Wednesday, June 17, 2015

Bill Rhodes No Longer Understands Today's Sovereign Debt Negotiations!

William "Bill" Rhodes, the world's doyen in the field of sovereign debt restructurings, had the following to say on Bloomberg TV:

"We are in a sense of gamemanship here and everything is being played out in the public rather than getting in a room, something that I was accustomed to for 25 years with so many debt restructurings around the world, and to say 'Let's get it done!'"

Why can the Greek government, the Institutions and the EU elites not follow Rhodes' advice?


  1. I think there are too many actors involved and too much imbalance of power. Tsipras' only weapon, is one. Which is a huge political gamble for himself. But on the other side, Tsipras has very little to lose from doing this publicly. Also, technically, this is not a discussion for debt restructuring. Only Tsipras wants it to be.

    And wait until the day that Prof. Varoufakis leaves office and pubishes a juicy book full of documents from the negotiations! Instant best seller.

  2. The answer is very simple: this is not about Greek bankruptcy or debt restructuring. This is a political fight about who controls Europe and which ideology will prevail. The Germans (and specifically the wheelchair brigade) have managed to get rid of most left of centre governments and are imposing the fake "austerity economics" because they think they own and control the EU.

    This is why all the detailed discussions about banking and economic management are completely irrelevant; it is also why Schaeuble tried to have Varoufakis removed for daring to waste his time with macroeconomic discussions.

    1. To Guest (Xenos),

      To be fair, it isn't just Germany here. Yes, Germans decided a recipe, there is no power on earth that can make them change their mind and if the patient dies, it was the patient's fault. But, if you take all goverments from countries that had to pass austerity measures, Tsipras seems almost like hybris personified. Someone wins elections and says "i will do no more cuts". And he gets "yes" as answer? Just like that? What will they tell their own electorates? Why didn't they do what Tsipras does?! Spain and Portugal have elections in few months.

      Germany on the other hand, being the paymaster, has to think all the others combined. According to the logic where everyone must have the same treatment, if Tsipras gets now a good deal with debt restructuring, won't this help the left parties in Spain and Portugal? Especially the spanish one is very strong. What happens if Spain takes Tsipras' example and asks for debt restructuring? And what of Portugal? Or what of Ireland? And what of the future? No responsible politician would give Tsipras an easy victory. If i were German, i know i wouldn't! Actually, the temptation to make an example out of Tsipras, especially in Germany must be great. It must be a terrible dilemma... Do i gamble the money to crush the little blackmailer and make an example out of him? Or do i not? In politics the logical answer is to hold your instincts and find a middle solution.

    2. @Anonymous. Although it is not *just* Germany, the control and initiatives (plus the rejection of initiatives) all come from Germany. You can argue that Germany is merely the locus of European neoliberal dogma, of the specifi austerity brand. I can also argue that Germany is the primary locus of nationalism, hiding behind ideas of "fiscal rectitude" and other economic dogmas that are rejected by mainstream economics.

      And of course your comments about Spain, Portugal etc are correct. Germany is determined to hold them in their current policies of austerity -- regardless of outcome. As they entered the horrors of this policy later than Greece, and have less serious problems with debt and state management, their populations currently suffer less than the Greeks. That is no guarantee for their future, however. In the end, the chickens will come home to roost, and Schaeuble and his anti-humanitarian book-keeping stupidities will be out. Preferably with a long prison sentence.

    3. Dear Xenos,
      anybody who reads this blog from time to time has understood that you hate Germany. O.K., we probably all have our prejudices.
      However, to refer to Mr Schäuble as the "wheelchair brigade" goes a bit too far, in my view. The man is more pro-European than many, and his personal physical handicap is due to an attack by a mentally disturbed fanatic. To sneer about such a handicap of a person seems to me rather tasteless, even if you disagree with his views.

    4. I reject the criticism. I treat all people fairly and equally, and this is merely a convenient descriptor. My own observation is that the modern obsession with political correctness (very visible in the UK) has led to horrors that have badly damaged society. Moreover, I observe in the case of this specific individual that he uses the handicap to his advantage -- embarrassing and even humiliating anyone who dares to challenge his views. It is a form of social manipulation, admittedly expertly handled.

      If you want to deride my straight-talking as "tasteless" then feel free to do so. I can also deride your social conformism and disinterest in independent thought.

  3. Thinking about it... Could it be that at the end, they all want to Tsipras to default? One possibility is that Tsipras get overthrown by public outrage. The new goverment, signs what Tsipras couldn't. Total victory for the creditors.

    Tsipras maintains power? Then the creditors can tell their voters that they have to start debt negotiations with Tsipras, not because they give in to a blackmail, but because Greece now has de fact started to default. No losing face to the little blackmailer.

  4. The main reason is Greece and its dirty government, Greece's a-systematically way of working.
    That is the Greek factor that nobody ever took within the calculations to create a clear view on the why. It has never ever been experienced somewhere in the world before.
    "Beautiful" filthy minds can create filthy politics (politics are dirty, but in this Greek government it becomes filthy, and the word filthy belongs to the game theory vocabulary: the filthiest one wins) and create what they want: insolvable debts. That is where it is about, isn't it Varoufakis.

    Bill Rhodes, talk with this creature, ask for an interview, and write an article about it.
    Without mincing words. Please accept my request to bring also an excellent psychiatrist with you, and some psychologists to observe, and report, analyze, for later, in public, on TV. this is needed to open the eyes of all who are blind for him, most important: to open the eyes of Greeks.

    And: bring a team with cameramen with you. He loves cameras. It will help also to record all and to study after, to check if all is written in your article as he has said it. Only in this way, with filming, and recording, he cannot deny anything. A team of scientists must control the film equipment, that nothing is manipulated, that all is as it has to be to create a prove that can be used in court.

    Looking forward to it.

    1. The psychiatrists need to be directed to someone in Norway, in my opinion.

    2. Ms. Antoinette,

      An ancient greek proverb says "there is no bad thing, without a good coming out of it". It doesn't matter which way SYRIZA goes, there is much good that will come out of it. This is their finest hour, let them enjoy it. Syriza needs to have ample time to unroll its true capabilities. Would you prefer an untimely demise after 2-3 months, where afterwards they would say "we didn't have the time to show what we can really do"? I wouldn't.

  5. There are numerous reasons why the Greek government Keep Talking. Culturally, as a nation they are "senders", not "receivers". The voters, they have to show their disciples and admirers that they fight the just and heroic battle. Internal politics, they have to show their fellow MP's that they are not making shady deals with the enemy behind closed doors. If they had had it their way they would have sent the whole central committee to all the meetings, they don't trust each other (not without reason).
    The European politicians (being politicians) took the bait and answered in kind, that was unwise. Just imagine what would have happened if the Europeans had kept a stoic radio silence. The Greeks would, as they are wont to, have argued with their compatriots and in the end with themselves, and contradicted themselves. And that is good clean fun to listen to.

  6. According to minister Dragasakis, all this havok is happening because of a 0,5% GDP difference for the measures of 2016 and because Greece asks for debt restrucruring (today Regling repeated that there is no such need).

    1. This simply can't be true but it is a very powerful argument. The 0,5% are the result of revenues and expenses. I guess the Troika is very certain about the expense side but very doubtful about the revenue side (billions from fuel cheaters?). So if you trust the revenue side completely, you might be down to 0,5%. If you think the revenue side is wishful thinking, you are talking about a huge problem.

    2. I can very well imagine that the troika considers almost everything wishful thiking, because in the past too, it was considering as certain measures, only the cuts in immediately measurable expenses. So when Syriza says "i will tackle tax evasion by X and oil smuggling by Y", the automatic troika response is "proposal cancelled"...

      Still, according to this article:

      Prof. Varoufakis offered an automation cut system. A committee that will be watching the budget execution on... weekly basis and every time there is a deviation that would lead to primary deficit, it would trigger automatic horizontal cuts to "all public expenditure". He even avoided mentioning an exception for pensions.

      This was Varoufakis' proposal yesterday.

    3. Let me only point out that SYRIZA, the self-declared Robin Hood against oligarchs, has so far been more lenient to the rich and tax cheaters than any government before. The poor are definitely not behind the bank run which SYRIZA refuses to stop via capital controls. The rich were not excluded from the recent tax amnesty (as previous governments had insisted on) and the Russian oligarch Ivan Savidis, who saved himself 20 MEUR thanks to the amnesty, placed full-page thank-you-advertisements in papers to thank SYRIZA. I am not aware of any new law by SYRIZA which would put credibility to their claim as Robin Hood against the oligarchs and tax cheaters.

    4. Mr. Kastner,

      You don't need to convince me. I have spent much of my time in your blog, trying to illustrate that Syriza isn't gold. But Syriza knows how to handle media. One of those who took advantage of the great discount with no limit to tax obligations, was a member of the well know Bobolas family (what you would call oligarchy). He ran to pay his obligation. Somehow, Syriza managed to turn this into an advantage. You could read everywhere, that "syriza made Bobolas pay". While in reality, he had been fined by the previous goverment and it just happened that the elections have given Syriza the win in the meantime, and SYriza on its turn gave this unexpected gift to anyone with unpaid obbligations to the tax office, lifting the cap that was imposed by the previous goverment. But "syriza made Bobolas pay"...

  7. There are several things that are wrong all at the same time. In a sense everyone us wrong.
    Germany confuses it's interests for what will make the EU viable and fair. Nobody joined the EU with the express aim to be identical to Germany. Besides if we all become export powerhouses as schauble seems to want to make us then the other tradeblocks would have to accept imports on a massive scale. They are already accusing Germany of exporting and not importing much. This point has been made elegantly by professor Paul Krugman.

    As for Syriza, it disturbs me because inside Syriza hide people who were partly responsible for the mess Greek finances were in starting in 1981.
    There is a tremendous lack of meritocracy in greece and Tsipras doesn't seem to worry about these things. Additionally he is destroying the private sector. He is not cleaning up the way things work in Greek politics, and he is inheriting the corrupt network of PASOK which decided finally to clean up, and when it did so it collapsed electorally.

    The modest proposal I have is to stop all this nationalism on all sides, declare the credit card capitalism dead along with large swathes of thatcherism but also reject the stalinism if many in Syriza.
    We need to find a federal model in Europe that will keep us together without dominant nations. Merkel should have had the maturity to resist posing as the de facto leader of Europe. Crocodile tears about the dark past of Germany are no good if German nationalism appears in German politics. Germany needs to declare that the preeminent role it is playing now out of necessity will be over the minute the nation building is completed in greece.
    Greece needs to admit it needs nation building because it's institutions are far worse than Poland's in 1989...
    Finally we need a finance ministry run by an economist not a lawyer like schauble. Varoufakis is not wrong about everything.

    Personally I think we need a finance minister based in Paris who can be anything except German or Greek. His express target needs to be everyone's prosperity. With a credible plan on how to achieve it. I want to see European companies dominating smartphones nanotechnology quantum computing etc. An energy union that uses German technology and Greek sunshine to make putin and the Middle East irrelevant to eurozone economic development.
    If we do these things the British would not want to leave the EU. They are like a gold digger wife, they will stay with anyone that seems powerful and monied. This is evident by the massive way they currently suck up to the Chinese, which has taken aback even the Chinese...