Tuesday, February 10, 2015

Greece: Why Russia And Not China?

Gone are the times when the official line was 'there is no Plan B'. Now, the Greek Defense Minister has announced that there is indeed a Plan B, that plan meaning that Greece would turn to Rusia if it failed to conclude a satisfactory deal with the EU.

Off the bat, I have always expressed my view that it would be irresponsible not to have a Plan B (or C or D...), both for Greece as well as for the EU. If such a Plan B entails entering new alliances (while possibly damaging existing alliances), that's fair game, too, as long as one has prudently evalued ahead of such a decision all the possible long-term consequences of it.

But why Russia? Wouldn't China be the obvious candidate?

The statistics which I was once given by the Bank of Greece said that, since the Euro, China has had the largest current account surplus with Greece among all countries. Even a bit larger than that of Germany, the second largest. I don't think China had to reciprocate in any form or fashion, for example by participating in the rescue loans (the way I learned sovereign debt restructurings over 30 years ago is that everyone participates according to his own benefit). And China has been smartly taking advantage of some of Greece's major potential - shipping and logistics. In fact, China appears to be a clear winner of the Greek crisis, if I am not mistaken.

Wouldn't it be smart for Greece to start asking China what they are prepared to offer in exchange for all the benefits they have had from Greece?


  1. The explanation for why Russia is simple: culture (religion) and history. Do not underestimate the power of these: after all, the UK has now become an external State of the USA -- for no reason other than commonalities caused by history and culture, alongside on obsession with free market dogma.

    China has nothing to offer Greeks: it is alien and incomprehensible. Russia was one of the backers of the original modern Greek state -- hence the Russian Party (alongside British and French parties) in the 19th century.

    1. Hi Xenos,

      I agree with everything you wrote, although China has and will continue to offer to the Greek economy. Because of China, Cosco, we now have the biggest container port in the balkans (in units imported and exported) and growing to be one of the biggest in EU. Like i mentioned in the past, if Cosco buys OSE, the public train lines, greece in 10 years will be the major container and why not dry weight goods port of Europe.

      Russia supports Greece and there is in a sense a brotherhood, monetarily wise every time Greece tries to make a deal with Russia it is torpedoed. By accident?



  2. Mr. Kastner,

    Yes on paper China is the clearest and wisest winner of the Greek Economical crisis. In Gerenal i perceieve China to be the wisest of all in general.

    China will continue to support Greece through its own interests in Greece. Both for countries interests but likewise an admiration Chinese have for Greeks. Likewise greek have an admiration for the Chinese. Personally i have not met a Chinese person that I did not like.

    But for the theatre of negotiations, Russia strikes a nerve in the USA and Brits I believe. Like wise Germany. Allying with Russia would not be allowed. In lamens terms Greece is the USA's, UK's and EU's "bitch." They would never allow it, so saying it provokes reactions and possibly easier negotiations. It was wise that they used Kamenos to blurt this out.

    By the way did you know Cyprus already closed a deal with Russia that gives them an airplane military base on Cyprus? It is only 40 km away from NATO's base.

    I also believe that there were other things that helped bring on the collapse of the Greek economy. When Karamalis was in governement he had signed an agreement with Russia and Bulgaira to make a new pipeline. Then the crisis hit, collapse came and Papandreou the USA' lapdog canceled the deal immediately.

    China would be a great parnter for sure but lets be realistic. that won't happen either. Only investment will come from China.



  3. Maybe there is a kind of a dislike of the Greeks towards China? I read in the Dutch news that Piraeus could have been sold to China, but that possibility has been wiped off the map: Syriza was against it.
    Russia is in a political power game with USA and Europe, and I am sure that Varoufakis likes it to tease (hit, kick) both by searching the side of Russia, instead of talking with China.

    Tsipras is a leftist. He admires Che Guevara (his second child is named after him), and has showed interests in communism and maybe his views on communism are more based on the Russian philosophies about that than the Chinese communism. For the right understanding now we have to forget that both communist countries are capitalist countries.

    I often asked myself how it is possible that Russia en Greece have a similar kind of writing: the Cyrillic script. Also the religions are related. Even how the Byzantine music is sung, and composed.
    So: Greece is more familiar with Russia than with China.
    Important note: Tsipras is atheist.
    Important also: the influences of what one has heard, seen, smelled, all what has come inside the human being as impressions during the childhood, are wanted or unwanted part of the self. So: in his unawareness/subconsciousness he senses similarities with Russia, and is wanted or not affected by it.

    There are also very much similarities between Tsipras and Theodorakis.
    Theodorakis was/is a friend of Castro (friends with Russia), has been a lot in South America (Chili, Pablo Neruda, Canto General), Tsipras is also interested in South American politicians and rebels, met his wife also on a very early age, they joined both also the communist party, has his birthday almost on the same day as Tipras.
    Both are really friends with each other.
    Theodorakis played a big role in the liberation of Greece from the Junta.
    Tsipras plays a big role in a possible and even unavoidable return of the Junta. When the mass will be outraged because of fury, exploding anger and hatred, there is not any other possibility left to bring the minds of the people under control, to avoid worse.
    Strong words. Yes. Let us hope and pray for a better scenario.
    I am an atheist also, but praying is much more than repeating constantly the same religious sentences that have been written by others. It is an act of the heart, a flow of warmhearted self created words of empathy into the direction of those who need it.

    1. Wow Antoinette, All over,

      Your 1st Paragraph. No there is no dislike to Chinese, on the contrary greek like chinese quite alot, with exceptions to the anomcity and anger created from factories closing due to the growth of China industrial machine. Mainly clothing. but Greeks in this industry are slowly coming back. There are many chinese merchents in Greece and they are doing quite well. There is absolutely no anamocity towards the chinese. As for the port, this is political game and it was not directed to China but more that public resources should not be sold to private industry which is a leftist platform. Varoufakis took that initial provacation back very quickly. I expect the new deal with Cosco to move foward.

      2nd Para
      Admiration: Why does admiring a person mean that it represents you? I admirer Niche, Dostoyevsky, Kazantakis, JFK, Churchill, Marx, Rommel, Thatcher, does that make me a Nazi, Communist, capitalist, Imperialist or war monger? No. Great people of our history regardless of their background and ideologies should not make you into them but to bring out new ideas for the future. Ok tsipras has a soft spot for Che. And? Tsipras is his own and self.

      3rd Paragraph:
      I am not so sure where the close relationship and care between Greeks/ Cyprians/ Serbians with Russian came or was created. I have not read how this came about. It is partially due to religion due to the orthodox but you have to remember that after communism in the Soviet Union religion is not as popular as in Greece. Ofcourse religion plays its role but maybe ideological behind the scenes these 4 groups see things similarly. I do agree Putin is great leader but he is also a warmonger, he just simple knows how to do it better in presentation versus the west.

      Last Para:
      I have little knowledge here, but as for the point of a Junta, no way. There are no military leaders in Greece that have the power or balls to make a Junta. That is gone. Civil strife yes but even that is a long shot. It is one thing the Junta and another screaming Nazis.

      The Golden dawn are Nazis. Junta or Junta orientated minds are were Nationalists. Big difference. Have you read about what golden dawn has done in the last years of our crisis? Not good.

      Tsipras the athiest. Greeks initially labeled him as Greeks are religious, but i and many greeks find it a hypocracy to steal and hurt and then go pray for jesus's forgiveness. You have to respect the man to have the courage to come out and say he is without religion in a country of "religious people." Being without religion also does not make you a communist as for example you are an athiest but without being a communist.

      Tsipras is showing really good character as a leader. Give him time and seperate ideologies, from the political game, and also seperate what it means to negotiate. All different games.

      By the way there are two types of communists in greece and they are 50/50. Super rich communists with the idea! hold good positions in society and can rant and rave all day because they sit on there a** as they are wealthy. And the poor farmer or worker who is thinking and following a dead dogma. Communism is dead as a modern solution but it does not mean the ideas can not be used in modern day society. Not as a whole ofcourse.


    2. Ms. Janssen,

      SYRIZA will allow the privatization of Piraeus (a gesture of good will to the Chinese i suppose).

      As to why the Russians and Greeks have similar writing or religious rituals, i can give you the explanation. 2 byzantine Greeks evangelized the Slavs. The process included also giving them an alphabet, because they didn't have one. Quoting approximately from memory one of the 2 brothers, "they based the alphabet on the greek one, but since the slavic language was harsher and harder to dominate, they designed letters like small cages, that would hold in trap the little indomitable bird".


      Since they were brought to orthodoxy at later stage, you may also understand why the same rituals.

  4. Mr. Kastner,

    You need not see only numbers. Geopolitically Greece has nothing to gain from China and China is more likely to bend under EU pressure. Greece has other interests in the region aside money, which only Russia can defend or act as balancing factor to a hostile EU.

    In case you don't know, tomorrow minister Kotzias is vising Moscow and minister Lafazanis Beijing. Α while ago, 2 SYRIZA MPs, said on tv and radio that Greece has had already economic offers from both China and Russia without even asking.

    Nobody stopped any EU country from taking advantage of the greek crisis like the Chinese did. It was their choice. The EU preferred to use greek accounts to disguise that they were saving their own banks and prevented greek early debt restructuring, which according to foreign reports of the time, with a mild restructuring, it would have left Greece with a debt at 80% of GDP.

  5. The new government had said it will reconsider past privatizations, and this will include Cosco. Additionally, as others already said, threatening with Putin does result in big publicity (I doubt it does work in favor of Greece).

    And last but not least: I have some doubts that the recent steps of the new government have been sufficiently well thought out.


    1. Not so fast!!!


    2. Tomorrow, minister Lafazanis is flying to Beijing. He can't go with empty hands, it is greek tradition...Cosco is safe. A day later, he will be in Azerbaijan (gas pipeline).

  6. Well,

    nobody is going to give you 10 bill for nothing. So, someone has to tell us what, tangible things, we are going to give the Russians/Chinese/Americans in return. My 2 cents, you cannot get a better deal than the Troika. Iceland and Cyprus went to Russia and came empty handed.

    Till then the discussion is purely academic.


    1. Well, yes. Iceland and Cyprus were not being kicked out of the EU, and Cyprus's relations with Russia were rather problematic as they were laundering money of Russian tycoons not in Putin's camp.

      However, I do agree that Greece would have a heavy price to pay. Something like selling your soul to the Devil, perhaps...

  7. Speaking to reporters in Istanbul after a two-day meeting of finance chiefs from the Group of 20, Schaeuble said “it’s over” if Greece doesn’t want the final tranche of the currency aid program. Greece’s creditors also “can’t negotiate about something new,” Schaeuble said.

    He also said media reports that the Commission will give Greece six more months to reach an aid deal “has to be wrong” because he’s not aware of such a plan and the commission isn’t in charge of making such decisions.

    who the hell he thinks he is? Who gave this person the mandate and the authority to speak on behalf of 18 nations?


    Does he have any repsect to the institues and principles of this union or he has claimed an authority of every single principle of democracy in europe? SHUT UP Juncker, draghi watch out, angela do as i say...

    1. Yes, I also would like to know who or what Schauble thinks he is. Nobody elected this guy to run the eurozone, and yet he thinks he is president of it. There are some very serious misconceptions amongst the German politicians about their place in Europe -- and not for the first time.

    2. It's rather simple. By the end of February, and if Greece doesn't enact a new program or prolong the existing one, decisions must be made: either Greece pays it's pensions/ salaries or it pays the IMF/ ECB. In other words, either Greece reneges on it's domestic liabilities, or on it's external ones. Both have serious repercussions, arguably reneging on it's external liabilities the most serious ones as it will induce the exit from the monetary union.

      Schaeuble is right and you are wrong.

      One can only hope Syriza comes to it's senses.

    3. Dear Friend,

      Mr chaeuble is the most powerful figureof the most powerful nation in the EU. He does as he chooses whenhe chooses and everyone gets in line. Brussels Congess should mandate Democratic ways but unfortunately even Democracy has its flaws and can easily be overcome.

      The only toolthe "rest of us" has is that HE will alienate himself and his country.

      All things come to an end, don;t panic as we are on the dawn of new begining.



    4. @ Jim,

      Actually T-bonds were issued and greece ok till end March, without the requested funds from the EU.



    5. I kind of agree with @ Anonymous at 1.36. No one can prevent, as far as I can tell, Greek banks from buying T-bills as long as they have the liquidity to do so. Obviously, that would violate agreements but who cares these days about honoring agreements, anyway? Obviously, the ECB could put pressure on these banks by reducing or calling the ELA funding. That I will believe when I see it.

    6. >"...that would violate agreements but who cares these days about honoring agreements, anyway?"

      What has triggered that change of your world view?


    7. In case you didn't notice, I was trying to be sarcastic...

    8. I apologize not having seen your intention :O

      But now i feel tempted to repeat my old rambling that nowdays only a few politicians see it your way...


    9. Hi All,

      The smell of "Kolo toumba" is in the air after last night's emergency euro group. From what I see they will continue more or less the program and maybe a few changes that will not require votes in respective congresses.

      The eu mandate and way things need to go, has been maintained and restored. Tsipras knows Greeks want to stay in Euro even if he gets nothing. He knows it and i hope and he has the will to make further changes especially chasing tax evaders. As so at later time Varoufakis can enforce the debt restructuring he wants.

      Tsipras (as i heard from radio and is more of hearsay but i believe he would have said it, someone please confirm) said, we have reached the day where the people of europe do not decide how europe should proceed, but to be ordered to go in specific direction. Something of this tone and these are powerful words if he indeed said this.

      As for russia, they "offered" us economical aid if we need but in roubles. Soon to be renamed toilet paper. We have no choices. We are at Germany's will. And i wil leave it at that.

      I can honestly and openly say i am sad we have not achieved much as a new governement against the "wall," but in retrospect happy we are "working on things with eu."

      Personally, I see alot of more anamosity and anger building. I am quite upset for the people of Greece and i do not care anymore how others view us or label us. I will do my best to help my compatriotes and then think of europe. And as i fight this new kind of war, new soldiers of economics/business are being born everyday in Greece. Likewise there are a newly 300,00 "soldiers" deployed in all the cities of Europe and America.

      In this time we have also seen the wool pulled behind our eyes and see the traitors for who they are. Greeks are not stupid and will make them pay. Those who lead in honesty will lead us our and be free.


      Thank You Mr. Kastner again for having an open blog for room to express ourselves.


  8. Mr. Kastner,

    I Just read the below.


    Spiegel presents a really nice picture of how Greece is on its way. Unfortunately, they fail to tell the story on the otherside in detail how cruel life has become on many people in Greece due to this Austere program.

    In light of the above and the events to turn what is your opinion?

    If Syriza accepts the conclusion of this last "program." Is it over? or do we need to get into the discussions of a "new program?" And if accepting this existing program, which i am sure troika will find new economical holes which need to be filled which will require more measures etc. Where will this lead us in the new program. Will it be on Varoufakis ideas and terms or again consistancy of Austerity?

    I can not see that Mr. Varoufakis is not right that we are perpectually throwing money down a empty bottomless barrel. Growth and Gowth for whom? From my personal economics from 2009 to 2014, i have seen a 10% increase in my taxes and manditory government requirements social insurance. 29% of my Gross salary to 39%!!!!!! Meanwhile i have had a salary haircut in that time by 10% and with hardwork came to the same salary. But essentially i have paided out 40%. Fine, it is for the good of my country. I should be happy i have a job and food on my table, with very little money for pesonal investment. Is this the picture Spiegal is painting? This is the hope of the future? We will be competive? Who will be competive? Our businesses. Our people though will be poppers.

    What are your thoughts.

    You know me to be a positive person and i try to see things from a positive view, but the instance of a dead or old program and not listening to new ideas is quite frustrating.



  9. Let's see. Let's see. What do you want to happen?

    Mr G enters into an conditional agreement to borrow funds in an amount way beyond his means. Ms E and others loan Mr G the extraordinary amount of money, based on the conditional agreement.

    Mr G then decides not to honor the agreement, or pay back the money.

    Mr G then wants the lenders to loan it even more money, even though Mr G refuses to pay back any of the previously borrowed money, or honor its previous agreement.

    What kind of precedent would Ms E be setting by allowing Mr G to default on its previous obligations and conditions, and by providing Mr G with even more money? Why then would anyone who owed Ms E money ever pay any of it back? Why then would anyone honor its agreements with Ms E?

    1. Point taken. And agreed.

      Did you every think that Ms. E's lending manners in the last 20 years to Mr. G's all over the western world were acceptable?

      In the great USA each person has a documentated credit line and credit history, like wise the banks have visible record of the income levels of people. Basically in the period of 1980-1995 in my teens you could not get a loan very easy. Actually it was nearly impossible and most banks told you, that you must establish at least a 2 years credit history to be considered for a loan!!!!!!!!!!!!!!!!!!!!!!!!

      In greece and in many countries of the eu for that matter, no personal credit agencies, no back checks, no history for making a bases of giving a loan.

      In the boom years, I was haggled by telephone on a daily basis by greek and foreign banks to take preapproved loans, over the phone!!!! X foreign bank (as i do not want to mention) told me they could give me a home with a 350,000 euro loan and have specific homes "to my level in society" pre approved. They where irresponsible giving moeny away. People took it. The banks are the bigger blame than the plain citizens. Then suddenly we have an economical crisis. Then we are labeled lazy and ouzo drinking dead beats who do not deserve to be in the euro. Right. It is all our faults. The the eu give greece another 200 billions so we can choke on it.

      Thank you for being so open minded.



    2. @ V. 1 of 2
      Well, V., here I have to respond as a former banker.

      No, the lending practices all over the world were definitely not acceptable in the last 20-30 years and they still are not. Greek banks are actually a bit of an exception because, as far as I know, Greek banks were really not involved in any of the big bubbles (sub-prime, derivatives, Bernie Madoff, Iceland, Ireland, Spain, etc. etc.). Greek banks by and large did what banks are supposed to do: take in deposits/funding and make loans which are on the books (as opposed to off-balance sheet items like derivatives).

      You complain that loans were made by Greek banks to Greek borrowers who were not creditworthy, where the banks didn’t even check the creditworthiness. Well, since January 1, 2007, Basel II is in place and governs all banks in the EU. Basel II introduced to so-called ‘risk-weighting’ which means that every borrower must be rated, based on hard facts, in terms of riks. Whether or not Greek banks complied with that, I don’t know. But you have to understand one thing about banks and bankers: they behave like herds and totally pro-cylical: in boom times, the eye for the risk sort of turns blind because everyone convinces each other that the boom will last forever (dot.com bubble, etc.). As soon as the (unavoidable ) bust begins, both eyes open up and suddenly only see risk. The result is no more lending (even if there is a lot of liquidity). I truly think that, until Lehman, the world had sort of convinced itself that a country like Greece was on a long-term growth pattern. I remember reading an analysis in early 2009 which said that Greek growth would probably not be affected by the financial crisis. Still, what Greek banks did within in Greece shouldn’t really be the problem of any foreigner.

      Worthy of a discussion with foreigners is the question of what foreign lenders did with Greek borrowers; to what extent they acted recklessly and how they should be made responsible for that.

      The first question is: who did foreign lenders make loans to in Greece? Well, private individuals like yourself were a minute, minute exception. The loans were made to the state, to the Central Bank, to the banking sector and, in only very small volume, to large corporate borrowers of the public and private sectors. Overall, the loans were split about 50:50 between the public (state, companies) and private (banks, companies) sectors.

    3. @ V. 2 of 2
      Now think of the people representing the borrowers (excecutives of the public debt administration, of the Central Bank, of private banks and of large corporate borrowers) and ask yourself whether they can be compared to the unemployed Afro-American sitting on the doorstep of his broken house somewhere in Alabama and to whom some smooth salesman of financial products sold a 120% mortgage. That’s how many, many of the sub-prime mortgages were made and that was the real scandal. Do you really think that the professionals at the various Greek borrowers can be compared to the above? Both, the professionals at the Central Bank and the state, had very, very high reputations and quite a few of them had Wall Street backgrounds (including Goldman). Yes, they knew what they were doing. But what could, for example, the public debt administration do? Not much because their job was to arrange financing required by the state. Their job was NOT to change fiscal policy. I should add, though, that both the public debt agency as well as the Central Bank warned the politicians that things were getting out of control as early as 2004.

      To sum up, please don’t think of the poor and uninformed Greeks having fallen victim to reckless foreign lenders.

      There are now two questions: how should the reckless borrowers be held accountable and how the reckless lenders?

      The easier part is the reckless lenders: you simply have them take the losses. Some of them will survive that but, particularly in the case of lenders to Greece, quite a few would have gotten into trouble. You then put them into 2 groups: the ones who can be expected to recover in the longer-term and the zombies. The zombies you liquidate. The other ones you bail-out. You bail them out via wiping out much of the shareholders equity (in the case of AIG it was about 90%) and if that’s not enough, you bail-in some of the unsecured creditors. At the end of this day, tax payers have become part-owers of banks and can hope to recover some of their bail-out money when the banks get privatized again.

      The far more difficult part is the reckless borrowers. In the case of Ireland and Spain, I thought it was irresponsible to make all citizens pay for the gambling of a few. In the case of Greece I see it differently and that goes gack to the discussion of “who ate the lunch” which we had a little while ago. I think a very strong case can be made that the debt of the state is the debt of all Greeks because all Greeks benefited from it in one way or another. With the debt of the banks it’s easier because you can apply the same mechanism as with reckless foreign lenders which I described abovel.

      To make a long story short: no one should be fooled by the victim-theory. That’s pure soap and it seems that there is no other country in Europe which is so skilled at playing the victim as Greece (and no other country where foreigners are so inclined to fall for the victim-theory). A choice needs to be made here. Either one claims to be the descendents of those ancient giants who gave all those wonderful things to the world. If so, then don’t play victim because the ancient giants would laugh at you for doing that. Achilles, Alexander & Co. would probably call you sissies. Or one acts as descendents or ancient giants, assumes responsibility, makes a plan of action and charges ahead. You can’t do both because you can’t have the lunch and eat it at the same time. Sorry for being so blunt but, from time to time, there are things which must be said clearly.