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Friday, June 9, 2017

Debt Relief For Greece - A New Proposal

This article proposes an approach to Greece's debt relief which has not been discussed by authorities. At the heart of the proposal lies the following premise:

'Debt burden' is the amount of government revenues which has to be allocated to debt service (i. e. interest). Populists would argue that 'this is the amount of government revenues which we have to give to banks instead of building new schools and hospitals'.

In consequence, 'debt relief' can only mean reducing the 'debt burden'. If one considers the percentage of the debt burden (i. e. percentage of government revenues allocated to debt service) as the 'Borrower's Sacrifice', the premise of 'debt relief' must be to reduce the 'Borrower's Sacrifice'.

The table below shows the 'Borrower's Sacrifice' for all Eurozone countries. I have made the arbitrary decision to consider countries whose annual debt service exceeds 5 BEUR as 'significant countries'. The 'significant countries' are marked in blue and sorted by 'Borrower's Sacrifice' top-down.


Year 2016
Ordinary Interest "Borrower's
Government Expense Sacrifice"
Revenue
(MEUR)
Portugal  76.613 7.836 10,2%
Ireland 73.029 6.178 8,5%
Italy 788.502 66.272 8,4%
Spain 421.672 31.358 7,4%
Greece 87.473 5.649 6,5%
Belgium 214.063 12.074 5,6%
Austria 173.077 7.347 4,2%
France 1.181.278 41.983 3,6%
Germany 1.411.381 43.372 3,1%
Netherlands 307.004 7.551 2,5%
Finland 116.047 2.277 2,0%
Slovakia 32.345 1.339 4,1%
Slovenia 17.352 1.275 7,3%
Lithuania 13.315 523 3,9%
Cyprus 7.019 465 6,6%
Latvia 9.097 282 3,1%
Malta 3.871 218 5,6%
Luxembourg 23.147 183 0,8%
Estonia 8.507 16 0,2%


Portugal has the highest 'Borrower's Sacrifice' (10,2%) and the Netherlands have the lowest (2,5%). Greece ranks in the middle with 6,5%. However, it must be noted that Greece's 'Borrower's Sacrifice' is highly subsidized by the fact that the bulk of its debt carries below-market interest rates. That is 'debt relief' right there.

Under normal circumstances, the 'Borrower's Sacrifice' of a country is determined by the markets. Not so with Greece because Greece is bankrupt and kept afloat by the Eurozone. Thus, in the case of Greece, the 'Borrower's Sacrifice' can (and must be) steered by its creditors. The balancing act is to make the sacrifice as large as possible for the creditors' benefit without making it so large that it becomes politically unsustainable in Greece (and/or slows the growth potential).

In short, the 'Borrower's Sacrifice' for Greece should be somewhere between 2,5% (the lowest of the 'significant countries') and 10,2% (the highest). My point is: it does not matter so much where the 'Borrower's Sacrifice' is set at the outset. What really matters is that (a) it is made variable; that (b) it is tied to the correct base; and that (c) it has the right adjustment mechanism when the situation changes.

Suppose the 'Borrower's Sacrifice' had been agreed at 2,5% for Greece. In that case, Greece would have been expected to set aside 1.750 MEUR for interest in 2016 (2,5% of 87.473 MEUR). Put differently, Greece would have had to pay 3.899 BEUR LESS in interest than it actually did. That would have been real 'debt relief'.

Once Greece has made its 'Borrower's Sacrifice' (i. e. paid the 1.750 MEUR), Greece's part would have been done. Now it would be up to the creditors to negotiate an agreement among themselves who gets what of the cake. As long as Greece needs to be subsidized, it is clear that none of the creditors can get everything they want. The trick will be to make all creditors equally unhappy.

Why should the 'Borrower's Sacrifice' be tied to government revenues? (instead of, perhaps, to GDP?). The answer is quite simple: interest is paid out of government revenues and not out of GDP.

What should be the right adjustment mechanism? That's the tough part. The adjustment mechanism must assure that as Greece's economic strength increases, the 'Borrower's Sacrifice' increases accordingly. At some point in the future, the 'Borrower's Sacrifice' will reach levels which are acceptable to the markets and, at that point, and only at that point, Greece can truly return to markets.

In summary: the negotiation with Greece should be about the initial 'Borrower's Sacrifice' and the adjustment mechanism, and the negotiation among the creditors should be about allocating the 'Borrower's Sacrifice' amongst themselves. No more, no less.

112 comments:

  1. @kleingut:

    1. Why should the borrowers sacrifice in the case of Greece be considerably smaller than that of Portugal, Ireland or Spain? Because the Greeks acted in the past even more irresponsible than the Irish, Portugese or the Spanish?
    2. This approach would do nothing in order to force the unwilling Greek governments to broaden the tax base and fight epedemic tax dodging. (We all know that no matter who is running the country, all Greek govenments are unwilling to act against tax dodging. And we all know why).

    Urs

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    1. Ad 1) Yes (regrettably, but that's the way it is in finance)
      Ad 2) Not really because Greece would remain under 'supervision' throughout. Sounds scary but let's remember that this happened before. Greece was put under 'International Financial Control" (IFC) after its 1897 bankruptcy and the IFC was abolished only in 1975 (it was staffed until then but it had ceased to operate on the ground back in 1936).

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    2. @kleingut
      1) That might be the way in finance when finance deals with private or corporate debt. But this case is different because Portugal, Ireland and Spain are debtors and creditors at the same time. And I can not believe that Spanish, Irish or Portugese politicians want to explain to their voters that the unwilling and inept Greeks are rewarded whereas the more complient countries get punished.

      2a) It doesn’t sound scary in my ears when unwilling (meaning corrupt) and incompetent institutions get supervised. On the contrary I would prefer to see them replaced and to see corrupt politicians, judges, tax collectors and policemen rather be jailed than just supervised.
      2b) Supervision alone , meaning reports that list hits and misses regarding fiscal and institutional reforms wouldn’t impress anybody in Greece (that’s what I learned from commentors here at your blog). Only the present danger of a sovereign default ensures at least the lawmakers to act. As long as the majority of greeks keep harbouring the illusion that they can eat their cake and have it at the same time the other european politicians shouldn’t let them off the hook.
      Urs

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    3. 1) Let's assume Greece's GDP is about 180 BEUR these days. They are shooting for a sustainable primary surplus of 3,5% (which no one really thinks can be accomplished). 3,5% would represent 6,3 BEUR. That would be the maximum amount available for interest without having to borrow money to pay interest (borrow money from your lenders so that you can pay interest to the same lenders). Put differently, that would provide for a maximum interest rate of 2,0% on a debt of 320 BEUR. The only place that Greece could borrow at 2% from is the EU. Of course, the EU could continue lending fresh money to pay interest but that only raises the total debt. So one way or another, the creditors have no choice but to give, either by way of interest subsidy or haircut.

      2) The IFC was on location from 1897 to 1936. That means they had some form of a High Commissioner on location without whose approval nothing could be done. I am not sure that something like this could be done in this day and age.

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    4. Urs:

      If Europe was supervising Greece in anyway then I would be with you all the way. The problem is Berlin supervises nothing. They allow the IMF to implement the IMF formula which is debt haircut first and then austerity, but in the Greek case this formula is reversed. It's all austerity up front and no debt haircut afterwards.

      Again, the only thing Berlin cares about is to set these safety budgetary margins via additional austerity so that, as Kleingut says, there is no need to provide Greece with additional financing to cover debt service.

      So, in reality nonthing of what you think is happening in Greece is happening at all. There is zero supervision, but some indirect budgetary review performance, and Berlin couldn't care less if Greece killed all its citizens as long as no additional German money flows to cover an experiment gone bad.

      So, as I said, if you were optimizing Greece by getting rid of inefficiencies and streamlining the public sector then I would be you most ardent supporter. But this is not what is happening. What is happening is a sick adhesion to austerity targets which lead to inability of citizens to meet new taxation obligations and an ever increasing gap of required vs. collected taxation. And that is not supervision. That's giving to the asylum residents weaponry to hunt each other to extinction.

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    5. @kleingut

      I think we talk at cross-purposes:
      1a) I do not deny that Greece’s debt level is not serviceable and I think that all of Greece’s credidors (including Mr. Schäuble) are well aware of that. Yet I think this is not the biggest concern of most of the creditors in general (excluding the IMF) and of Mr. Schäuble in particular. Their biggest concern is the political sustainability of the currency union. Will the Euro-Zone become the guarantor of the (and via the banking union not only) sovereign debt of it’s member countries or not - that’s the Elephant in the room.
      1b) Try to put yourself in the shoes of Mr. Schäuble:
      - The Greek debt? He most likely has already most of it written off.
      - The Greeks opinion of him? Why should he care? Greeks don’t vote in Germany - his conservative electorate does. And they don’t grudge the lazy, always lamenting, german hating Greeks (their view) the success of a substantial debt relief.
      - Tsipras and the Syriza government? Why should a conservative fiscal hawk reward left leaning deficit spenders whose success would (and indeed already did) inspire like minded groups in other Club Med countries?
      Furthermore he knows that the imminent threat of a sovereign default is his only leverage on the Greek government.
      - The german economy? Is doing fine despite the "threats" of Greeks in the comments area of blogs and newspapers that they would boycott german products if the germans would not fund the purchase of them ;-).
      - The break apart of the currency union? Greece will never leave the currency union because the Greeks know quite well that with their economy they are far better off as a member of the EZ than they would be alone in the cold with a wortless New Drachma. And the Italiens? If Italy goes belly up even the Germans couldn’t bail them out even if they wanted to.
      - The Greek economy? What would the Syriza government do if Greece’s credit worthiness would be restored? Would they implement measures to foster competitiveness, innovation and productivity? Or would they just lend more money to buy some votes?
      Bottom line: Mr. Schäuble has not much to gain yet quite a lot to loose if he would agree to a substantial debt relief for Greece. Why should he do something that is not popular (to say the least)among his electorate when Greek politicians for decades rejected to do so even if it was in the best interest of Greece.
      Urs

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    6. @Phoevos:
      Quote: "
      So, as I said, if you were optimizing Greece by getting rid of inefficiencies and streamlining the public sector then I would be you most ardent supporter."

      Right, you would be the most ardent supporter and at the same time you would keep on dodging you taxes. As you already explained to me everything else would be foolish statism.
      Urs

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    7. Urs:

      If the taxes are part of an optimization calculation as to their correct level corresponding to the capacity of society to pay them then I can be reasonable. Otherwise if your idea is to impose any arbitrary tax that crosses your mind so that Berlin is not inconvenienced then the answer is resistance to taxation and avoidance of feeding an unfair system. I am sure you can understand such basic premise.

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    8. Urs:

      You reply to Kleingut @ 4:26 PM is precisely the reason why we don't have a union and why the eurozone is nothing but a mechanism of selling German products via a free trade zone and nothing more. So don't be surprised if people say to Germany sooner or later to eff itself because no one finds any beneficial reason to support German delusions of grandeur. In fact all citizens of Europe have the manifest duty to beat Germany senseless even at a hint of the attitude which you just described. And so they will, sooner or later. This part is comming I can assure you because the only cure for arrogance is merciless and unforgiving punishment.

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  2. Kleingut:

    Berlin can't even provide a simple statement that would allow QE participation for Greece and you are talking about Germany allowing Greece to set its "Borrower Sacrifice" at 2.5%?

    What is this logic? Since we can't do the baby easy let's do the ultra difficult?

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    1. But Germany (like all the others) presently has most of its loans to Greece at zero interest! The logic is that sooner or later all parties will have to find a long-term solution for Greece, whether they like it or not, if they want to keep their hope alive that Greece might eventually be able to service its debt. Greece will only ever be able to service its debt when, prior to that, the debt is reduced in whatever form or fashion. A nominal haircut can be ruled out. Thus, one has to go to more creative solutions.

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    2. Kleingut:

      I am with you on this and my statement is rhetorical. But here we deal with an obsession of denying Greece breathing space. All Greece needs at this stage are 3 practical things which are much easier to deliver:

      1. Stop using ELA which causes already burdended Greek banks with an unnecessary 150 basis points of additional borrowing cost.

      2. Allow QE access so that the ECB can buy its small alotment of Greek sovereign debt and thus relieve Greek banks from carrying such sovereign debt in their balance sheets.

      3. Return to Greece all profits made by EU central banks on Greek sovereign debt which is an obligation the Europeans have but are holding back on instructions from Berlin.

      We then have a whole year to discuss your fine proposal about debtor's sacrifice (how much, how long etc).

      But please do these simple 3 things because otherwise you look like an oppressor rather than a partner.

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    3. Why do you think those Greek bonds ever got on the balance sheets of the banks? Right, because the interest rate is so much higher than anything they could get elsewhere. So that's terrific deal, even if you have to fund it at 1,5%.

      The 3 points you make relate exclusively to the banking sector. No benefit for the state as a borrower.

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    4. Kleingut:

      You forget the fact that it is via the banking sector the brutal occupation of Greece unfolds. The whole debate in Greece @ the moment is whether Greece gets a simple disbursement or something more. It's obvious that Greece will not get a debt reprofiling of any kind. The only hold-out on the reprofiling was the IMF and the IMF will continue to contribute after 2018 only if and when there is a debt reprofiling to its satisfaction. The only other person asking for debt relief is Tsakalotos but what is his leverage? These Syriza guys complain of Berlin's excessive micromanagement because they get the text written in Berlin which most of the time conflicts with Greek law. No one cares what Syriza or Tsakalotos want. Unless they are willing to challenge the authority of the euroworking group which is a mickey mouse deal they are not going anywhere.

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    5. German delusions of grandeur.

      Yes, that vaguely fits into the image context you seemed to use earlier somewhere. Not verbatim: eterally the same? Something about the "German Mind" specifically, or more our beastly predatator souls? Our will to power, our will to dominate others with only on surface other means then in the last century?

      Elsewere you suggested we are raping/abusing others with our surplus. Neither rape or abuse are a nice matter, absolutely no doubt. But how exactly is that done with a surplus? Deliberately with the intent discribed above? I wondered here:

      In reality it was more like an act of reckless nakedness, exposing ourselves voluntarily to severe exloitation and abuse by German trade surpluses. ... And to call yourself after such abuse a "committed European" is the equivalent of a rape victim trying to convince us that the experience was "good".

      ******

      What I do not completely understand is: What is beneath the imagery.

      If we are bleeding the Greek to death so to speak, sucking their blood and thus their very means of living or surviving out of them, why don't you chose the much more fitting images from fiction the vampire from nature the vulture, maybe?

      Should this only concern German banks? Do you actually have solid evidence about the national identiy of investors in Greece. National versus public debts?

      3. Return to Greece all profits made by EU central banks on Greek sovereign debt which is an obligation the Europeans have but are holding back on instructions from Berlin.

      Could it be that we are looked at 'collectively' so well off since we suck the life blood of others, not only via our surplus, but we are also sending out bankers who force people in other countries at the point of a gun to sign a credit contract?


      LeaNder

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    6. LeaNder:

      I have no idea what you are talking about. When was the last time you received a full medical check?

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    7. LeaNder:

      In case you are a newbie in geopolitcis here is the 2040 forecast by George Friedman. After you read and understood it then ask a simple question: why are you asking Greece to side with a loser?

      In Europe, the European Union as an institution will collapse or redefine itself as a more modest trade zone encompassing a smaller part of the continent. The current free trade structure is unsustainable because its members, particularly Germany, have grown overly dependent on exports. This dependency makes these economies extremely vulnerable to fluctuations in demand outside of their own borders. Germany is the most vulnerable country and will experience economic decline due to inevitable fluctuations in the export market. Consequently, by 2040, Germany will be a second-tier power in Europe. Other countries in Western Europe will be affected by its decline, leading Central Europe, and Poland in particular, to emerge as a major, active power.

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    8. Not a newbie, around here, Phoevos. If you allow: More random, not deeply reflected response.

      Not in need of medication either, I am told. At least my analytics over quite a few centuries didn't feel I needed it in any way. Maybe they are wrong?

      Simply a curious nitwit. That's all. You seem to be pretty actively & emotionally engaged recently. Which yes, admittedly drew my attention. But yes, Phoevus, drew my attention earlier. Had to. Slightly off Phoebus. B and V are no doubt related. Phoibos/Phoebus. ...

      But, yes, usually keeping out of the comment section beyond 'observing'. Meaning observing Klaus' blog, since I highly appreciate that he is 'Observing Greece' for me. Big thanks to him in this context.

      Never mind I never made it on his offered learning curve on basics. Did you?

      AAA-What this blog is all about

      In case you are a newbie in geopolitcis here is the 2040 forecast by George Friedman. After you read and understood it then ask a simple question: why are you asking Greece to side with a loser?

      Would George Friedman of Stratefor fame fit into the larger area of American economical expertise that the Euro is bound to fail anyway ultimately? Or does he venture beyond the Euro. Put another way, is he also some type of Kassandra for the larger Union? Meaning all 28 versus 19?

      Winners versus losers? Perpetrators versus victims? ... On a world scale beyond Europe or America? To return to "geopolitics"?

      LeaNder

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    9. LeaNder:

      I have a hard time following what you mean. Why would Greece be interested whether the euro succeeds or fails? Greece wants the eurozone to fail so that germany loses its oxygen and dies a cruel death. That's all.

      Delete
  3. I have a marketing gimmick for Greek exporters who export to Germany. "Every EUR 10 000 we make in profit we will buy EUR 10 000 in Greek government bonds from the German government"

    What an attractive offer !

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    1. Isn't this the same thing as saying that all Greek exporters to Germany will be paid in Greek bonds? Why would the Greek exporters want to do this? benefit to them?

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    2. The Benefit to them is to encourage the choice of Greek imorts rather than other imports by the German consumer, who is concerned about their government's exposure to Greek debt.

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    3. Dinero:

      The only thing that matters to Germany for a market the size of Greece is the delta (meaning the difference of exports minus imports). The Germans want to maintain a high delta of trade surplus with Greece. So if you increase German imports of Greek products you will automatically face a flood of German imports at home. It's a game designed to leave you a loser. The only way to prevail in this game is to apply punitive tariffs to Germany and in order to do so you need to be outside the EU like the UK has already decided to do so.

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    4. @Dinero:

      When I read your very funny suggestion that Greek exporters should invest their profits from trade with Germany in Greek bonds that they buy from Germany (at face value?) I was curious what Greek posters would answer you. I have to say that I am a tad disappointed that they have not more faith in the payment morale of their state. (Sorry I couldn’t resist.)
      Regarding punitive tariffs that Greece can only apply after leaving the EU - ask yourself why nobody in Greece - despite of the usual Clowns - is opting for this path to wealth. Btw. the British want to leave the EU yet the last thing they want to introduce are import tariffs for german or other european products. Again, ask yourself why.
      Urs

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    5. But Urs Amigo de los Grandes Alpes y Almirante de la Marina del Lago de Ginebra:

      The punitive tariffs work when two countries like Greece and Germany have such unbalanced trade. When Germany sells Greece 4 times what it imports from Greece you can bet your bottom dollar that tariffs would work in favor of Greece.

      And if Germany decided to impose tariffs on Greek products, no big deal because German imports of Greek products are laughable, to begin with. Greece exports to Germany about the same number that it exports to Cyprus (a tiny country) or to Lebanon (another tiny country). So the loss of Greek trade due to German tariffs, not a big deal.

      In the UK case if both sides decide to employ tariffs, obviously Germany will get hurt the most but it's not as so obvious like in the Greek case.

      So the use of tariffs does not produce an equal effect on all cases applied. It depends on how out of wack the trade imbalance is. And in the Greece-Germany case, we are talking about an uber glaring imbalance inviting the use of tariffs even if you didn't want to use them in the first place. It's a case of tariffs looking as the most obvious solution.

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    6. @Phoevos:

      Punitive tariffs or rather protective tariffs make only sense for developing countries who have a goods producing industries that they try to protect until these industries are competitive.
      In the case of Greece punitive tariffs would just raise prices.

      Quote: "Urs Amigo de los Grandes Alpes y Almirante de la Marina del Lago de Ginebra"

      Despite that it’s rather Lago de Zúrich I have to say that I like title. Thanks.

      In exchange I sketched a short play. I shall give it the title: "The World according to Phoevos (a Farce):

      At the KDW (a well known Supermarket and department store) in Berlin. A couple - Hermann and Anneliese - is shopping for the weekend.

      H: Honey, let’s buy some cheese.
      A: What cheese? The choice is overwhelming. Appenzeller, Mondseer or ..wait what’s this (clumsely reading from the package) Graviera Agrafon?
      H: The last one - where is it from?
      A: ah ... Greece
      H (talking to himself): Appenzeller? No way! Those despicable Zurich gnomes with their banks hiding our tax dodgers money are rich enough. Mondseer? Never! These austrian toll collecting highwaymen that rob us every year when we cross their tiny country on our way to Italy don’t deserve our hard earned Euros.
      H (to Anneliese): Let’s go for the Greek one. I don’t know if we will like it but at least the profit they make on our purchase will free the fatherland from some of this worthless Greek bonds.

      Meanwhile at the german Department of Commerce: Subsecretary Müller and one of his underlings, a certain Mr. Schmidt monitor the german supermarket sales. Schmidt entering Müllers office:

      S (out of breath): Subsecretary we just received a message from one of our agents at the KDW. They sold a loaf of cheese.
      M: Cheese? So what?
      S: A loaf of ... Greek cheese!
      M: What? (bangs his fist on the table). Oh those cunning Greeks with their bond buyback programme. They are attacking our delta. Quick, get me the boss of Mercedes on the line.
      S: (Hands the phone to M.) Dr. Zetsche for you.
      M: Dr. Zetsche? Department of Commerce subsecretary Schmidt speaking. We just received a message from one of our agents at the KDW in Berlin. They sold a loaf of greek cheese. You know what that means, don’t you? ... Exactly, they are attacking our delta. So what can we do about it?
      Aha, hmm .. very good. Yes that will do. Perfect, thank’s Dr. Zetsche, I knew I could rely on you.
      Good bye and Hail Trade Surplusses. (Puts down the phone).
      M. (to S.): From tomorrow on Mercedes will sell their S-Class in Greece at a 1% discount. Ha, we will teach those insubordinate Greeks a lesson. Never again, shall they try to get their sovereign bonds back from us. All their debt is ours and it shall remain ours for the next thousand years.
      S: Brilliant mein F.... ah sorry subsecretary.

      The End

      Urs

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    7. Almirante Urs:

      If Greece's economy problem is too much consumption based then higher prices would lead to less consumption. Which is desirable I would think.

      As far as Tsipras is concerned he is determined to take his loaf of cheese all the way to an EU summit. So much for the ungrateful Greeks. The beginning of the End.

      http://www.ekathimerini.com/219238/article/ekathimerini/news/greek-official-pessimistic-about-thursdays-eurogroup-meeting

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    8. I am sure that the increase in aiport traffic is all due to Fraport and nothing to do with Greece being an uber attractive tourist destination this year.

      http://www.naftemporiki.gr/story/1246893/14-fraport-managed-airports-in-greece-report-higher-passenger-traffic-in-may-2017

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    9. @Phoevos:
      Quote: "If Greece's economy problem is too much consumption based then higher prices would lead to less consumption. Which is desirable I would think."

      Yes indeed it would make goods produced outside Greece more expensive and thus less attractive or less attainable yet as long as Greece does not produce any of those goods herself the trick is only half done.
      When the US would level the playing field and would make cars produced in europe and asia more expensive then this would make cars produced in the US (and thus car manufacturing in the US) more attractive. But Greece does not produce cars any more (afaik (What about NAMCO’s Pony? Have they started production again?) so a tariff on foreign cars would only "help" the trade balance if Greeks buy less cars in general but it would not help any Greek car producers as there are none (any more). More generally speaking import tariffs are even for countries that are eager to develop their own industries (which afaics Greece is not) a mixed bag with many pros and cons.

      Quote: "As far as Tsipras is concerned he is determined to take his loaf of cheese all the way to an EU summit. So much for the ungrateful Greeks. The beginning of the End."

      Any time you promise me the end (meaning troubles ahead for the EZ) I hope for hefty windfall profits on my CHF cash. But seriously there has to be more than this lukewarm Tsipras begging to make that happen.

      Urs

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    10. Lago de Zúrich

      interesting, a relative of mine lived there. Come to think of it, a banker. Equally interesting your first pick Appenzeller. My all time favorite from Switzerland. But strictly I find it interesting to buy in little huts in the Alps, if there is a chance.

      I once stumbled into an odd scene in Switzerland. A nostalgic group around getting heavily drunk on the day before the much changed, so they told us, historical "Almabtrieb" event. They tried to convince my brother to invest in their business, which was selling Swiss cheese in Berlin. Were, so they told us, was in high demand. Considerin their price, maybe in the KDW? ;)

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    11. Urs:

      The only people who buy cars in Greece are the rental agencies. The add to their fleets around March and by June they unload their one year old cars of 30000 kms or more to the public.

      Those who buy the used cars either for themselves or as a resale to others perhaps outside Greece.

      So I don't have a problem if rental agencies have to pay 195% tax per the Danish model because such like make them steer away from German cars and buy Japanese instead as an example.

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  4. Congratulations for the effort.
    For many months i m also collecting-calculating -tax-data, which are occasionally unclear in many countries and much different from yours.

    But 1 question first:

    Why Ireland has worst interest/ to ordinary (not tax) revenues (8.5%) to Greece (6.5%)?
    It seems much more sustainable the Greek debt with that perception you calculate than the Irish!!!.

    Many are the questions.
    One -among many many other- is Ireland's current account surplus.
    So possible connections to built a kind of modelling structure to explain the investor approach is quite complicated with one approach.

    2. About methodology, what i m calculating

    e.g Ireland budget execution for 2016, page 5 from 10

    http://www.finance.gov.ie/sites/default/files/December%202016%20publication.pdf

    Direct taxes 27.799
    Indirect taxes 12.420
    Other Indirect taxes 11.248
    Social Contributions 9.172
    and Property income 1.580

    Total tax revenues 62.219 €

    Interest expense: 6.865 €

    Note: I m not incuding other receipts (tax or non tax the 7.879 € ?) and inflows from operations in financial instruments (3.403 €) which possibly are non recurring revenues and mainly it is unclear if are any kind of tax revenues.

    So according my calculation 6.865/62.219=11%

    3. Italy

    http://www.istat.it/en/files/2017/04/EN_NotificaEDP.pdf?title=Net+borrowing+and+debt+in+the+EDP+Notification+-+24+Apr+2017+-+Full+text.pdf

    Net borrowing net of interest doesn't reduces the level of net (interest) borrowing?

    Net borrowing net of interest what might be?
    Inflows from operations in financial instruments or other unidentified receipts?

    Contradicting with Ireland?


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    Replies
    1. First of all, here is the Eurostat site from which I got the numbers:

      http://appsso.eurostat.ec.europa.eu/nui/show.do?query=BOOKMARK_DS-416345_QID_3D496EDE_UID_-3F171EB0&layout=TIME,C,X,0;GEO,L,Y,0;UNIT,L,Z,0;SECTOR,L,Z,1;NA_ITEM,L,Z,2;INDICATORS,C,Z,3;&zSelection=DS-416345NA_ITEM,TR;DS-416345UNIT,PC_GDP;DS-416345SECTOR,S13;DS-416345INDICATORS,OBS_FLAG;&rankName1=UNIT_1_2_-1_2&rankName2=SECTOR_1_2_-1_2&rankName3=INDICATORS_1_2_-1_2&rankName4=NA-ITEM_1_2_-1_2&rankName5=TIME_1_0_0_0&rankName6=GEO_1_2_0_1&sortC=ASC_-1_FIRST&rStp=&cStp=&rDCh=&cDCh=&rDM=true&cDM=true&footnes=false&empty=false&wai=false&time_mode=ROLLING&time_most_recent=true&lang=EN&cfo=%23%23%23%2C%23%23%23.%23%23%23

      It's actually a cool site. In the center you see a box which currently shows "total general government revenue". You can switch to the other 2 search criteria and you can add/delete criteria. As I said, very cool.

      If Greece didn't have EU subsidies (zero interest on a portion of the debt, near-zero on the rest), Greece's % would be closer to 15%. So that you have to bear in mind when comparing Greece to the others (in fact, one should remind Greece from time to time that the EU HAS made substantial concessions so far).

      Interest expense, I presume, correlates very much with the level of debt because most countries now borrow at very similar rates.

      But the crux is probably government revenues. Surprisingly, Ireland's government revenues are lower than those of Greece. Germany has much higher government revenues than France which has higher taxes. And the large Italy is a dwarf when it comes to government revenues.

      You are right that one would have to go in much greater detail than I could but, then, I only wanted to present a concept.

      Delete
    2. Your work is excellent .
      My approach was about tax revenues and social contributions not ordinary revenues that ECB calculates.
      Under ESA 2010 there is a code for every revenue tax or not.
      I can't recall if there is for every inflow from operations in financial instruments or other unidentified receipts.
      In case of Italy the net borrowing net of interest what is it?
      Reduces the real interest burden from 66 to 41 bn €?
      It is the profit that ministry of Italy gain from bonds it holds, interest from companies that has shares or various dividends?

      The point here however is political.
      Mr Schaumble would accept such a proposal?
      I have doubts (lol).


      Delete
  5. I have had an additional thought countering those who say that my proposal would kill all government motivation to increase revenues. I doubt that this would happen but if that were the worry, one could link the 'borrower's sacrifice' to government expenses.

    ReplyDelete
  6. Part I - The main disagreement is between the International Monetary Fund and Greece’s European creditors. In summary, the IMF is more pessimistic about Greece’s growth prospects and its ability to sustain a large budget surplus than are eurozone countries. The institution is, as a consequence, more insistent on a commitment to debt restructuring by Europe that is more generous and more specific than what has been offered so far. Wolfgang Schäuble, the German finance minister, has publicly criticised the IMF for a low long-term growth estimate of just 1 per cent per annum over the next 40 years. Even the European estimate of 1.25 per cent is very low — but it makes a big difference to the required debt relief.

    A cool look at the facts reveals that there is little logical reason for this disagreement to have become as big an obstacle as it has. The cause is twofold. First, the structure of Greek debt has already been so stretched out that its sheer size is not very meaningful; what matters is how much its service burdens the Greek economy from year to year. As a result, it is possible to limit this burden sufficiently without writing down the nominal amount owed by Greece, the reddest of red lines drawn by eurozone governments. That is one of the conclusions borne out by the most comprehensive analysis of the Greek debt situation by Peterson Institute economists

    Second, because of the restructuring that has already taken place, it is not the size of the debt itself that is holding back growth. The Greek economy is so depressed that there must be significant potential for a strong acceleration once the brakes are taken off. Those brakes consist of a continuing squeeze on budget to achieve surplus targets; uncertainty about the short-term debt service burden and the possibility of a new refinancing crisis; and generally, doubts caused by never-ending talks which make people hold off on investing while capital controls and an exclusion from central bank bond purchases persist.

    It is quite easy to imagine a virtuous cycle in which all three were reversed, which would prove misplaced the long-term pessimism of Greece’s creditors. Note that Greece returned to growth in 2014, when no fiscal consolidation was programmed or carried out (it fell back into recession with the political uncertainty of the following year when, importantly, government belt-tightening also returned with a vengeance).


    Today, with the end of austerity in sight, the Greek economy has started to grow again, if weakly and fitfully. Unemployment is falling. Imagine the improvement that could be expected if a loan programme agreement coaxed the European Central Bank into including Greek bonds in its asset purchase programme.


    The imperative, therefore, is to complete the austerity programme as soon as possible to give the economy room to breathe while minimising any debt refinancing needs in the short- to medium-term horizon. A cyclical upturn, if given time to grow, could turn economic and political expectations around, letting a recovery take root, and make all the numbers more favourable. That, in turn, might even allow a sustained, large primary surplus. While the Peterson authors note the very low frequency of such sustained periods of government surpluses, we should note that it is only the increase in government saving that hurts short-term growth; a large but constant primary surplus is compatible with fast growth (in the jargon, it amounts to a zero “fiscal impulse”).

    The deal to be struck, therefore, should programme in no more fiscal consolidation, noting that Greece racked up a 4.2 per cent of GDP primary surplus last year. It should also deploy all resources unused in the loan programme to refinance upfront all debt falling due in the next few years. Finally, it should stretch out the remaining debt profile even further, along the lines suggested by the Peterson Institute paper.



    source: Ft.com

    ReplyDelete
  7. Part II

    How to get to such an agreement given the current stand-off? By recognising how much turns on the different expectations for growth. This disagreement should be turned around to acknowledge the following point. If the Europeans accepted the IMF’s view of growth prospects, they would also have to accept its call for greater debt relief given the commitments they have already made. If the IMF accepted European estimates, it would have to scale back the required relief it demands. Conditional on future growth, the parties are in agreement.

    But there is no need to agree on the future growth assumptions. Instead, the conditional agreement can be built into the debt restructuring. Greece’s debt to the various European rescue loan mechanisms should be amended to incorporate GDP-linked payments to cap the debt service should growth disappoint — but accelerating payments should it outperform.

    The Greek debt problem is a Gordian knot: a technocratic solution exists that can bridge seemingly gaping political differences. Not before time, that solution should be adopted now; the knot should be cut. Otherwise, a quarrel over minor amounts will continue to cause disproportionate economic harm to Greece and financial and political risk to everybody.

    Source: Ft.com

    ReplyDelete
  8. Kleingut:

    The Thessaloniki port deal not looking good:

    http://www.hellenicshippingnews.com/the-thessaloniki-saga/

    ReplyDelete
    Replies
    1. While not surprising, this sounds simply awful! I hope it turns out to be untrue. Savvidis is quite a name here in Thessaloniki but I have yet to find someone who thinks that his name is a good one. Just the other day a friend told me that Savvidis is involved in a cigarette smuggling case. The only thing that pleases me is that the article would suggest that my early gut feeling was correct, but I would have felt better if my early gut feeling had been proven wrong.

      Delete
    2. I don't like Savvidis; don't like him at all.

      Delete
  9. Kleingut:

    This is what the Greek government wants to get out of this (caution: the Greek translation to English is awful but feel free to try it on other languages such as German if you can get a better outcome):

    Sustainability of debt is a 3-parameter equation

    First, the necessary measures on debt:

    A) The grace period for interest rates

    B) Expansion of maturity maturing

    (C) Return on Greek bond yields held by the ECB

    Second, growth rates

    Third, the primary surpluses

    We claim the lowest possible surpluses to have a socially sustainable solution.

    We pledge commitments on specific development actions to achieve higher growth rates.

    And of course the greatest possible expansion as well as the normalization of the repayment curve.

    What is the key to the solution?

    The key lies in accepting the proposal for an automatic mechanism for linking medium-term debt-to-GDP measures to bridge the gap between institutions and to enable positive DSAs from all institutions including the ECB.

    It is a rational and fair proposal that respects the reservations of all sides and creates the conditions for the final overcoming of the crisis.

    http://www.avgi.gr/article/10842/8230202/al-tsipras-de-tha-dechtoume-protase-paromoia-me-aute-tou-eurogroup-tou-maiou

    ReplyDelete
  10. Since Greek imports seems to be a big issue tax the hell out of them. To the best of my knowledge EU allow that, provided you tax domestic production the same rates for the same category of goods. Since Greece do not produce anything it's a real winner.

    ReplyDelete
    Replies
    1. I had once recommended that Greece should learn from Austria, among others because Austria does just that, but not as a tax. Austria has an environment charge on ALL cars which, on average, is about 20%, I believe. All cars are imported because Austria does not make cars. Thus, it is de fact a tax on a major import category.

      http://klauskastner.blogspot.gr/2012/04/greeks-should-learn-from-austrians.html

      Delete
    2. o.k. we are ready to be annexed by Austria, at least the better Germany. If you are already annexed by Germany it makes sense to improve your position in the annexation poll. Where do we sign up?

      Delete
  11. @ Kleingut.
    Sound like a workable solution. Let's settle on the 10% borrowers sacrifice I seem to remember you recommending a few years ago. That would also keep the Portugese happy.

    ReplyDelete
    Replies
    1. Aha. You caught me! All I can say in my self-sense is that I found the exact comparative numbers only now.

      Delete
    2. I think the Portugese are plenty happy being the Chmapions of Europe in football and with a team far better than Germany's.

      So, I think we need to correct your typo and assume you meant an 1% Borrower's sacrifice.

      Delete
  12. My thoughts exactly. In addtion to de facto also de jure.

    http://www.politico.eu/article/why-greece-is-germanys-de-facto-colony/

    ReplyDelete
  13. Denmark can do it one better than Austria. A Danish car owner will pay a one-time tax of 195% of the sales price the first time the car is registered in Denmark. During his ownership he will then pay taxes and levies, plus VAT, on ownership, insurance, road usage, fuel, light bulbs, packaging of lube oil (cans), tires, batteries, oil filters and license plates.
    The state revenue for the above was EUR 4,4 billion in 2006, not bad for 5 million people.
    Anybody remember a know Danish car brand? Anybody know the currant account of Denmark?

    ReplyDelete
    Replies
    1. After checking Eurostat, do I get this right that Denmark's current account surplus is about 22 BEUR equivalent???

      Delete
    2. The numbers that would be more telling with regard to the "clever" taxing of foreign made products would be a) the number of cars per capita in Austria and Denmark compared to say Germany, Switzerland and Greece and b) the price (net and after tax) of say a Toyota Corolla or a VW Golf in the above countries. If the numbers of cars in high taxing countries would not differ much from those in low taxing countries and if the price of the cars (after tax) in high taxing countries would be considerably higher than in low taxing countries the tax would be simply a burden to the domestic tax payer and nothing else.
      Urs

      Delete
    3. Part 1 of my answer to my request:

      Road motor vehicles per 1000 inhabitants:

      Greece = 586
      Austria = 578
      Germany = 572
      Switzerland = 566
      Denmark = 480

      So the higher tax works indeed for Denmark but it doesn’t work for Austria. (And who would have thought that the poor enslaved Greeks own more cars per capita than their oppressors).

      To be continued (but not today)

      Urs

      Delete
    4. I will go for the Denmark 195% car tax with closed eyes. That's precisely what Greece needs to stem the unwanted flow of german cars.

      I like Denmark's current account also:

      https://tradingeconomics.com/denmark/current-account

      Generally speaking the Vickings, a sea faring peoples, have a hell of lot in common with the Greeks than some barbaric germans.

      So bring a Danish administration in Greece and I will sign up for it.

      Delete
    5. Quote: "So bring a Danish administration in Greece and I will sign up for it."

      Be careful what you wish for. I know danish businessmen. They wouldn’t underwrite your debt neither. And 195% car tax is not only put on german cars but on your beloved japanese as well.
      Urs

      Delete
    6. Urs:

      I am fine with the 195% tax on new cars. Anything that arrests consumption is fine by me.

      As for our debt, it is already owned by the bozos of Brussels and Berlin which makes it non repayable. So there is no longer an issue of Greek debt. You own it all and the interest we pay on it is mickey mouse interest.

      So if you think that owning our debt makes you our bosses, I have news for you. Your bossy behavior is the surest way towards the rapid fragmantation of the EU. So thank you for helping us accomplish one of our stated goals which is the death of the eurozone. Every day and based solely on your behavior, more Greeks join the ranks of the eurosceptics and that's an uber good thing.

      Delete
    7. I recall that, before the Euro, Greece had a 100% import duty (if not even more) on imported cars. Greeks who returned from the Diaspora could once in their lifetime import a car without import duties.

      Delete
    8. Kleingut:

      It makes a lot of sense having a 100% import duty on cars.

      1. It benefits state revenues
      2. Car rental companies pay the bulk of it which then they could recoup via higher rates payable by tourists.
      3. Upon car rental company fleet renewal sales, Greeks benefit from a deep discount on used cars and no need for further payment of import duties.

      In other words, foreigners pay for the cost and Greek rental companies act as intermediaries paying a beneficial import tax to the state and recouping their added cost through higher rental rates and through higher resale prices of used cars because of a higher cost basis.

      Delete
  14. @ PHOEVOS 14 June, 1718 hours.
    None of Syrizas 3 parameters are on the agenda.
    Berliner.

    ReplyDelete
    Replies
    1. I know. We just agreed that Greece is a German colony. Question is for how long?

      Delete
    2. Quote: "I know. We just agreed that Greece is a German colony. Question is for how long?"

      Greece will always be dependent on those who fund her unless the Greeks start to care for their state and sociiety at least as much as they ask others to do.
      Urs

      Delete
    3. Urs:

      I like the part of you funding Greece forever. Carry on. As Kleingut had said before Brussels+Berlin now own the entire Greek sovereign debt. The laughable part is that you expect us at some point in the future to replace the EU owned debt with market debt and thus let you off the hook. This part will never happen because it makes zero sense to us. So keep lending to Greece by making yourselves thoroughly unpopular as the oppressors and let's wait who will break first. It is not going to be us, so much I can tell you.

      Delete
    4. As regards the replacement of EU debt with market debt, this will become possible in 50-100 years when the current debt has sufficiently devalued at near-zero interest rates. The whole idea of pushing out maturities and lowering rates to near zero is for inflation to pay off the debt.

      As regards Greece's dogma of 'returning to markets', I have always failed to understand the logic of that. No one will lend Greece at the rates which it receives from the EU. So there will be an extra cost and that extra cost will impact the budget balance and new borrowing needs.

      Of Greece offers 5-year bonds at 5%, there will be huge demand because everyone will know that the EU will not allow a default. I. e.: 5 year EU risk at 5%%, not bad!

      Delete
    5. Kleingut:

      We have known each for a long time and I have come to the conclusion that you are a decent man. So here is a truth about Greece without any pretence to cover it up. The Greek political class has no idea what they have done so far post 2008, what is the nature of their predicament and what the solution out of the crisis is. So to them "returning to markets" means end of supervision. Which both of you and I know will never happen. So please forgive financially semi illiterate men and women, posing as Greek politicians, have to say about the opium of returning to markets as a means of restoring sovereign independence.

      The sad truth is that the current Greek system is set for a big crash due to overtaxation and public discontent and only a miracle of GDP growth could only hide for a while the eventual crash pretending that there is no elephant in the room and that there is actually a way out of such which by its very nature is prohibitive of this type of aspiration.

      Delete
  15. Quote: "Anybody know the currant account of Denmark?"

    Here you go:

    https://tradingeconomics.com/denmark/current-account

    Urs

    ReplyDelete
    Replies
    1. The Eurostat figues are better.

      http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tipsbp20&plugin=1

      Delete
  16. CA, yes. Or about 14 BEUR average for the last ten years. The question was largely rhetorical, but the European Commission also wondered enough about it to write an Economic Brief "What is behind Denmark's Current Account Surplus"?
    It gave a "clean bill of health". In short, prudent tax policy (except for the bloody car taxes), investing in countries with high return but political stability, investors in Denmark accept low returns due to conceived "safe heaven" (political and economic stability).
    But that is far away from Greek import policy.

    ReplyDelete
    Replies
    1. @AnonymousJune 15, 2017 at 12:17 PM

      Thanks, the danish numbers gives Phoevos et al. who try to promote the narrative of Europe as a "german free trade zone" something to reflect on. The truth is that Europe as a whole is a strong export oriented place despite the fact that Greece or the UK run trade deficits with the rest of the EU. The answer to their trade deficits is an improvement in their productivity and not a transfer union (that nobody in the UK is asking for btw.)
      Urs

      Delete
    2. Urs:

      The answer for a consumption based economy with heavy dependence on German imports is not to be on a free trade zone such as the eurozone so that germany engages in dumping practices with impunity. We know that the best cars in the world ar all Japanese. So Greece for as long as it has a broken economy should not be allowed to import any other cars other than the best for money, meaning only Japanese cars. They are the best engineered cars in the world with an unmatched record of maintenance which is uber impressive.

      Delete
    3. "The answer for a consumption based economy with heavy dependence on German imports is not to be on a free trade zone such as the eurozone so that germany engages in dumping practices with impunity."

      The EU is a "free trade zone" and as I pointed out many countries are glad that this is the case. Just because the Greeks are living in a failed state with a failed economy does not mean that others will be so stupid to give up something that works quite well for them. Time and time again you try to make others responsible for the shortcommings of Greece and her economy. Try to change things in your county for the better instead of asking others to change for the worse.

      Quote: "We know that the best cars in the world ar all Japanese. So Greece for as long as it has a broken economy should not be allowed to import any other cars other than the best for money, meaning only Japanese cars."

      Phoevos in all honesty: If you are older than say 3 you should be seriously alarmed.
      Urs

      Delete
    4. Urs:

      Are you in the middle of a big wave season in Lake Zurich or are you simply feeling the symptoms of sea sickness?

      What eurozone is working for whom, where? Is the eurozone working for Italy? Poland? Spain? the UK? France?

      Germany derives almost 50 percent of its GDP from exports. As Europe has weakened, Germany has shifted its export focus to the United States and, to a lesser extent, China. If the United States is cutting Chinese imports, then German exports to China will likely contract. But far more important, if the U.S. is cutting imports from Germany, Germany’s economy will be affected rapidly and dramatically. The Germans are addicted to exports and therefore utterly at the mercy of their external customers. Their last major customer with a healthy economy is the United States. If the United States cuts purchases, the German economy will be hit hard because Germany can’t increase domestic consumption enough to compensate.

      There is a growing sense in Germany that the German system is failing. It has not yet dawned on most that excessive exports are a sign of weakness and not strength because it makes a country dependent on external customers. But the tremors are now being felt by the finest financial analysts in the world: ordinary people who work for a living and need their paychecks to survive. The political base of modern Germany is crumbling, and as in Britain with Brexit, it will be dismissed as the work of the irresponsible proles. But you should know better on a calm day at lake Zurich.

      Delete
    5. @Phoevos:

      OK, I get it. You definitively should be alarmed.
      Poland - glad to be in the free trade zone, same as France and Spain. UK? Wait and see (you and others will be up for a surprise. The vast majority of economists on the island are already in the know.) And the reason the Brexiteers want out has nothing to do with the UK trade balance but with immigration from the balkans. Just some Syriza-Clowns as Phoevos don’t get it.
      Urs

      Delete
    6. Urs:

      Hahahaha! Are you one of these people who harbor the false hope that Brexit will not happen? Hahahaha!

      Delete
  17. Pointed out that officials at various ministries had no idea as to the precise purpose to which assistance should be put. Overall, given the shortcomings of the administration, the chaotic fiscal system and the widespread aversion to income tax and economic controls, officials had severe doubts whether Greece was equipped to handle the sums it requested. he was disappointed that so few active steps had been taken to overcome the crises. He felt that the political system was largely to blame, observing that in the absence of any western concept of the state, politics was mainly limited to power struggles between individuals. Moreover he dismissed the civil service as a depressing farce and deplored the general sense of helplessness within the country. He did not believe the government would be up to the task of carrying through the necessary reforms, and suggested that "guidance" by outside personnel would be necessary. action was to be taken in several areas including public finances, the balance of payments, administration, industry and agriculture. Public finances were to be improved by vigorous action to augment revenue and control expenditure. The entire structure of taxation would have to be simplified. Tax rates would have to be raised by at least 50%, and strictly enforced. All special funds had to be abolished, while pensions and indigence lists were to be subject to severe scrutiny. The government would undertake to promote tourism and ensure that a greater part of Greek shipping earning was repatriated. The civil service was to be pruned and its quality was to be raised via training and selection. Etc etc.
    Does it ring a bell? You don't have to go back to the IFC of 1898 to see that supervision is only successful for as long as it lasts.
    The Porter Mission report was handed in in 1947 and USA had a modest short term success with their program until 1952, when strict supervision (economic veto) was abolished. The back sliding was instant.
    Lennard

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    Replies
    1. Hi Lennard,

      thanks for the sobering quotes. Could you provide a link to the source. Thanks.
      Urs

      Delete
    2. Lennard:

      If the back sliding was instant what makes you think that this time you can fix it? What are your qualifications and your success record regarding Greece?

      Delete
    3. @Phoevos:

      Quote: "If the back sliding was instant what makes you think that this time you can fix it? What are your qualifications and your success record regarding Greece?"

      Why on earth should Lennard fix it? Is Lennard a Greek? What on earth will you do to fix it? You are a Greek, aren’t you? What is you success record as an outspoken tax dodger regarding Greece?
      Urs

      Delete
    4. Urs:

      I fix nothing for the invaders and occupiers of my country. Zero cooperation.

      Delete
    5. @Phoevos:

      You would fix nothing even if you would run the failed state that Greece is.
      Urs

      Delete
    6. Urs:

      Absolutely I will fix NOTHING if I run Greece. How else do you suggest that I piss you off?

      Delete
  18. Greece has always needed a Koumbaros and donor. And then she becomes dependent, and then she hates herself for being dependent on a lesser person, and then she hates the godfather for exposing her to that dependency. And then she starts looking foe another godfather, thinking that it will make a difference.

    ReplyDelete
    Replies
    1. These are all byproducts of the anti-Greek religion you know as Greek Orthodox which nothing more than a Roman invention for the empire's slaves.

      Delete
  19. Don't worry, Switzerland is in good company. Of the EU countries only Cyprus, France, Greece, Latvia, Lithuania, Poland, Romania Slovakia and UK (9 of 28) have a negative CA. At least 5 of these do so because they try to build up a stronger production, and Greece in not amongst those.

    ReplyDelete
  20. Your mentioning of the 1897 IFC and Borrowers Sacrifice stirred my curiosity. At that bail out the Borrowers Sacrifice, as defined by you, was 50%. Now, let's make a "fair deal" as the Greeks say.
    Lennard

    ReplyDelete
    Replies
    1. Wow!

      Japonica: Congratulations Greece won 14 billion debt relief!
      Paul Bruce Kazarian said "that Greece must congratulate the great success of winning 14 billion euros in debt relief." The decision of the Eurogroup and how it is valued by Japanica Partners.

      Greece in the Eurogroup won a debt alleviation of 14 billion euros, says Japanica Partners. As it claims under International Accounting Standards, debt relief will reduce net debt on its balance sheet by a similar amount.

      The House relies on the Eurogroup's decision and the debt relief components. Based on the Greek debt at the end of 2016 (€ 176 billion), it concludes that the relief is in the 8% of GDP band.

      Paul Bruce Kazarian said that "Greece must congratulate the great success of winning EUR 14 billion in debt relief and reducing the net debt balance by about the same amount."

      Japanica Partners also congratulates Greece on the significant progress it has made with state reform, which is the management of public finances.

      Delete
  21. Spot on comment in Ekathimerini:

    http://www.ekathimerini.com/219291/opinion/ekathimerini/comment/building-a-fresh-narrative

    Urs

    ReplyDelete
    Replies
    1. Urs:

      I am not quite sure how much you understand of politics and especially of Greek politics which have a large dose of the art of deception.

      So when a newspaper like Kathimerini, known as the press office of Nea Demokratia, calls for a new narrative it actually addresses its own party membership. No matter what ND does it seems Tsipras always hands it defeats and for this simple reason ND requires a new narrative.

      The fact that Stangos is asking the same of Tsipras is part of the oldest trick in the book. Which is to ascribe to your enemy an obvious shortcoming of your own.

      Therefore here is the English translation of the Stangos article for you: Mr. Mitsotakis you urgently need a new narrative because no matter what trap you lay on Tsipras, he always escapes and you end up falling into your own trap.

      Is this easier for you to understand now of what is going on?

      This was the last chance for ND to defeat and humiliate Tsipras and from the evidence in front of us it failed to do so. Which means Tsipras now is good for another 2 years and he has plenty of time to rebuild his reputation before the 2019 next elections.

      Delete
  22. After Lennard mentioned the Porter Mission, I got curious and googled the subject. Most interesting what I found about Paul Porter. Here are just a couple of links. Look at the 9 points on page 10 of the CIA report. All are still valid except 4-6 which were superseded by the Euro.

    http://notthemajorityopinion.blogspot.co.at/2013/09/wanted-miracle-in-greece-collier-sep-20.html

    https://history.state.gov/historicaldocuments/frus1947v05/d15

    https://www.cia.gov/library/readingroom/docs/DOC_0000256990.pdf

    ReplyDelete
    Replies
    1. Kleingut:

      Every time you hear the words communism and Greece together provided a vivid reminder of the hysteria that existed in Europe at one time and which lead to the re-integration of Nazis back into the mainstream of German society for no other reason but on the grounds of solid anti-communism.

      It's like the same thing as thinking murderers and rapists might be a good defence towards your political opponents and therefore selling your mother in the process is a good and justifiable action (which of course is not).

      Problem is that we all know that such short-term thinking leads to disasters down the road. Mogen Pelt analyzed that period for Greece in a very effective and revealing way.

      Germany and Greece are no longer fighting communism, there is nothing in common in their national self-interest to bind them together, not even NATO which is a present day relic without a mission.

      Delete
  23. @Phoevos.
    No Danish politician, of any color, would touch Greece with a barge pole.

    ReplyDelete
    Replies
    1. I know they have their hands full with Greenland which does not seem to want to change its color.

      Delete
  24. Phoevos, Phoevos, Why are you so hard on me? I am only trying to help you, after all we want the same thing, to get Greece out of EU.
    Lennard

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    Replies
    1. Greece is fine with the EU. Let the german bastards continue to pay Greece forever becaused they are forced to by their own rules. It's the eurozone we need to destroy for the simple reason that the eurozone is based on a false concept:

      "To the west of Eurasia lays Europe, a region predisposed to division. It is surrounded on nearly all sides by islands and peninsulas that make it difficult for Europe to cohere. The northern half of the continent, moreover, sits on a plain whose short, meandering rivers tend to empower countries without forcing them to work with others. The southern half is situated on more mountainous terrain that has historically impeded the creation of strong, unified economies. As a result, Europe is a continent riven by pockets of distinct cultures whose differences are all too often irreconcilable."

      Delete
  25. We need a new thread/subject...

    V

    ReplyDelete
  26. @ Phoevos.
    You do have some strange ideas. What makes you think that modern day Danish Vikings have something in common with contemporary Greeks? Or that Danish politicians and civil servants would wish to administrate Greece? Is it something you know something about? Or are you just talking without engaging the brain?
    Lennard

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    1. Lennard.

      O.k. nothing in common between Vikings and Greeks. I guess the seafaring part is another Viking saga then.

      Delete
  27. To LeaNder on June 16, 2017 at 1:30 PM & June 19, 2017 at 4:56 PM

    I’ll take this opportunity to remind you that, contrary to the variations of “Pirate Jane” by Phoevos, the “image context” carefully constructed and propagated for years by Germans against southerners and specifically Greeks has been actually made into policy. If you need the slightest proof of that, I won’t tire you by suggesting you read the contributions of certain NON GERMAN commentators, although this exactly why they are revelatory: they spontaneously and without fail combine a nationalistic propaganda that prima facie isn’t their own with a certain (neo-)liberal worldview, which “naively” and systematically confounds nation, individual, character, household, history, culture, “historical character”, collective subconscious and other “grand” ill-digested notions from social studies and the Humanities , which is all very good and dear to their hearts cause they identify with it as long as no one turns its contradictions against them – I mean, a Suisse and a Greek quarreling over tax-dodging? How precious…
    No, I won’t do it, because I know you’ve already read them. I’ll only remind you the reason why Germany demands the completely unreasonable primary surpluses it demands or at least the reason it puts forward… Or, I can refer you to what I commented on this occasion: https://klauskastner.blogspot.gr/2017/03/debt-trap-report-debt-restructuring.html.
    My point is, this is what triggered me from your response to Phoevos: “Not verbatim: eterally the same? Something about the "German Mind" specifically, or more our beastly predatator souls? Our will to power, our will to dominate others with only on surface other means then in the last century?” I cannot abide Germans or Germanophiles (by conviction or otherwise) who complain about the very thing they’re incessantly doing themselves to the point it actually informs their policy and, by extension, EU policy. In fact, most if not all of these people who are very eager to explain to Greeks and generally to the world what it means to be Greek and how to draw out the proper conclusions from Greek history (and who can rarely restrain themselves not to expand their “national psychology” and “historionomy” treatises to other offenders, be it Italians, Spaniards, Polish and now amusingly so… British) are ridiculously unable to speak the language (except English of course!) as well as seemingly unable to see what’s the problem with it or where this attitude of them stems from; and of course they are all very quick to point out the faults in their otherwise favored “methodology”, and generally to raise a hell, when others return the favor and use it to draw out the “proper” conclusions from German history…

    Lykinos

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    1. What am I doing? When I get pushed, then I just push back twice as hard as a gentle reminder that I would not appreciate getting pushed again.

      Delete
  28. LOL Spain threatens to block Greece bailout payment.

    Very good. In view of the scandalous trial against former ELSTAT chief Andreas Georgiou one can only hope that the Spaniards won’t move.

    https://uk.finance.yahoo.com/news/spain-threatens-block-greece-bailout-121059463.html

    Urs

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    1. Urs:

      Forget the "what is Spain" rhetorical question. Oh, lo olvidé. España es el sobrante del fascismo de Franco. Un puñado de cerdos fascistas que parecen cerdos alemanes.

      Delete
    2. https://uk.finance.yahoo.com/news/spain-threatens-block-greece-bailout-121059463.html

      Italy will join the Spaniards in their effort to teach the Greek government the importance to stick to the agreements made.

      Urs

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    3. https://uk.finance.yahoo.com/news/spain-threatens-block-greece-bailout-121059463.html

      You should bother to read first the articles you're linking to.

      Additionally

      http://www.keeptalkinggreece.com/2017/06/16/spain-block-tranche-greece-eurogroup/

      Delete
  29. O.k. here is a serious question for you Kleingut before your Swiss friends drive me nuts.

    Why wouldn't Greece finance its needs through the issuance of 7 year debt @ 2.28%?

    This is what I would do right away and replace all these 3-month and 6-month T-bill issues which are floating around @ actually higher rates. And every time the yield on the 7-year bond drops below 1.5%, I would refinance and replace existing debt with lower priced debt.

    https://tradingeconomics.com/gggb7y:ind

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  30. The myth of German dominance of Europe, or the world, by means of their current account surplus, forever repeated, never substantiated.
    Holland, Norway, Sweden and Switzerland all have surpluses that are larger as a proportion of GDP than Germany's.
    The same 4 countries accumulated have a larger surplus in absolute numbers than Germany, but they only have half the population.
    The same 4 countries have been doing it for ages, Germany had a deficit a few years ago.
    Source: Daniel Gros, The German Scapegoat.
    Lennard

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    1. Yes, toothless Italy will take a bite at Greece. I love these german folk tales.

      Delete
    2. Lennard: Does Daniel Gros know how to read charts? Don't you and he know that you can't draw conclusions by comparing rates of growth among countries with unequal bases?

      https://www.google.com/publicdata/explore?ds=z6409butolt8la_&ctype=l&met_y=gdp#!ctype=l&strail=false&bcs=d&nselm=h&met_y=gdp&scale_y=lin&ind_y=false&rdim=world&idim=country:DEU:NOR:NLD:CHE:SWE&ifdim=world&hl=en_US&dl=en_US&ind=false

      Delete
  31. My take on these enormous current account surpluses is that they are an extremely risky strategy for the countries concerned (Germany & Co.). It has already been mentioned that the country makes itself dependent on customers far away. But the far greater risk is that a current account surplus must mathematically always be matched, 1:1, with an export of capital. The German economy, for example, has almost 3 times its GDP invested abroad, much of it in foreign currency and all of it subject to foreign jurisdictions. That is an enormous risk!!! Just consider things like sub-prime, Iceland, Bernie Madoff, etc. There was a WSJ report a couple of years back that the German economy had lost about 500 BEUR of its foreign assets in the first 3-4 years after 2007! These losses are not well known because they are taken by banks, insurance companies, etc. but not really by the state. There is also the risk of limiting political options: is Germany going to be really tough with Turkey when German industry has enormous investment in Turkey? Among those 7-8 BEUR in Germany's foreign investments are included the hundreds of millions of claims against Greece, Italy, Spain, Portugal, etc. The Swiss are even more exposed. If I recall, Switzerland's foreign assets are close to 6 times its GDP. Put differently, Switzerland has really exported itself!

    In summary: my point has been all along that both, current account surpluses AND deficits, are equally problematic when they are huge and when they are structural.

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    1. @kleingut:

      Look, we are working on it ;-)

      https://www.blick.ch/news/wirtschaft/doppelt-so-viele-pakete-aus-dem-ausland-ein-rekord-den-niemanden-freut-id6870615.html

      Urs

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  32. @kleingut:
    Quote: "My take on these enormous current account surpluses is that they are an extremely risky strategy for the countries concerned (Germany & Co.)."

    I beg to disagree. Neither hugh current account surplusses nor deficits are the result of a willingly chosen strategy. They are rather the result of highly competetive domestic enterprises or the lack thereof.

    Quote: "It has already been mentioned that the country makes itself dependent on customers far away."

    I’d rather be dependent from a customer far away than from a creditor near or far.

    Quote: "But the far greater risk is that a current account surplus must mathematically always be matched, 1:1, with an export of capital. The German economy, for example, has almost 3 times its GDP invested abroad, much of it in foreign currency and all of it subject to foreign jurisdictions. That is an enormous risk!!!"

    Well, it is at least a diversified risk. And it is a risk every investor in foreign assets faces day by day. Furthermore it is a risk that can be rewarding. Again, I would prefer to take this risk over being dependent on the money inflows of foreign investors anytime.

    Quote: "Just consider things like sub-prime, Iceland, Bernie Madoff, etc. There was a WSJ report a couple of years back that the German economy had lost about 500 BEUR of its foreign assets in the first 3-4 years after 2007! These losses are not well known because they are taken by banks, insurance companies, etc. but not really by the state."

    Well our SNB owns (among a lot of other foreign assets) 18.9 million shares of Apple. Sure in a crisis investors in foreign assets lose a lot of money but so do the investors in domestic assets. And if you look at how Greece fared after 2007 and compare this to Germany or Switzerland I again claim that a competitive economy and thus a current account surplus is the preferable option.

    Quote: "There is also the risk of limiting political options: is Germany going to be really tough with Turkey when German industry has enormous investment in Turkey? Among those 7-8 BEUR in Germany's foreign investments are included the hundreds of millions of claims against Greece, Italy, Spain, Portugal, etc. The Swiss are even more exposed."

    True but I have to say I see the advantages of this weakness. It keeps your politicians ambitions in control. And in the case of such a small country as Switzerland the stick one should always carry is rather a toothpick anyway.

    Quote: "If I recall, Switzerland's foreign assets are close to 6 times its GDP. Put differently, Switzerland has really exported itself!"

    The last time I checked the shelves in our supermarkets were bursting with domestic and foreign products. No need to be alarmed. ;-)

    Quote: "In summary: my point has been all along that both, current account surpluses AND deficits, are equally problematic when they are huge and when they are structural."

    Well, they are two sides of the same coin but whose responsibility is it to act on this? Shall a country with a competetive economy become less competitive or rather a country with an underperforming economy more competetive? To me only the latter makes sense.

    Urs

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    1. Reading between your lines, I get the distinct impression that you disagree with me on very single point. Well, let's just say "We agree to disagree".

      Delete
  33. Zettelmeyer raises questions which can not be construed to be in Berlin's favor:

    https://piie.com/blogs/realtime-economic-issues-watch/eurogroup-greece-debt-relief-fiscal-straitjacket

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  34. For normal countries current accounts became an issue in the 1980ies when globalization was speeding up, until then they ran fairly balanced accounts. Unbalances are dangerous when they are large and structural, maybe. But Germany's are smaller than the 4 other mentioned countries, and I would not consider them structural, given that Germany has had 13 years of deficits within the last 27 years.
    You know better than most that there is no profit without risk. That Germany get a 4% average profit on her international investment is not too bad, considering they are mostly invested in countries with low political risk, further considering that other countries are willing to invest in Germany with no profit. The countries Germany invest in consider the investments mutually beneficial, they do that for the reasons you always emphasize for Greece, technology transfer and work for people. That creates the healthy balance there should be in that sort of transactions.
    You mentioned the question of diminishing political power, Greece will likely say that Germany is soft on Turkey, she does when other nations refuse to fight her wars for her. With the same logic it becomes difficult to explain Greece's going soft on China and Russia.
    It's not as black as you paint it. Yes, there will be other economic problems, and Germany will ride them out as they did their last one, with respectable credit worthiness, because investors and bankers also have memories.
    Lennard

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