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After describing getting the Bundestag to pass the necessary legislation to move forward on negotiations with Greece Edward Harrison had some interesting thoughts while giving Schauble his due:

Wolfgang Schaeuble the Salesman

The takeaway here is that we are seeing serious bailout fatigue. It may seem like Wolfgang Schäuble is working against the Greeks by making inflammatory statements. The reality, however, is that he has domestic political issues to contend with. And he needs to make sure that whatever the German government does is seen in a favourable light given the domestic constraints. I think we are going to have a problem then if Greece wants more i.e. a reduction in the net present value of its debt via a derivatives structure like GDP-linked bonds or writedowns. It makes sense to get that reduction because the debt burden is unsustainable. But it is not politically viable in Germany right now, in my view. We could see a default as a result. And that does not necessarily mean Grexit. A politically acceptable outcome is Greece negotiating for NPV reduction, the Germans saying no and Greece defaulting and staying within the eurozone. Greece can say we fought for what was right and Germany can say they did not allow the Greeks to get off lightly; the Greeks simply reneged on their obligations. This is an outcome that is politically viable and one I think has a high likelihood of occurring.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 12th, 2015 at 11:33:35 PM EST
Except Merkel and Schaeuble created their own political problem here.
by Colman (colman at eurotrib.com) on Fri Mar 13th, 2015 at 04:02:24 AM EST
[ Parent ]
I don't think so.  They are 'marshaling the mainstream' and trying to make sure they are seen to do the right thing by it. If Merkel has one strength above all, it is reading the political tea-leaves and acting within what mainstream (or manufactured, if you will) opinion will regard as "sensible" or the least damaging to her political fortunes... She will not go out on a limb, but for the problem to be seen as a "Greek problem" plays into chauvinistic and nationalist narratives.  The one thing she lust avoid is for it to come to be seen as a German problem - by the German electorate themselves - because then it is she who will be held responsible for solving it. And solving it, as we know, is going to cost someone a lot of money.  If it ends up being the German elite/banks, she had better have someone else to blame.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Mar 13th, 2015 at 07:19:59 AM EST
[ Parent ]
I am sure that there are plenty of instances where it is perfectly clear that she reenforce the whole 'feckless Greek/virtuous German' meme and it has been in use so long that neither she nor her party could not but be blamed, and, IMO, deservedly so. I must give her credit though for being the ONE conservative European leader to see that the situation is untenable and the results of 'austerity' are and will continue to be catastrophic. Legacy time for Merkel.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Mar 13th, 2015 at 07:57:03 AM EST
[ Parent ]
I like Harrison's stuff BUT he's missing the fact that the German gov't agreed to a debt writedown in 2012 if Greece achieved a primary surplus.

Promsises must be kept. Political winds do not change the agreements.

ESPECIALLY when the gov't is the same!

by Upstate NY on Fri Mar 13th, 2015 at 08:29:19 AM EST
[ Parent ]
"missing the fact that the German gov't agreed to a debt writedown in 2012 if Greece achieved a primary surplus."

They did?

by IM on Fri Mar 13th, 2015 at 10:11:24 AM EST
[ Parent ]
Yes.

http://www.ft.com/intl/cms/s/0/9ec817d8-cadf-11e3-9c6a-00144feabdc0.html#axzz3UH8U2Yfu

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Since the crisis has abated, however, the political pressure for eurozone countries to carry out a major writedown of Greek debt has also eased. Still, the November 2012 agreement requires Greek creditors to begin getting the country's debt levels "substantially below" 110 per cent of GDP by 2022.

There are a lot of other promises for Greece in those agreements as well, which have not been upheld.

by Upstate NY on Fri Mar 13th, 2015 at 10:21:31 AM EST
[ Parent ]
Sorry for the additional copy.
by Upstate NY on Fri Mar 13th, 2015 at 10:22:11 AM EST
[ Parent ]
That 110% debt projection was completely unsupported by anything.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Mar 13th, 2015 at 10:45:35 AM EST
[ Parent ]
That 110% debt projection was completely unsupported by anything....

...except all of the hype and rhetoric surrounding Reinhart and Rogoff's carefully cooked data in their famous paper on debt sustainability.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Mar 13th, 2015 at 11:57:38 AM EST
[ Parent ]
Tch. You're just naive.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Mar 13th, 2015 at 12:04:07 PM EST
[ Parent ]
I mean there was no way to get there from here. Not the infamous 90% Debt-to-GDP threshold.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Mar 13th, 2015 at 12:06:20 PM EST
[ Parent ]
If it had been carefully cooked, it wouldn't have been so easy to point out the mistake.
by gk (gk (gk quattro due due sette @gmail.com)) on Fri Mar 13th, 2015 at 12:14:33 PM EST
[ Parent ]
Heh. Carefully cooked in the era of Twitter means the mistakes are buried in the body of the text (which no one reads).

Here's another gem by R and R: "Greece has been in default for over 50% of its existence."

Is anyone really going to read the body of the text after that?

by Upstate NY on Fri Mar 13th, 2015 at 03:58:54 PM EST
[ Parent ]
Worse yet. The errors were not detected until the U Mass. professor and grad students used the spreadsheet Reinhart and Rogoff claimed to have used and could not replicate the results. They then requested the original data sets. It was when they got these that they found out what had happened. It HAD been carefully cooked and the evidence deeply buried, but the stench rose to the surface after a while.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Mar 13th, 2015 at 10:15:36 PM EST
[ Parent ]
 a target that formally launches talks over additional debt relief.

Thought so. They did promise talks about debt relief, nothing more.

by IM on Fri Mar 13th, 2015 at 10:57:42 AM EST
[ Parent ]
Not exactly:
The Eurogroup is confident that, jointly, the above-mentioned initiatives by Greece and the other euro area Member States would bring Greece's public debt back on a sustainable path throughout this and the next decade and will facilitate a gradual return to market financing. Euro area Member States will consider further measures and assistance, including inter alia lower co-financing in structural funds and/or further interest rate reduction of the Greek Loan Facility, if necessary, for achieving a further credible and sustainable reduction of Greek debt-to-GDP ratio, when Greece reaches an annual primary surplus, as envisaged in the current MoU, conditional on full implementation of all conditions contained in the programme, in order to ensure that by the end of the IMF programme in 2016, Greece can reach a debt-to-GDP ratio in that year of 175% and in 2020 of 124% of GDP, and in 2022 a debt-to-GDP ratio substantially lower than 110%.
(Eurogroup Statement on Greece, 27 November 2012 [PDF])

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Mar 13th, 2015 at 10:44:36 AM EST
[ Parent ]
It is contingent on Greece fulfilling the program, indeed. BUT, all I'm saying is that the now politically unacceptable restructuring is already envisaged in the agreement.
by Upstate NY on Fri Mar 13th, 2015 at 10:57:58 AM EST
[ Parent ]
The only "restructuring" envisaged is an interest rate reduction.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Mar 13th, 2015 at 11:00:16 AM EST
[ Parent ]

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