Friday, February 6, 2015

What's Another 3 Months of Austerity in the Grand Scheme of Things?

The Greek side seems rather clear: Greece wants another 3 months of time (until May 31) to negotiate a mutually satisfactory deal (they call it 'breathing space'). The EU side says that Greece must comply with the program or else... It should be noted, however, that the EU side has signalled long before the election that a program extension of up to 6 months for the purpose of facilitating responsible negotiations would be favorably considered if Greece makes a request.

So it's all about face, as the Chinese would say. Greece feels it cannot request the extension of a program which they have promised to kill right away and the Finance Minister argues that he cannot request the extension of a program which he has described many times as 'fiscal waterboarding' for Greece.

But what's the big deal about losing face when one is not talking about returning to a much hated program but, instead, only about extending it for another 3 months so that a truly good program for Greece can be negotiated? Isn't the saying that the end justifies the means? Can one not explain to SYRIZA voters that another 3 months of the much hated austerity is a small price to pay for eventually getting an optimal solution for Greece?


  1. Mr. Kastner,

    The implications are wider than the usual political cost for SYRIZA. Yes, SYRIZA will suffer a political cost, if it will ask a prolongation of the current program. But, more importantly

    1) Tsipras will have to put his signature, acknowledging the "legality" of the program. This would be tantamount to acknowledging the measures of the program, which are contrary to his and has said he won't accept!

    2) He would acknowledge the troika and would have to actually have a session of "evaluation" with the troika.

    My hunch from today's statements, is that Prof. Varoufakis wants to proceed to his original plan, that is, default into the euro, if he can't have another option.

    It was interesting that tonight a SKAI TV journalist, known to be hostile to SYRIZA and the anti-memorandum rhetoric, described indirectly that what's coming is capital control measures for the banks.

    It's anyone's guess on what SYRIZA will do. SYRIZA wants the bridge program, because it allows to bypass the old program and the troika.

    Also, has reduced its request for 10 beur in T-bills (rejected) to 4,5 (rejected) and now to 2 beur (will be probably rejected).

    If prof. Varoufakis' opinion prevails, my guess, is that SYRIZA will give this narration: "We went with good will to our partners and asked for time. We are a newly elected goverment, that has been blackmailed by the ECB and found ourselves at gunpoint, despite that our mandate was very clear. Our partners didn't leave us a choice. We have to prioritize our people over the creditors and have no choice but to default".

    Today's poll. Tsipras in his "resistance" has 72% overall approval, with 96% amongst SYRIZA voters.

    1. You write: "We have to prioritize our people over the creditors".... That what is really prioritizing the people needs a party that can create solutions on the long term. Otherwise it is not a solution. Syriza has not shown to watch beyond the horizon, where the long term can be found.

      It is true that the popularity for Syriza in Greece has grown. Of course! Syriza is the voice of the people that do not want to bend the head, that want to stay in a dream, not wanting to wake up from it and Syriza only throws oil on the fire, constantly. Voices can hypnotize. Words can.
      Even now: it is a huge pity that European peoples mostly do not speak Greek, to be able to hear what Tsipras tells the people when he comes back from a mission. They, Europe, would be shocked. Also about the Greek media that do not put any question mark under/behind the words of the new Greek leader. Mass hysteria has taken over the sound of the voices that speak another Greek language and wish for common sense.

      Tsipras knows what the Greek people want to hear. He will reach more and more the moment in time however where he has to tell the Greek people the full Truth about what is possible and NOT possible. Not even in his bloody, creating fairy tales, mind. A NO against Europe does not change the problems. Greece will have to go through the desert anyway.
      Unless it will be sold to Russia, or USA. (Die Tagespresse, tweeted in Herr Kastner's Twitter; I did not like the article btw.).

      I hope sincerely that Europe stays strong, to force Greece to go on the knees.
      What has come out of the mind and mouth of Tsipras and his party into the direction of Europe, is far enough for Europe not to show any pity or offer any delay, till there have been apologies for the bad behavior of a man and a party which did not do anything else than to say no against all and everything, and still!, instead of taking time to study cases that were actual when he/they were not in the government. He/they would have been prepared and not needing more time for more excuses. He would have had real answers. Now he only nourishes anger.

      Work, and real acts are something that the man has not invented. He is only talking and travelling. Entire Greece is talking. Repeating words. Repeating videos, time after time again, endlessly. Losing time that could be used to study at least something. To listen with interested, open ears and mind to reasonable people. To calm down, and find inner strength back again, instead of losing the self in insane mass hysteria.

      That has happened also in Germany in the former century. Mass hysteria and false promises are not only related with nazis, the war and hatred they created, the ruining of their country. Syriza is on the same road. With his own popular leader.

      Hard words with much resistance. Into the direction of a leader that uses hard words himself, and does not show anything else than resistance. I fight back. At least I have opened my mouth instead of saying later: "wir haben es nicht gewusst" to my grandchildren or worse: "I knew, but I was a coward and kept my mouth shut."

  2. To add to my 1st post. Minister Stathakis to WSJ: Ιf the EU rejects the bridge program, Greece will become the first country to default over a 5 beur difference". He said that in March, Greece will find herself 5 beur short compared to its bond obbligations and specified that all that asks is 1.9 beur from the gains of ECB on old greek bonds that had bought at discount and the right to issue 2 beur in T- bills.,-%CE%B7-%CE%B5%CE%BB%CE%BB%CE%AC%CE%B4%CE%B1-%CE%B8%CE%B1-%CF%87%CF%81%CE%B5%CE%BF%CE%BA%CE%BF%CF%80%CE%AE%CF%83%CE%B5%CE%B9-%CE%B3%CE%B9%CE%B1-%CE%BC%CF%8C%CE%BB%CE%B9%CF%82-5-%CE%B4%CE%B9%CF%83-%CE%B5%CF%85%CF%81%CF%8E.html

    So, it appears, that this is the goverment line for the time being... We will see what happens in the Eurogroup.

  3. Addendum: Just to be fair, minister Stathakis released a statement, refusing that he ever told WSJ that there will be a liquidity problem in March and the goverment will take measures to increase tax flows so that it will have no payments problems up to June, when there must be agreement on new program.

  4. Looking back at the last week I am increasingly skeptical for a compromise between Greece and its partners.

    At all occasions Tsipras and Varoufakis made clear that a compromise acceptable for them would need to be completely outside of the current political architecture and would require a long string of rewriting laws, contracts, treaties, acts of parliaments or even referendums in several countries.

    A game theorist like Varoufakis must know that a Grexit will be preferred over those prospects. So the real question is: what does Syriza really want and when will we get to know it?

    1. Dear sir,

      I don't know what Tsipras thinks or what other economists close to Tsipras think (he has a team of close advisors, aside prof. Varoufakis), but prof. Varoufakis himself, is following exactly his past positions.

      This is an article in greek, he had written in February 2014. He proposes to the greek goverment a negotiation from "zero" of a new program. Germans will deny. The greek part, must then proceed with:
      1) Unilateral suspension of the memorandum measures, while continuing reforms that are useful (he mentions liberalization of professions).
      2) Default on payments of ECB bonds, as long as the greek debt is unsustainable.
      3) Veto any article concerning the "so called bank union", "which is nothing else than the extension of the Cyprus experiment to the entire continent".

      "And what if Germany still doesn't will to negotiate a new plan", he asks. Then, "patience"." The state will be living within its means".

      The real risk he says? Is if ECB decides to cut ELA on greek banks. He says it is not impossible. But, he argues, this would mean the automatic expulsion of Greece from the euro, which on its turn, would trigger the beginning of the end for the deconstruction of the euro itself. He argues that he believes that if they had the possibility to kick Greece out, they would have already done it. And if they could really amputate Greece, they would do it, no matter what Greece could ever do. But they haven't done it and don't do, because they know that it will then be impossible to stop the collapse of the euro.

      He also argues, that if Greece takes these moderate steps, the ECB won't even dare to cut ELA for one more reason.It won't be able to pass the vote for approval in a period where emerging economies are under panic, EU and USA are holding their breath. He continues that it will be a greek gift to the Eurozone this position on the greek part, because it will force Berlin to get out of its denial that hurts the european idea in general.

      So, if you leave prof. Varoufakis free, i think everything he has said and done, is completely coherent with his previous positions. Even when he took office right after the elections, he made a statement, that i think most Greeks didn't realize. He spoke of "litos bios" (simple/austere life). I think his plan of the country living exclusively out of what can gather from taxes and bank limits, describe very well what he meant by the cryptic "litos bios".

    2. Thank you for the insights. Taking these ideas for granted the Syriza strategy seems to be based on one key assumption. That is to say that the Eurozone fears a Greek exit more than having a partner within the group who puts the destruction of the current policy framework on top of its priorities.

      In my opinion Varoufakis stands on shaky ground. A greek exit might show some dirty implications even outside Greece but it could also be a long awaited starting point for building a healthier and more stable union.

    3. Yes, it is hard to see how a country run by a national-socialist government could ever become a real partner to other Euro-countries. It would just go on blackmailing and making trouble.

      Greece was only cooperating with other the Euro- and EU-countires as long as it had something to gain from it in terms of money flows.

      Moreover, since the schism 1000 years ago it sees the catholic and protestant West as the source of Evil. Greeks never really felt to belong to Europe.

    4. @ Anonymous at 10.23

      Yes, you are right that Varoufakis, deep down, has a consistent a agenda which goes back quite some time. Below is an article from February 2012!

  5. ANEL leader and currently Defense minister Mr. Kammenos: "Berlin walls usually fall by the people. The goverment has the support of all the greek people. We united the Greeks and this is important. Now it is Greece that negotiates. We don't negotiate with our head bent down or or down on our knees. The greek population has reached pauperization and we won't retreat. The policy followed by the previous goverment has ended and the creditors don't have to deal anymore with Mr. Samaras and Venizelos. They 'd better realize that".

  6. It will also become quite clear soon that this national-socialist government has no real plan for economic growth. How could they? They are collectivists who only can think about blowing up the state again, copying the marxist policies that previously have shown to be so disastrous in Poland or in the "GDR".

    As the blogowner himself wrote in january;

    "What I am missing [in Syrizas programme] is much more emphasis on a competitive private secctor; an emphasized belief in a market economy; an emphasis on foreign investment and know-how transfer from abroad; and other things like that."

    Moreover, to venture into uncertain waters until May or even June - Drachmes or Euros? - will be the kiss of death for the tourist sector this year. Anyone planning the holidays for the summer in the upcoming weeks will steer clear of Greece, a country stumbling into chaos for ideological reasons.

    1. @Seukel:
      Economic growth can only be the result of a thorough administrative reform of Greece, made by Greeks!

      No past and present government knows how to sell that bitter medicine to it's voters.

      Regarding tourism in Greece: I am very happy I spent almost two months last spring, this year I would not dare to do that.

      But international tourist agencies most probably have already bought their contingents of mass tourists to be flown to Greece, so that figure will not vanish unless a truly endangering civil unrest breaks out.


    2. @Herr Trickler. Of course, nobody in their right mind will deny your statement that Greece needs thorough administrative reform. It also needs massive reform of the private sector, which although less obvious, is equally an imperative. (In case this is not clear, I am referring to refusal to employ workers in accordance with the law; refusal to conform to the law regarding consumers' rights; refusal to pay taxes and social insurance; refusal to reward workers for their positive contribution to a company, instead giving top jobs to relatives and friends; the lack of career structures. &c &c &c)

      The greatest problem confronting modern Greece has always been the domination of society by powerful familes -- usually with the direct support of western powers. There is a small hope, as with the communist supporters during the civil war period, that if there is a government of the people, by the people and for the people, then ordinary people will be able to accept bitter medicine when needed.

      To be honest, I am not even convinced that bitter medicine is a proper analogy. This is Germanic morality again. What is needed is reform, and that will hit the rich and not the poor if it is done properly. I know that Varoufakis has views similar to mine on this, and I earnestly pray that Syriza will be a new era in Greek politics. It is primarily the EU and USA that have kept the kleptocrats in power for decades; it is this that has to stop.

    3. Xenos, you show some highly allergic symptoms when the proverb of 'bitter medicine' leads you to think about 'German morality'!

      This proverb is internationally proven by facts: Often somebody must take some bitter medicine in order to survive a certain illness. If the patient prefers not to take that substance, illness will make him suffer more than swallowing that bitter substance.

      Your reaction proofs my standpoint, that help from outside of the Greek country is not possible. Once more Greek population must take their decision and bear all consequences of it.


    4. @Herr Trickler. Even as a Swiss, you show some of the German obsession with morality. Economics is NOT about morality, even if at a fundamental level the issue of resource allocation should be. This is about how to solve a political crisis with economic consequences, and moralising about it does not help in the slightest.

      As I have stated on many occasions -- presumably you have either not read them or chosen to ignore them -- the culpablity for the eurozone crisis lies almost entirely with France and Germany. They constructed a defective system deliberately, in defiance of expert advice, in order to impose their own ideas on Europe. They must now accept the financial and politicial consequences of their actions.

      Other EU countries in the North, are merely passive by-standers; those in the South have some culpability, but not as much as Germany and France.

      And it is not within the remit of Greece to solve its problems within the eurozone, nor does it make sense to quit it now. That would be another disaster.

      So, if we are going to have some Protestant moralising (and I am Protestant) let's put the blame where it lies -- on France and Germany.

  7. Mr Trickler, Xenos might not be a racist but he clearly is a germanophobe.

    1. I admire much about German history and culture, because there is a lot to admire. However, I do not admire stubborn stupidity that has no basis in logic -- wherever it comes from. At this time, much of it emanates from German thinking: in the recent past, it was the USA and UK that made terrible errors of judgement and reckless political-economic mistakes.

      If your definition of Germanophobe is someone who dares to argue with German political power, then clearly the description is apposite.