Story from yesterday with some more details about the 'deal' that the Greek govt is trying to sell to the EU.
One part of it proposes that the central banks return all of the interest paid by the Greek government on the Greek govt bonds held by all of the EZ central banks; excerpt below from a story here at Reuters via Yahoo:
Athens will ask for a bridge agreement until June 1 that includes the return of 1.9 billion euros (1 billion pounds) in profit made by the European Central Bank and other central banks on Greek bonds, the official said.Good luck with that as "the money is gone".
These "profits" are used to cover central bank expenses and the remainders are in proud ceremony forwarded to the domestic govt accounts and used as "deficit reduction" by those govts.
Indeed with the current collapsing rates on ex-Greece govt bonds over there, without the current juicy returns provided by the Greek govt bonds to use, all the CB morons would perhaps consider themselves "bankrupt".
The return of this "money" would require a new appropriation by the receiving govts.
This would be like asking: "Hey Merkel, how about getting an appropriation from your legislature and transferring the balances to us and in the process increase your deficit and help reduce ours?"
Highly unlikely to happen to say the least.
This is more evidence that the current policy people in the new Syriza govt don't really understand the current monetary and fiscal arrangements in the EZ and have an inadequate mathematical understanding of the systemic relationships or they would never have proposed such an absurdity in the first place.
19 comments:
Well, the ECB does maintain a "reserve fund" to which 20% of its profits are allocated by law. Maybe there is some way it can play around with that? But I suspect even if it can, any disbursements from the fund to Greece would only constitute a loan.
The profits Greece is asking the ECB to return are profits the ECB made under treaties and agreements to which Greece is a signatory.
Nevertheless, it's good to get all this stuff out in the press as a precursor to the negotiations next week.
Dan I dont know why they would not target import reductions (start with petroleum/products/chemicals) as job 1 (if they really understood what was happening...)
Try to cut a deal with Toyota on advanced implementation of some of their new stuff or something... put a factory in Greece, etc...
The people over these want to stay in the Euro so, if they really do value "democracy", then you have to figure out a way to stay in AND deliver a robust economy to the citizens...
Proposing a "non-starter" like this if in hopes of getting thrown out is ANTI-democratic and in effect (to me) saying 'we're too stupid to figure this out...'
rsp,
Playing to the Greek people, saying to them that Greece has been responsible for ECB profits and now the ECB is not willing to recognize that. Smart PR move.
Of course the eurocrats are not going to accept anything that Syriza offers as long as they believe they control the game. The ECB "offer" is an ultimatum that Syriza has rejected out of hand and is proposing alternatives to show that it’s the eurocrats that are the problem.
They announced today that they are going to continue the privatization of the port in Piraeus that they suspended last week.
Still don't have any idea what Greece is looking at as the foundation of their economic future and the source of jobs and growth for a country where only 39% of the population is employed.
Tom all they have to show is that the result of the subtraction (G-T) is not an independent variable....
NOBODY in Greece is going to be able to see the mathematical equivalence in the way you describe the policy here...
So its NOT a "smart PR move" as it requires the citizens to have cognitive abilities they do not possess...
If your goal is an undemocratic one of getting yourself thrown out, THEN agree this would probably be a "good PR move"...
rsp,
Dan, YV probably thinks "the minotaur ate the jobs!" or some BS....
They announced today that they are going to continue the privatization of the port in Piraeus that they suspended last week.
Still don't have any idea what Greece is looking at as the foundation of their economic future and the source of jobs and growth for a country where only 39% of the population is employed.
This is a bit complicated because China owns part of the port now and wants to expand its holding, potentially buying the whole thing. This is potentially a fantastic deal for Greece, since it would be an entry point to Europe on the maritime Silk Road, and Russia has already blessed Greece as the entry point to Europe for Turk Stream. The rents that Greece could expect to collect in the future from the transit of goods and energy would be substantial.
The fly in the ointment is that Greek ship workers and longshoremen are unionized and enjoy much higher wages and benefits than China is willing to pay. So there is a lot of tension in the region over this.
Difficult to say now how this will shake out but the long term interest of Greece is served by a growing relationship with BRICS. Syriza realizes this, but they are in the difficult position of also representing the Greek workers, who really don't like the reduction in compensation. But those expectations may be too high given the reality of the situation.
Tom all they have to show is that the result of the subtraction (G-T) is not an independent variable....
NOBODY in Greece is going to be able to see the mathematical equivalence in the way you describe the policy here...
I don't think that it a matter of economics wrt to the PR but the perception.
It may be that neither the eurocrats or Syriza (Yanis) actually understand the economics, but I doubt that. These people are smart enough to know the difference between a gold standard and fiat currency and they know that the game is to fool the rubes by pretending that the world is still on a gold standard.
So far, Yanis hasn't chosen to go there publicly either, since the neoliberal programming runs so deep the Very Serious People could easily paint him as a wild-eyed radical. Thus far, that strategy has worked and only the MMT people have stepped over the line so far, to shouts of "Weimar" and "Zimbabwe". "Weimar" is still a loud dog whistle in Germany, and almost all Europeans have had to deal high inflation, too.
We have to remember that this game is chiefly political rather than economics, as is the euro.
Yves Smith keeps lamenting how Greece will be worse off if it splits from the EU. Some of her rationale I get. But I don't see how a monetary union that preys on the weak sisters within it can ever be sustainable.
Unless there's a United States of Europe, how, pray tell, will it be better for Greece to remain in the EU? Even with some form of debt forgiveness how does Greece realistically dig itself out of it's horrid economic hole catalyzed by the present European arrangement? So, hearkening back to Smith, how can getting out from underneath the EU's boot be worse for Greece than staying within? She seems incredibly myopic to my mind.
Yves Smith has a very good post today on just how bad all the options are for Greece.
It's looking like the only hope for Greece under current financial constraints might be to get the US, Russia and China in a bidding war for infrastructure assets in the Eastern Mediterranean.
What I hope the new guys realize is that the problems in Greece are deep and systemic can't be fixed by some demand-side "stimulus" to "jump start" the economy. Greece needs a revolutionary industrial policy and massive public-private program of economic transformation and redevelopment. Otherwise they are doomed to a future as a poor periphery sister looking at the nice things all the other Europeans have. They need to hire millions of people and put them to work building the New Greece, and and they need to do it yesterday.
People who work need to be paid, and so Greece needs to find innovative ways of paying them: special credits for food and fuel, equity shares in state-run coops, negotiable sovereign wealth tickets - something.
Varoufakis and Tsipras, put your country to work! Greece can't recover just by shuffling its pitiful national income around.
Dan, If Greece does all that you advise, will EU overlords sign off on it?
Dan, Matt et al.
Unfortunately what you ask for requires creativity, not-VSP (aka mediocre 'technocracy') thinking and a consistent government body backing up the plan.
They need to deal with the real economy, yesterday effectively. But is not going to happen because we are in a world that the majority is laser-focused on paper assets because they think 'paper' = 'real' and we are governed by fauxSay's Law, Ricardian equivalences, etc.
We have gone back to the XIX century and the morons in power have those believe systems. The worst think though, is that the alternatives have also teleported to the past: from non-sense marxism in the far left to jingoist economics in the far right.
Hopeless!
Malmo, how much does the EU have to sign off on?
Dan,
Doing an end-around EU austerity measures would likely be seen by the bloodthirsty overlords as a breach in contractual obligations, and would thus have Greece isolated even more than it now is no? On the other hand why not give it a go?.
At any rate, have you read that this is a plan percolating within the Greek coalition?
The weakness of Syriza as I said previously is that Yanis is not the "Marxist" he sees himself as but rather thinking within the neoliberal framework by habit and training.
Greece needs to cut loose from the Atlanticists and join BRICS as the emerging power center. That is where its future lies rather than with the neoliberal Atlanticists that will never ever cut Greece into the deal.
The EZ is unsustainable economically and therefore socially and politically. Europe is not going to become the United States of Europe either. Best to cut and run and join a team that one can work with. why hang around waiting for the EZ to implode?
So while all polls indicate they want to stay in the Euro, we should just ignore that and surreptitiously jam them into the BRICS dont tell me ... "for their own good"...
?????
Wouldnt it be more appropriate to support democracy and boot both incompetent sides in this current debacle and figure out a way to get it done for the citizens?
Matt, I suspect that if Syriza can't follow through on the promises that got them elected, then they call for another election. I don't think that they would make a unilateral decision to leave the euro.
But Tsipras would not be be talking to Putin if there weren't something in it for both Greece and Russia, and China is already in Greece as a big investor that wants to increase its investment.
There's a good chance that if the eurocrats won't finance some space for Greece, Russia and China will and BRICS will be only too happy to replace European nations as trade partners.
Matt,
Syriza isn't going to leave the euro. Had they campaigned on this they would not have been elected. On the other hand it's certainly possible Syriza wanted to leave because it understood it's the only way out of this vise, but could not explicitly state this. Thus they proffer parameters that the troika couldn't possibly accept and get booted out? I have no idea, but setting up a scenario to get kicked out makes sense to my mind given Grecian fidelity to the EZ and it's impracticability to correcting what ails them. Perhaps that's being too cynical on my part? Maybe Syriza thinks their EZ overlords are reasonable and will bend to it's demands? Sorry, but I can't buy that for minute. Syriza knows damn well it's leave euro or die.
It's not about money at all anymore. Greece is becaming a nightmare for the euro austerity bosses. They can't bend even if they wanted to. And if they bend, what good is that going to do for Greece? Varoufakis is only demanding the surplus to be reduced. This is not even a reasonable demand from Greece and Syriza must know It. They are trying to get some time.
Then there is BRICS that eurobosses must be unhappy about. I don't believe for a second that US government officials have not been in talks with Greek government when there are Russia and China involved. It seems that the eurobosses are being played. EU has too many governments and electorates involved to negotiate effectively.
It is nightmare for them for another reason too, the longer It drags on, the more talk there will be on how dysfunctional the euro is. Greenspan is pointing the conversation to right direction etc.
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