Greece, or why Europe's doomed

[Geoffrey de Ste. Croix]

Greece, or why Europe's doomed

I see the Helots are getting a bit uppity again. One would hope that the debt colony is kept placated whilst the French, Dutch and German elections take place before the blood funnel is once again rammed in.

[Vulgarian Visigoth]

Greece, or why Europe's doomed

I know this is three days old but I thought I'd mention it since I think no one has. This is the kind of 'moderate' Labour type Tubbs loves:

http://www.bbc.com/news/world-europe-39350113

[The Awesome Berbaslug!!!]

Greece, or why Europe's doomed

The endless cycle moves on.

You know, If Greece didn't spend the last decade fucking around, this would be over by now.

[ad hoc]

Greece, or why Europe's doomed

This sounds like a book worth reading https://www.theguardian.com/books/2017/may/03/yanis-varoufakis-greece-greatest-political-memoir

[ursus arctos]

Greece, or why Europe's doomed

Excellent, that's ursus minor's birthday present sorted.

[The Awesome Berbaslug!!!]

Greece, or why Europe's doomed

He has an interesting article about what Theresa may can come to expect.

I'm not sure about his bit about democratic mandates though. There's a parallel to be drawn between Greece and the UK in this respect, but I'm not sure that he's the man to draw it. There's always a lot of self-justification going on in his articles. The thing that I hold against Varoufakis, that I respect in Tsipiras, is that Varoufakis spent all his time drawing attention to himself and getting nowhere before flouncing away, while Tsipiras Said fuck it, and has settled down to fight the long battle to save Greece from Fascism, all within the context of the grinding reality. That's a job for a man with unchanging goals, not unbending principles, publicly held.

So while I'm sure his account of how the EU spins is illuminating and accurate, I have little time for his complaints about it, given that he freely admits that his approach was motivated by Game theory, and as such involved an awful lot of spin.

The thing is that The EU seems to have two main approaches when dealing with democratic mandates. Based on the simple fact that the EU is 28 different democratic mandates, operating in a way that they can all live with. They are herding really aggressive anti-social Cats.

The first is that you can only vote to change what you do in the future, not to get out of things you agreed to in the past. (The Italy clause) I.e. The UK will leave the EU in 2019, and have no relationship with the EU, but they have to pay for their share of the pensions of EU civil servants employed between 1973 and 2019. They can't vote to walk away from commitments, that they voted to make.

Similarly variously legally elected greek Govts, entered into all sorts of arrangements to borrow all sorts of money, and you can't just vote to walk away from that. Every EU country has particularly low borrowing costs for its current level of accumulated debt, because it is considered inconceivable that an EU country will default on their debts. If Greece is allowed to Default in a major way, then everyone will suffer, and what will italy do then? Greece's debt will just have to be warehoused until they reform and recover.

The Second is that you can only vote for things that you yourself intend to do, with money you have. And its corollary no-one has a mandate to get other people to do things, or give you money. This is where Varoufakis ran into trouble. You can't have a mandate that runs "These are the terms under which you should give us money." Because other people say that they have a democratic mandate to behave otherwise. He spent his time radically overplaying his hand, and grandstanding to the outside world and didn't get very far.

This is the mistake that a lot of english politicians and enthusiastic brexiteers are making. They think that their vote means that the EU should let them away with paying the bill, and give them a good trade deal, and every step away from what getting what they feel is their due is the action of an enemy acting with ill intent, rather than the inevitable and foreseeable consequences of leaving the Single market, and not wanting to have freedom of movement and the ECJ.

This belief is an utter delusion, yet it seems to be the basis of the Tory Party campaign for this election. So when Theresa May complains about the EU interfering in the UK election, she's right in a way, in that they are interfering, but she attributes completely inaccurate motives to them. The EU really doesn't care who the Govt of the UK is at this point or how strong their mandate, they just want to point out that the entire Discourse around the EU is completely fucking delusional.

[anton pulisov]

Greece, or why Europe's doomed

Saying that Varoufakis failed implies that he somehow had a chance of succeeding.

[The Awesome Berbaslug!!!]

Greece, or why Europe's doomed

I didn't say he failed. I think he succeeded at his major aims.

Can you name any other former Greek minister?

[anton pulisov]

Greece, or why Europe's doomed

You know I can't.

The Second is that you can only vote for things that you yourself intend to do, with money you have. And its corollary no-one has a mandate to get other people to do things, or give you money. This is where Varoufakis ran into trouble. You can't have a mandate that runs "These are the terms under which you should give us money."

He didn't want more loans, that was the whole point.

The point Varoufakis was trying to make to the Euro ministers was that it was possible to construct a better deal that would be better for Greece which would, in turn, result in better returns for the European taxpayers. It soon became obvious that the other Euro ministers had no interest in getting a good deal for the European taxpayers. It probably had something to do with all the other ministers having ties to the financial sector through previous employment and/or party donations.

And that's ultimately where the comparison between Greece and Brexit falls down. Syriza and the Tories have completely different motives.

[NHH]

Greece, or why Europe's doomed

The Awesome Berbaslug!!! wrote: I didn't say he failed. I think he succeeded at his major aims.

Can you name any other former Greek minister?

As are seriously suggesting that Varoufakis was motivated by some kind of egotism?

[The Awesome Berbaslug!!!]

Greece, or why Europe's doomed

It soon became obvious that the other Euro ministers had no interest in getting a good deal for the European taxpayers. It probably had something to do with all the other ministers having ties to the financial sector through previous employment and/or party donations.

hmm the financial sector being bailed out happened a long time before. Nearly all greek debt was held by EU govts, and the Troika, and the greek pension fund by the point that Yannis appeared on the scene. A lot of the money he was talking about writing off would have been taxpayer money.

The problem still remains that by adopting the approach he did, asking for a debt reduction, rather than a debt holiday, (Which amounts to much the same thing, and is what is going to happen eventually) and by doing much of his negotiation to the gallery he wound up making it look to the EU as though Syriza were just the latest manifestation of Greek clientelism, rather than something different.

I mean he did so well at winning them over that they asked for him to be replaced, and that's quite an achievement for a negotiator.

As are seriously suggesting that Varoufakis was motivated by some kind of egotism?

well maybe a little. It's not unknown among political figures, particularly on the more radical left.

[anton pulisov]

Greece, or why Europe's doomed

hmm the financial sector being bailed out happened a long time before. Nearly all greek debt was held by EU govts, and the Troika, and the greek pension fund by the point that Yannis appeared on the scene. A lot of the money he was talking about writing off would have been taxpayer money.

And who stands to profit from the firesale of Greek public assets? Would it be the corporations that European politicians sit on the boards of?

We can either follow the money trail or make baseless suggestions about people based on photos of them on motorbikes.

[The Awesome Berbaslug!!!]

Greece, or why Europe's doomed

Hmm, that's a bit different to the last time, and Privatization in these circumstances is not a done deal. The IMF and the World Bank and the EU don't particularly care about privatization usually. Privatization is usually brought up by govts to get wiggle room on other aspects of meeting targets. (Instead of making cuts, or raising taxes to the value of X we'll sell something instead sort of thing)

Also just how attractive are most of these assets? Virtually everything in greece is fucked, and requires huge amounts of investment to get up to modern standards, and Greece being fucked in general means that the return on investment is a very long way away.

Before the bailout, all the talk was about how bertie ahern was going to be the front man for a chinese company that was going to buy all our forestry. As it turned out, the only thing we privatized was Bord Gais Energy, the commercial generation and supply arm of Bord Gais, while hanging onto to the network. And in fairness it's not exactly clear why a government should run two separate electricity generation utilities. (We chose instead to focus on Nama as a means to benefit vulture capitalists, but that was entirely and utterly our own doing)

The thing is that If greece wanted to avoid privatizing things, they could easily have helped prioritize that by agreeing to other things that they should probably agree to anyway. Given that three quarters of Greece's debt was held by other EU govts, or their own pension fund, and the IMF and the World Bank were on the hook for most of the rest, a debt writeoff was never ever going to happen.

they should have presented themselves to the EU as partners in the recovery of Greece, that the govts who came before fucked everything up, through bullshit clientelism, but that it was your aim to turn greece into a modern developed country capable of providing a good standard of living for its people. And then proceeded to talk to them in their language.

The EU and Greece broadly want the same thing. A debt write off would be nice, but The aim for Syriza should have been to change what the EU wanted to suit themselves, rather than waste time trying to force your way on them, and ending up getting nothing of what they wanted, and pissing off everyone involved.

Instead they should have tried to negotiate that the rest of the EU countries take over the rest of Greece's debt, and charge them a fraction of the interest they would have paid otherwise. If Greece had to pay 1% interest when they were facing 7% on the market, that is effectively an 85% writeoff for 20 years. Syriza should have just focused on accelerating this process rather than looking for what would have been an immensely problematic and damaging write off.

To do this They should have sworn to only spend what they can collect in tax and that they would take the heat from the population, but in order to be able to do this, and to restructure their economy (Important to talk like this) they couldn't keep paying interest payments so please accelerate the Debt holiday.

and then in order to convince the EU that they were serious, and that they were different to previous greek govts, they should have plonked their copy of the World Bank's doing business report on the table, pointed to where they are (61), then pointed at the Former Yugoslav republic of Macedonia, in tenth place, and said that the only way that greece is going to recover is if we are up there in 5 years, but that they will need help. That would have got their attention.

The EU doesn't really care about the Debt so much. It is in the region of 1.5% of the EU GDP. They're not particularly worried about Greece's budget Deficit that much either, it's not a particularly large amount of money. The EU is primarily worried that Greece is going to remain an utter economic wasteland.

Getting control of their finances is one step, and dealing with the debt is another step, but even before the boom foreign investment in Greece was limited to aspects of the tourist industry, because Greece was and remains an absolute fucking clientelist nightmare to do business in. Here's the report for Greece

this sort of thing doesn't involve sacking workers, or cutting wages, Denmark are third in this ranking, Norway 6th, sweden 9th. It doesn't involve having large amounts of money. Macedonia are 10th, and before the bubble burst, they had literally nothing compared to Greece, but they're catching up very fast. It's considerably less hassle to manufacture something in Macedonia, and export it to the EU than it is in Greece, and Macedonia isn't even in the EU. (macedonia is a gangster state however which acts as a dampener on investment)

What it does require is the radical overhauling of your civil service. Greece doesn't really have vary many civil servants. and they're really not very well paid. They're just doing the sort of thing that Civil servants used to do in the 50s in Ireland. often in similar conditions (It was around 2000 before the Department of industry and commerce had more civil servants than the Dept of Agriculture in ireland)

There isn't any need to fire people, which would cause a political nightmare, and lead to a less reform minded govt, but Greece will need help from the EU in restructuring their Public Service, which will require retraining and investment, and facilitate recovery.

The two areas where greece lags furthest behind are in lacking any coherent form of land registry. it's entirely on paper, and it makes it very expensive and time consuming to buy and register a property in greece, and it makes it impossible to tax things, because there is no computerized record of who owns what.

But perhaps most importantly they need to radically simplify their overall tax system which is essentially too complicated to adequately enforce, or comply with. Denmark are the country you want to be learning from in this instance, and they need to reform their labour market regulation system to enable as many companies as possible come in from the black market, without killing everything.

The Second broad area involves changing the legal system. The first area is in enforcing contracts. That requires technical legal reform, as does improving Greece's insolvency framework. Following on from that are improvements to the legal framework around getting credit. Basically just ask for a template, best practice framework, (You can be sure that the EU has one on file) check that it's in accordance with the Greek constitution, and just change your system. Then get financial help to ensure that your legal system can make these laws run as smoothly as they can.

That is the sort of thing you say to the EU when you want to reform your economy without firing a whole load of people. That is how you get around privatization. You offer them a whole heap of reforms that you want to implement yourself, that have a limited social cost, make recovery more likely, and they get a hell of a lot more relaxed about this nightmare being resolved at some point in the future.

And when you have got this far, then start talking about the political cost of implementing all these reforms, in a time of economic crisis, while dealing with an influx of refugees, and point out that this is a bad time to be messing around with pensioners as well. It's important that all these good intentions don't slide into fascism. Oh and how about some fucking help with the refugees?

You also get across to them that unlike previous greek govts, you are interested in making Greece a successful member of the single market. Beyond that they don't really care all that much what you spend your money on, or what sort of system you try to build on the back of your govt revenues.

To be honest, it would have caught them completely off guard because it's a lot more than they would have hoped for. The point is that Syriza were supposed to mark a departure from past greek govts, who were literally doing everything wrong.

There were an almost infinite number of things that they could have cobbled together as steps they would take to fight the old-style clientelism. If the EU were convinced that Syriza were going to take a flaming sword to clientelism bit by bit, there would be a lot less pressure on them to do things that would damage their political standing, and a lot more in the way of help.

But the pay off, aside from having more control on where the burden of greek restructuring initially falls, is that it would have increased available money, by cutting interest repayments, while simultaneously making greece more attractive to set up operations in. this is literally the only way that Greece's economy is going to ever grow.

It's a model that is working really well for virtually every former eastern bloc EU country. the more they adhere to it, the faster they grow, and these are the people that Greece are competing with. if the greek economy starts to grow, then that reduces pressure for cuts, and allows for the gradual expansion again of government expenditure, often at quite impressive rates. We've used to to recover from Bankruptcy twice now. It's fucking rocketfuel.

I appreciate that this may seem a little captain hindsight, but this was all obvious at the time. Game theory is utterly fucking useless if you get your opponents motivations wrong. He should have paid more attention to Ireland. It's not always clear what Ireland is up to, but it is worth pointing to the absolutely enormous amount of shit we get away with. It would seem that Ireland is pretty deft at sensing what way the wind is blowing and reacting accordingly.

Our plan to burn the bondholders died a swift death when we figured out that wasn't going to happen, and we quickly changed tack. It has ultimately worked out very well for us. We managed to go through a bankruptcy and emerged on the other side with our valuable tax haven status intact. Our EU delegation are clearly fucking ninjas. It's also worth pointing out that we have no idea who these heroic men and women are. They are our night's watch, our brave 300, our modern day Fianna.

[anton pulisov]

Greece, or why Europe's doomed

The problem here is that you are putting forward this straw man narrative about Varoufakis being a rock star professor who was making no proposals at all for legal and tax reforms, and that he just wanted to get free money from the EU to continue a corrupt Greek state.

Varoufakis kept going in to the Eurozone meetings and saying that Greece was corrupt, that tax and legal reform was needed... and the Euroministers just straight up ignored him. He was an outsider and they were the serious people. I mean, he had his programme designed in collaboration with that far-left, socialist organisation known as the OECD... how dare he. The Eurozone ministers were mostly pissed off that ND hadn't won. If ND had made the same proposals, they would have been rubber stamped.

The reason the Euroministers love the 'reforms' in Ireland is because there have essentially been no reforms. The Irish people were squeezed for the necessary amount of money, the Irish establishment is still very much in charge and the next housing bubble is just around the corner. It has been a very successful capitulation indeed.

[The Awesome Berbaslug!!!]

Greece, or why Europe's doomed

The problem here is that you are putting forward this straw man narrative about Varoufakis being a rock star professor who was making no proposals at all for legal and tax reforms, and that he just wanted to get free money from the EU to continue a corrupt Greek state.

no, not quite. I would have quite liked him to be a success. I'm saying he went about his job in a cack-handed way, that ensured that he got nothing of what he wanted, and a major part of this process was conducted in a deliberately eyecatching way that was completely counter-productive. .

Both solutions involve greece receiving large amounts of other people's money. Say Ireland has taken on €1 billion of greek debt. What that means in practice is that Ireland has borrowed €1 billion, at whatever rate applies to Ireland, and lends it to greece at 1%, with the Irish govt having to pay the difference. Greece's problems with debt are to do with the rates that they are charged on the debt that is not already held by the other EU govts. This is the issue for Greece.

If you think of National debt as a flow of payments you have to meet, the EU approach is far better from the point of view of greece. Greece has a debt to GDP ratio of 180%. 120% is bankruptcy, and 60% is the maastricht target. Whatever debt write off greece would receive would be a long way short of 100%, so there will be debt service payments either way.

From the point of view of a govt, you're considerably more interested in your debt service levels, than your debt level. Japan has a debt to gdp ratio of over 200%, but has a debt service burden in the order of 2% of GDP.

Consider the following scenario, varoufakis emerges from discussions having received a write off of half of the debt. Greece are no longer bankrupt, however they are now back on the bond market, and on the hook for debt repayments at market rates of 5% of 90% or GDP, or 4.5% of GDP every year.

scenario 2, the EU govts take over the rest of Greece's debt and charge them 1% interest on 180%, which amounts to 1.8% of GDP at current levels. For 20 years Greece is paying vastly less money. At the end of 20 years, greece takes back this debt burden, and if the economy has grown by 50% Then they won't be bankrupt, but Even Northern ireland managed Growth of 50% over 20 years, so that would have to be at the lower end of expectations. Greece is starting from a very low base.

In the first scenario, the EU Govts have to turn to their people and deal with the problem of giving the feckless Greeks a debt write off with their money in a time of relative austerity. This would be overwhelmingly politically toxic for the EU.

In the second scenario the EU Govts announce that the Greek Debt crisis over, and that responsible Greece will pay back its debts, (In practice no-one ever does this) and the money that they are slipping to Greece sits there in the footnotes of the debt service figures of 27 other EU states.

I'm also not convinced that the EU govts wanted to deal with a particular Greek political party. The reason that they were still struggling with the Greek problem in 2015 was because all the previous Greek Govts were completely fucking awful at delivering what they were supposed to.

My point is this. The easiest way to differentiate Syriza from the other Greek Govts, and to turn the Greece-EU dynamic from open warfare, into a really beneficial partnership, would just have been to accept that a debt write off is never going to happen the way they want it, and asking for it was just counter-productive.

Then just say in public that you "accept that Greece must live up to its commitments, and will work with their partners to achieve this," and then watch the problem disappear for 20 fucking years, while you get on with Dragging your country out of the shit.

That's when you whip out your plans for wider reform, and they listen to you. If you've opened with a demand for a debt write off, they're no longer listening to you. If you're conducting discussions with them, while also running a public campaign with the outside world, then you are pointlessly provoking them. It was a foolish way to behave, and only made things worse.

And Every time I read one of his articles, or an interview with him, there is loads of good and shrewd stuff in there, but it is always filtered through the prism of justifying this period. like in that article I posted above. It's like being aware of Mary O'rourke's continual campaign to rehabilitate the memory of Brian Lenihan Jr. He reminds me a lot of Thierry Henry on Sky Sports. There's a lot of legacy curating going on.

The reason the Euroministers love the 'reforms' in Ireland is because there have essentially been no reforms. The Irish people were squeezed for the necessary amount of money, the Irish establishment is still very much in charge and the next housing bubble is just around the corner. It has been a very successful capitulation indeed.

erm, restructuring your tax base away from bubble taxation to more stable tax sources is a fucking massive reform. It's the really hard and painful bit that everyone struggles with. The way the burden has fallen is a reflection that taxes on businesses and capital gains and housing went away for 10 years. But that will change as these taxes return, but how we deal with that has changed.

In the midst of the Bailout we voted nearly 2:1 to adopt the EU fiscal compact treaty, which is going to have enormous impacts on the way we structure our tax system. We've essentially signed up to a regime explicitly designed to prevent us from using bubble taxation to fund long term financial commitments. This is how we went bankrupt twice before. This is an absolutely enormous change, and will completely transform Irish politics over time. You could see its impact in the last election, but it will take time to settle down.

Brendan Howlin sat down with the civil service, and the unions, and completely restructured the civil service, in a process that everyone seems to be very happy with. an awful lot of problems arose over the last 20 years because the underlying structure and practices of the civil service hadn't really changed all that much since it was headquartered in Dublin Castle. The Irish govt was pretty enthusiastic in the movement to gradually turn up the heat on corporate tax, particularly as we stand to benefit disproportionately.

A lot of important things have changed. Even the property situation is fucked up for an entirely different reason. Prices are rising now because a series of massive market failures have lead to no new buildings, at a time of increasing demand. It's a problem that can be addressed by building houses. This is markedly different to a situation where prices are soaring, even though you're building twice as many new houses as you need. It's still a pain in the hole, but it requires completely different solutions.

[Diable Rouge]

Greece, or why Europe's doomed

Interesting developments, where it appears Spain and Italy have backed Macron's call for the introduction of eurobonds. Of course, Merkel and Schauble are the ones who ultimately require convincing, and Berlin will hardly favour becoming the effective backers of a European Federal Reserve, but if popular support for the EU is to be revived, they may have little choice.

[Ginger Yellow]

Greece, or why Europe's doomed

Warren embarrasses Mnuchin on Glass-Steagall. I suppose he can't just come out and say that what they mean by "a 21st century Glass-Steagall" is rolling back all financial services regulation from the 21st century.

[anton pulisov]

Greece, or why Europe's doomed

Diable Rouge wrote: Interesting developments, where it appears Spain and Italy have backed Macron's call for the introduction of eurobonds. Of course, Merkel and Schauble are the ones who ultimately require convincing, and Berlin will hardly favour becoming the effective backers of a European Federal Reserve, but if popular support for the EU is to be revived, they may have little choice.

Once re-elected, Merkel can safely dispose of Schauble, and then there will be Eurobonds. Unless she plans on running again in 2023... surely not?

[Ginger Yellow]

Holy cow:

[The Awesome Berbaslug!!!]

What does that graph mean?

This should make the next round of discussions between Greece and the EU very interesting indeed.

[Ginger Yellow]

It means Italian bank accounts are spectacularly expensive. Especially when you consider the rate of interest they pay (or the banks earn on their loans), compared to every other country until the UK.

[E10 Rifle]

This is an interesting alternative in Greece, on a micro-level.

[Ginger Yellow]

This week's tale of insane Italian retail investors and the shitty banks that prey on them.

Walter Baseggio, a 74-year old pensioner in Montebelluna, where Veneto Banca was founded in 1877, said the lender and its employees were like family for as long as he can remember. When he decided to retire in 2009, he sold his half of a car dealership and invested the proceeds in his bank's stock without hesitation — that's just what everyone did. It cost him 800,000 euros.

All his money. In the equity of one, bad, Italian bank. In 2009.

[ursus arctos]

It really is a completely incomprehensible culture.

[The Awesome Berbaslug!!!]

That's amazing. Think of how cunning a retired Italian used car salesman was over just so long, in order to be in a position to do this? It's like a professional pickpocket giving a housekey to a professional house burglar.