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Greece should default on all sovereign debt owed to entities that are not individuals, and all sovereign debt in excess of 100.000 owed to individuals.
Then Greece should present the ECB with an ultimatum: Either the ECB carries Greek debt at the Frankfurt overnight rate until Greek GDP has recovered to the pre-crisis peak level and the hysterical children in the international money markets have stopped throwing their infantile hissy fit. Or Greece will leave the , and convert all debt owed by Greek citizens and government agencies to the new currency, without compensating the creditor. Greece could then conduct its economic policy without consulting the markets that have failed so completely.
As an ardent supporter of the European project, it gives me no pleasure to make a recommendation that may result in a breakup of the -zone. But I can no longer in good conscience watch Greece commit economic suicide for the sake of the failed economic doctrines at the core of current -zone policy. Enough is enough.
None can dispute that Greece has serious economic problems. But those problems are not caused by the public debt; the problems are what is causing the debt. Attempting to solve Greece's problems by paying down the public debt is akin to bathing a fevered man in cold water to lower his temperature: It does not cure the problems, and it causes new damage in the process.
As citizens of Europe, we all have to endure occasional misguided policies from the European Union. Just as we as citizens of our countries have to endure occasional misguided policies from our national governments. But enough is enough. By imposing devastating austerity policies on Greece, the European Union has signally failed the first duty of any government: To serve and protect its citizens and the common weal. If these policies made economic sense, the matter would be debatable. But they do not. Austerity represents a triumph of dogma over thought - it has never worked to resolve a crisis like the Greek, and it never will work. Not in Asia, not in Latin America, not in Hoover's America, not in Europe.
It is time to say no to this insanity, in the only language that will get through to the financial parasites who propagate it. Enough is enough.
- Jake Friends come and go. Enemies accumulate.
Should Greece present the ECB with an ultimatum, will the ECB and the Commission take it lying down? Is there no punitive countermeasure they can resort to? This is a question that applies to Ireland as well, but even more so in Greece where the real economy is weaker. Isn't this really an extortion by the ECB/EC? The road of excess leads to the palace of wisdom - William Blake
There has been speculation as to what the ECB might do, which I understand as boiling down to messing with the monetary system. However, as long as the police and military gets their paychecks from the government, not ECB, there is in the end little ECB can do.
Just issue notes saying "this bill is good for paying 100 euros in taxes to the goverment of Greece" and stop paying your debts. First problem solved.
Since Greece runs (or did run) a trade deficit, some imports need to be slashed if trading partners are not found of collecting future opportunities for paying taxes in Greece. I would suggest starting with government imports of advanced weaponry. Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
Should Greece present the ECB with an ultimatum, will the ECB and the Commission take it lying down?
No, they will probably refuse. That's why this recommendation would have been impossible half a year ago: Back then, it still looked like the costs to Greece of leaving the were larger than the costs of playing ball with the deficit errorists. But unless things begin changing posthaste, leaving the will be preferable to continuing to appease the deficit errorists.
Is there no punitive countermeasure they can resort to?
They have a variety of creative ways to screw Greece over. They can refuse to carry Greek bonds, thus leaving Greece at the mercy of the markets. But if Greece quits the , Greece can tell the markets to go and commit unnatural acts with farm animals. They can refuse to release EU funds for Greece (which is a net recipient). They can sue Greece in the European courts (but that takes years and years). Greece will lose prestige, standing and political capital in Bruxelles (but political capital only matters if you have an actual policy to push in the first place...). And a variety of other innovative forms of mean-spiritedness.
But the point of the Greek situation is that, short of sending a naval task force or ejecting you from the EU altogether and putting up punitive tariffs, they can't do anything worse to you than they already are doing with this AusterityTM crap. Having your back firmly pressed against the wall is enormously liberating in terms of policy options.
Now, it's important to note that leaving the won't make the pain go away completely. Following a default, it will take a year or two before Greece is able to borrow at anything resembling reasonable rates in the international money markets. What leaving the will do for Greece is restore Greek government control of the domestic money markets. That means that domestic Greek economic activity can be funded at reasonable interest rates, but hard currency will have to be rationed, presumably by explicit import quotas and capital controls, as well as activist ForEx policies to rapidly build foreign currency reserves.
The question you should be asking yourselves is whether the inability to import Siemens and Samsung for the next two years is better or worse than AusterityTM.
Isn't this really an extortion by the ECB/EC?
"Extortion" is such a crude word. I believe that the internationally recognised term is "foreign policy."
For a left government leaving the euro would be a major strategic error. The new currency would be devalued as that is, after all, the desired objective. But that would immediately open up a space, which the financial markets would immediately use to begin a speculative offensive. It would trigger a cycle of devaluation, inflation and austerity. On top of that, the debt, which until that point had been denominated in euros or in dollars would suddenly increase as a result of this devaluation. Every left government which decided to take measures in favour of the working class would certainly be put under enormous pressure by international capitalism. But from a tactical point of view it would be better in this test of strength to use membership in the euro zone as a source of conflict.
But that would immediately open up a space, which the financial markets would immediately use to begin a speculative offensive.
Then you cut their balls off, by identifying the aggressive market participants and cutting off their Greek credit lines. You can't short a currency without access to its domestic credit market. And the Greek government controls access to the Greek credit market.
The Commission will scream bloody murder, and the banksters will sue in the European courts. But by the time the case reaches the last judge, everybody will have forgotten about it.
It would trigger a cycle of devaluation,
A real risk.
inflation
Potentially. Beats austerity.
and austerity
Nothing short of a foreign naval task force in Aegean can force the Greek government to engage in austerity policies if they don't want to. They may have to live with a patch of inflation. But that still beats austerity.
On top of that, the debt, which until that point had been denominated in euros or in dollars would suddenly increase as a result of this devaluation.
Convert the debt at some more or less fictional official exchange rate when you do the currency swap. The bits you haven't defaulted on explicitly, that is. Nothing short of a naval task force in the Aegean can force Greek residents to repay debts that the Greek government is unwilling to enforce.
Every left government which decided to take measures in favour of the working class would certainly be put under enormous pressure by international capitalism.
So you cut the banksters' balls off. Capital controls, bank confiscations, confiscatory taxes on wealth, unilateral repatriation of Swiss and Cayman Islands bank accounts. And all the other little dirty tricks that aren't used in polite company, but which a country with nothing to lose can indulge in to its heart's content.
The point here is that Greece is being pillaged and burned. And not even necessarily in that order. You have options other countries don't, because all the bad things that will or might happen if you leave the are still less bad than what the IMF is doing to you as we speak.
If policy does not change, leaving the altogether will be the superior alternative for Greece. They have nothing to gain by beating around the bush about this. Six months ago, it looked like the might still, overall and in the long view, be a good idea for Greece. Back then, circumspection was indicated.
And six months ago, you could have made the case for the Greeks to be circumspect out of a sense of European solidarity. But enough is enough. If the creditor nations want to play every country for itself, then the debtor nations can only continue to take the high road for so long.
I think the Internet's ability to increase global frustration by informing people what is available, and what they do not have, is underrated.
you can definitely make that point, but how else can a head of steam big enough to change anything fundamental build up?
history shows the printing press and its effects on peoples' desire to overthrow oppression, the internet can do orders of magnitude more, it's barely begun.
maybe frustration is just the beginning of empowerment, certainly it beats apathy and ignorance, which have been the meat and potatoes of european public economic/political awareness since? WW2?
i had never connected the dots before, but the wave of rage and yearning in these latest uprisings in n. africa and the middle east may well be the thread that will unravel the plunderers' plans to keep milking us europeans all'americana, captured governments, finance 'riding bareback', institutionalised ponzi pyramids et al.
certainly any major interruption/price rise of the oil supply will accelerate the pace of change, hopefully educating many hitherto untroubled by serious crises, just how we are all in similar -if not identical- lifeboats.
frustration is the first twitch in the moribund, learned-helpless, shock-doctrined populace. even as we are introduced to the sting of the IMF lash here, we can relate better to what is happening in the arab world, whose corruption has much -if not all- connection to our greedy meddling and peddling too long.
we are fortunate indeed that the mass of the arab street is not directly blaming us for their plight, and hope this continues, it seems like only the rabid irani theocrats have a hate-on for the west, and that's not even their people, the other maghreb and ME countries want to join with our youth and have a life not that different than the youth here or anywhere else they can have a FB page and chat away...
the internet makes it all seem so tantalisingly just out of reach, it must be infuriating.
as we see... 'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
Finally, about reducing Greek debt to the level that it was prior to the crisis, it's important to remember that creditors fled Greece when it's level of debt to GDP was at 110%. It had been at 95-105% for at least a decade if not more. So, presumably, a reduction to that level would not improve things as far as credit goes because those levels are the levels which spooked the credit markets in the first place (after several hedge funds made huge short bets against the country).
Finally, it may be that Greek banks are repatriating Greek debt by having the ECB back them in their purchases of Greek bonds, thereby paying off outside creditors while the EU and Greek banks take on more EU debt. In other words, the longer these austerity measures continue, then we come to the point when the totality of the debt has moved from private hands to EU taxpayers and Greek banks.
I could live with that. Then all you have to do is shaft the Greek banks and the ECB, which is if nothing else politically easier than shafting German pension funds.
But unless the ECB is moving massively in this market, it's mostly cosmetic anyway, because these buybacks will be matched by Greek interbank debt to the rest of the -zone. So shafting the Greek banks will still shaft the creditor countries.
We know the ECB has bought under 80bn of Euro sovereign debt. That's no more than 1/3 of Greece's outstanding debt. Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
"The purported statements of the European Commission representative in Sunday newspapers are at the very least off target, and certainly inaccurate," Papaconstantinou said in a press statement midday Sunday. The three international lenders--the IMF, EU and ECB commonly know as the "troika" in Greece--held a very controversial press conference Friday. It was their third review of the debt-laden Mediterranean state's progress on austerity, fiscal consolidation and economic restructuring reforms. And while they approved the fourth EUR15 billion aid tranche, they also ratcheted up expectations on reforms....Greek Prime Minister George Papandreou midday Saturday called the head of the IMF, Dominique Strauss-Kahn, and Olli Rehn, the European Commissioner for economic and monetary affairs, to complain about the tone of Friday's joint press conference of the international lenders of last resort. Papandreou also criticized the statements as "unacceptable." Other government ministers have talked about a breach of the country's sovereignty and underlined the cabinet only takes orders from the Greek people.
"The purported statements of the European Commission representative in Sunday newspapers are at the very least off target, and certainly inaccurate," Papaconstantinou said in a press statement midday Sunday.
The three international lenders--the IMF, EU and ECB commonly know as the "troika" in Greece--held a very controversial press conference Friday. It was their third review of the debt-laden Mediterranean state's progress on austerity, fiscal consolidation and economic restructuring reforms. And while they approved the fourth EUR15 billion aid tranche, they also ratcheted up expectations on reforms.
...Greek Prime Minister George Papandreou midday Saturday called the head of the IMF, Dominique Strauss-Kahn, and Olli Rehn, the European Commissioner for economic and monetary affairs, to complain about the tone of Friday's joint press conference of the international lenders of last resort. Papandreou also criticized the statements as "unacceptable." Other government ministers have talked about a breach of the country's sovereignty and underlined the cabinet only takes orders from the Greek people.
That's now even worse: both the IMF and the Commission catching the fire before the ECB. *Lunatic*, n. One whose delusions are out of fashion.
Greek Prime Minister George Papandreou midday Saturday called the head of the IMF, Dominique Strauss-Kahn, and Olli Rehn, the European Commissioner for economic and monetary affairs, to complain about the tone of Friday's joint press conference of the international lenders of last resort
In practise, it's going to be the ECB, but DoDo is right about the rhetorical points.
If you're willing to present ultimata to the ECB, you're past the point where that sort of political theatre matters very much.
German banking association says Greece will restructure The president of the German banking association said Greece will not get through this crisis without debt restructuring, and he called for stress tests to specifically include a component of sovereign default on the banking book. This is an interesting comment, as reported in FT Deutschland, but remember that the association only encompasses the private-sector banks. Most of the toxic waste in Germany is located with the state sector banks, such as HRE and WestLB.
The president of the German banking association said Greece will not get through this crisis without debt restructuring, and he called for stress tests to specifically include a component of sovereign default on the banking book. This is an interesting comment, as reported in FT Deutschland, but remember that the association only encompasses the private-sector banks. Most of the toxic waste in Germany is located with the state sector banks, such as HRE and WestLB.
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