Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Germany is asking for more from Greece. Past promises from the Greeks have gone nowhere. Germany is applying the old mantra of "Trust But Verify."
This of course is starting to make some investors nervous as they thought a deal was done on Friday. This market is acting very apprehensive on pretty much anything. A sign of a top? Perhaps. We shall see.
It is forgone conclusion that Greece proposal is a done deal. The five months of brinkmanship game they played actually resulted in the lost of their credibility. As Mark noted earlier that this proposal could amount to nothing more than a Trojanhorse, and there are many hurdles to overcome, i.e. payments to IMF.
it sounds like Germany and a couple of other countries want Greek assets placed in a trust to guarantee a loan. Collateral , something we all have to show for our loans.
@John, you hit the nail on the head. If the same U.S. home loans application process is being applied to this plan, they are in deep trouble with few valuable assets as collateral and lots of debts (and getting worse). Recent defaulting on debt payment and degrading on its credit rating do not help. Wish I can live in such gifted life.
What are you reading or watching? Poor analogizing.
'Suppose you consider Tsipras an incompetent twerp. Suppose you dearly want to see Syriza out of power. Suppose, even, that you welcome the prospect of pushing those annoying Greeks out of the euro. Even if all of that is true, this Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. ... the economics have almost become secondary. But still, let’s be clear: what we’ve learned these past couple of weeks is that being a member of the eurozone means that the creditors can destroy your economy if you step out of line. This has no bearing at all on the underlying economics of austerity. It’s as true as ever that imposing harsh austerity without debt relief is a doomed policy no matter how willing the country is to accept suffering. And this in turn means that even a complete Greek capitulation would be a dead end.' (PK blog this afternoon)
I'm surprised that the Krug didn't mention that not having your own currency is what started this mess. Sure, Greece would be heavily in debt but it would be in drachma. Their problem, their fix.
The UK was smart to not adopt the € and stayed with the pound.
I'm a big fan of Krugman, and like him I'm disappointed that Tsipras was bluffing and did not in fact plan at all for a Grexit, which probably would have been for the best for all the parties concerned.
But I actually read through the Eurogroup list of demands http://t.co/D1bmAxUGTF and frankly, they seem pretty reasonable, as far as structural reforms go, the sort of thing that would actually help the Greek economy within a couple of years.
No surprise that the Germans won't hand Greece another bailout check without some assurances that they will actually participate in the terms they agree to.
Either way, eventually the Greeks will have to pay for this, either through inflation, austerity, increased productivity or asset sales (or some combination of those 4).
So you would think. Or hope. But it has been conclusively shown that you cannot 'austere' your way out of this situation, not even close, and their econ/monetary options are limited for being in the EU. Parthenon to China, I guess.
If you could see the present deplorable condition of the Parthenon transferring it to Chinese control might not be such a terrible idea... they might have the resources to restore it properly.
"...and the escrowing of some €50 billion in Greek assets in a liquidation fund.
Granted said fund will not be domiciled in Luxembourg as was originally envisioned, but Europe will still have control and first refusal rights over what are technically Greek properties, in the process Athens handing over about 25% of Greek GDP (and sovereignty) over the Brussels.
What are these assets? For the answer we go to the horse's mouth, Jeroen Dijsselbloem, who laid out the holdings of the proposed Greek privatization that would be sold off as follows: "it still is going to be an independent fund, valued at €50 billion which can be airplanes, airports, infrastructure and most certainly banks.”"
@davidrmoran- we were last there in 2006, and they were doing sporadic restoration at that time, but it didn't look too promising. Perhaps they did better than I thought that they would.
It may not matter. PK blog tonight: ... basically that Europe has created a system that treats surplus and deficit countries asymmetrically, even more than the classical gold standard, and leads to a severe deflationary bias. ...
This is true both for fiscal issues and for balance of payments issues. Debtors are forced into draconian austerity, while creditors face no pressure to reflate; economic crisis, which should be met with expansionary policy, instead leads to contraction because of this asymmetry. Meanwhile, countries that find themselves overvalued are forced to deflate in an effort to regain competitiveness, while undervalued counties face no pressure to help out with a higher inflation rate — so at times of major misalignment, when moderate inflation can help, the overall effect is declining inflation and maybe even deflation.
... suggests that it takes about 4 point-years of output gap to reduce prices relative to baseline by 1 percentage point. So suppose that you are 25 percent overvalued, and get no help from higher inflation in the core. Then “internal devaluation” requires sacrificing around 100 percent of a year’s GDP. Let’s repeat that: Given what we now know about the rules of the game, countries as overvalued as much of the European periphery became thanks to the lending boom are supposed to sacrifice a full year’s economic output as part of a process of beating prices and wages down. Now more than ever, the euro looks like a terrible idea.
Business Greece debt crisis: What's the deal? By Robert Plummer Business reporter, BBC News 13 July 2015
You might wish to take note of the fact that so far, the EU has not yet firmly undertaken to pay out one cent to Greece. For now, everything hinges on whether Greece's leftist Syriza government can get this package approved by the country's parliament. By Wednesday night, Greek MPs have to vote on a raft of measures covering the VAT increases, the pension changes, the independence of the country's national statistics institute and commitments to "fiscal consolidation". Only then can final agreement on the latest bailout be reached. Many people believe that Greece's debt burden can never be repaid and that austerity is only making things worse. Is there any support for that view in the summit document? None whatsoever. The text says that "the euro summit stresses that nominal haircuts on the debt cannot be undertaken" - in other words, eurozone leaders have no intention of unilaterally reducing the amount that Greece owes. In 2011, Greece's private lenders took a massive 50% haircut on what they were owed, reducing Greece's debt by €100bn. Greece pushed for a second debt haircut this year, but has failed to reach an agreement with its creditors. And the Greek government seems to have accepted that a second haircut is not going to happen, since the document says that "the Greek authorities reiterate their unequivocal commitment to honour their financial obligations to their creditors fully and in a timely manner".
So what does Greece have to do to get hold of the money? Value-added tax will be streamlined and go up. The pension system will undergo major reforms. The Greek statistics agency is to be made independent and reliable. A system of quasi-automatic spending cuts are to be implemented if Greece deviates from ambitious surplus targets. These have to be adopted by Wednesday.
Then, besides the adoption of the BRRD, the Greek civil justice system will have to be overhauled by July 22.
And then there’s a raft of other market reforms, including recommendations on Sunday trade, sales periods, pharmacy ownership, milk and bakeries and the opening of macro-critical closed professions like ferry transportation. The electric grid system will have to be privatized or subject to competition. The labor market is to be made more flexible. And the financial sector is to be strengthened.
On top of all that, Greece has to set up a €50 billion privatization fund half of which will pay for bank recapitalization, a quarter of which will be for paying down debt and the final quarter for investments. As a small concession to the Greeks, its creditors will allow the fund to be run from Athens rather than Luxembourg, which was originally proposed.
Some of the above might sound familiar for a very good reason.
The Syriza government will have to reinstate policies on pension reforms agreed under previous rescue plans. Basically, the Syriza government has had to back down on almost all fronts relative to what it promised when seeking election in January. And the new bailout plan includes the IMF, a situaton Mr. Tsipras fought against in the talks overnight, but a battle he ultimately lost.
An Empire Strikes Back: Germany and the Greek Crisis Geopolitical Weekly JULY 14, 2015 | 08:00 GMT In chess, when your position is hopeless, one solution is to knock over the chessboard. That is what the Greeks tried to do with the referendum The European Union is founded on the dual principles of an irrevocable community of nations that have joined together but have retained their national sovereignty. The Greeks were demonstrating the national will, which the government thought would create a new chess game. Instead, the Germans chose to directly demand a cession of a significant portion of Greece's sovereignty by creating a cadre of European bureaucrats who would oversee the implementation of the agreement and take control of Greek national assets for sale to raise money. The specifics are less important than the fact that Greece invoked its sovereign right, and Germany responded by enforcing an agreement that compelled the Greeks to cede those rights. The Germans consulted with these other governments, but Berlin decided the negotiating position, because in the end it was Germany that would be most exposed by French or Italian moderation. This negotiation was in the context of the European Union, but it was a German negotiation.
And with this, the Germans did something they never wanted to do: resurrect fairly unambiguously the idea that Germany is the sovereign and dominant nation-state in Europe, and that it has the power and the will to unilaterally impose its will on another nation. Certainly the niceties of votes by finance ministers and prime ministers were adhered to, but it was the Germans who conducted the real negotiations and who imposed their will on Greece. https://www.stratfor.com/weekly/empire-strikes-back-germany-and-greek-crisis
NEWS July 16 02:11 AM Deal with lenders approved despite strong SYRIZA opposition Greek Parliament passed the prior actions demanded by lenders to pave the way for bridge financing and a third bailout in a vote during the early hours of Thursday morning. A total of 229 MPs voted for the measures, 64 voted against, six voted present and one was absent. Before the vote, Tsipras said the agreement with lenders was the only viable option open to him and challenged rebels within his party to propose a better one.
In his speech before Parliament, Finance Minister Euclid Tsakalotos sought to defend Greece’s agreement with creditors as a necessary evil. “It’s a difficult agreement, a deal which only time will show if it is economically viable,” he said. “I don’t know if we did the right thing, but I know we felt we had no choice,” he said. “We never said this was a good agreement,” he added, noting that “a lot will depend on how politicians will handle the many changes included in the agreement.” http://www.ekathimerini.com/199591/article/ekathimerini/news/deal-with-lenders-approved-despite-strong-syriza-opposition
Comments
Greece doesn't like this of course.
Poor analogizing.
'Suppose you consider Tsipras an incompetent twerp. Suppose you dearly want to see Syriza out of power. Suppose, even, that you welcome the prospect of pushing those annoying Greeks out of the euro. Even if all of that is true, this Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. ... the economics have almost become secondary. But still, let’s be clear: what we’ve learned these past couple of weeks is that being a member of the eurozone means that the creditors can destroy your economy if you step out of line. This has no bearing at all on the underlying economics of austerity. It’s as true as ever that imposing harsh austerity without debt relief is a doomed policy no matter how willing the country is to accept suffering. And this in turn means that even a complete Greek capitulation would be a dead end.'
(PK blog this afternoon)
The UK was smart to not adopt the € and stayed with the pound.
I do find calling this a coup a bit extreme.
(Video)
http://finance.yahoo.com/video/tspiras-forced-resign-nigel-farage-203500531.html
But I actually read through the Eurogroup list of demands http://t.co/D1bmAxUGTF
and frankly, they seem pretty reasonable, as far as structural reforms go, the sort of thing that would actually help the Greek economy within a couple of years.
Krugman has mentioned that thinking dozens of times and analyzed it to death.
Coup is not his wording.
Either way, eventually the Greeks will have to pay for this, either through inflation, austerity, increased productivity or asset sales (or some combination of those 4).
Parthenon to China, I guess.
If you could see the present deplorable condition of the Parthenon transferring it to Chinese control might not be such a terrible idea... they might have the resources to restore it properly.
https://en.wikipedia.org/wiki/Parthenon
Germany, as many are pointing out, has certainly forgotten how they were treated as to their debts. By everyone.
"...and the escrowing of some €50 billion in Greek assets in a liquidation fund.
Granted said fund will not be domiciled in Luxembourg as was originally envisioned, but Europe will still have control and first refusal rights over what are technically Greek properties, in the process Athens handing over about 25% of Greek GDP (and sovereignty) over the Brussels.
What are these assets? For the answer we go to the horse's mouth, Jeroen Dijsselbloem, who laid out the holdings of the proposed Greek privatization that would be sold off as follows: "it still is going to be an independent fund, valued at €50 billion which can be airplanes, airports, infrastructure and most certainly banks.”"
It may not matter. PK blog tonight:
... basically that Europe has created a system that treats surplus and deficit countries asymmetrically, even more than the classical gold standard, and leads to a severe deflationary bias. ...
This is true both for fiscal issues and for balance of payments issues. Debtors are forced into draconian austerity, while creditors face no pressure to reflate; economic crisis, which should be met with expansionary policy, instead leads to contraction because of this asymmetry. Meanwhile, countries that find themselves overvalued are forced to deflate in an effort to regain competitiveness, while undervalued counties face no pressure to help out with a higher inflation rate — so at times of major misalignment, when moderate inflation can help, the overall effect is declining inflation and maybe even deflation.
... suggests that it takes about 4 point-years of output gap to reduce prices relative to baseline by 1 percentage point. So suppose that you are 25 percent overvalued, and get no help from higher inflation in the core. Then “internal devaluation” requires sacrificing around 100 percent of a year’s GDP. Let’s repeat that: Given what we now know about the rules of the game, countries as overvalued as much of the European periphery became thanks to the lending boom are supposed to sacrifice a full year’s economic output as part of a process of beating prices and wages down. Now more than ever, the euro looks like a terrible idea.
@davidrmoran- yeah, you're right. My bad.
Greece debt crisis: What's the deal?
By Robert Plummer
Business reporter, BBC News
13 July 2015
You might wish to take note of the fact that so far, the EU has not yet firmly undertaken to pay out one cent to Greece.
For now, everything hinges on whether Greece's leftist Syriza government can get this package approved by the country's parliament.
By Wednesday night, Greek MPs have to vote on a raft of measures covering the VAT increases, the pension changes, the independence of the country's national statistics institute and commitments to "fiscal consolidation".
Only then can final agreement on the latest bailout be reached.
Many people believe that Greece's debt burden can never be repaid and that austerity is only making things worse. Is there any support for that view in the summit document?
None whatsoever. The text says that "the euro summit stresses that nominal haircuts on the debt cannot be undertaken" - in other words, eurozone leaders have no intention of unilaterally reducing the amount that Greece owes.
In 2011, Greece's private lenders took a massive 50% haircut on what they were owed, reducing Greece's debt by €100bn. Greece pushed for a second debt haircut this year, but has failed to reach an agreement with its creditors.
And the Greek government seems to have accepted that a second haircut is not going to happen, since the document says that "the Greek authorities reiterate their unequivocal commitment to honour their financial obligations to their creditors fully and in a timely manner".
http://www.bbc.com/news/business-33505555
So what does Greece have to do to get hold of the money? Value-added tax will be streamlined and go up. The pension system will undergo major reforms. The Greek statistics agency is to be made independent and reliable. A system of quasi-automatic spending cuts are to be implemented if Greece deviates from ambitious surplus targets. These have to be adopted by Wednesday.
Then, besides the adoption of the BRRD, the Greek civil justice system will have to be overhauled by July 22.
And then there’s a raft of other market reforms, including recommendations on Sunday trade, sales periods, pharmacy ownership, milk and bakeries and the opening of macro-critical closed professions like ferry transportation. The electric grid system will have to be privatized or subject to competition. The labor market is to be made more flexible. And the financial sector is to be strengthened.
On top of all that, Greece has to set up a €50 billion privatization fund half of which will pay for bank recapitalization, a quarter of which will be for paying down debt and the final quarter for investments. As a small concession to the Greeks, its creditors will allow the fund to be run from Athens rather than Luxembourg, which was originally proposed.
Some of the above might sound familiar for a very good reason.
The Syriza government will have to reinstate policies on pension reforms agreed under previous rescue plans. Basically, the Syriza government has had to back down on almost all fronts relative to what it promised when seeking election in January. And the new bailout plan includes the IMF, a situaton Mr. Tsipras fought against in the talks overnight, but a battle he ultimately lost.
http://blogs.wsj.com/moneybeat/2015/07/13/heres-what-the-greek-deal-entails/
Tick,tick,tick,tick.....
http://www.timeanddate.com/worldclock/greece/athens
An Empire Strikes Back: Germany and the Greek Crisis
Geopolitical Weekly JULY 14, 2015 | 08:00 GMT
In chess, when your position is hopeless, one solution is to knock over the chessboard. That is what the Greeks tried to do with the referendum
The European Union is founded on the dual principles of an irrevocable community of nations that have joined together but have retained their national sovereignty. The Greeks were demonstrating the national will, which the government thought would create a new chess game. Instead, the Germans chose to directly demand a cession of a significant portion of Greece's sovereignty by creating a cadre of European bureaucrats who would oversee the implementation of the agreement and take control of Greek national assets for sale to raise money. The specifics are less important than the fact that Greece invoked its sovereign right, and Germany responded by enforcing an agreement that compelled the Greeks to cede those rights.
The Germans consulted with these other governments, but Berlin decided the negotiating position, because in the end it was Germany that would be most exposed by French or Italian moderation. This negotiation was in the context of the European Union, but it was a German negotiation.
And with this, the Germans did something they never wanted to do: resurrect fairly unambiguously the idea that Germany is the sovereign and dominant nation-state in Europe, and that it has the power and the will to unilaterally impose its will on another nation. Certainly the niceties of votes by finance ministers and prime ministers were adhered to, but it was the Germans who conducted the real negotiations and who imposed their will on Greece.
https://www.stratfor.com/weekly/empire-strikes-back-germany-and-greek-crisis
Deal with lenders approved despite strong SYRIZA opposition
Greek Parliament passed the prior actions demanded by lenders to pave the way for bridge financing and a third bailout in a vote during the early hours of Thursday morning. A total of 229 MPs voted for the measures, 64 voted against, six voted present and one was absent.
Before the vote, Tsipras said the agreement with lenders was the only viable option open to him and challenged rebels within his party to propose a better one.
In his speech before Parliament, Finance Minister Euclid Tsakalotos sought to defend Greece’s agreement with creditors as a necessary evil. “It’s a difficult agreement, a deal which only time will show if it is economically viable,” he said. “I don’t know if we did the right thing, but I know we felt we had no choice,” he said. “We never said this was a good agreement,” he added, noting that “a lot will depend on how politicians will handle the many changes included in the agreement.”
http://www.ekathimerini.com/199591/article/ekathimerini/news/deal-with-lenders-approved-despite-strong-syriza-opposition
http://www.nytimes.com/2015/07/15/opinion/germanys-destructive-anger.html
internationalpolicydigest.org/2015/05/09/ireland-has-limited-lessons-for-greece-s-recovery/