Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
I think her conclusions do follow from her premises:

  • Greece is running out of money and needs funding right now.

  • The people who Greece has to convince to get funding is the Eurogroup.
  • If those hold true then yes the memo was total surrender since they conceded the right to evaluate their reforms to the institutions. This also turns their later communication strategy incoherent.

    But do they? On the second point I clearly disagree. I'm more than halve convinced that the Spaniards would advocate blocking the ports and bombing the population centers if they could be seen as doing so. What limits the Euros' action phase is public perception and fear of an exit. At least Schäuble would have no future if he is seen to push Greece out of the Euro and then demands the 300 billion hole in the ECB's balance sheet be filled by fresh tax money. Which he probably would since he is a believer.

    On the second I also disagree. A default in and of itself is no problem, except if used by the ECB to force capital controls. And at least in the case of the IMF the Greek position is that the ECB should just hand over the two billion they owe them to the Fund. If the ECB refuses and than uses the resulting default to murder the payment system they really need to be in control of the media narrative. Because otherwise that looks like a carrier limiting move.

    Finally I think she puts too much importance on the exact language used since in private sector negotiations everything you say can resurface in court. Here the only court that matters is the one of public opinion.

    by generic on Tue Mar 3rd, 2015 at 04:22:23 AM EST
    [ Parent ]
    For me it was a question of emphasis. I don't doubt she is correct as far as expressing how Greece is viewed by the world banks and their executives. But what matters here is how to deal with that, and giving too much solicitude to those sentiments leads to surrender. Too little MAY lead to default and forced exit, but I think Greece's best chance is sailing as close to that head wind as possible and tacking as it must. The very thought of the ECB filling a $300 billion hole in Eurogroup banks deriving from a Greek default, much as the Fed did with the GFC, would be the end of the world for much of the conservative political elite. The could not but see that as inflation - "Three Hundred Billion Created Out Of Thin Air!!". The only other place the money could be obtained is from those 80 individuals who own more assets that the bottom half of the population combined. They cannot even contemplate such a thing. It would be worse than the Bolsheviks.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 09:35:29 AM EST
    [ Parent ]
    The very thought of the ECB filling a $300 billion hole in Eurogroup banks

    I think the 300 billion are supposed to be the whole damage, including official creditors and central bank balances. Only a very small part of this involves private banks directly.

    by generic on Tue Mar 3rd, 2015 at 09:47:17 AM EST
    [ Parent ]
    Of course, but it undermines the narrative: "Debts must be paid!" In REAL money, of course. And gives rise to the awkward question of why this can be done for banks and not for the people.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 09:50:48 AM EST
    [ Parent ]
    What exactly are "the Eurogroup banks"?

    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 Carrie (migeru at eurotrib dot com) on Tue Mar 3rd, 2015 at 09:51:03 AM EST
    [ Parent ]
    I would take them to be all the national central banks supervised by the ECB by treaty obligations, all of the banks they supervise and those new institutions responsible for resolving insolvent banks and stabilizing financial conditions in Eurogroup countries.

    "It is not necessary to have hope in order to persevere."
    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 09:58:08 AM EST
    [ Parent ]
    Those are not the ones that would take a direct hit if Greece defaulted, I don't think.

    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 Carrie (migeru at eurotrib dot com) on Tue Mar 3rd, 2015 at 10:03:01 AM EST
    [ Parent ]


    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 Carrie (migeru at eurotrib dot com) on Tue Mar 3rd, 2015 at 10:11:25 AM EST
    [ Parent ]
    The IMF and ECB would take a $15 billion hit this year if they force a default. So, take careful aim and see if you can only blow off a toe or two. Then the question becomes: "who holds the Greek Treasuries and how forthcoming will they be to able to extend and pretend?" Forthcoming I believe. Do you really believe that their principles are worth $15 billion a year? If they take that kind of hit it is a sign that they see Greece's actions as an existential threat to their whole system - which it is. But they only up the ante by calling the debt. That action also raises an existential threat to their own continued wealth and power.

    I recall reading about 11% yields for holders of Greek treasuries in 2014. Many of them seemed to be hedge funds. I would bet that a lot of those bills are spread around Eurozone banks. They needed to get returns somewhere. Looks like about $15 billion in Treasury bills all together. More hits to the same suspects in 2016. Of course if they force a total debt repudiation by Greece the entire structure of the new ESFS will almost cerainly dissolve, unless the money to cover those out year liabilities is already in the fund, which I have trouble believing. So another piece of paper ass cover dissolves in the rain.

    "It is not necessary to have hope in order to persevere."

    by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Mar 3rd, 2015 at 01:48:15 PM EST
    [ Parent ]

    Display:

    Occasional Series