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Wednesday, February 25, 2015

D-Day - Cancelled Or Postponed?

Monday and Tuesday, particularly Tuesday, of this week were extraordinary for me. I had expected Monday to be the day where countless drafts of lists would be leaked to Twitter & Co. and for Tuesday I expected a High Noon type of showdown with the definite result that there wouldn't be a definite result and that further lists and phone conferences would be scheduled for the rest of the week.

For a while it looked to me, judging from tweets, that Tsipras & Co. had outsmarted the Eurogroup. They were going to raise 7,3 BEUR in new taxes from oil smugglers, tax cheats and oligarchs which would allow them to finance all of their campaign promises. I was wondering whether the Eurogroup would have the nerve to say: "First the revenues and then the expenses", and I wasn't so sure.

And then - nothing happened! Monday was a very slow day for Twitter & Co. and Tuesday felt like a bank holiday. The only debate seemed to be about the question whether or not the list had arrived in time. And then, Tuesday evening, word got out that the list had indeed arrived in time, that the phone conference among the Eurogroup had taken place and that they had approved the extension. That was it! No more, no less. Sometime later, the letter of the Greek Finance Minister together with the list was published but it was kind of a non-event - here is the list for anyone who cares, so to speak. No one seemed to care much. Statements by the IMF and the ECB appeared showing between the lines that they really didn't trust the list, but no one seemed to care.

It seemed to me like some Superior Force had called the quarreling children to order and told them: "I've had enough of your fighting! Now stop quarreling and be nice to each other!" And they stopped quarreling and they were nice to each other.

Suddenly, there are totally new perspectives. Tsipras will turn into a Tony Blair. He will slowly discard his radical left and substitute for it with new voters from the center. Like Tony Blair, Tsipras will go for a Third Way! In fact, that truly is the great opportunity which presents itself to Greece now. In fact, it's the opportunity of a lifetime. In fact, there is hope and confidence in the future!

There was one question throughout the last weeks which I have never heard discussed. We have heard from the Eurogroup & Co. that they really 'wanted to keep Greece in the Eurozone' but that they 'might not have a choice but to kick Greece out of the Eurozone'. We have heard noises from the Greek side that they don't wish to get kicked out of the Eurozone. But the one question which I didn't see discussed anywhere is: What would be best for Greece? Staying in the Eurozone or returning to a local currency?

Returning to the Drachma is always discussed in the context of what it would do to Greece's international competitiveness, to its trade and current account balances and to private wealth of Greeks. However, the predominent themes which have come out of Greece in the last couple of months were: 'stop austerity'; 'cease to follow orders', 'regain self-determination'.

A return to the Drachma would give Greeks all the things which seem to matter to them: it would be total financial self-determination; there would be no impediment to fulfilling campaign promises; the humanitarian crisis could be resolved relatively quickly.

In a nutshell: Greece could again print its own currency and become fiscally irresponsible. Prof. Paul Krugman would applaud because he encourages fiscal and monetary irresponsibility. Like Milton Freeman travelled to Chile in the mid-1970s to advise the government on fiscal and monetary responsibility, Krugman could visit Athens to advise Tsipras & Co. on fiscal and monetary irresponsibility.

What about pressure to implement reforms? Well, why implement reforms if Greece has lived happily for ages without reforms? If the external accounts get out of balance, just devalue from time to time and everything is fine again. What about inflation? Ok, we've learned to deal with that!

I was obviously a little satirical above but I truly believe that the question whether the Euro or a local currency is best for Greece should be discussed without prejudices during the next four months. Greeks' passion for the Euro strikes me a little bit like a nun's passion to preserve her virginity for heaven. She can and will be very proud of herself if and when she ever gets to heaven but just think of all the fun she has missed and how many sacrifices she has made in the meantime!

Not to mention the possibility that there might not be a heaven!

26 comments:

  1. I think that, like almost everyone, you have completely misread the political situation. The evidence has emerged that the European Commission wrote the Greek text, in both its draft form and final form. It was, of course, approved by the Greeks before being submitted to the EuroGroup.

    This information has been gleaned from the metadata of the pdf file, which are as follows (I have the actual file):

    Author: COSTELLO Declan (ECFIN)
    Created: 23/02/2015 22:09:43
    Modified: 24/02/2015 11:31:47

    This electronic information confirms the story of last week that the final text for the EuroGroup was given to Varoufakis by the Commission, and rejected by the Germans. In other words, the real political fight (behind the scenes) is between the European Commission and the German Finance Minister. That fact is then able to explain every single thing that has occurred since Syriza took office, in its dealings with the Eurogroup.

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    1. Are you really sure that you got what my point was?

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    2. If your point was that Greece should think of exiting the euro, then you share that view with a motley crowd including very far left Greek economists and some German economists. Varoufakis has always considered it to be a route to disaster, and I too have always held that view. It seems to be the view of Tsipras.

      The fact that Greece should never have joined, does not mean that leaving is a desirable option. The short-term costs -- after 5 years of economic collapse -- are not acceptable in humanitarian terms. It implies that they would not be acceptable in political terms, if that was a voluntary decision as opposed to one imposed by Germany et al. That could lead to the collapse of the government.

      Of course, it is theoretically possible that a managed exit would be desirable, but there are too many negatives for this to look realistic. They include market speculation prior to exit (and there would be leaks about printing presses and suchlike), the massive problem of the existing debt, the longish period of a collapsed new currency where imports (including essential imports for hospitals and domestic production) would likely be impossible, and potential hyperinflation. I feel ill even thinking about it.

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    3. I agree with Xenos on this...

      It would be a disaster and even worse than being beaten by our europrean counter parts.

      To be honest Mr. Kastner, as the weekend lead up to Monday, the beginning of lent for us, i expected the ironical timing of the beginning of lent, which i will "fast," with the approval of the terms. Monday indeed came and went as well Tuesday.

      Basically, that which was agreed is the agreement to the extension under the existing terms and the ability to to allow Greece to study the humanitarian crisis and prepare for new typs of reforms. Like you wrote in an article a few weeks ago, "what is a few months?" The new types of reforms i hope equate to hiring 500 DA's to review the thousands of tax evader files.

      That which will begin now is the discussions of a new program and new terms and that is what and where the big fighting will come.

      There is alot of political rhetoric in all countries mostly against Greece and even internally. Likewise in Greece about Syriza.

      To be honest everything is like a muddled watered lake. Blurry. To be in the euro is the better of two bads. Greeks know this. Greece as country after reading the above is that like 16 year old rebelious teenager who finds ways to sneak out past his bed time but also enjoys the conforts of Mommy and Daddy's loving home. In practical terms though Greece needs the belt to be loosened but not too much. Maybe our counter parts agree with Syriza on this. If they do not and after killing Pasok, ND and then Syriza I guarantee you that Potami will not be next to run the country but most probably KKE. And that will be a complete disaster. (Then Mommy and Daddy will "commit" the 16 year old to the mental institution.)

      In the meantime, working hard to help contribute to our fight for growth and contribution.

      V

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  2. Very nice!
    Nick Malkoutzis speaks about your inimitable style in one of his latest tweets. It is.

    I never asked myself why the Greeks chose for the Euro. The same counts for me: I am Dutch and nobody has ever asked me, us, if it was okay to introduce the euro. I did not like the euro at all and missed my Royal Dutch money. I understood its value, and with the euro I could not understand anymore how much things really cost. Had to calculate all the time. In the beginning (years). Found out that all was so much more expensive.

    We learned to use it, and I know now also the nice sides of the euro. Where I travel in Euro-Europe, I know now how much all really costs, because I can compare, and when back home I do not need to go to the bank to exchange that "strange" money. The euro is a symbol of being "united". I would not chose for the old "gulden" (florin, guilder) anymore. My money is the euro.

    I do not know what the reasons were that Greece chose for the euro. It has not brought heaven. Heaven does not exist in Netherlands either. For a lot of women (and men) the monastery brought safety by becoming a nun (do not want to speak about the male version because, well, we know that there have been and are (d)evil ones among them), and safety can really feel like heaven when one has been or is threatened.

    Maybe the Greeks expected that the euro would bring safety, and especially now I can imagine that only those Greeks who have the strongest courage and trust in Europe dare to go for the euro, and those who lost all the trust, also in the euro, and did not learn how to use it, want the Drachma back. But they forget that the same mentality will continue to govern their lives, and that also Drachmas leak through their fingers if they do not want to learn how to use them right.


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    1. Antoinette,

      Greeks wanted the Euro before anybody else and efforts were made to achieve that even though many book fixings were made.

      Greeks still want the euro. The sane ones but under the original manner and hope of united europe. With the positive aspects that the euro should provide. The 20% that want the drachma are either communists living in a dream world of theory and people that may gain lots of money off a greek exit. Especially the people that have not paid taxes and taken their money outside of Greece. With the drachma the next day they will buy half the country.

      The outcry is due to the austerity and the pain people feel everyday. Meanwhile being bashed verbally everyday is not liked. Trust me if you had the whole 20 nations of eu bashing down on you everyday you would not feel nice about the euro.

      Aside from that we know that it is good for us but we remain to see the good aspects of this unity, we hope. We are still waiting, because realisticlly, we do not believe we are working together but it feels more like an occupation.

      I find Trangas to be an extremist but he is right when he says that Greece is simple a colony of Germany. From many aspects it is very very true. We also have 4 parties in Greece. The French party, the UK/USA party, the Russian Party and newly reformed German party. Greece like i have said is the "*itch" of the super powers. Always was, always will be.

      Since the ottoman occupation till today. We have paid out full on all forced loans and then some. We are the biggest and best customer of the world banking system in comparison to our size.

      Sincerely,

      V

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  3. Klaus, only an old catholic sinner can write this way about nuns o_O

    H.Trickler

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  4. Or a retired after 40 years in banking in 6 countries...

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    1. I do know that, but you seem to have missed my joke ;)
      H.Trickler

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  5. ......As for Paul Krugman.

    I also follow his blog and find his articles quite interesting.

    I especially like today's "Explaining Recovery Performance in Europe"
    I like this article in correlation to this article.
    Feb 17th "Comparative Austerity"

    Maybe an understanding can be made, from both article together, just HOW austere the Euro was with Greece by comparison with the "good" of the bad kids. P I * S

    And to see things from Mr. Kastners eyes (which is the Greek Subconscience sometimes) as to find some kind of balance, Greece had the worst fiscal program and needed the deepest reforms and is why so much austerity was needed.

    The point I am making though is a better balnce was needed for Greece and that an overdose of chemotherapy will not only kill the cancer but the patient as well. The Greek people have been so overdosed (As to put nicely) that it is very hard to have hope for recovery, even though the worst, so to say is behind us.

    This especially when you hear MP's in German Congress stating even stricter terms of Austerity on Greece. And when i hear things like that even if it just political rhetoric, it borderlines with sadism.

    Sincerely,

    V

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    1. @AnonymousFebruary 26, 2015 at 9:54 AM:

      I'm sorry to say that you are fully correct about the overdose and that imho the worst is not yet behind.

      It should also be said, that the overdose given to the lower income classes in Greece has not been applied by the Troika but former Greek governments which preferred that 'easy' but unfair approach because real reforms looked too difficult.

      Syriza has jet to prove that they can substantially decrease cronyism, tax evasion, overweight of the obese administration etc. etc.

      H.Trickler

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    2. Hi Trickler,

      I said "so to say" the worst was yet behind us. But thanks for the moral support. It is a positive aspect knowing that things are going to get worse, in the sense that at least KNOW the worse is yet to come and there is even something below the barrel base.

      There is talk and rumours that the government wages will be categorized and made equal from institution to institution with maximum wages set. It is something to hope for.

      Syriza has been in government for less than one month. You can not rule out anything because time is necessary to put new people in to evaluate projects. Even in the private world when you are assigned a project you need time to assess.

      That which is the most important is not the government employees but the tax evaders. With there current popularity rating it is now they should have the will to enforce the tax office to bring those who should be brought to justice. If this does not occur within 1 year, if significant change is not made to the system as to have a bargaining chip to relax debt restructuring we are really looking at an end game. They need to make some tax evader examples.

      The longer they wait and do nothing or don't do enough, the harder an end game will be. In over view a hard end game may be necessary and have a complete collapse. (but i think of my countrymen and ask how much suffering can be withstood) This way a new constitution is written and newly reformed governements who are clean can rebuild the country from scratch. The drawbacks is we will fall off the map for 30 years just like we did after WW2.

      Sincerely,
      V

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    3. AnonymousFebruary 26, 2015 at 4:47 PM

      >"That which is the most important is not the government employees but the tax evaders."

      I would prefer not make any difference but say that both and many more problems must be solved.

      For Swiss citizens it is just incredible that from the huge Lagarde list only a handful of legal cases have started because most names look too famous to be accused. Here such negligent action of the government would _immediately_ bring masses into the streets!!

      I somehow have the impression, that most people in Greece benefit in some small or larger way from this kind of system and for this reason it has never ever been tried to change it at all....

      Recovery of a failed state might ordinarily take about five years, but up to now Greece has had five mostly lost years and imho it might take 5 more...

      H.Trickler

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  6. By now it should be obvious that nothing was resolved by the latest eurogroup meeting. Not surprising really, was there ever a chance for something meaningful to come out of there? I agree that it is time to for the Greek government to consider seriously a parallel currency as a means of a coordinated exit from the eurozone. In your previous post you demonstrated that -Greece albeit from a little help by EU contributions- is running a current account surplus now. This means that a new Greek currency would not have to be devalued by a significant amount more like something close to 15-20% in order to bring the trade deficit further down. I agree with Xenos's remarks concerning the short term possible repercussions but unfortunately the political standoff between Berlin, its lackeys and well everyone else is leaving no other option. If Berlin does not sign off on the debt restructuring necessary for Greece in order to run significantly lower primary surpluses so as to return to growth then an exit via default is inevitable. The debt load is simply unbearable and if one considers also that Greece nowadays is firmly at the bottom of the deflation chart in the EU with something close to -2% then the situation is obviously hopeless. The next 4 months are going to be interesting then.

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    1. ....or they can kick the can down the road... you know we have been hearing deadlines for the last 5 years of an end game. It seems that there never is one and i believe they will not allow it.

      An exit would be terrible for Greece short and long term. It is as simple as that. I can not say the greeks are not to blame themselves but isn't it ironic that even though greece acquired its indepence in the 1820's and ever since then we have been in tormoil? Loans more loans, unstable governments and unrest. There has never been a period more than 5 - 10 years where Greece was left at ease or in stability. Healthy stability.

      V

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    2. @AnonymousFebruary 26, 2015 at 4:33 PM:

      Some so called experts have said Grexit would be the hell, but after studying a lot I now am fully convinced that a parallel currency with Drachma inside the country (similar to Grexit) is the only reasonable way for Greece to go.

      You are quite correct that after 1830 Greece really had several moments of bad luck and I still cannot understand why. When Napoleon left Switzerland, the whole country reorganized over night, with much better structures than before occupation!

      H.Trickler

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    3. mr trickler, if you cannot understand the difference between a country (Switzerland) that managed its own governance and economy for many hundreds of years, and a new country formed in 1832 and controlled by a mix of revolutionaries on the one hand and by foreign powers on the other, including a 17-year old Bavarian king who was actually being manipulated by Bavarian advisors -- then really you understand nothing at all.

      History shapes institutions, as well as economies; capital follows power and opportunity, not small states that were encouraged to break away from an empire by the enemies of that empire. Greece remains a small state, whose destiny is manipulated if not controlled by Great Powers. Your country, Switzerland, has for some time positioned itself as the home of international organisations, uncontrolled banking deposits to house the secret caches of trillions owned by criminals, dictators and thugs, and a neutral country that is loosely connected to Europe.

      There is no comparison possible between the two.

      Delete
  7. Anonymous has left a new comment on your post "D-Day - Cancelled Or Postponed?":

    I think you might like this - starts at 16 min.
    https://www.youtube.com/watch?v=Cz8jC7WqkzU

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    1. Wow! It is one of the most interesting analysis about the greek society, culture and economy I have ever seen.
      Sounds quite convincing for me, much more than most of the other theories I have heard over years. But I would be interested what Greeks think about these ideas of Aristos Doxiadis, and if his ideas and proposals are seriously discussed in Greece nowadays.
      With Greetings, Roger

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    2. I have read Doxiadis's views in several places, including OpenDemocracy. Not that impressed, although he outlines the symptoms of problems fairly accurately. He is competent, I would say.

      What he does not have is a systemic comprehension of why Greece is the way it is, or indeed of how it relates to the eurozone. In other words, it is a rather standard analysis and not really very insightful. Such an approach is suitable for business advice, but nowhere near the political vision that is required to get Greece back up from the hole it is currently in.

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  8. GREXIT hypothesis:
    http://russeurope.hypotheses.org/3501

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  9. That would damage tourist revenues this summer very badly.

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  10. "Greece runs out of funding options despite euro zone reprieve"

    http://www.reuters.com/article/2015/02/27/us-eurozone-greece-funding-idUSKBN0LV1OK20150227

    Plus a video showing Riots in the streets of Athens.

    I wondered for a few days why after that capitulation of Tsipras so few opposition was visible within Greece.

    H.Trickler

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    1. AS I understand it, the rioters are mostly communists and anarchists who did not support the original government intentions anyway -- since they are anti-capitalist. The support for Tsipras remains very high indeed.

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    2. To be Honest, not many people know who they are. Sometimes they are referred to "Known Unknown". Quite frustrating. whoever is governement they show up. Some people say many of those within those ranks are police men, some undercover some not, some are very well to do sons of magnets blowing steam, and ofcourse there is your mix lower society trash following along who if are caught are the ones blamed. in any case i really do not understand. why any governemtn or society who has had to deal with these freaks of society are not struck down.

      Who knows maybe they are a part of the governement maybe not directly. to put pressure but on whom? In any case they should bring in the greek army, block them off in a few streets, get some 3-4 super firetruck water guns and arrest the lot of them.

      The news seems to be piling up these last few days. This general unrest is not good. Turkey openingly wanting half of the Aegean is not good either. Good for german hotels built in turkey though.

      Mr. Tricker, how would you feel if someone was telling your country threats of wanting to take over geneva, or run a militray excersie in your general borders of your country?

      You talk and point and of course we accept blame in our own country but when threat of war are constantly on you whether they be real war or economical war, lets just how civil and organized you would be. Just how uncivilized can a person can person or people can be come when they are pushed from all sides.

      V

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  11. Yes, it would be prudent to discuss Greece's membership of EZ and EU. It would require the cooperation of Greece as it could only be carried out after introduction of capital controls and closure of the stock exchange. It seems unlikely that Greece would be willing to contemplate that. The basis for the discussions should not be Klaus's "what is best for Greece" but rather what is best for EZ (EU), after normal democratic principle of "the best for the most". Since I have long time ago accepted that the money owned by Greece will not be payed back, my view is clear. No more money for any Greek government, humanitarian help, yes, but controlled by the donors.
    As for the parable about the nun it caused many riotous comments at the monthly expat Sunday lunch. I shall spare you the more juicy ones and quote the most frequent "why limit yourself to one suitor when you have the Drachma, the USD, the Ruble, the EUR and the Renminbi? A sad thought on my way home, we have become even more conscious of where we are and how we behave at the lunches. The reason being that, we know that when two ore more foreigners are laughing loud it is perceived by Greeks as directed at them. It would never occur to a Greek that the laughter could be caused by one in our company saying something stupid. Greeks do not have an easy lot; it is hard to go through life with a chip on your shoulder.
    Lennard

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