The German democracy is off for summer vacation. So are the parliament of several other North European countries. Even if renegotiation would miraculously reach a new compromise tomorrow, for it to pass many eurozone countries would require the approval of the parliaments. Can’t imagine the Germans or Fiinns being more inclined to a favourable compromise with Greece after having been called home from vacations. Meanwhile Greece is running out of money, food and medicine and other imported goods, and two weeks off from a large debt payment which would be a full scale default (the missed IMF payment was reclassified as delayed payment or some such thing I think)
Can be the Greek government was in the right on principle, but it has still displayed spectacular bad political handiwork.
Nitpick, but that’s untrue. Most countries don’t print their own currency. It’s often printed in other countries for reason of economy of scale and technological know-how. And it’s not always central banks that are printing money. There are private companies in this business.
Humor aside, I can see the point of insisting on structural reform in Greece. But that’s not really the status quo. Imagine a smoker gets into an auto collision. You want them to stop smoking so that they won’t return to the hospital in another two years. But they are bleeding. What to do? You apply tourniquets: you don’t withhold medical care.
For the sake of argument (and consistent with my suspicions) let’s say that Greek governance is inadequate. The problem is that 80% budget cuts combined with an inability to depreciate your currency will lead to unemployment in any country. Even if the Greeks did pension reform, etc., austerity policies would still destroy them. And I don’t see austerity being used as a threat so much as something that is being insisted upon.
There are 2 viable situations. They are greater fiscal integration or monetary control. Over in the US we take option 1: the US routinely sends South Carolina $4-$5 for every dollar that it takes in. The US bailed out Florida and Nevada this recession via the FDIC. If the European core doesn’t want to do the same for the periphery, that’s ok, but they really shouldn’t share a currency. Back in the late 1990s the Germans were made aware of the problem, but they figured they could kick it down the road. And here we are.
Another great link: Greek crisis: 11 people and institutions to blame Greek crisis: 11 people and institutions to blame | Vox
Fuck the European Central Bank, Europe’s private banks, European policy makers c. 2010, the current Greek government, the IMF, Finland, the Netherlands, Austria, Helmut Kohl, François Mitterand, Greece’s other political parties, Europe’s Social Democrats and of course the Germans. Fuck 'em all!
ETA: Yay Greece!
Well, skimming through it, the second one right off the bat seems kind of bullshit to me:
So, Greece, a full member of the EZ/EU is asking to borrow money. They have a pretty high credit rating (as part of being in those organizations AND with Germany and the rest backing them). Also, much of the information available to them (these private lenders) has been doctored by the Greeks themselves, and it’s unknown if even the other EZ/EU members know how bad things are because of that. So…why are the private creditors who loaned money to the Greeks to blame, exactly? Maybe you could explain it to me or point out what I’m missing in this narrative which is my understanding of the run up to this cluster fuck.
The rest, just skimming I can see (mostly) and probably agree with at least nominally (I thought the one on Obama was cute ;)), but the reasons for this second one seem like a cave in to the left wing narrative in Europe that the private lenders were at fault for this mess (either partially or fully), while, at least from what I understand the real folks to blame were the Greek people (who I didn’t notice on the list of those to blame), the various Greek parties who took the money and DID know they were cooking the books and that there were real, systemic issues, and the IMF/ECB and the freaking Germans when all this shit hit the fan originally.
It is ludicrous not to include private lenders in the list of 11. It was known that the EU was not a common currency area: this blowup was inevitable and called ahead of time. (What was not anticipated except by a few was the magnitude of the recession/depression.) The dysfunctional tax regimes in Greece and for that matter Italy weren’t exactly state secrets. If you are a bond analyst, you are not suppose to just grab a credit rating from Moody’s, plug it into your spreadsheet, place a bid and leave at 10:30AM for golf. You are suppose to be familiar with, oh, let’s say the internet.
Back in 2004, Greece was ranked 49th in the world by Transparency International’s Corruption Perceptions Index (with 1 being honest and 145 being Bangladesh). That sandwiched Greece between Seychelles and Suriname. Could be worse. But there’s a phrase that applies +5 to profession bond buyers: caveat emptor. http://www.transparency.org/research/cpi/cpi_2004/0/
(ETA: “Various Greek parties” were on the list of 11.)
[QUOTE=Measure for Measure]
(ETA: “Various Greek parties” were on the list of 11.)
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Not on the list I’m looking at. The only ones for the Greeks are the 1) The current Greek government and 10) Greece’s other political parties…and I agree with both of those for the reasons generally stated under each.
Well, I suppose if you are listing a top 11 ‘in no particular order’ then I guess I can agree they should be on the list somewhere. I’m not a bond analyst (nor, sadly, a bond agent with a 00 rating drinking vodka martinis shaken, not stirred) so I don’t know what they should or shouldn’t know or how they judged or judge risk. I’ve seen various analysis done of similar criticisms for bond companies wrt the 2008 cluster fuck and I know that I don’t know enough to understand all the complexities in play. I DO know that it’s not really fair to place all or even most of the blame on them though, since it was the overall situation and the various governments involved that played a large role in how companies judged and understood risk. Obviously these guys trusted the wrong people, as Shodan’s post pithily points out.
But financial institutions buying financial instruments don’t operate on the basis of trust. (Nor do I at times: I trust Wells Fargo approximately as far as I can throw them.) They operate on the basis of verification, or at least they should.
That said, hurray for European financial institutions! Keep making naive lending decisions: in particular forward funds following the Grexit! Huzzah!
Not that it matters but I folded “Various Greek parties who cooked the books” into #10: "Those were the parties who’d gotten Greece so deeply in debt, those were the parties who’d set up Europe’s least effective tax collection system, and those were the parties who’d created the bad economic policies they were now claiming to be “reforming.” Yeah, book broiling should have been mentioned. If only to evaluate the practical extent of it.
I honestly don’t know enough about this to apportion blame or even begin to. I will say that making the European banks out to be doe-eyed victims is laughable though perhaps sadly accurate. Sort of like US mutual funds buying Puerto Rican bonds for a couple of extra interest rate points.
[QUOTE=Measure for Measure]
But financial institutions buying financial instruments don’t operate on the basis of trust. (Nor do I at times: I trust Wells Fargo approximately as far as I can throw them.) They operate on the basis of verification, or at least they should.
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But they do operate on a model of risk that was different before the 2008 meltdown than after, and they weren’t working with perfect information on the actual state of the Greek liabilities and debt model. The trust thing was, presumably, a joke…I thought it was amusing anyway when I read his post.
I took it as the other Greek political parties, and my own list included the Greek PEOPLE as well, which weren’t on the list and I thought that’s what you were addressing. In any case, certainly the previous Greek governments were heavily to blame in all of this, since presumably THEY at least they had access to what the real balance sheets looked like and they knew they were spending borrowed money like water simply to make their voters happy so they would vote for them more.
I’m not doing that, however. I just didn’t think they should have been the number 2 on that list, but then I didn’t notice when I skimmed the article that it was ‘in no particular order’, and that a lot of especially left leaning Europeans (and Americans for that matter) put them at the top of any list. Myself, the fact that they were foolish enough to make loans to the Greeks is understandable based on how they saw the risk picture before 2008, which is that even if the loans might not be that wise specifically, in the aggregate they would be fine especially with the EU/ECB and folks like Germany backing the Greeks. Obviously, that was a foolish premise, but it seems to me that the major portion of the fault for this disaster resides with the folks who asked for those loans and the folks who tried to deal with the crisis by jerking their knees…and, of course, the folks who have brought us to where we are today, with Greece looking down the cliff at the long drop awaiting them if they move even a tiny bit further. YMMV of course, but I’m definitely not saying ‘the European banks out to be doe-eyed victims’.
Christine Lagarde spoke to Alexis Tsipras today, and explained that the International Monetary Fund can no longer provide money to Greece after it failed to repay €1.6bn last week.
Under IMF rules, once a country is in arrears, fresh funds cannot be supplied, a spokesman explained.
The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.
ELA can only be provided against sufficient collateral.
The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.
In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.
The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.
This basically (I think) decreases any amount of liquidity the Greek banks can get from the ECB and (I think) precludes the banks reopening until there is some kind of deal. Which I don’t think is happening any time soon.
Frankly, I am not sure how the hell the whole country can subsist on cash only and that at $60/day per person for even a short time. Something’s gotta give.
By the way - I saw someone’s commentary that Greece de facto has two currencies right now. Both of them Euro. One of them is “Euro in the bank” and the other one is “physical Euro banknotes”. The second one is a lot more valuable than the first one, and there are probably already informal exchanges that convert between the two.
There was a poster up thread who mentioned barter as well. I was watching a BBC video earlier (sorry, no link atm) about this and it’s already happening in some of the Greek cities and on several of the Greek islands.
The difficult problem now is to find a good way forward. The purpose of assigning blame is to avoid repeating mistakes. But in assigning blame there is one tendency which is always wrong. Blame should be assigned to institutions not to an entire people:
Most Dopers would agree that human genes vary little between Germany and Greece, and that human nature is largely the same everywhere.
What does it mean to blame the Greek people? XT, are you specifically targeting wealthy Greeks who, rather than paying their taxes, spent the money on yachts? If the U.S.'s IRS were toothless do you think Americans would still pay their taxes?
It is important to face a crisis like this with a clear mind about political and economic realities and not treat it as a morality play. This applies to both sides of the political spectrum of course; neither “Those rich bankers shouldn’t have been so greedy” nor “Those lower-class Greeks shouldn’t be so lazy” is useful. Instead, the task is to set institutions on a proper path.
I would tend to think the “Y” wouldn’t effect anything. So long as they’re issued with ECB authorization, they’re legal tender, regardless of where they were printed. If, say, Missouri suddenly had some sort of financial crisis, that wouldn’t effect the Federal Reserve notes that were printed there.
That’s a good point. As I understand it, some of the pre-existing German debts to American creditors were not paid for 100 years, after American restructuring. America wanted a strong, economically healthy Germany after WWII, and paid for it.
Of course, the Greek government could define the Drachma as being worth whatever it wants them to be worth. Just as the USSR defined the Ruble as being worth 35 USD.
Anything is worth whatever a willing buyer will pay a willing seller.
The Ruble never sold for $35 - maybe 0.10 on a good day.
It’s not a conspiracy, but big chunks of it are nevertheless true: Wall Street banks perpetrated fraud on an epic scale, knowingly selling (and profiting from the sale of) fraudulent securities. When the shit hit the fan, the banks came running to the government for safety - and it was given. In return, no CEO or other senior official of any Wall Street bank was ever prosecuted, despite clear evidence of what they’d done, and despite the massive financial hardship it caused.
The implications are this: money talks, and money writes the rules. Moreover, if you’re rich enough, the rules don’t apply, even the ones you wrote yourself.
