A retired American banker in his late 70s, once my boss at an American bank, sent me the following email.
"What is it that I am not understanding about the so called "crisis"?
They have two options:
- accept Eurozone and IMF demands for pension cuts and tax increases in return for loans (why would anyone want to give them MORE money?).
- face bankruptcy and default (and then presumably get kicked out of the Eurozone and the Euro).
If they accept option 1, the politicians get removed from office and the country goes even more berserk -- big deal NOT.
If they go option 2, they are like many other countries and municipalities which have done so without having to commit hara-kiri.
I realize that like here in the U.S. during the early 2000's, money was easy and the European banks threw money at them (we all have made similar mistakes ), but everyone, including the Greeks, had to know that it was going to be difficult to impossible to have all those loans repaid.
And why is it so crucial that the Greeks be in the Euro? Will Europe fall apart if Greece exits the Euro?
Help me understand this. It seems entirely too simple to me."
I told him that there was a long answer and a short answer to his question, and that the short answer was: Europe is quite different from the USofA.
"What is it that I am not understanding about the so called "crisis"?
They have two options:
- accept Eurozone and IMF demands for pension cuts and tax increases in return for loans (why would anyone want to give them MORE money?).
- face bankruptcy and default (and then presumably get kicked out of the Eurozone and the Euro).
If they accept option 1, the politicians get removed from office and the country goes even more berserk -- big deal NOT.
If they go option 2, they are like many other countries and municipalities which have done so without having to commit hara-kiri.
I realize that like here in the U.S. during the early 2000's, money was easy and the European banks threw money at them (we all have made similar mistakes ), but everyone, including the Greeks, had to know that it was going to be difficult to impossible to have all those loans repaid.
And why is it so crucial that the Greeks be in the Euro? Will Europe fall apart if Greece exits the Euro?
Help me understand this. It seems entirely too simple to me."
I told him that there was a long answer and a short answer to his question, and that the short answer was: Europe is quite different from the USofA.
The answer is indeed: Europe is quite different from the USofA.
ReplyDelete"God bless America"....
?
God blesses Europe as well. And more.
I changed the lyrics of America's hymn, fitting more with God and us, human beings, to be able to survive the global warming, pole shift, increasing of the CO2, all that does not seem to matter so much as Greece on the moment, unfortunately:
God Bless our unique earth,
Her Nature I love.
Stand beside her, and guide her
Thru the night with a light from above.
From the mountains, to the rivers,
To the oceans, white with foam (of dirt)
God save our Planet Earth, Home of Humanity.
The other short answer is that the USA's debt is financed by China, for complex economic and political reasons, whereas Greece is reluctantly financed by the eurozone. The childish simplifications that Americans insist on are not valid even for the USA.
ReplyDeleteI wonder what the answer will be if Klaus puts the above comment, with which I agree perfectly, to his American friend and insists for an answer. My experience with my American (even Greek American) friends was disappointing.
DeleteIn poor words: Tsipras no matter how much he would like to default (Prof. Varoufakis i believe would have already defaulted if he was PM), is aware that he got elected on a completely different basis and so he isn't certain of what the reaction of the people would be. He is also aware that the bulk of his electorate, weren't convinced radical leftists. He also has no mandate for drachma.
ReplyDeleteOn the other hand, Tsipras sees the opportunity ahead of him. He has a high popularity and a destroyed opposition. This could be used either way.
BUT, handling a default, with possible Grexit, is something that requires good planning. SYRIZA is bad at planning. And, Tsipras is also aware that , as prof. Varoufakis testifies in his eurogroup speeches, the previous "Quislings" PMs, have done the bigger part of the dirty job to stay in the euro. To this, Tsipras must be thinking "and they can't do to me the kind of opposition i did to them, because they are pro-memorandum". So the temptation for Tsipras to go the last mile, must be high, because, a) the opposition can't be too harsh with him , b) the frictions in his own party, at least for a period of time he can calm them, by using the following tactic: "Do you want to be the ones that will make the goverment of the left fall?".
So if Tsipras manages to get an offset, like debt restructuring, he could use it to say "i got lower primary surplus targets and debt relief at least. Because i did true negotiations, not like Samaras". This would hold some value to the population.
Very good comment 6pm. Let me add to b) that they can appeased by granting them more power and euros (where will the juncker 37bn go to?). And debt relief will be the crowning jewel of the true negotiations.
ReplyDeleteTo AnonymousJune 23, 2015 at 2:14 PM
DeleteOn my turn i must agree. I had forgot about Juncker. If this Juncker package materializes, it is the only way i can see that Tsipras can stay in power, because i doubt that otherwise SYRIZA can bring the country out of recession.
But, one must always take Juncker's commitments with a grain of salt. Tsipras should have it written on paper and have Prof. Varoufakis register them while the Germans agree on it. If Tsipras does manage to get investment package + debt relief, then Tsipras' plan isn't just wishful thinking, but he is pointing on the probability to be able to say "i brought growth to Greece, i am the one who has showed there is light at the end of the tunnel". And the same for debt.
> klengut
ReplyDeleteyes the euro area is different f rom USA
>kleingut
what do think of this video on Target 2
https://www.youtube.com/watch?v=kMC_Ns4sJSw
not my video
Well, it didn't address one of the key questions: what happens should a country leave the Eurozone? The claims are on the books of national Central Banks and they are claims against the ECB and not Greece, for example. Some argue that those claims are irrelevant. I think claims are claims, and claims are an asset of the NCB. Should these assets become worthless (because, for example, Greece falls into the Aegean), then the NCB would seem required to write-off the asset, incur a loss and reduce equity. But this has become an endless debate.
DeleteMy understand that the US differs from the Eurosystem in the sense that, once a year, target balances have to be cleared by providing government securities.
"My understand that the US differs from the Eurosystem in the sense that, once a year, target balances have to be cleared by providing government securities."
DeleteGovernments of the US states or the federal Government?
I am interested to learn more about how the US makes it and how they deal with bancrupts.
The Federal reserve system allocates the ownership of the assets of the Fed to the disricts in proportion to the money flows to that district. Any one particular district can't go bankrupt as their assets are a fractional ownership of one aggregate of assets with one aggregate value.
DeleteTsipras has unleashed the people close to him on the media for full damage control. The amount of propaganda and the gall they have is beyond belief. I wish i could give you a link, but this was on radio, with SYRIZA's parliament spokesman.
ReplyDelete1) "What we will sign is not a memorandum".
- And what is it then?
- It is not a memorandum. It is an array of measures we are forced to take, but that will allow us to soon end austerity and open the path to growth. We want time for a full 4 year term, to be able to implement our program and be judged upon it at the end of the 4 years.
2) There is criticism for the fact that you raise tax to SMEs from 26% to 29%. Isn't this bad?
- Before, it was even higher! Samaras' goverment dropped it by 9% and to what end? Nothing.
3) Aren't the VAT changes a measure that hits hard the poorer and dries out the market?
It is done with social justice. We don't touch the housewive's basket. If someone wants to eat caviar, this is something else, let him pay. (Note: all "packaged" food is supposed to go to 23%. Such as packaged pasta, rice, olive oil, etc. This can be described in one word as "caviar").
After five months of political catwalk with no substance and a mexican/greek standoff in a cunning game-strategy surely designed to fool the EU to make a bad deal -
ReplyDeleteand transform Tsipras to a workers hero at home -Tsipras has finally reached the endgame.
The endgame means that he is checkmate and finished.
If he take the given deal - infighting or possibly total rejection will meet him at home.
All ends with a snap election.
If he rejects the deal - the country will break down to a standstill in no time - and the Greek people will go berserk.
All ends with a snap election.
Whatever happens - In the final analysis Greece is a failed state with no export or functioning structure and a corrupt political class that stops all potential change.
The only thing that can save Greece is to get rid of the political class all together and root out the corruption and build a new system from ground up.
It´s like to tear down the old house and build a new!
Anything less than that will be status quo.
If by any chance Tsipras would hang on for a time - he is the wrong man to rebuild and get the economy going.
Greece rather need experienced and competent capitalists than utopian communistic projects.
Even an interim government with officials running the country would be better than this.
After a while it would all end with a snap election.
Probably - the real solution will come in it´s own time - and probably it will be initiated after the Eurozone crashed and the utopian, totalitarian EU-project is going down itself in flames.
Saxobank CIO Explains Why The Greek 'Problem' Won't Be Solved
http://www.zerohedge.com/news/2015-06-24/saxobank-cio-explains-why-greek-problem-wont-be-solved
Václav Klaus stands up for Freedom
https://www.youtube.com/watch?v=ljAANHPkrAE