Plan Z --- A Scandal or a Light of Prudence?

Peter Spiegel of the FT published a most interesting series about How the Euro Was Saved. In Part II, he described how officials from the EU Commission, the ECB, the IMF and the Eurogroup worked literally behind closed doors and without written exchanges to prepare contingency plans for a possible Grexit (Plan Z).When reading it, one might be lead to be shocked by the secret dealings which took place beginning in early 2012. One might even think that conspirators had been at work there.

Personally, I was much relieved to read about Plan Z. From the beginning of Greece's external payments crisis, EU elites had hammered into the public that everything could be and was talked about except --- a possible Grexit. At some point, I started believing that story.

This is why I stated repeatedly that such a position was not only irresponsible but truly reckless. A Grexit could never be ruled out and as long as the possibility, however minute, of a Grexit remained, it was indefensible that leaders would not prepare any contingency plans for it. The US government always ruled out the possibility of an American default when the debt ceiling was approached but that did not prevent the US Treasury from assuring the public that, in the event a default could not be avoided, they would have contingency in place.

Thus, in restrospect I have to become a bit more mellow as regards my judgement as to what EU elites did or did not do during the peak of the crisis. By preparing Plan Z, they had obviously done the right and responsible thing. What Spiegel's series does not reveal is whether Greece on its own had also preprared contingency plans for a Grexit. I would hope they had, too.

Greek Law vs. UK Law

This is an interesting article which suggests that, back in 2011, Greece (FM Venizelos) rejected an alternative to UK law for new bonds even though Greece's attorneys (Lee Buchheit) had recommended it.

The difference between these two 'laws' is the question of jurisdiction, not the law itself. Assume that Greek and UK law were identical. In this hypothetical scenario, it would appear that there is no difference between a bond issued under one or the other law. However, within the national borders of Greece, it is Greek jurisdiction which rules the state of law. If the Greek state, through its legislative process, wants to pass a law which establishes retroactive collective action clauses on a bond issued in the past, it can do so any time it choses (which it did under PM Papademos) and the new law is binding (even though retroactive). The UK jurisdiction could theoretically do the same thing but it is most unlikely to do so when such action would be exclusively to the advantage of Greece and to the damage of international creditors.

Lee Buchheit formulates this as follows: "A submission to the jurisdiction of English courts would ensure that Greek law - as in effect on a certain date (typically the date of bond issuance) - would be applied by a judge who is beyond the influence of the Greek Government and unaffected by popular sentiment in Greece".

I don't quite share this definition because it could suggest that Greek judges rule under the influence of the Greek Government and are affected by popular sentiment in Greece. While that may in actual fact be so, the point is that the Greek Government can - any time of the day - through its legislative process change laws in view of popular sentiment, even retroactively, and then Greek judges rule within the new law.

Personally, I doubt that Greece really had a chance back in 2011 to accept anything but UK law but if anyone would have been in a position to make at least an effective attempt to that effect, it would have been Lee Buchheit. Strange that FM Venizelos would not have instructed Lee Buchheit to do so.

People of Aruba, Curacao, La Reunion, Martinique, St. Bart, etc. --- Vote for the EU Parliament!

Here is an interesting piece of news. If true, quite a few people in far away locations around the globe can vote in the upcoming EU elections. They may even be more excited avout these elections than the eligible voters on the European continent: the governors of Aruba, Sint Maarten and Curacao have made public appeals to their people to make sure that they vote!

This, apparently, has to do with EU law which stipulates that everyone holding the citizenship of an EU country is eligible to vote. That broadens the range of eligibility to the 'outermost regions' and 'overseas countries and territories' of France, Spain, Portugal, Great Britain, Denmark and The Netherlands.

Wouldn't it be funny if the Wallis and Futuna islands near the Fiji Islands showed a greater voters' participation than, say, Germany or France?

Or serious?

Checking Tax Evasion at a Snail's Pace

From the PressProject

At the same time that the Finance Ministry is enacting its austerity policies on ‘small fry’ taxpayers, in the drawers of its auditors thousands of cases of suspected major tax evasion are gathering dust. They are cases concerning significant wealth, with large amounts transferred abroad and to offshore companies. The audits here move at a snail’s pace.

Offshore companies subject to audits: 6,575
Actually audited: 4

Cases of large wealth subject to audits: 720
Actually audited: 59

Wealth transfers abroad subject to audit: 24,710
Actually audited: 31

Keep Up The Good Work, Greeks!

"Gains in Greek banks' shares gave billionaire investor John Paulson's $3.2 billion Recovery Fund a lift during the first quarter, and future returns are expected to keep climbing as the housing and real estate markets continue to recover" --- writes the Ekathimerini.

Now, if that is not a real recovery, then I don't know what is! Not necessarily a recovery of the Greek economy but certainly a recovery of John Paulson's Recovery Fund which, without the boost from Alpha Bank and Piraeus Bank, would have performed rather poorly in the first quarter of this year.

Keep up the good work, Greeks!

Ode to European Joy!

Don't Fool Around With The Lαικεσ Aγορεσ

I don't know what this debate about the laikes agores is all about but I definetely hope that noone is getting any ideas about reforming this Greek institution (local farmers' markets) which, to me, is one of the most positive hallmarks of everyday life in Greece!