Friday, July 20, 2012

Is the EU getting exasperated with Greece?

I sense a tremendous change in published and public opinion in the German-speaking countries and this article from Reuters would seem to indicate that this exasperation may not be limited to the German-speaking world. Here is just one quote:

"Sources from both sides said the meetings reviewed a track record of two years of broken promises to international lenders ... Among a long list of failures, Athens has not completed any substantial privatizations and is behind on tax reform, restructuring the public sector and properly opening up markets and professions".

Less than half a year ago, back in February, Greece had pulled off the feat of being congratulated on the largest debt forgiveness in financial history. Everyone seemed extremely happy for having been able to forgive so much debt and very impressed with the professional handling of the case by Prime Minister Papademos. The shared feeling seemed to be that Greece was now getting on the right track. 

And then there was an election; and another election. There were election campaigns with all sorts of crazy things being threatened that Greece would do, and the world braced for what might happen after the election. The new government took over and discovered - surprise, surprise - that a lot of valuable time was lost due to those exercises in democracy and that the program had gotten off track. Once again. 

I watched a discussion on Austrian TV the other day. One of the participants went overboard praising the Italians. What a great people they were; how they took the need for reforms seriously; how they were taking bold action; etc. That in and by itself was o.k. but what really hit home was his closing sentence about Italians, that "they are not like those Greeks who complain all the time and get nothing done".

Normally, one would think that a new government deserves the benefit of doubt, particularly when the new government makes the kind of "appropriate noises" which the new Greek government has made. Nevertheless, it seems very much like the new government will not look into a lot of compassionate faces when they sit down with the Troika for the first time.


  1. The more the time for Grexit closes, the more the exasperation. When time closes to part ways, you can't have it happening like a thunder in a clear sky, can you?

    Exasperation has been in the last 2 years at least. If you could read greek press, you 'd know. Today the 2 new exasperated were Mrs. Fetchner and a lady from CSU.

    Interesting part:

    The IMF's latest report on Greece warns that internal devaluation can fail. The few cases of countries regaining their competitiveness by suppressing labor costs, such as Germany and the Netherlands some years ago, happened in a better international environment, and in more flexible economies with less debt. "Most of the conditions for success are missing in Greece," the IMF report said.

    I like the part of "CAN" fail. They think it hasn't failed yet?

    P.S.: The comparison of the greek situation with the italian is to put it politely, different.

  2. You may also find interesting this page.,3746,en_2649_34605_49693508_1_1_1_1,00.html


  3. "Less than half a year ago, back in February, Greece had pulled off the feat of being congratulated on the largest debt forgiveness in financial history. Everyone seemed extremely happy for having been able to forgive so much debt and very impressed with the professional handling of the case by Prime Minister Papademos."

    Everyone was extremely happy except for the markets, which for some strange reason didn't welcome warmly the new bonds and greek debt was registered to the sustainable level of 165%.

    Where the markets wrong or the others who were happy? History will tell.


  4. " Nevertheless, it seems very much like the new government will not look into a lot of compassionate faces when they sit down with the Troika for the first time."

    Pffff...Mr. Kastner, you think that the troika in Athens is like it would be in Vienna... You don't know what happens to them each time... Have you wondered why they are off by a large margin each time in their evaluations?

    After getting "filled up" each night, the next morning can't think straight. -+3% recesion, a bit of inflation more, it all sounds a bit hazy and doesn't matter, we have to sleep to be able to go to the buzukia tonight :)

    Mr. Samaras is already preparing special "treatment" for them before the negotiations.


  5. Who cares?

    The Euro is the problem. It has become a bankruptcy machine. The five countries (so far) that have asked for bail-outs is all the proof you need.

    Removing monetary and fiscal policy from politicians in order to force them to deliver reforms might sound good on paper. In practice, however, it is nothing short of a humanitarian disaster, as the depressions in Greece and Spain (and the deep recessions in Ireland and Portugal) show.

    Really, is that what they want? The bitterness that will follow the collapse of the Euro is gonna taint Europe for decades to come.

    1. As i said, a divorce is precedented by quarrels. That's how people divorce and how countries divorce. The goverment must keep going with the internal devaluation. The people voted "no more". At some point, if you want to avoid new violent protests, you need to do referendum.

      Internal devaluation can work, but needs some requisits (as IMF says). Internal devaluation supposes that falls in salaries are followed by falls in prices too. Not in Greece. You can't go on like that.

      In Italy for example, it can work. There was time to do reforms before starting the real devaluation, which won't be huge either. Also there is nothing basically wrong with italian economy. The main problem is that they compete in a lot of common things with Germany. So they 'd ideally need a 20% devaluation if they had to go to the lira, but they can do it without going to the lira if their politicians manage to sell well the story to the population.

      Spain can also do it, but only if the population endure it and it will be tough to endure it because they already have high unemployment. But has common points with Italy. On the bright side, from what i saw, their protesters aren't trainned in urban warfare with the police like ours are. Spanish police was making easy game out of them. If the Spaniards had the expertese and methods of Greek leftists, Spain would be in serious trouble.

      Portugal i don't know enough.

      In Ireland there was nothing wrong with economy, their problem was pubblic finances after taking the bank debt. They didn't need to make internal devaluation for competitivity, they are fine.

      Also, European banks had ample time to prepare for Grexit,ok, they lost 20 bln in total in the PSI, nothing terrible, they will lose a bit more after the default, but, after all, they had partecipation with 40 bln in the PSI, so, the once feared "domino" won't happen even in the impossible scenario that they would loose all.

      The ESM is also up and running, Grexit won't be contageous. Besides, Spain is already contageous without Grexit...

      The EU and the greek gov will probably go to negotiations about a friendly way to treat the official sector damages (ECB,state loans) or they will do the "see you in court".

      Whether Greece did well or not to do Grexit and whether the program was realistic or not, is something for the future economic historians to decide and economic simulations which will compare the 2 scenarios. It is a pitty though, Greece could have almost done a new world record in economic history for the most spectacular combination of reforms+internal devaluation in the shortest time,while practically bankrupt. Although probably in Germany they 'd still say "what? They barely made it, those lazy Greeks! We would have done it in 2 years tops!" :)))

      Eurocountries can recover, given time and money. And accepting that some damages will have to be accepted as inevitable. The real question is will they find a new way to co-exist in the euro, in such a manner that they can confront a future crisis?

      On the positive side, both Greeks and Germans will stop complaining about the other. Well, Germans will still complain about the money they will loose from the greek default, but, in 50 years nobody will remember such things.


    2. I don't think so.

      You are suggesting that Italy, Spain and Ireland are going to succeed with internal devaluation, reverse the dynamic, and thus be able to grow at the expense of Germany (aka the opposite of what has happened so far).

      Not gonna happen.

      Instead, what's going to happen is a period of anemic demand and contraction for everybody, periphery and core.

      The Troika's report on Ireland is telling.

      "The Irish government is sticking to the terms of its bailout program, although economic growth will remain "modest" this year and next as export demand weakens and high unemployment dampens domestic demand."

      In other words, Ireland is doing great with it's program, but somebody has to spend money. If nobody spends money, no matter what reforms you do, your economy will contract and the output gap will widen.

      And The Eurozone makes sure nobody spends any money.


    3. Well, i didn't say it was going to be easy (see Latvia which is Mrs Lagarde's darling...). And the fact that many do the same job at the same time, is making things more difficult. The weaker will suffer the most, also because competitivity is something relative. For example, Greece is trying to gain competitivity. But as Italy tries the same, Greece loses the initial relative competitivity advantage over Italy and so must do more on products that share.

      So, assuming the euro will be still there (this will depend on Spain and Italy), Italy with probably recover first, followed by Ireland after they cut her debt, followed by either Spain or Portugal.

      Greece would be in for a loooong recession (without counting the debt that scares away investors, the imaginary 50bln of privatizations (the only way to find buyers as situation is today is to give them so low prices that they will think that it's worth to buy now rather than wait for drachma) and the people that will continue happily their internal devaluation with a slight inflation).

      The other day i talked about this to a greek MP and he said "yes, prices are a problem, but inflation is just 1,2 now". If Marie Antoinette was familiar with inflation, she may have used that :)))

      Today i saw a greek video with a man saying "what do you want me to tell you, i 've been staring at the fish all day, trying to fill my belly by looking at them".

      As the greek proverb says "the one with the full belly doesn't believe the one who says he is hungry". And hungry and angry youth is very bad combination. Revolutions aren't made by 50 year olds, nor can 50 year olds stop the 20year olds in the street...

      I don't know if they are idiots, if they can buy enough time and put enough money, maybe they can make it. I don't know. The problem with EU is that politicians plan 3 months ahead, arrive to a deadend, decide to act at the last moment for another 3 months, dead end and so one. Maybe they can play this game long enough, as crazy as it may be...

      I don't think it is wise, but maybe they will be lucky...Miracles happen...

      On the bright side, if DEI manages to put her act together quickly enough and manages to restore electricity soon enough, Greeks may be broke, but they will be freed by this torment and enjoy the show, as Prof. Lapavitsas said last month.


  6. Some news. Despite what i may think, the goverment is determined to fall trying.

    The good news. According to a newspaper, the goverment wants to replace public servants with privates where possible. The newspaper says they want to use privates instead of public tax controllers, civil engineers and KTEO centers (where they inspect vehicles for being proper for circulation). Also they plan to rent parts of idle hospitals in the islands to foreign health insurance funds so that foreign pensioners can get health treatment in Greece.

    If you insist on one road, you may as well try to do something that will be useful in any case, so good for Greece!

    P.S: Today it was Mr. Ressler's turn to inform us that "the prospect of Greece leaving the euro isn't frightening anymore". We 've noticed already! (pre- and post-election stance).

    I hope that Greeks will be soon asked to say too if they are frightened or not anymore.