, he complained to the EC not the ECB. My omission. From the linked article:

Greek Prime Minister George Papandreou midday Saturday called the head of the IMF, Dominique Strauss-Kahn, and Olli Rehn, the European Commissioner for economic and monetary affairs, to complain about the tone of Friday's joint press conference of the international lenders of last resort



The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sat Feb 19th, 2011 at 06:28:52 AM EST
[ Parent ]
(Editorial note: I probably deleted and re-posted my comment with the extended quote before you got to post the above reply with the same quote.)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Feb 19th, 2011 at 06:48:46 AM EST
[ Parent ]
Yes. Well the ECB representative was more constrained last Saturday in his statements, mainly because he was talking about the banking sector.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Sat Feb 19th, 2011 at 06:30:41 AM EST
[ Parent ]
Strike "ECB" in the draft, replace with "troika."

In practise, it's going to be the ECB, but DoDo is right about the rhetorical points.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 19th, 2011 at 06:32:47 AM EST
[ Parent ]
The IMF is there because the ECB wants the political air cover. The IMF has no stick that can hurt Greece remotely as bad as the stick the ECB has.

If you're willing to present ultimata to the ECB, you're past the point where that sort of political theatre matters very much.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 18th, 2011 at 02:42:36 PM EST
[ Parent ]
You are attacking the ECB on the occasion of a public row between the government of Greece and IMF representatives. So what you say in the first paragraph would better be there so that readers of the LTE not reading ET will get the apparent shift of target.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Feb 19th, 2011 at 04:29:27 AM EST
[ Parent ]
The Brussels Consensus and the ECB have done this all by themselves. The IMF and the Washington Consensus are the story of 15 years ago...

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 10:23:26 AM EST
[ Parent ]
Eurointelligence: Berlin opposed to Draghi - and ready to dump Juncker
German banking association says Greece will restructure

The president of the German banking association said Greece will not get through this crisis without debt restructuring, and he called for stress tests to specifically include a component of sovereign default on the banking book. This is an interesting comment, as reported in FT Deutschland, but remember that the association only encompasses the private-sector banks. Most of the toxic waste in Germany is located with the state sector banks, such as HRE and WestLB.



Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 12:19:50 PM EST
[ Parent ]
Please correct me if I'm wrong, but is it not the case that the problems in Greece do not stem from a lack of competitivity due to elevated unit labour costs, but due to a bloated and inefficient public sector and the fact that people just won't pay their fucking taxes?

If that is so, how will the troika efforts to lower wages make anything better, even from their own warped point of view?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Feb 18th, 2011 at 10:09:26 AM EST
None of the proposed policies are solutions to the current problems, nor would they have prevented the crisis had they been in place over the past decade.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Feb 18th, 2011 at 10:25:17 AM EST
[ Parent ]
There is a huge tax problem in Greece. That being said, it pays to do an analysis where you look at tax revenue per capita related to GDP per capita. It's not an apples to oranges comparison between countries--obviously--since tax rates are different in every country. Whichever way you cut it, tax collection in Greece might seem meager to those in high tax Scandinavian countries, but not very different from other European countries. When you factor in the main industries in Greece (tourism especially) then its official tax evasion rate of 25% (some put it up to 30%) is perhaps a considered result, when compared to the EU tax evasion rate of 19%. Or, heck, 17% in the USA, where it is actually legal for a hedge fund manager to pay half the amount of tax on his income of hundreds of millions as someone in the $200k bracket.

I also question the lack of competitivity. Greece is not a high-tech manufacturing country. They are not competing for high-tech stakes. It does compete in agricultural markets, and in metals. Beyond that, however, tourism, banking and shipping are major industries.

The public sector is a whole other ball of wax which I can't say I understand because of the wide divergence of information about average salaries.

I will say though that if you bring together all the stories of Greek boondoggles with foreign companies, bribes and corruption, especially in the purchase of military weaponry, but also in bridges to nowhere and even security systems, you can easily come up with in excess of $100 billion over the last 10 years which the country did NOT absolutely need to spend.

by Upstate NY on Fri Feb 18th, 2011 at 11:37:37 AM EST
[ Parent ]
Because the offensive is ideological. The IMF is not drafting all of this from scratch, it is implementing one by one, all items from the Greek Board of Industrialists wishlist... Some of them really do believe that if they depress wages the economy will boom, because that is their idea of what a healthy economy looks like: permanently depressed wages, high inequality etc. On the other hand they are trying to gather in some taxes: Apart from making tax evasion laws stricter, Greece now has the highest proportion of indirect taxes as a percentage of total revenues at least in Europe. At the same time they are decreasing the corporate rate....
BTW this study is a look at the distributional aspects of tax evasion in Greece. While far from perfect (and possibly not tracking down money from corruption and crime or the real top of the income ladder) it does show that income underreporting is rife at the lowest (mainly undeclared wage earners, small shopkeepers etc I imagine) scales (where it has a very small taxable footprint) and at the very top (24% among the top 1% - that's beyond whatever they avoid legally) the largest part of middle income wage earners seem to be fairly honest. So contrary to myth, tax evasion in Greece is not ubiquitous but much concentrated at the top of the income ladder.

Note that they are destroying the tax base in more ways than one, yet they state it doesn't matter because they plan to cut expenses even more. Couple that with the planned sellout of everything but the kitchen sink and one begins to realize this isn't about improving the Greek economy but squeezing as much out of it as possible before it its remains are left to fester into a specially prepared second and a half world of former first world countries, with limited sovereignty.

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Fri Feb 18th, 2011 at 01:26:49 PM EST
[ Parent ]


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]