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Antiausterian policies in small countries - feasible?

by talos Wed May 2nd, 2012 at 05:49:03 AM EST

I'll be putting up a diary on the upcoming Greek elections, both the most promising and the most ominous in recent history as well as the most unpredictable, shortly... The elections are scheduled for next Sunday, so they will coincide with the second round of the French presidential elections, and probably will be overshadowed by them... At least initially...

This here is an introductory diary that would like to open a discussion about the possibilities and prospects of an antiausteritarian policy starting from a single, small EU country. It's more of a call for a discussion really as it is not just about Greece, but in general about the possibilities and routes of escape from the straitjacket of ECB brand austerity... Something most of us here aim and wish for...

See this: Greek anti-bailout leftist wins over austerity-weary voters:

Alexis Tsipras says Greece's political elite are bluffing when they say harsh austerity cuts are required to keep the country in the euro zone. And he wants Greek voters to call them on it.
With Greece due to vote on May 6, the young leader of the Left Coalition party is urging Greeks to vote out austerity - and the two pro-bailout parties imposing it - arguing Europe cannot afford to kick Greece out of the monetary union.
"It's a pseudo-dilemma, a fabricated myth, that our future in the euro is at risk. It is blackmail by pro-bailout parties, a tool to pressure people to accept measures that bring misery," he told Reuters in this port city in central Greece.
"If any country left the euro under the pressure of markets, then as a herd they would seek the next one to speculate on. The cost for the zone, for Germany, would be huge," he said.
The rhetoric may find little sympathy among Greece's international lenders, but it is winning him voters at home. The 38-year-old leftist's party is one of four vying for third place in national elections on May 6.

frontpaged - Nomad


Full disclosure: I am a member of SYRIZA and am campaigning for it currently:  Yet, although for a variety of reasons I am fiercely for sending the troika home, declaring that the official ECB/IMF policy on Greece has failed miserably, and that on humanitarian grounds alone, the disaster suffered and that planned (as Greece is supposed to cut an extra 15 billion Euro from its budget in the next 3 years, and lower private salaries by decree, yet again, after a 22% cut suffered already) should not be voluntarily accepted by any people in the world... I'm not as confident as Tsipras that things will go exactly as planned (to be fair, neither is he, there are Plan Bs that have been considered in any case). So let me raise three issues, that really affect most of the EU periphery in one form or another:

  1. Is euro membership secure? Isn't there a significant faction in the German government that supports "kicking Greece out of the euro" already?
  2. Wouldn't an act of rebellion (such as reversing the ban on collective bargaining, or resetting the private sector minimum wage back to the dizzying levels of <700 Euros per month, or deciding that teachers need more than 600-1000 Euros to live on per month, or refusing to privatize the public companies that Greece has agreed to privatize) cause an all-out war by the powers that be in the EU against a "rebel" Greek government (or Portuguese, or Irish, or even Spanish), on many fronts inside the EU, starting from EU convergence funds etc? Wouldn't there be some sort of domino-theory desire to avert the "bad example" from spreading?
  3. What would the inability to form a government in Greece coupled with a very strong "left of the left" showing in the coming elections precipitate in the EU and how would it affect the crisis? Would a Hollande victory have any effect?

IMHO the third is the most crucial question. I think that the markets' reaction to a "problematic", from the Greek lenders' perspective, electoral result might act as a bomb in the current atmosphere of impending doom, coupled with Spanish problems, a French socialist victory and anti-austerity protests around the EU. Would such a result trigger then a critical point that would decide the fate of the Euro earlier than expected? Weariness is evident already in the markets, and the IMF is worried...

I note that SYRIZA is the only political party in Greece that informed all of the relevant stakeholders that it does not accept the legitimacy of the Papademos government and is not bound by its signature...

Now there are is a ban on publicizing electoral opinion polls in Greeve 15 days before the elections (an insane rule IMHO), but I do know the results of one of the unpublished recent polls and "vying for third place" is an understatement. In reality SYRIZA is aiming for second place with a large enough percentage to block a stable pro-austerity government from forming. The combined forces of various shades of anti-troika left (including the Greens) in Greece are around 39%, and the anti-troika right (not counting the Nazis) is at 10%. Pro-memorandum parties are at 42%... But more about the elections soon...

[No-one would in SYRIZA would officially admit to so high a goal BTW, because the Melenchon campaign has taught everyone that an evident victory can be turned into a perceived defeat by high expectations alone....]

Display:
A financial collapse due to voter rebellion in Greece and France, if it comes, would weaken - if not destroy - the forces that are benefiting from and driving the current policies. Such a collapse is unlikely to be confined to the EMU or Europe, but would also impact the USA. I would find such an outcome superior to acquiescing to the current self defeating policies of increasing privation in the name of austerity, driving economic activity straight into a debt-deflation death spiral.

Were this to lead to the collapse of a number of TBTFs it would either show that they are not too big to resolve or it would force what until now has been avoided - writedown of bad debt. Either outcome would be a positive. It would be highly ironic were Germany's aversion to allowing the ECB to print money were to lead to the writeoff of large portions of debt held by German banks, among others. Even were TPTB to manage to temporize the problem once again, even that would be illuminating.

I hope that Alexis Tsipras and others in Greece forcefully make the point to the Greek electorate that the bailouts are not of Greece, but of the lending banks and the the bank making a loan is always in a better position to know the quality of a loan than is the borrower. This is especially true when the banks making the loans are also massively involved in orchestrating attacks on currencies and the ECB refuses to deal with that problem - among a large list of willful failures.

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 Tue May 1st, 2012 at 01:00:27 AM EST
William K. Black and others have been making the point that when a lender makes a loan knowing that it cannot be paid back or without knowing how it will be paid back, this is fraudulent conveyance in many jurisdictions, including the State of New York, and that a fraudulent loan is not enforceable. I would be interested in equivalent statutes in European countries. But such statutes will only be enforced when the power of the financial sector has been severely weakened. But the crisis is not going to be resolved, at least in any manner that is an improvement on the current situation, until the rule of law has been restored and finance again has to be concerned with what is lawful behavior and what is not.

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 Tue May 1st, 2012 at 01:09:19 AM EST
[ Parent ]
good for you talos.

Beppe Grillo's Blog


My name is Beppe Scienza. I am a lecturer with the Department of Mathematics at the Turin University and I (unfortunately) deal above all with the topical issue of the abuse of savings. In the case of Greece, the issue is somewhat complex, and more than a little contradictory since, just a few weeks ago the television news and newspaper headlines were telling us certain things such as: "Greece has been saved", "Greek public debt successfully restructured" and "Greek bankruptcy averted". Then, suddenly, a couple of weeks ago, anyone who had, let's say, 10-thousand Euro in Greek Government Bonds, would suddenly have received 24 different bonds in return for his/her original Bonds and, when he/she proceeded to add up the respective values of these new Bonds, he/she would have discovered that they have a total combined value of only two thousand Euro. In other words, Greece was saved and I lost 80% of the money I invested, so what shall we call this? The truth must be told, and that is that there have been two separate misrepresentations here:
  1. one perpetrated by the top politicians and the members of the European Union and its Central Bank, who said: "We are going to rescue Greece", "No way can Greece be allowed to fail under any circumstances" and "Greece must be saved" but meanwhile, they were hastily making preparations for Greece to go bankrupt, and
  2. the second misrepresentation, which came a little while later because the fairy tale that is now doing the rounds is that Greece has been saved.
The restructuring of the Greek bonds, and God forbid they should go the same way as the Italian ones have, occurred in two phases:
1) first a proposal was put to the banks, provident funds and insurance companies, asking them to accept that the bonds they held be replaced with new government bonds and accept that the values be cut. In effect, the vast majority of these so-called institutional investors accepted this proposal although, as to just how willing they were to accept the proposal, I refer you to what the head of the German Commerzbank, Martin Blessing, had to say with regard to the acceptance of the restructuring of the Greek public debt, namely that: "This is about as voluntary as a confession made to the Spanish Inquisition". Whatever the case may be, the Central Bank somehow managed to convince the banks to accept this deal and that's their business.
What's not their business is that immediately thereafter, even those investors who had not agreed to the deal suddenly found themselves in that same boat, in other words the nominal value of the bonds they held was halved and their market value dropped by 80%. Now, in technical terms, this effectively amounts to "default" and is called insolvency. Whenever someone (whether it be a Country's Government or a private enterprise) is obliged to make interest payments or to repay any invested capital and fails to do so, in essence this amounts to bankruptcy, although in technical terms it is called insolvency or default. Greece has gone into default and is in a state of insolvency as regards those investors who did not agree to the restructuring deal. Greece has failed to meet its obligations and this is called insolvency, so Greece is effectively bankrupt. This is not the first time that that Country has gone bankrupt and indeed all Greeks will undoubtedly remember the statement made on 10 December 1893 by the then Prime Minister Charilaos Trikoupis, who said in Greek: "Δυστυχώς επτωχεύσαμεν" (distihós eptohéfsamen), which translates as "Unfortunately we are bankrupt".
So the Country was bankrupt then, and similarly it went bankrupt once again in the 30's. The Greeks truly can, and do honestly say "Δυστυχώς επτωχεύσαμεν ξανά" (distihós eptohéfsamen ksaná), or "Unfortunately we are bankrupt once again". So, let's stop bullshitting everyone by saying that Greece has not gone bankrupt because Greece has indeed gone bankrupt!

Same face, same race
However, it must be said that there is something rather strange about this whole restructuring deal and that is that it has not affected everyone equally because something happened that, if such a thing was to happen in the case of a private company, it would be called preferential bankruptcy and would be classified as a criminal offence. By the end of 2011, Greece's public debt amounted to 380 billion Euro, which is extremely high and more than 170% of GDP. One would expect that that figure would have at least been halved by now, yet it hasn't, but why? Well, prior to the restructuring and prior to the voluntary agreement to the public debt cutting proposal, a little sleight of hand occurred whereby the codes of all the bonds held by the European Central Bank, the Bundesbank, the Italian Central Bank, etc, suddenly changed and these bonds remained unaffected by either the proposal or the mandatory value cuts. These bonds, which remained as they were except for the new codes, received their interest earnings in full and the full value of the ones that had expired was paid out, no bankruptcy there then!
Now we can't honestly say that any private individual benefitted from all of this, but only the same old European Union financial system that lent the money in the first place. The action may even be justified, however, it is nevertheless rather strange and was discussed and even object to by Bundesbank President Weidmann, who felt that if the truth be told, this action appeared to be very strange indeed. So Greece was indeed bankrupt, but not when it came to the Greek Government Bonds held by the various central banks.
At this point, the important thing is not to become embroiled in any legal action against Greece and not to hand over any money to attorneys that promise to instigate legal action to recover at least some of the money that has been lost. Sovereign States are called "Sovereign States" precisely because the can decide not to pay their debts if they so wish, so either we declare war against them or that's the end of the story. Now no one is thinking of declaring war against Greece, however, it is important not to throw good money after bad by instituting legal action, even if there is a good chance of winning it in Court because, although a number of parties won legal cases against Argentina, some even in the American courts, it all came to nought because they won the court cases but they never did get any of the money awarded to them.
...

One question that many people are asking themselves is: "How come we have gotten to this point?" It is said that it happened because the Greeks were falsifying their public accounts and was making a mess of it too. This is true, undoubtedly Greece was utilising derivative contracts, which is the reason behind the disasters in many of our Italian municipalities, regions and provinces. Greece had even done this with Goldman Sachs, for example, when Mario Draghi was with Goldman Sachs, just in the interests of accuracy. They had hidden the shortfalls and had made the public debt appear to be less than it really was. All of this in unquestionably true, however, it must also be said that a little more diligence, adroitness and farsightedness by the European Union and the European Central Bank would also have gone a long, long way indeed. How is it possible that no one had any suspicions whatsoever until finally, in 2010, the financial markets began to become concerned about Greece? How come, since Greece's entry into the Eurozone, in other words for an entire decade there was never any suspicion that perhaps someone in Greece was busy fiddling the books or making things look better than what they actually were? Maybe everyone chose to look the other way because various other Countries, such as France, Italy or Germany were perhaps also doing something very similar. Someone had to know what was going on. Not everyone at the European Central Bank or the German one is a total idiot. There must have been some suspicion that all was not as it seemed, yet no one ever said anything. It would have been better if they had said something earlier, back in 2007 for example, when Greece's public debt amounted to only 115% of its GDP.

merkel is in a devilish bind of her own making, either she loses right wing industrial/bankster political support in germany, result: career down in flames.

or: europe jettisons greece like so much useless ballast and the rest of europe realises the hangman's rope austerian policy is and rises up to roundly defeat it.

and angie gets to go down in history as the willing idiot who pulled the lever, judge, jury and executioner all in one 3-fer!

when europeans realise the depths of this scam, and not only their fond faith in the humanitarian and peace-loving EU project was in reality just a way to hold the patient in coma while harvesting individual organs for sale to the invisible idiot with the groping, pickpocket, increasingly visible hand.

the 4 trillion E question is will EU citizens stand idly by seeing their sovereignty, nay even their national patrimony ripped from under their feet to keep the 1% in profits?

we may be learnedly helpless (good description of bloggers!), we may be spinning from the avalanche of lies coming from most media and our leaders, we may be senile and rendered penniless, hungry and thrown into the street, but their gamble that we aren't going to make any fuss as we go kettled into the alleys and brutalised by rentathugs, or herded into the showers of zyklon B to cleanse us of our fiscal sins.

people are not going to go into that good night as passively as our lords and masters, living in the past might wish.

why did it have to come to this indeed! as usual, the powerfreakery of a few greedy bastards determining the fate of millions of the duped.

the best they can hope for is we take our own lives and save them the trouble, as is sadly proving often to be the case...

the comeuppance for these parasites will he unstoppable once it kicks in properly, as their provocations practically guarantee that result. they have sated desire of honest governance with a consumerist ersatz satisfaction, as that is removed, expect sparks to fly and people who have nothing further to lose throw themselves into the gears of an unjust machine.

frau merkel is toast either way. she's lucky if she isn't carbonised... lecturing people after raping them is hardly fetching behaviour, and thatcher's drooling decrepitude surely also awaits her senescence.

grr

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

by melo (melometa4(at)gmail.com) on Tue May 1st, 2012 at 03:21:17 AM EST
To give you some idea about the scale of the fraud involved. Pension funds in Greece were forced to participate despite the objections of their managers. Unlike the banks they were offered no recapitalization as a carrot. So i.e. the Journalists' pension fund went form a 2 billion in savings to 700 million Euros overnight. But furthermore the Bank of Greece which is managing the accounts of many if not most public institutions did something unprecedented. They took the money not only from the savings accounts but even from the current accounts of Hospitals, Universities, Public Authorities (the Pharmaceutical Regulatory Agency among others), bought government bonds without informing anyone from these institutions, and then pretty much decimated these accounts to the point that they were unable to pay bills and salaries... Interestingly a few weeks before the PSI took effect, the then Finance Minister (and now PASOK leader) Evangelos Venizelos, passed a law (hidden in some other bill) which gave immunity from prosecution to all BoG employees involved in managing public institutions' assets.

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Tue May 1st, 2012 at 07:01:36 AM EST
[ Parent ]
so there's reason, not just instinct, not to trust this man further than you can throw him, and with his girth, that ain't far.

he looks like the very personification of all that's sleazy about greek politics.

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

by melo (melometa4(at)gmail.com) on Tue May 1st, 2012 at 07:06:12 AM EST
[ Parent ]
If you are referring to Venizelos he, as a high profile legal scholar, is the guiding power behind almost all laws in the past 20 years, that have secured and institutionalized "diaploki", the marriage between, big business, media and politics that has created the de facto new Greek elites. He has masterminded the laws protecting Ministers from prosecution, laws that have reduced protection of forests and the environment, laws that give away the air-waves to the Oligarchs, that protected the bankster involved in the Proton Bank scandal. He was also the person in charge of the Olympics' preparations etc. etc. Truly PASOK could not have a more emblematic leader...

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Tue May 1st, 2012 at 07:38:45 AM EST
[ Parent ]
Truly PASOK could not have a more emblematic leader...
...and his would be the perfect head with which to adorn the first spike.

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 Tue May 1st, 2012 at 10:16:34 AM EST
[ Parent ]
Machiavelli would not object. A little dismemberment does the elite some good.
by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Tue May 1st, 2012 at 06:24:10 PM EST
[ Parent ]
Heh??

Did you see the size of this guy? It would take a lot of dismemberment to do the job......

by Euroliberal on Wed May 2nd, 2012 at 09:48:57 AM EST
[ Parent ]
Actually the girth, height and beard of Cola di Rienzo betrayed him as he tried to steal away from Campidoglio dressed as a woman. He was properly run through after being held an hour before the Roman crowd, hacked to pieces and displayed in an near-by square. When his remains were burned several days later, written testimony has it that the fire lasted days due to his considerable reserves of fat.

No one missed him, a demagogue populist, although he was later sanctified in the 18th century as some sort of noble spirit.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Wed May 2nd, 2012 at 11:24:24 AM EST
[ Parent ]
heh, looks can deceive, but...

he'd have fit in perfect with the berlusconi cult, did he learn his statecraft there perchance?

makes jack straw look friendly!

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

by melo (melometa4(at)gmail.com) on Tue May 1st, 2012 at 03:04:55 PM EST
[ Parent ]
I'm having a WTF moment here...

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Tue May 1st, 2012 at 05:04:17 PM EST
[ Parent ]
There is some version of the events here, but I haven't found a detailed account in English somewhere yet...

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Tue May 1st, 2012 at 05:37:30 PM EST
[ Parent ]
Would Greece be the anonymous country discussed by Gustavo Piga in "Derivatives and Public Debt Management"?
by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Tue May 1st, 2012 at 06:18:14 PM EST
[ Parent ]
why, because of how fat the guy is, or my bad taste in bringing it up?

more likely because this guy takes 'overfed crook' to new levels.


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

by melo (melometa4(at)gmail.com) on Wed May 2nd, 2012 at 05:49:12 PM EST
[ Parent ]
I want to know why the devilish games of falsification are being portrayed as secretive or hidden, and yet there are articles such as this one published many years ago:

http://www.risk.net/risk-magazine/feature/1498135/revealed-goldman-sachs-mega-deal-greece

Equally murky is the exact effect of Goldman Sachs' transactions on Greece's publicly reported national accounts. Since the deficit was a comfortable 1.2% of GDP in 2002, it is more likely that the cashflows were either used to help lower the debt/GDP ratio from 107% in 2001, to 104.9% in 2002 (by funding buybacks) or to lower interest payments from 7.4% in 2001 to 6.4% in 2002. But why did the large negative market value of the swaps not appear on the liability side of Greece's balance sheet?

The answer can be found in ESA95, a 243-page manual on government deficit and debt accounting, published by the European Commission and Eurostat in 2002. As revealed by Piga, the drafting of ESA95's section on derivatives was the subject of fierce arguments between the government statisticians and debt managers of certain eurozone countries.

The statisticians wanted derivatives-related cashflows to be treated as financial transactions, with no effect on deficit or interest costs, and with the derivatives' current market value stated as an asset or liability. The debt managers opposed this, insisting on having the freedom to use derivatives to adjust deficit ratios. The published version of ESA95 reflects the victory of the debt managers in this argument with a series of last-minute amendments.

Goldman of course claimed that Eurostat was consulted:

http://www.risk.net/risk-magazine/news/1593054/corrigan-goldman-sachs-consulted-eurostat-greece-curr ency-swaps

Eurostat then claimed ignorance:

http://www.risk.net/risk-magazine/news/2070897/eurostat-continues-deny-knowledge-greece-goldman-swap s

Eurostat is apparently like many of us. The past is the past. There is no history there. But of course, Eurostat is then also claiming incompetence by claiming ignorance since the publishing trail for the deal is widely known. Only Eurostat seems unaware.

Perhaps the powers that be are relying on journalistic amnesia. After all, the very person who wrote the original 2003 article, Nick Dunbar, recently wrote a piece about the deal in which he seemed to aver that the deal was first uncovered in 2010. Either Dunbar has much editorial oversight in his work or else he has a severe amnesia about the things he himself has previously written about.

Did people know? Well, if you're following the budget deficit reports of the countries in the Eurogroup's sights, you already know that statistical manipulation is still occurring. Whereas Ireland has been prevented from properly logging the nature of outstanding banking debt that the nation is responsible for, Portugal has been allowed to shift debt (1.9% of GDP) from its current account to a pension account which is strictly off the books and thus allows Portugal to meet its requirement.

by Upstate NY on Wed May 2nd, 2012 at 09:57:51 AM EST
[ Parent ]
Looks like the rule of thumb is: "So long as most will either ignore, not remember or not understand you can use the truth freely."

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 Wed May 2nd, 2012 at 10:07:53 AM EST
[ Parent ]
I messed up the big block quote directly after the first link. Those are not my words.
by Upstate NY on Wed May 2nd, 2012 at 03:39:22 PM EST
[ Parent ]
Couple of ideas:

  1.  The first accomplishment needing to be done is stop the bleeding.  

  2.  Recognize Greece has a Public Relations problem.  You're not going to solve the mess solely on your own so you need political allies and to do that you'll need to change the current CW in the rest of Europe you're all a bunch of wastrels.  "Scruffy Southerns," in Migeru's phrase.  A necessary - IMO - action to take to drive this is ...

  3.  Bring the corrupt to justice.  Not only the politically corrupt but also their "enablers" in the economic realm.  I note people in the Nordic countries take a dim view of public corruption and when the message is driven home that most of the problem(s) in Greece was caused by corruption and you're taking steps to bring the guilty to account you'll have a two'er.

  4.  And I can't emphasis this enough: SYRIZA needs it's own media organizations to 'get the word out' in Greece and elsewhere in the EU.  If you do as hoped TPTB are going to attack you 24/7 for everything from being UnSerious© to goat fucking.  You'll start off with a good deal of Street Cred but you'll lose it if you don't fight.  And remember you're doing mass media Journalism and you'll need to use the forms and techniques of mass media Journalism, i.e., Take a Lesson from Murdoch.

  5.  Catchy Slogan for your policies.  Something like "Greece is Working."

The way this would work is, let's say, restructuring the Greek power industry:

Stop the Bleeding: reduce the need for Greece to import oil

Bring the Guilty to Justice: attack the oil importers for selling Greece out to foreign multinationals.  Prosecute people and businesses for corruption, special favors, etc.

Greece is Working: programs to build wind, solar, etc. power production units, building urban mass transit systems to reduce the need for imported oil, & all that kinda stuff.

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue May 1st, 2012 at 01:12:55 PM EST
2b) Recognise that 2) may not be possible and draw up contingency plans for doing 1) without outside help.

Of course, this will require 3) through 5) anyway, so it does not make a great difference to the operational planning.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 1st, 2012 at 01:39:48 PM EST
[ Parent ]
4. is critical. Already SYRIZA is being blamed for everyting from supporting illegal immigrants to causing street riots and "subverting the rule of law" (the "liberal" side is now suggesting that civic disobedience is pretty much "fascist" violence in disguise), while at the same time a nazi / criminal gang will be in parliament so with immunity etc.
The media, especially after the crisis, are almost entirely owned by the elites and their backers. At this point they are all politically delegitimized along with the parties they support but they exert social influence and can shape agendas...

Having said that, I want to make clear that the chances of SYRIZA leading a Left government after the May 6th elections are close to nil (barring a miracle) since the Communist Party has declared that there exist no government inside capitalism and the EU that can help workers and that it has no plans of supporting (much less participating or creating an electoral front with) anyone, much less the petty-bourgois reformists of SYRIZA. So a good result at this stage would be for the two big and corrupt parties to not achieve a majority and they would probably need less than 35% combined to achieve that.... If they don't then again this is a political event of some significance since there will be no government to pass the austerity measures for at least another two months, and there goes the programme... If this happens the next election will not be held under the same political conditions as the current one...

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

by talos (mihalis at gmail dot com) on Tue May 1st, 2012 at 01:55:37 PM EST
[ Parent ]
I understand SYRIZA will be in opposition.  At best you'll have a blocking minority.  However, you can use your status as the Designated Opposition to 'flip' the next election by positioning yourselves as the Real Alternative.

Glad you know trying to work or ally with the Communist Party is pointless.  

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue May 1st, 2012 at 02:48:19 PM EST
[ Parent ]
Insert a new step two:

2. Cancel the fucking arms purchases - already! And tell Germany and France to use some of their own money to pay for them and they can call it a 'rescue' - if the arms make it to Greece.

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 Tue May 1st, 2012 at 02:34:50 PM EST
[ Parent ]
Depending on how the contracts were written it may not be possible for SYRIZA to halt the sales as a minority, non-governmental, political party.

However, they can use that as a Stop The Bleeding/End the Corruption issue in a media campaign.

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue May 1st, 2012 at 02:54:08 PM EST
[ Parent ]
Another possible step:

Appearing on Tonight with Vincent Brown on April 18 Steve Keen endorsed a proposal in Ireland that would have the Irish Government issue new Punts pegged to the value of the Euro, but restricted to Irish domestic use only. They would buy euros from the Irish public and use those to pay Euro-denominated debt to the Troika, while allowing the Punts to circulate domestically.  Steve described the process as saying: "Here is your damaged currency." The debt would be paid without reducing the value of the currency in circulation domestically. Exporters could still sell in Euros internationally. IIRCC this proposal is about ten minutes into the program, which is very interesting.

While Ireland has a primary surplus and Greece does not, performing a similar maneuver with a New Drachma for domestic use only and pegged to the Euro, could at laest prevent a collapse of the domestic money supply. But the primary deficit Greece runs could provide complications. At least they could provide an adequate money supply for all domestic transactions in a currency under the control of the state.  

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 Tue May 1st, 2012 at 02:52:11 PM EST
[ Parent ]
Problem, as I understand the matter, is Greece has a structural Import imbalance.  Oil is a Biggie, according to this:

The main imported commodities are machinery, transport equipment, fuels and chemicals.

Oil imports are, roughly, 497,000 bbl/day at (call it) $115 per barrel or ~$57 million (43 million euros) which equals 17 billion euros/year which is a huge chunk (~27%) of the estimated import total of 45.36 billion/euros per year.

The transport sector consumed 46% of Greece's total oil demand in 2008 or, roughly €20.9 billion/year.

This illustrates Troika insanity of destroying public mass transportation.  Instead Greece should create a crash program to increase non-oil using public transportation,e.g., electric trams.  I note this would help the Greek economy by providing jobs for the infrastructure build, jobs to run the things, and - since trams are mature tech - building the trams in Greece could be done and should be done.  With a bit of intelligent design and planning the tram lines could also serve as light cargo transporters within the urban areas.  By building these systems in the ten largest Greek city roughly 5 million people, out of a total population of ~13 million, would be served.  

The adverse impacts on existing businesses, e.g., car dealerships, would need to be studied and a way to alleviate them would need to be added.    

Now, if these idea was coupled with ARGeezer's idea of a New Drachma capital for the project could be raised at a minimum cost.  Government could pay domestic cost(s) in New Drachma and sink the monies through taxation at all levels of government.  

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Tue May 1st, 2012 at 03:58:26 PM EST
[ Parent ]
The idea was neither mine nor Steve Keen's, but it does pertain specifically to domestic activity. Green power and electric transit are the obvious targets and the New Drachma would be a way to pay for them. It was Greece's structural import imbalance to which I referred using the phrase 'primary deficit'. Primary trade deficit would have been clearer and it obviously imposes problems which Ireland would not have with a New Punt.

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 Tue May 1st, 2012 at 04:12:00 PM EST
[ Parent ]
Ireland might have those problems as well, though. Ireland is special among the GIIPS in that the difference between trade and current accounts balance is driven mainly by repatriation of profits rather than debt service. This would not be made to go away by defaulting on external debt.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 1st, 2012 at 04:39:51 PM EST
[ Parent ]
For US firms doing business in Ireland that should be 'expatriation of profits' as they don't usually make it to the USA, going instead to some tax haven domicile.


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 Tue May 1st, 2012 at 07:26:47 PM EST
[ Parent ]
The discussion of the New Punt proposal starts about 7 minutes in. It came to Steve in an e-mail. He has not disclosed the name of who proposed it. Hopefully more will come out later. China long maintained a domestic only currency, the renmembi, which is similar to what is being proposed. From wiki:
Before 2009, the Chinese renminbi had little to no exposure in the international markets because of strict government controls by the central Chinese government that prohibited almost all forms of yuan holdings or transactions. Transactions between Chinese companies and a foreign entity would have to be denominated in US dollars. With Chinese companies unable to hold US dollars and foreign companies unable to hold Chinese yuan, all transactions would go through the People's Bank of China. Once the sum was paid by the foreign party in dollars, the central bank would pass the settlement in renminbi to the Chinese company.


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 Wed May 2nd, 2012 at 12:51:52 AM EST
[ Parent ]
The key points that Steve did not mention is that the government accepts the New Punt and banks are required to clear domestic transactions in New Punts.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed May 2nd, 2012 at 09:10:56 AM EST
[ Parent ]
Heh, I deleted a sentence about the state accepting tax payments in New Punts after not finding that in his discussion.

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 Wed May 2nd, 2012 at 09:56:59 AM EST
[ Parent ]
Were those requirements in Argentina when they pegged their currency to the dollar?

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 Wed May 2nd, 2012 at 12:28:00 PM EST
[ Parent ]
Yes, but they were also trivially fulfilled for Argentina, because they didn't adopt the dollar as legal tender. They simply pegged to it.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed May 2nd, 2012 at 04:59:09 PM EST
[ Parent ]
  1. No. The Euro will stand or fall depending on Germany's willingness to accept a Eurobancor, unrestricted Eurosystem money printing or a federal European employer/investor of last resort with an unlimited ECB overdraft facility. The Greek decision on austerity or not has nothing to do with it one way or another. Which means that Greek Euro membership will not be safe if it ditches austerity... but neither will it be if it implements austerity.

  2. An all-out war is improbable. Greece has too many white people and too many NATO weapons. However, it is almost certain that you will be looking at a suspension of voting rights, freezing of cohesion funds and assorted other economic and political sabotage, ranging from the dubiously legal to the nakedly unconstitutional.

    But the alternative to anti-austerity policies, default and sanctions are not austerity, no default and no sanctions. Greece will eventually default. Anybody who tells you otherwise is either selling you a bill of goods or has rocks and gravel in his head. And when it does, this assault will come anyway.

    So the relevant question is whether compliance with the austerity measures will increase your preparedness for the default and consequent exclusion from hard currency credit. This is only true if the time it buys is spent building strategic food and fuel reserves, drawing up plans for rationing schemes, etc., and then only if these preparations increase preparedness faster than austerity measures increase the magnitude of the catastrophe.


  3. It probably won't. At this point, anybody in the EU who does not have rocks and gravel in his head knows that Greece will default, and they're just playing musical chairs with the blame (and bill) for the ensuing clusterfuck. And those who have rocks and gravel in their heads will continue to pursue their current policies, undeterred by little things like obvious reality.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 1st, 2012 at 01:29:24 PM EST
Most people in the EU are not aware of it, but Cyprus is ruled by a relatively hard left communist party government under the presidency of Dimitris Christofias. Now Cyprus is a small country (the southern part has ~800.000 people IIRC) and politics is small scale. However the presence of a left government has led to an impressive differentiation with respect to austerity policies and the debt crisis: Despite a big deficit, a major catastrophe that crippled its energy production, and the hit that Cypriot banks have taken as a result of the Greek PSI, the country has had by EU standards no austerity to speak of and has chosen to take a loan from Russia instead of the EU or the "markets" (as many know Cyprus has a... special relationship with Russia).

Of course the Central Banker in Cyprus was not happy with this fiscal profligacy, and was creating problems and pressure for the government to stop the automatic inflation adjustment of wages and cut down on benefits and public investment. The Cypriot government insisted on its policy, so when Athanasios Orphanides term was up, he was not reappointed, despite a huge fuss and roar from the ECB itself and the Cypriot opposition.

The President of Cyprus and the government spokesman accused Orphanidis of playing a political anti-government role during his whole tenure and insisting on cuts for the weak, while ignoring the necessity to tax the richest, and accused him for failing in his regulatory role, by allowing Cyprus' banking system overexposure to Greek bonds...

If the ECB is not happy about Orphanides removal, they will be even less happy about his replacement: Panikos Demetriades, is a professor of financial economics at the University of Leicester in Britain, who has been critical of ECB policies over the past two years and has called for... Germany quitting the Euro:

Demetriades: a new Keynesian at the CB's helm:

Demetriades, a keen blogger, is a critic of the idea that stringent austerity measures alone can turn an economy around, espousing the view that austerity should be limited to an economy's absorption capacity without sinking it into recession.

Perhaps his most notable public intervention was his suggestion last year that Germany should re-adopt the mark currency to help weaker euro zone members. He argued that euro strength as a result of its link to the powerhouse German economy was an impediment to growth elsewhere in the bloc.

...Demetriades has also argued for more direct support to states finding it difficult to raise funds on markets.

In articles, he has questioned the ECB's "problematic" mandate of keeping inflation close to, or below, 2.0 per cent.

"The alternative would have as its primary target recovery and the achievement of healthy growth for Greece and the euro zone," Demetriades wrote in his blog last November... So instead of a 2.0 per cent inflation target, and ignoring everything else ... the primary target of economic policy should be increasing GDP by 2.0 to 3.0 per cent per annum, in real terms."

It will be interesting to see how he interacts with his new colleagues to say the least...

So Cyprus has sent a message that there exist other paths other than surrender to the markets and its oracles of societal doom. But elections are in and its likely that the electorate will swing back to the conservatives. And they'll live to regret it...

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

by talos (mihalis at gmail dot com) on Tue May 1st, 2012 at 01:36:36 PM EST
Iceland and Cyprus lead the way. Next?

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 Tue May 1st, 2012 at 03:00:55 PM EST
[ Parent ]
Iceland, too, looks set to put creators of the last crisis back into government...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed May 2nd, 2012 at 03:02:48 AM EST
[ Parent ]
Our memories are shorter than...

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 Wed May 2nd, 2012 at 12:29:55 PM EST
[ Parent ]
Very interesting.

I have previously suggested that any country that has come under ECB austerity should fire their CB boss and prosecute for high treason. Let the old CB boss appeal the firing to the Court, meanwhile your newly appointed CB boss cooperates with the prosecution in getting all the dirt on how the CB boss helped the others in ECB to subvert the treaties and cause economic harm to the nation.

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 Wed May 2nd, 2012 at 03:59:59 PM EST
[ Parent ]
An excellent plan. Now if a larger country would take this path it might start something. But they all seem some combination of paralyzed and captured by financial interests. The financial industry really is the tool which has been used to bring about this state and the crisis as well. We should be concerned not to let this become a second Twenty Year Crisis, as that from 1919 to 1939. But a frightening number of parallels exist between that time and this.

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 Wed May 2nd, 2012 at 04:59:05 PM EST
[ Parent ]
"We will crash your banking sector" seems to have worked as a threat on both Ireland and Portugal in 2010.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
by Migeru (migeru at eurotrib dot com) on Wed May 2nd, 2012 at 05:07:37 PM EST
[ Parent ]
Finance is just diplomacy, (or war), by other means. A possible rejoinder could have been: "You are going to crash the entire world economy soon enough anyway."

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 Wed May 2nd, 2012 at 10:55:45 PM EST
[ Parent ]
Noonan comments criticised - The Irish Times - Tue, May 01, 2012
Minister for Finance Michael Noonan has today warned he will have to introduce a tougher budget that will include tax increases if the public rejects the Fiscal Treaty Referendum.

Speaking on his way into a Cabinet meeting this morning, Mr Noonan rejected suggestions that the country would still be able to access funding if a No vote is returned by the electorate.

"It's very clear on this treaty that only those countries that ratify it will have access to European Stability Mechanism (ESM) funding and there are no other funds," he said.

"If there's a No vote the Budget I'll be planning for later in the year will be dramatically more difficult than if there's a Yes vote.

"If people think that by voting No they'll avoid further tax cuts and increases, actually a No vote will do the opposite," he added.

Fianna Fáil described Mr Noonan's comments as "unhelpful" and said they would only serve to alienate potential Yes voters.

The problem is not that there is no mechanism for stimulating the Irish economy in the event of a no vote and a default (or similar) on Anglo Irish promissory notes etc. -  the problem is that the national elite have absolutely no idea how this might be done.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 1st, 2012 at 04:48:30 PM EST
See Steve Keen on Tonight with Vincent Brown. He discusses, (about six or seven minutes in), an e-mailed suggestion for Ireland to issue New Punts pegged to the Euro for domestic use only. They would trade Euros for New Punts with Irish citizens and use the Euros so acquired to pay off their Euro denominated debts to 'The Troika', telling them: "Here is your damaged currency back!" With the value of these Euros still circulating domestically as New Punts, the domestic economy would not crash. See also this thread.

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 May 3rd, 2012 at 07:28:17 PM EST
[ Parent ]
Thereby circumvent the ECB's near monopoly on the creation of money?  I can't see our overlords in the CB liking that!

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu May 3rd, 2012 at 08:14:40 PM EST
[ Parent ]
Fuck 'em. If you have a plan implement the plan and listen to them scream. And just to make the point, some respectable people, such as yourself, need to start pointing out in print that, by refusing to consider negotiating with the Troika and by refusing to consider possible alternatives, such as the one discussed by Steve Keen, the Fiana Gael government becomes the collection agent for foreign powers that are collecting what, by any reasonable interpretation, should be considered odious debt. No matter how many times the debt has been through the laundry, it remains odious. By making Fiana Gael the face for the tax collector of funds to repay odious debt it is likely that Fiana Gael will follow the illustrious path of Fiana Fail. Come the day.

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 May 3rd, 2012 at 09:16:41 PM EST
[ Parent ]
Me respectable? LOL
Serious people won't consider funny money.
There is no concept of odious debt in popular debate. We're screwing the little people in negative equity for their debts even after their houses have been foreclosed. That "system" doesn't work if the State suddenly defaults...

At the moment the Irish economy is bouncing along the bottom with c. 0.7% growth, stable unemployment, significant emigration and some good news job announcements. Most small mall businesses and consumers are just about hanging in there. If there is a significant further downturn then all bets are off. Just now people are still clinging to the life rafts and a belief that we may still get out of this alive.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri May 4th, 2012 at 06:12:59 AM EST
[ Parent ]
Well, it is probably not too long before govt. policies at the behest of the Troika come to be seen as the smasher of life rafts.

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 May 4th, 2012 at 09:33:13 AM EST
[ Parent ]
The deal with the Troika requires that a further incremental €3 Billion be taken out of the economy each year for the next few years. That will more than kill off any green shoots that might be trying to peep through...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri May 4th, 2012 at 09:51:09 AM EST
[ Parent ]
The Wörgl solution, in short.

Of course, that is a violation of the EU treaties since they give the ECB the monopoly of legal tender. More imaginative ways around it must be sought.

guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper

by Migeru (migeru at eurotrib dot com) on Fri May 4th, 2012 at 01:55:25 AM EST
[ Parent ]
  1. Replace the central banker.

  2. Create a government charter bank.

  3. Intervene to defend the yield curve per Article 123 b) of the Consolidated Treaties.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 03:45:38 AM EST
[ Parent ]
More imaginative ways around it must be sought.

Adding the three points from Jake's list and just doing it would be pretty creative. As a sweetener they could preface the actions with a statement that they are fully pledged to maintaining the value of the Euro and the Punt to which it is pledged and would consider exiting the plan if the EU and the ECB began to show signs of sanity.

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 May 4th, 2012 at 09:40:55 AM EST
[ Parent ]
Such a pledge would be prima facie incredible, for the simple reason that if upholding it were possible, they would not need to issue New Punts.

You should not make obviously incredible threats or promises. It gains you nothing and makes people more likely to call upon you to make good on future threats and promises, which is almost always expensive.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 09:44:33 AM EST
[ Parent ]
The USA certainly has been impressed with the effectiveness with which the Chinese have maintained the peg of the renmimbi to the dollar.

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 May 4th, 2012 at 11:16:44 AM EST
[ Parent ]
Different situation. China is maintaining an undervalued peg. Ireland would be maintaining an overvalued peg.

The former is trivial, the latter is impossible.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 11:18:19 AM EST
[ Parent ]
In that case it might be necessary to devalue the Punt wrt the Euro so that the Punt is slightly undervalued. Even that would seem better than what is currently on offer from the Troika.

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 May 4th, 2012 at 12:31:54 PM EST
[ Parent ]
Both printing Punts and firing the central banker can be struck down by the court. But in the meantime executive power rules, and if the time is used to establish that this is a functioning policy, then you use that either in a cat-and-mouse game (change the rules slightly and claim you have complied) or stand your ground against the dictates from Brussels.

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 May 4th, 2012 at 10:26:02 AM EST
[ Parent ]
The Cypriot central banker reshuffle does not seem to have been challenged in the Court.

For that matter, I'm not totally convinced that the powers that be want the Court to be looking too closely at their - uh - creative interpretation of the treaties.

I guess in the final extremity, you could always get a few pictures of the outgoing central banker with his favourite hooker and resign him instead of firing him.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 10:40:42 AM EST
[ Parent ]
JakeS:
The Cypriot central banker reshuffle does not seem to have been challenged in the Court.

I thought - but have no other source then the wording - that the term was up. If I remember EMU rules correctly its a six year term and appointment is by the parliament-appointed CB board. Firing a CB board member during the term can be challenged in national court and firing the boss can be challenged in the Court. Can't find a source right now.

JakeS:

For that matter, I'm not totally convinced that the powers that be want the Court to be looking too closely at their - uh - creative interpretation of the treaties.

Yes, firing for subverting EMU treaties with respect to other goals then price stability and using ECB to subvert other EU-treaties, would make a court hearing an interesting spectacle.

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 Sat May 5th, 2012 at 04:58:07 AM EST
[ Parent ]
The trick would be to hold implicit and explicit threats of default in reserve and then proceed to implement your plan and pay back the debt in Euros. The debt would get paid, but not be accompanied by the 'soaking' of the rest of the economy that is the point of the current scheme. It would seem that the further Ireland proceeded along this path the more secure she would be in continuing. By so doing she would be providing a light for the feet of others.

One possibility would be to carefully 'privatize' the process of the creation and administration of the Punt. Then they could plead respect for private property. :-)

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 May 4th, 2012 at 11:23:39 AM EST
[ Parent ]
The Euro is hard currency for Ireland. There is no guarantee that it can pay back these debts. In fact, if I were to bet, I would bet on "not."

And if not, then they need to hang on to their strategic hard currency reserve, not expend it on frivolous things like pleasing foreign creditors.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 11:39:20 AM EST
[ Parent ]
The proposal is really unvetted, but it was Steve Keen's surmise that, by exchanging a significant portion of domestically circulating Euros for Punts that this would enable foreign creditors to be paid without crippling the domestic money supply. And additional Euros would still be entering Ireland, as it has a trade surplus. How much of the available Euro reserve so obtained it would be wise to pay on debts to other countries or the ECB should be a tactical decision - designed to buy time for the domestic economy to recover.

While no details were spelled out, I expect that it would be necessary to require all cross border transactions to be conducted through the Irish CB. This is what worked in China, however the Argentine experience might suggest other options. I don't know.

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 May 4th, 2012 at 12:28:22 PM EST
[ Parent ]
But it will have a current account deficit, which means that there will not be a net inflow of hard currency, unless .

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 12:40:11 PM EST
[ Parent ]
... unless they default on external debts, or take steps to prevent expatriation of profits.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 4th, 2012 at 12:41:15 PM EST
[ Parent ]
Are you saying that the present current account surplus will turn negative if they implemented the proposed New Punt plan or that they do not now have a surplus? Were such a New Punt to be implemented it would allow for more domestic economic activity. Were it to be devalued relative to the Euro that would reduce imports. The effects on Intel and other transnational corporations could be mitigated by allowing such corporations to continue to make purchases of raw materials in Euros, and, of course, to price and sell their products in Euros.

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 Sat May 5th, 2012 at 10:26:32 AM EST
[ Parent ]
Ireland has a current account deficit, but a trade surplus.

Now, for a normal country, that would mean that after repudiating sufficient amounts of foreign debt, it would have a current accounts surplus. But Ireland is not a normal country, because the difference between trade balance and current accounts balance is driven by expatriation of profits rather than expatriation of interest payments (as is usually the case).

That means they can't default and peg the New Punt to the €, because they can't defend that peg.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat May 5th, 2012 at 04:58:04 PM EST
[ Parent ]
Can anyone cite a previous period in history with a non-shooting (sort of) economic world war? That seems to be what we're experiencing. Or is the whole of human history just that?

The good news ... it's only a life sentence. You eventually leave this planet of idiots.
by THE Twank (yatta blah blah @ blah.com) on Wed May 2nd, 2012 at 07:48:02 AM EST
Diary?
by Metatone (metatone [a|t] gmail (dot) com) on Thu May 3rd, 2012 at 08:46:40 AM EST
[ Parent ]
Much of the 19th century with enclosures and ongoing suppression of workers. Then too was there much cooperation between the PTB to destory any alternative.

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 Thu May 3rd, 2012 at 02:30:54 PM EST
[ Parent ]


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