Greece General Discussion

[swl]

France, US support Greece in debt battle: https://euobserver.com/political/127444

[jaichind]

France, US support Greece in debt battle: https://euobserver.com/political/127444

Just to balance this

http://www.bloomberg.com/news/articles/2015-02-02/tsipras-damage-control-fails-to-budge-euro-officials-on-greece

"In the past two days, officials in Berlin, Paris and Madrid have rejected the possibility of a debt writedown as they held out the prospect of easier repayment terms, an offer that has been on the table since November 2012."

[Velasco]

France offered "support, but not relief".

I'll quote Krugman, since common sense is fairly uncommon as of late:

http://www.nytimes.com/2015/01/30/opinion/paul-krugman-europes-greek-test.html

You must be logged in to read this quote.

[swl]

France, US support Greece in debt battle: https://euobserver.com/political/127444

Just to balance this

http://www.bloomberg.com/news/articles/2015-02-02/tsipras-damage-control-fails-to-budge-euro-officials-on-greece

"In the past two days, officials in Berlin, Paris and Madrid have rejected the possibility of a debt writedown as they held out the prospect of easier repayment terms, an offer that has been on the table since November 2012."

It's possible to (how do you say in English) kick the can down the road for 10 or 15 years, by just delaying reimbursement again and again. There is no need for a writedown because if the eurozone survives, debt mutualization will inevitably happen at some point and the problem of Greek debt will be solved that day.

[jaichind]

If Tsipras insist on some sort of debt write-down. I can propose a compromise (which I know there is no hope for anyway) which would be a debt-to-equity swap.  Since the Greece debt/GDP is 175% and the Eurozone limit is 60%, what we can do is to swap 115% of the 175% debt into equity.  That 115% can be swapped into shares which allow the owner of said shares to own part of the Greek economy.  Lets say 40% of the Greek economy can be swapped this way where that 115% of the debt is transformed into 40% ownership of the Greek economy.  All Greek income will be subject to an extra 2.5% tax to pay for dividends to said shareholders who can then buy and sell these shares.  What is good about this setup are that these shareholders will do everything possible to push up Greek income instead of just pushing the Greek government for more austerity so their debt can be repaid.  They can even end up helping and pushing for (I cannot believe I am saying this) the Greek government to reduce the size of the black economy so to overcome tax avoidance since that will only increase their dividends.  Overtime as the Greek economy recovers the Greek government can even start buying back these shares from the market.  You have to get the current debt-holders to have an economic incentive to get help grow the Greek economy.  

See

http://www.reuters.com/article/2015/02/02/greece-politics-bonds-swap-idUSL6N0VC4GU20150202

It seems Varoufakis is proposing something somewhat similar to my compromise above he "will seek a "menu of debt swaps" including two types of new bonds - one indexed to nominal economic growth and one he called "perpetual bonds" to replace European Central Bank-owned Greek bonds "

[Foucaulf]

See

http://www.reuters.com/article/2015/02/02/greece-politics-bonds-swap-idUSL6N0VC4GU20150202

It seems Varoufakis is proposing something somewhat similar to my compromise above he "will seek a "menu of debt swaps" including two types of new bonds - one indexed to nominal economic growth and one he called "perpetual bonds" to replace European Central Bank-owned Greek bonds "

Not really, since this deal has nothing to do with equity or government assets (and if Varoufakis did propose such a thing people will call for his heads). Basically, barring any inclinations of a writedown from debtors, Greece wants to renegotiate when their bonds reach maturity. The growth one basically reaches maturity at "when the Greek government can deal with it," and the perpetual ones reaches maturity at "never".

Greece will still pay interest/coupons on all the debt with their primary surplus, but essentially vows never to have another situation where the government is short several billion near the end of the month and have to max out another credit line from the Troika to fix it. To convince their creditors of this plan's credibility, Greece can pull out the Krugman argument: "we will have to be forced to collapse and default at this rate, so this is the best scenario where you won't get implicit writedowns through default."

Consider this Varoufakis making the first offer, I guess. Given the Europeans' cool reception and only a few more weeks of solvency, he has to bite his tongue and put something out. This is one of three proposals from him: the other two are the elimination of the Troika auditors and ability to negotiate with individual creditors, and reduction of Greece's mandated primary surplus to 1.5%, down from 4.5% now.



EDIT: Varoufakis's itinerary so far:
Friday, met with Eurogroup head Jeroen Djisselbloem; Sunday, met with French FM Michel Sapin; Monday, met with British Chancellor George Osborne; Tuesday, met with Italian FM Pier Carlo Padoan; Wednesday, will meet with ECB chief Mario Draghi; Thursday, will meet with German FM Wolfgang Schaeuble; meeting with EU Commission President Jean-Claude Juncker TBD.

[Antonio the Sixth]

The Greek government hired French banker Mathieu Pigasse to advise them in the negotiations to scale back their debt. I heard him on the radio today and he seems like a pretty smart guy. He completely debunked the German/austericrats' arguments in a rational and non-demagogic way.

[jaichind]

See

http://www.reuters.com/article/2015/02/02/greece-politics-bonds-swap-idUSL6N0VC4GU20150202

It seems Varoufakis is proposing something somewhat similar to my compromise above he "will seek a "menu of debt swaps" including two types of new bonds - one indexed to nominal economic growth and one he called "perpetual bonds" to replace European Central Bank-owned Greek bonds "

Not really, since this deal has nothing to do with equity or government assets (and if Varoufakis did propose such a thing people will call for his heads). Basically, barring any inclinations of a writedown from debtors, Greece wants to renegotiate when their bonds reach maturity. The growth one basically reaches maturity at "when the Greek government can deal with it," and the perpetual ones reaches maturity at "never".

I agree.  I am saying they are similar in the sense that both my idea and his tries to link performance of the economy as a whole to the payout which could mean even higher over-payout if the Greek economy does very well down the road.

[Foucaulf]

I agree.  I am saying they are similar in the sense that both my idea and his tries to link performance of the economy as a whole to the payout which could mean even higher over-payout if the Greek economy does very well down the road.

That's right regarding the GDP-indexed bonds most people talked about, where the coupon is some function of GDP growth or levels relative to a baseline (the Greeks actually tried this in 2012). The question remains: is this what Varoufakis is proposing?

Since this is breaking news, the details are frustratingly vague. But Varoufakis is, I think, proposing something different: bonds with a "bisque clause"

You must be logged in to read this quote.

Emphasis mine. "Inversely related" isn't really the right word here either - "monotonically decreasing step function" would be more accurate, but also hard to say.

[swl]

Agreement found between Greece and the rest of the eurozone. My (very limited) understanding is that Greece basically agreed to continue with the bailout program negotiated by the previous government, and got very little in return. It's only a short term agreement and the next "battle" will be about what's coming after the bailout program.

[jaichind]

Tsipras was forced to back down.  He was trying to expand the battlefield by refusing to fight on the ground of EU creditors.  He seems to have been forced to back down.  So the deal is Greece has to come back next week with what sort of reform commitments he is willing to agree to and the EU creditors will vote ya or nay on extending the bailout.  The reason he had to back off is because even though the Greek voters voted for his party, their Euros did not.  Since his election victory the Greeks pulled out a lot of Euros from the Greek banking system as well as delay paying taxes so tax receipts are falling way short of target.  This means that even if Tsipras defaults on all Greek debts he will still need external funding to stay afloat. 

There is only one outcome of this, Greek Euro exit or not. Repaying the debt or dealing with the consequences of possible default will have and it always will be on the backs of the Greek lower and middle classes.  The wealthy are wealthy for a reason, they will find ways to avoid paying, especially in the era of mobile capital.   Tsipras cannot change fundamental laws of economics.  His whole program  of relief for the lower classes was never possible other than in some minor and marginal ways.

[swl]

The agreement is much more limited than you seem to think in my opinion. More details here: http://openeurope.org.uk/blog/greece-bends-eurozone-will-find-short-term-agreement/

[jaichind]

The agreement is much more limited than you seem to think in my opinion. More details here: http://openeurope.org.uk/blog/greece-bends-eurozone-will-find-short-term-agreement/

Could be.  At the core bailout extension came at the cost of concessions including a commitment to spell out reforms within two days.  The reforms would be aimed at persuading its European creditors to extend further loans. Athens received no immediate loan assistance.  Tsipras did warn Greece that "real difficulties" lie ahead.  It seems that the reforms he has to come up with by next week will deviate dramatically from what he promised in his election platform. 

[jaichind]

Daniel Gros, director of the centre for European policy studies points out:

"From a symbolic and therefore political point of view, the Greeks yielded on everything,"
"They can hope to receive nothing now... only to give,"

[Okay, maybe Mike Johnson is a competent parliamentarian.]

So Greece swept in an inexperienced party with unseemly cultural-liberal tendencies, which then formed government with a party with very unseemly cultural-ultraconservative tendencies, for, essentially, nothing? Wonderful. Absolutely wonderful.

[Ban my account ffs!]

Greek dictatorship here we come.

[Hash]

Alexis Flanby off to an excellent start.

[ingemann]

So Greece swept in an inexperienced party with unseemly cultural-liberal tendencies, which then formed government with a party with very unseemly cultural-ultraconservative tendencies, for, essentially, nothing? Wonderful. Absolutely wonderful.

First, no one had expected the Greek could have gotten more, at least no one knowing anything about the issue.

Second, the new Greek government seem to have made some institutional reforms which may have much more positive long term consequences than any deal with EU if they work (like strengthen the collective power of the government versus the individual ministers). Also if they begin to collect the taxes the Greeks owes, that will also have much greater effect. If Greece can get a real revenue surplus, and it's very possible as the payment of most of the debt including the interest have been pushed into the 2020ties, they will be in a much better position, at the next negotiations.

[Landslide Lyndon]

So Greece swept in an inexperienced party with unseemly cultural-liberal tendencies, which then formed government with a party with very unseemly cultural-ultraconservative tendencies, for, essentially, nothing? Wonderful. Absolutely wonderful.

Well, we can safely say that Tsipras has vindicated his staunchest critics. He personally and his party seem totally unprepared to govern, despite the fact that it was a given they would be our next government for months now. The choice of an inexperienced narcissist like Varoufakis as our Finance Minister is just his most glaring mistake.

Also, the fact that Tsipras chose for President the right-hand man of Karamanlis, the minister responsible for our bloated public sector and the December 2008 riots, generated quite the backlash, even from right-wingers who consider the 2004-09 government responsible for our current predicament.  

[Oakvale]

[Velasco]

So Greece swept in an inexperienced party with unseemly cultural-liberal tendencies, which then formed government with a party with very unseemly cultural-ultraconservative tendencies, for, essentially, nothing? Wonderful. Absolutely wonderful.

You should not become discouraged too soon. As Krugman wrote recently, " big fights are still to come".

http://www.nytimes.com/2015/02/27/opinion/paul-krugman-what-greece-won.html?rref=collection%2Fcolumn%2Fpaul-krugman&action=click&contentCollection=Opinion&module=Collection&region=Marginalia&src=me&pgtype=article

Despite what Krugman calls the "unholy alliance between left-leaning writers with unrealistic expectations and the business press, which likes the story of Greek debacle because that’s what is supposed to happen to uppity debtors", the Syriza government didn't show the servitude of the François Hollande administration. Remember that Greece is a bankrupt country and its economy only represents a 2% of the Eurozone. While it was unrealistic to expect major concessions from the great powers, the negotiations showed differences inside the EU membership and, according to James K Galbraith (who is the son of that Galbraith and advised Varoufakis in the negotiation), the Commission and the ECB were more "constructive" than certain national governments. For instance, Spain and Portugal fought bitterly any type of concessions to Greece due to domestic policy reasons. Both are struggling to convince their voters that austerity works, despite all evidence, and have a deep interest in the failure of the Greek government. Such attitude is not only a sample of servitude and misguided economic extremism, it's highly irresponsible. If Syriza fails and is humiliated, as many radicals would like, it will be a gain for the Golden Shower, which is awaiting for its window of opportunity. Chancellor Brüning implemented austerity in Germany in the early 30s and everybody knows the consequences.

[windjammer]

Alexis Flanby off to an excellent start.

[Simfan34]

Are you Snowstalker now? Are all of you now Snowstalker?

[Boston Bread]

SYRIZA doesn't have the room to implement its platform without EU concessions. Velasco is right. Greece still needs financing, even after a hypothetical Grexit and debt default. We should accept a gradual path as opposed to a radical one that would be extremely risky for Greece.

[swl]

Greece pass anti-austerity bill: http://www.euractiv.com/sections/euro-finance/greece-pass-anti-austerity-bill-312603

You must be logged in to read this quote.

Syriza popularity is rising, so it looks like they suceeded to present it as a victory at home.

Talking of future negotiations, there are rumors about a 3rd bailout plan once the current one (extended until June) expires.