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Greece Reaches Deal With Europe That’s Quite Similar To The One Voters Rejected

Greek European Union Flags

European leaders and the Greek government have reached an agreement regarding Greece’s debt problems that bears a lot of similarities to the deal that Greek voters rejected just a week ago in a nationwide referendum:

BRUSSELS — Greece and its European creditors announced an agreement here on Monday that aims to resolve the country’s debt crisis and keep it in the eurozone, but that will require further budgetary belt-tightening that Primes MinisterAlexis Tsipras could have trouble selling back in Athens.

The agreement does not guarantee that Greece will receive its third bailout in five years. But it does allow the start of detailed negotiations on a new assistance package for Greece. One open question is whether the deal gives enough confidence to the European Central Bank to let it continue channeling sorely needed emergency funding to Greek banks hollowed out by a long economic slump and the withdrawal of billions of euros in recent months by account holders as the country’s financial crisis worsened.

The tough terms, demanded by Germany and others, are meant to balance Greece’s demands for a loan repayment system that will not keep it mired in recession and austerity budgets, against creditors’ insistence that loans worth tens of billions of euros not be money wasted. Testy negotiations and Greece’s inability to live up to the promises made in its previous bailouts had cast a shadow of distrust over the weekend’s discussions.

An accord would end five months of bitter negotiations that raised concerns that Greece would be the first country to be forced out of the euro currency union — a development that proponents of European unity had sought desperately to avoid.

“The advantages far outweigh the disadvantages,” Chancellor Angela Merkel of Germany told a news conference, explaining her decision to accept the deal and recommend that the German Parliament also grant its approval.

(…)

The total commitment of money has not been disclosed. But a document by the eurozone leaders noted that experts had estimated that Greece might need from 82 billion to 86 billion euros more — $91 billion to $96 billion — to shore up its economy, rebuild its banks and meet its debt obligations over the next three years. The document said Greece and its creditors should seek to “reduce that financing envelope,” if possible.

As part of Greece’s commitments, Ms. Merkel said, a fund will be created to use the proceeds from selling off assets owned by the Greek government to help pay down the country’s debt. That fund would be “to the tune of” €50 billion, she said.

Greece will also be required to seek assistance from the International Monetary Fund and to agree to let the organization continue to monitor the country’s adherence to its bailout commitments. The Greek government had resisted a continued role for the I.M.F., seeing the fund’s involvement as unwanted meddling.

The Greek Parliament will also be required to approve the terms of the agreement “without delay,” according to the document released on Monday morning. One of the sticking points in the negotiations over the weekend had been a demand that the Parliament sign off on any deal by Wednesday, but that requirement appears to have been relaxed.

During the marathon negotiation session, Mr. Tsipras, the Greek prime minister, struggled to reach compromises on economic overhauls that the creditors demanded but that his left-wing government may find difficult to sell at home after Greek voters overwhelmingly rejected softer terms in a referendum just a week ago.

A bleary-eyed Mr. Tsipras, speaking to reporters here on Monday, tried to put a positive spin on what might be seen as an almost total capitulation by Athens to creditors’ demands for tough austerity. He said that the threat of Greece being forced out of the eurozone had been avoided and a promise of debt relief and growth funds had been secured.

“We gave a tough battle for six months and fought until the end in order to achieve the best we could, a deal that would allow Greece to stand on its feet,” Mr. Tsipras said. “We faced hard decisions, tough dilemmas,” he said, adding that the Greek authorities finally “assumed the responsibility of averting the extremist ambitions of the most conservative circles in Europe.”

But any easing of Greece’s debt repayment obligations would not include something Greece had previously made a condition of any deal: a so-called haircut, or reduction of the overall debt, which is more than €300 billion. The document issued on Monday made its resistance to that demand clear in one sentence: “The Euro Summit stresses that nominal haircuts on the debt cannot be overtaken.”

The first takeaway from all of this, of course, is that it seems quite apparent that Prime Minister Tsipras miscalculated in the political game he was playing with his European counterparts. Over the past several weeks, Tsipras has played the Greek public off the Europeans with the idea that their rejection of harsh conditions for another bailout deal would result him having more bargaining power in Brussels. During the run up to last week’s referendum vote in fact, that’s exactly what Tsipras was telling voters as they went on to overwhelmingly reject a deal that European leaders had already said was off the table in any case. The logic of Tsipras’s argument was never hard to follow to begin with since he seemed to be arguing that a rejection of the deal that Europe had offered would mean that he’d be in the position to negotiate a better deal. Logically, this is an argument that never really should have made sense to Greek voters since it was largely premised on the idea that the Europe needs Greece more than Greece needs Europe. If there’s anything that the last several years have shown, it is that the opposite is true. Thanks largely to an unmanageable welfare state combined with an economy that has been in the doldrums for decades, it’s clear that it’s the other way around. Europe has plenty of its own problems, but in the long run it would be just fine without Greece. Greece, on the other hand, would likely be in even worse shape than it is today without Europe. Given that disparity, the idea that Tsipras was ever in a “strong” negotiating position is fundamentally silly. Add into the mix the fact that Greece is still in the middle of a cash flow crisis so severe that the banks look as though they will remain closed for a third consecutive week, and it becomes that Brussels and Berlin have been the ones holding the winning cards all along.

Even with the new deal announced, it’s not clear that everything is smooth sailing going forward. The Greek Parliament will still need to approve the agreement, and even though Tsipras’s coalition has a majority there it’s still not clear that he can get it through. Even if it does pass, though, the fact that the deal announced today is arguably far harsher than the one that was rejected a week ago could have an impact on the political future of Greece. As things stand right now, the nation seems set for more austerity in order to satisfy its creditors, but nobody, not even the people opposed to austerity, seem to have any credible ideas for sparking economic growth in the country. Indeed, it seems fairly certain that as long as the Greeks continue on the same social welfare path that they have been on they are no going to solve any of their long term problems regardless of whether they currency they use is called the Euro or the Drachma. Most of all, though, without those long-term solutions, it is fairly certain that Tsiras, or more likely whomever ends up succeeding him, will be sitting across the table from these same European bankers in a few years and we’ll be going through this same crisis all over again.

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About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May, 2010 and also writes at Below The Beltway. Follow Doug on Twitter | Facebook

Comments

  1. C. Clavin says:

    This deal only dooms Greece to 3 years that will be far worse than the last 5.
    They’d be better off leaving the EZ.

    Like or Dislike: Thumb up 8 Thumb down 1

  2. gVOR08 says:

    I read over the weekend that Tsipras didn’t have any plan in place to cut loose from the Euro and issue Drachmas. If true, that seems amateurish. First, you have to have plans for contingencies, even remote contingencies. Second, he needed an artfully leaked credible “secret” plan in place to back up his negotiating position.

    Like or Dislike: Thumb up 5 Thumb down 0

  3. C. Clavin says:

    @C. Clavin:
    In fact this deal is so unbelievably bad…that I think the EZ is trying to force Greece out.

    Like or Dislike: Thumb up 6 Thumb down 2

  4. Jack says:

    @C. Clavin:

    They’d be better off leaving the EZ.

    What would happen to Greece?

    The previous Greek Prime Minister, Antonis Samaras, warned that living standards could fall by 80% within a few weeks of exit.

    Unable to borrow from anyone (not even other European governments), the Greek government would simply run out of euros.

    It would have to pay social benefits and civil servants’ wages in IOUs (if it pays them at all) until a new non-euro currency can be introduced.

    The government would not be able to repay its debts, which now amount to a total of about €320bn (£237bn), most of it owed to European governments and agencies and the International Monetary Fund.

    The government would have to impose a freeze on withdrawals and on people taking money out of the country. This could lead to queues of ordinary Greeks trying to empty their bank accounts before they get converted into a new currency worth substantially less than the previous one.

    In the longer run, Greece’s economy should benefit from having a much more competitive exchange rate.

    But the devaluation would not solve underlying problems in the economy, including poor tax collection and a struggle to control government spending.

    There is also a real possibility of a surge in inflation.

    Tax receipts would probably fall as the economy contracted, so the government might finance spending by printing money.

    The likely currency depreciation would also be inflationary. It would make imported goods – which in Greece includes a lot of its food and medicine – more expensive.

    http://www.bbc.com/news/business-31457991

    Yeah, that’s so much better than the deal the got. Stick with US politics, you are much less bad at it.

    Like or Dislike: Thumb up 8 Thumb down 6

  5. Hal_10000 says:

    Amazing, the math of Greece’s finances didn’t change because people voted against it.

    Like or Dislike: Thumb up 5 Thumb down 0

  6. C. Clavin says:

    @C. Clavin:
    The Euro is the very cause of the problem…and so Greece should endure decades of imposed poverty to maintain a currency and economic structure that is fatally flawed and no one…no one… should have embraced to begin with.
    I hate to say it…but Jenos was right last week when he pointed out that Thatcher predicted this from the get-go.

    Like or Dislike: Thumb up 6 Thumb down 2

  7. Mu says:

    It’s interesting to read the howling in the European left leaning press that the EU governments didn’t respect the clear will of the Greek people and gave them more money for free. Kinda like parents who ignore the demand of their children for $50 a week and 4 h of taxi services.

    Like or Dislike: Thumb up 5 Thumb down 4

  8. Scott says:

    I really don’t have much to add to this discussion but I was catching up on my reading this weekend and read this National Geographic article from the Mar 15 edition.

    http://ngm.nationalgeographic.com/2015/03/two-cities/nicolson-text

    Takes a larger look at the situation.

    Like or Dislike: Thumb up 1 Thumb down 0

  9. C. Clavin says:

    @Jack:
    Greece is giving up their sovereignty in exchange for absolutely no hope of improvement.
    Personally I’d rather maintain my sovereignty with a slim hope for improvement.
    I can understand why you’d rather have the EU rule you…it’s the Republican in you to just give up.

    Like or Dislike: Thumb up 3 Thumb down 3

  10. Avid sportman says:

    @Jack:

    This could lead to queues of ordinary Greeks trying to empty their bank accounts before they get converted into a new currency worth substantially less than the previous one.

    They’ve already been doing this for quite some time, the only reason they stopped was because the ECB stopped giving Greek banks money. As soon as (or if, depending on one’s perspective) the ECB starts giving Greek banks money again the withdraws will restart.

    Like or Dislike: Thumb up 3 Thumb down 0

  11. Jack says:

    @Avid sportman:

    They’ve already been doing this for quite some time,…

    Yes, they’ve been queuing up to get cash to feed themselves. Period. Not to pull out all their life savings in Euros before they become a steeply devalued drachma.

    Like or Dislike: Thumb up 1 Thumb down 1

  12. stonetools says:

    @Hal_10000:

    Indeed it did not. The math saying that the Greeks could not meet their debt burden with continuing
    austerity remains exactly the same. Glad you admit it.
    One thing moralists and Austerians don’t seem to grasp is that you can’t beat someone into performing the impossible.
    What the referendum said is that the Greeks wanted a better plan than continuing austerity with no debt relief. Unfortunately, the referendum also made clear that the Greeks wanted to remain the Eurozone. This meant that Tsipras had no option but to meet the German demands.
    The best course of action for him now is to make a good faith effort to meet those demands, reform the government, and prepare for Grexit when the current plan fails (as most economists believe it will).

    Like or Dislike: Thumb up 5 Thumb down 3

  13. Avid sportman says:

    @Jack: over 3 billion euros between 15 Jun and 18 Jun, including 1 billion euro in just one day. 30 billion euro from Oct 2014 to Apr 2015 just how much food do you think they’re eating?

    http://rt.com/business/268405-greece-banks-deposit-withdrawals/

    Like or Dislike: Thumb up 1 Thumb down 0

  14. Modulo Myself says:

    Given the alternatives and the country’s economic position, I’m not sure how terrible this dead is for Greece. They don’t have to exit the Euro, which would be a catastrophe and maybe the goal throughout these negotiations of the Germans. And they get hard cash. As for the rest, what’s going to happen when the demands aren’t met? It’s a matter of Greece reforming on their own pace. Germany kind of blinked. If certain criteria aren’t met,what are they going to do? If they couldn’t kick Greece out now, why would they be able to do in a few years?

    Also, calling Greece a social welfare state is idiotic. Greece is what would happen if you took a bunch of Southern states with an aging population and a lot of middle-class and upper-class people who don’t want to pay taxes and made it a bit more compassionate.

    Like or Dislike: Thumb up 3 Thumb down 5

  15. Jack says:

    @Avid sportman: I should have made it clear I was talking about the average Greek and those living on a pension. Those are not the people withdrawing billions from the Greek banks. The wealthy will get their money out one way or another.

    Like or Dislike: Thumb up 0 Thumb down 0

  16. Mu says:

    Before we get all exited about who blinked etc, this is considered a new bailout program. Which means it has to be ratified by all Eurozone nations, which is by no means guaranteed. The June 30th deadline was so important because it would have made money available that was already approved. The German parliament typically votes with their leadership due to the strong influence the parties have on reelection. Other countries with more direct elections might not have it so easy getting this through parliament.

    Like or Dislike: Thumb up 1 Thumb down 0

  17. C. Clavin says:

    @Modulo Myself:

    Greece is what would happen if…

    The Blue States started to demand that Red States pay them back.

    Like or Dislike: Thumb up 10 Thumb down 3

  18. wr says:

    @stonetools: “One thing moralists and Austerians don’t seem to grasp is that you can’t beat someone into performing the impossible.”

    Sure, but that only matters if you make this assumption that this is about Greece. The bankers running the EU and the IMF are sending a message to the rest of Europe — if you get out of line, if you disrespect the financial geniuses running the system, if you dare to elect a government that does not conform to our right-wing preferences, we will destroy you.

    They don’t care about Greece, and I doubt they even care much about the money.

    Like or Dislike: Thumb up 6 Thumb down 2

  19. Davebo says:

    This is the best explanation of the situation I’ve read to date and I’ve looked around a lot.

    @Jack: Nice cut and paste there Jack.

    There is also a real possibility of a surge in inflation.

    Duh! Would such a surge in inflation be worse than the deal they’ve been offered?

    If I were Greece I’d offer Russia a deepwater Mediterranean port. Putin would love it. They’d probably cough up 10 billion for it even with oil prices being low. Then bail on the EU and let them swallow the loss.

    Like or Dislike: Thumb up 2 Thumb down 2

  20. Scott says:

    @Davebo:

    If I were Greece I’d offer Russia a deepwater Mediterranean port.

    They would be bailing on NATO also.

    Like or Dislike: Thumb up 3 Thumb down 0

  21. C. Clavin says:

    @Davebo:

    If I were Greece I’d offer Russia a deepwater Mediterranean port.

    Or at least make noise like you are….then see how fast the rest of Europe gets off of this insanity program.

    Like or Dislike: Thumb up 2 Thumb down 1

  22. Ben Wolf says:

    @gVOR08: I’d agree with you and suggest Syriza’s leadership are dumb as rocks. How they could fail to understand the ECB would destroy their banking system unless they surrendered is beyond my understanding, but that’s exactly what happened. They simply did not believe that being forced out of the euro was something that could realistically happen and so never planned for it. They thought that Greeks and Germans and Italians and French were all “Europeans” and ultimately would come to a compromise.

    But Europe is not united. Germans are Germans and their only concern is German national interest.

    Like or Dislike: Thumb up 4 Thumb down 2

  23. HarvardLaw92 says:

    Those celebrating should note that this proposal still has to be approved by the Greek parliament AND a majority of the member states of the EU. It’s relatively far from being a done deal at this point.

    I’m also inclined to believe this is merely buying Greece time. It doesn’t prevent what has become the inevitable IMO, it just delays it.

    Like or Dislike: Thumb up 0 Thumb down 0

  24. michael reynolds says:

    Greece’s economy runs on tourism. Bail out of the Euro and tourism will explode. Only a tiny percentage of their economy is industry or agriculture and ag won’t be affected.

    This is a mistake. Greece should repudiate its debts, leave the Euro, issue the drachma and appeal to non-European sources (the US) for sufficient aid to keep them staggering along toward a recovery – a recovery which strikes me as quite likely if they’re debt-free.

    Greece leaving won’t kill the Euro, but Greece thriving outsize the Euro will spell its demise.

    The Germans are being bloody-minded fools, and hardly for the first time in their relatively brief history as a unified nation. They’ve been beaten twice in war, occupied, split in half, and when all is said and done they’ve still managed to be self-righteous prigs, despite rising to their current high perch on a ladder made of American dollars. The next step will be Greeks attacking German tourists and businesses and that, along with the Euro, will destroy Greece’s only functioning economic sector.

    Merkel will not be treated kindly by history, and neither will the German people.

    Like or Dislike: Thumb up 2 Thumb down 6

  25. stonetools says:

    Even if you believe Tsipras and Syriza were complete morons, the EU plan simply can’t work without debt relief. Even with debt relief, Greece should most likely leave the euro.
    Here is someone who believes Tsipras was an idiot and even blames him for the current crisis.His conclusions?

    No matter what the parliament decides and whether Greece ultimately stays in the euro or leaves, Europe will pay a price down the road for such a vengeful act. Many Greeks are enraged, and the prominent role played by Germany in driving such a harsh bargain has awakened old stereotypes, which the European Union and its common currency were designed to dispel forever….

    Greeks have ample reason to be mad at their euro area partners, but they should hold their own prime minister responsible for destroying their economy in a reckless political experiment. Regrettably, this is not over. As a result of the prime minister’s actions and Europe’s brutal response, Tsipras — or a successor Greek government — may yet get a mandate to abandon the euro.

    Like or Dislike: Thumb up 3 Thumb down 0

  26. Ben Wolf says:

    @stonetools: The left isn’t up to the task. I think it more likely fascists will gain power and exit, with all the horrid outcomes a Golden Dawn governmwnt entails.

    Like or Dislike: Thumb up 3 Thumb down 0

  27. Ben Wolf says:

    @michael reynolds: The large increase in tourism related taxes suggests the goal is to punish Greeks even more by damaging their only reliable source of foreign income.

    Like or Dislike: Thumb up 2 Thumb down 1

  28. C. Clavin says:

    @stonetools:

    the EU plan simply can’t work without debt relief.

    This.
    Show me one other similar situation, resolved successfully, that did not involve debt relief

    Like or Dislike: Thumb up 3 Thumb down 1

  29. michael reynolds says:

    @Ben Wolf:

    I suppose this is what it’s like to be on the other side of one of those, “What in God’s name are they thinking?” moments. Usually we’re the ones being referred to in that way.

    We’re going to get a desperate, likely fascist Greece. And we’ll get a Europe where countries like Italy and Spain have been plainly shown that their future is as serfs of the Germans. Sooner or later the Spaniards if not the Italians will have their pride engaged.

    Like or Dislike: Thumb up 2 Thumb down 0

  30. Mu says:

    20 people get together, decide unanimously, but the Germans are the evil ones. After they wrote off $25 billions in the first refinancing hair cut, and now have agreed to drop in another $20B, knowing it’s good money after bad. All after they accepted Greece’s financial papers in the interest of political unity, assuming no one would lie that blatantly.
    No good deed goes unpunished.

    Like or Dislike: Thumb up 3 Thumb down 1

  31. Mu says:

    Found an interesting poll from Germany: http://www.spiegel.de/politik/deutschland/deutschlandtrend-deutsche-halten-sparauflagen-fuer-angemessen-a-1043500.html

    52 % of Germans agree with the new bailout, 44% don’t.
    78% of Germans think the new Greek assurances are so much BS.
    Only 13% of Germans think the EU demands are too severe.

    Like or Dislike: Thumb up 0 Thumb down 0

  32. Mikey says:

    Some additional insight into why a managed Grexit could be the best course for Greece.

    Europe’s Insane Deal with Greece

    Like or Dislike: Thumb up 2 Thumb down 0

  33. Ben Wolf says:

    @michael reynolds:

    And we’ll get a Europe where countries like Italy and Spain have been plainly shown that their future is as serfs of the Germans.

    I’m thinking that was the point of making the terms so harsh, to send a message to those countries along with France.

    Like or Dislike: Thumb up 3 Thumb down 1

  34. Mu says:

    @Mikey: Good article, so it misses one vital point. The desire in the EU to keep national sovereignty sacrosanct is so hard, they couldn’t even agree to an “everybody but one” mode of government, every important rule has to be agreed on by everybody. The idea of a true political union is just not practical for the next generation at least.

    Like or Dislike: Thumb up 0 Thumb down 0

  35. Cyberats says:

    Hand government administration & all officials over as payment of debt.
    Problem solved.

    Like or Dislike: Thumb up 0 Thumb down 0

  36. Davebo says:

    @Scott:

    But who needs NATO when you have the Russian Navy in your yard? OK, so the Russian Navy may consist mostly of decrepit cabin cruisers but still…..

    Like or Dislike: Thumb up 0 Thumb down 0

  37. Avid sportman says:

    @Jack: That’s just not simply true, rich, poor, middle class, basically everyone has all been taking their money out of greek banks as fast at they can.

    “Bank of Greece figures say the €30bn pulled out of accounts in the past six months has “largely taken the form of cash withdrawals and hoarding, while the flight of capital abroad has also been recorded”. The rich are sending money abroad everyone else is taking out cash. Just google it, reports of people keeping their life savings in walls under mattresses, if safes and so forth.

    http://www.independent.co.uk/news/world/europe/greeks-take-their-money-and-run-as-potential-eu-exit-looms-on-the-horizon-10329868.html

    Like or Dislike: Thumb up 0 Thumb down 0

  38. lounsbury says:

    @C. Clavin:
    No, what would doom Greece would be to exit Eurozone without a stable financial plan in place. A Grexit w/o a plausible funding support from EU means banking sector collapse.
    As usual, you haven’t the slightly bloody clue as to what you’re blithering on about and are merely engaged in innumerate Left-Tribal maundering.

    @Jack:
    Quite right, spot on.

    @gVOR08:
    It’s been rather clear for a while that the Syriza gang – this quite aside from a view on the fundamentals of their policy goals – was completely over their heads and amateurs who had no clue as to what they were doing.

    @michael reynolds:
    Funny kind of serfdom, getting hundreds of billions of German Euros for free as part of transfer programs.

    No, that’s mere silly emotional Leftist git rhetoric and idiotic ideological tribalism mistaking EU policy for your stupid Republican party.

    Like or Dislike: Thumb up 0 Thumb down 0

  39. lounsbury says:

    @Ben Wolf:
    ” How they could fail to understand the ECB would destroy their banking system unless they surrendered is beyond my understanding, but that’s exactly what happened.

    ECB didn’t destroy anything. ECB kept the bloody Greek banking system alive. They stretched their statutory restrictions to the breaking point in continuing to extend emergency lines to Greece.

    Without ECB pushing their long-standing statutory limits to the breaking point, the Greek banks would have already totally collapsed several weeks ago.

    Like or Dislike: Thumb up 0 Thumb down 0

  40. michael reynolds says:

    @lounsbury:

    No, that’s mere silly emotional Leftist git rhetoric and idiotic ideological tribalism mistaking EU policy for your stupid Republican party.

    No, it’s how the Spanish and Italian voter will read it. They do still occasionally allow people to vote in the EU, and the issue of the Eurozone and the European experience more broadly, is going on the agenda with new force. The mask has fallen.

    Like or Dislike: Thumb up 0 Thumb down 0

  41. C. Clavin says:

    @lounsbury:
    Dude…I get it…you’re all for exactly what hasn’t worked…but it will now…because…Unicorns.
    And anyone with a different viewpoint…like a shitload of economists…are lefty tribal something something’s.
    Talk to your DR about your meds…they are out of balance and have you all emotional and stuff.

    Like or Dislike: Thumb up 0 Thumb down 1

  42. Hal_10000 says:

    @stonetools:

    The idea that austerity makes the financial situation worse and that spending binges make it better is no more supported by the evidence than the idea that tax cuts pay for themselves. Greece literally can’t continue on their current tax/spend trajectory.

    Like or Dislike: Thumb up 2 Thumb down 0

  43. C. Clavin says:

    @Hal_10000:
    Austerity and spending binges.
    Nice false dicotomy you set up there!!!
    Easy to understand how you come to your opinions.
    Set up the choice as something that hasn’t and can’t work versus something unpalatable that no one is suggesting.
    Time travel or castor oil. Fwck…I want time travel!!!

    Like or Dislike: Thumb up 0 Thumb down 1

  44. Ben Wolf says:

    @Hal_10000: Spending = income = employment = output. Greece needs a large boost to topline spending to being it out of depression. Longer term the country has significant supply-side problems to address but that can’t happen until eff3cr8ve demand is restored.

    Like or Dislike: Thumb up 0 Thumb down 1

  45. Ben Wolf says:

    @lounsbury:

    ECB didn’t destroy anything. ECB kept the bloody Greek banking system alive. They stretched their statutory restrictions to the breaking point in continuing to extend emergency lines to Greece.

    The ECB is required to preserve stability of the banking system. Nothing was “stretched” by providing liquidity to Greek banks; cutting off assistance was entirely a political action to force Greece into compliance.

    Like or Dislike: Thumb up 0 Thumb down 1

  46. Ben Wolf says:

    @lounsbury: Perhaps your memory has faded: Greece was forced as a condition of remaining in the eurozone to accept the first two bailouts. See, the Greek government wanted to let its banks suffer the consequences of their actions but this meant German and French and other foreign banks would take losses as well. So the German goveenment made clear Greece would either accept “aid” or have its economy destroyed.

    Like or Dislike: Thumb up 0 Thumb down 1

  47. lounsbury says:

    @Ben Wolf:
    My memory is perfect on this, and my understanding of actual reality rather better.

    Your explanation is utter bollocks. “Greece [wanting] to let is banks suffer the consesquences” = total banking sector collapse in the midst

    Contrary to the empty and economically illiterate posturing of the Idiot Left Blogger Class (whose advice should structurally and systematically be ignored as the Syriza fiasco illustrates), a banking sector collapse does extreme and serious economic damage to an economy. Long term and serious damage. There’s absolutely no doubt on policy on this, the econometric data is clear.

    A Greek policy of “letting its banks go” is a Greek policy taking 50% GDP hit and a depression worse than the 1930s.

    That of course is idiocy.

    so your idiot spin about the Germans is not only idiotic, it is utterly unfactual.

    @Ben Wolf:
    ECB has a secondary mandate for Eurozone stability, its primary statutory mandate restrictions prevents it FUNDING insolvent banks.That is primary and standard – insolvent banks are not funded by Central Banks, they are funded either via fiscal or special Bank Resolution accounts – the special European Stability Facility is for this.

    The ECB line is not allowed to do anything you think based on a naive and ignorant reading it should do, the Stability Mechanism is for that.

    This is fundamental bank regulatory – and speaking as a person who sat on these very financial stability committees thank you very much – and merely shows you don’t know what the bloody f**k you’re on about.

    Maundering on about ECB doing something wrong when you clearly don’t understand the basic rules of the game is again a nice Left Idiot Blogger and commentator game, but the actual reality is very different.

    Like or Dislike: Thumb up 1 Thumb down 0

  48. wr says:

    @lounsbury: Let me make sure I understand you correctly: Bankers should run everything for their benefit; if people have to suffer, that’s just fine. Anyone who disagrees is a lefty idiot blogger. That about it?

    Like or Dislike: Thumb up 0 Thumb down 1

  49. Ebenezer_Arvigenius says:

    See, the Greek government wanted to let its banks suffer the consequences of their actions but this meant German and French and other foreign banks would take losses as well.

    Oh for chrissake. I get so tired of this shit. German bank held about 10 billion € Greek debt. They already lost half of that in the 2011 haircut. We would have been much better off just compensating them and scuttling Greece than “forcing” them to spend more German money.

    Honestly. The hard left on here has gone completely cuckoo over this. Including all kinds of weird conspiracy theories (faceless bankers making an example of Greece, Germany wanting to humiliate and “take over” Greece etc.).

    I won’t claim that this was handled badly by the creditors. But the amount of hate the northern EU countries get for basically giving Greece their money (which they are unlikely to get back) is just amazing.

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  50. Ben Wolf says:

    @lounsbury:

    1) There is no statute forbidding the provision of liquidity to central banks within the eurozone regardless of solvency. Reread the ECB charter.

    2) Again, your recollection is flawed. The Greek government planned to restructure bank debts in a controlled wind-down. Germany and the troika refused to accept this and demanded Greece accept bailouts or be ejected from the eurozone.

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  51. Ben Wolf says:

    @Ebenezer_Arvigenius:

    Oh for chrissake. I get so tired of this shit.

    Silly sentiment.

    German bank held about 10 billion € Greek debt.

    German banks held 23 billion of Greek public debt in 2010. That figure does not include loans to households and firms. French total exposure was 56 billion.

    They already lost half of that in the 2011 haircut. We would have been much better off just compensating them and scuttling Greece than “forcing” them to spend more German money.

    And yet Germany didn’t. It took the path of more pain and suffering. I’m afraid its government has, in a remarkably short period, managed to make itself look more the bully than my own government has been able to do in fifteen years of perpetual war.

    Honestly. The hard left on here has gone completely cuckoo over this. Including all kinds of weird conspiracy theories (faceless bankers making an example of Greece, Germany wanting to humiliate and “take over” Greece etc.).

    There’s a reason Germans are considered history’s worst imperialists.

    I won’t claim that this was handled badly by the creditors. But the amount of hate the northern EU countries get for basically giving Greece their money (which they are unlikely to get back) is just amazing.

    When one behaves viciously, others respond accordingly. Germany and its allies have signed the eurozone’s death warrant thanks to their weird ordoliberal theories and moralizing.

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  52. Ben Wolf says:

    Out of curiosity, what distinguishes “hard” left from “soft” left? Are they different than the medium-rare or well-done left?

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  53. Ebenezer_Arvigenius says:

    Silly sentiment.

    Very fitting then.

    German banks held 23 billion of Greek public debt in 2010. That figure does not include loans to households and firms.

    I’m not going to argue about numbers here. Here is a good rundown. Even taking your numbers, it would have been much cheaper to tell the Greek government (to quote Michael I think) to “take a hike” given that the current German risk is between 28B€ and 87B€.

    And yet Germany didn’t. … When one behaves viciously, others respond accordingly. Germany and its allies have signed the eurozone’s death warrant

    Yeah. Sure. All that evil money. The Greeks were practically forced to the bank at gunpoint.

    To put it simply: Greece could have left the Euro at any time if they considered that the best option. But strangely enough even Syriza is back asking for money. One wonders why. Perhaps they just should ask some American blog commenters how to handle their crisis.

    I’m afraid its government has, in a remarkably short period, managed to make itself look more the bully than my own government has been able to do in fifteen years of perpetual war.

    You know what? Why not head over to Baghdad or Kandahar and ask a local what he thinks of that statement? Preferably one whose relatives got killed. Fwuck this. I’m done with your BS. This is industrial-level delusion. There is just no way of discussing with someone who is that deep down the rabbit-hole. Do your theorizing from an ocean away and spare me.

    There’s a reason Germans are considered history’s worst imperialists.

    Yeah. The biggest one is lack of historical knowledge. Fits well with your other delusions.

    Out of curiosity, what distinguishes “hard” left from “soft” left?

    The level of delusion.

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  54. HarvardLaw92 says:

    @Ebenezer_Arvigenius:

    You’re dealing with people motivated by emotion. The primary factor from their point of view is suffering, coupled with the tendency among the hard left to always, regardless of the circumstances, side with the party they perceive to be the underdog in any given situation.

    Greece faced, and still faces, suffering, and that’s intolerable for a hard lefty, so Europe in their opinion should cheerfully fork over as much money as may be required to mitigate the suffering without regard to any concerns about repayment – because it’s their their moral duty to do so. The fact that Greece’s economic problems are almost entirely of its own making through decades of fiscal mismanagement means nothing to them – because, suffering!

    Arguments based in “it’s a bad business proposition to loan money to debtors who will never, ever be able to repay it” or “Greece has not, and likely never will, actually implement the fiscal measures necessary to rectify its ongoing and historically perpetual deficit problems” fall on deaf ears where they are concerned.

    because – suffering!

    They’ll come back with “well, you work on Wall Street and they got truckloads of loans from the US government”.

    Yup, we did, and we paid them back, with interest, ahead of schedule, so stuff that one. Treasury made a nice profit off of lending to us. We were a good economic bet – Greece is not.

    (much pearl clutching and rending of garments ensues …)

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