Feb 012015
 
 February 1, 2015  Posted by at 12:20 pm Finance Tagged with: , , , , , , ,


William Henry Jackson Steamboat Metamora of Palatka on the Ocklawaha, FL 1902

Europe’s Creditors Play With ‘Political Fire’ Pushing Greece To The Brink (AEP)
To Escape Economic Hell, Greece Needs Tsipras To Call Germany’s Bluff (Guardian)
As In 1942, Germany Must Show Restraint Over Greece (Cockburn)
The Country That Refuses to Bow Down to Western Bankers (AlterNet)
Greece Hires Lazard To Advise On Debt (FT)
Greece Will Repay ECB, IMF, Reach Deal With EU, Tsipras Says (Bloomberg)
Barricades Down, Ties Off: Welcome To Greece’s Style Revolution (Guardian)
Podemos Looks to Capture Tsipras Momentum to Oust Rajoy (Bloomberg)
Spain’s Anti-Austerity Podemos Stages Show Of Force Before Elections (Reuters)
Merkel’s Unintended Creation: Tsipras Win To Upset EU Power Balance? (Spiegel)
Dijsselbloem To Varoufakis: “You Just Killed The Troika” (Zero Hedge)
Greece Shakes Europe’s Political Kaleidoscope – Expect The Unexpected (Reuters)
China Manufacturing Shrinks For The First Time In Two Years (Guardian)
Beyond GDP: UK Greens Spark Debate On A Better Measure Of Progress (Guardian)
The Rise Of The Working Poor: When Having A Job Cannot Prevent Poverty (Ind.)
10 Reasons You Don’t Hear The Doomsday Clock Ticking (Paul B. Farrell)

“We are ants; the Greeks are grass-hoppers..”

Europe’s Creditors Play With ‘Political Fire’ Pushing Greece To The Brink (AEP)

Spain’s Podemos party – much in evidence at Syriza’s victory party in Athens, and even more mutinously radical – is leading national polls at 27pc. Marine Le Pen’s Front National won the EU elections in France with calls for a return to the franc and a return to sovereign borders. The three biggest opposition parties in Italy are now hostile to the euro. This is not contagion from Greece. It is running in parallel. Yet how it is handled will spill over with emotional force into the internal debates everywhere in Europe. “Syriza has just won a landslide popular mandate from the Greek people to tell the Troika to go to Hell. It is ludicrous to shout at them and tell them they can’t wriggle out of agreements,” said Giles Merritt, head of the Brussels think-tank Friends of Europe. Mr Merritt said the Syriza revolt has exposed the political failure of EMU crisis strategy with refreshing clarity.

“People in Brussels are losing patience with Germany. The real issue at hand is how we are going to rescue the eurozone from economic depression caused by five years of misguided austerity. Tspiras may find that he has more friends in this city than he thinks,” he said. “We cannot possibly risk Grexit at this stage and trigger a fresh eurozone crisis, so the Commission will soon waiver. Jyrki Katainen is toeing the line for now but he is not a fool. It is Greece that really has the whip hand, and the task is to find a face-saving formula for Germany,” he said. Prof Ashoka Mody, a former IMF bail-out chief in Europe and now at Princeton University, said hints by ECB members that they may pull the plug on Greek banks are “extremely irresponsible” and beyond the proper authority of these officials.

“They are supposed to be the guardians of financial stability. I have never heard of such outlandish threats before. The EU authorities have no idea what the consequences of Grexit might be, or what unknown tremors might hit the global payments system. They are playing with fire,” he said. Marc Ostwald from Monument said Grexit would open a Pandora’s Box. “They are all playing down the risk but once you throw Greece out, you are setting a precedent that nobody wanted to set. How could Cyprus stay in the euro given its dependence on Greek banks? As we have just seen with the Swiss franc, once the system buckles the markets will go after the next victim like a plague of locusts,” he said. The ECB would shield Portugal from immediate Grexit fall-out, but corrosive doubts would be planted.

As the Portuguese newspaper Publico wrote in an editorial entitled “Portugal is not Greece, but…”, the country has the same afflictions of crushing debt, low-growth, and lack of competitiveness within EMU. Combined public and private (non-financial) debt is 380pc of GDP, the highest in Europe, making the country acutely vulnerable to debt-deflation dynamics. Nor is it still viewed as an austerity poster child by Berlin. “The reforms have stalled. Behind the scenes they have put a halt to cuts. It is surprising that people haven’t paid attention to this,” said Raoul Ruparel from Open Europe. “We are ants; the Greeks are grass-hoppers,” protests Luís Marques Guedes, Portugal’s presidency minister.

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“Living standards were 85% of the European average before the financial crisis; they are now down to 60%. ”

To Escape Economic Hell, Greece Needs Tsipras To Call Germany’s Bluff (Guardian)

Lovers of Greek myths know the story of Sisyphus, the king of Corinth who as a punishment from the gods was condemned to spend his time in Hades pushing a boulder to the top of a hill. Every time Sisyphus neared the summit, the boulder slipped from his hands and rolled to the bottom of the slope, and he had to start all over again. The parallels between the sad story of Sisyphus and the equally sad story of Greece are too obvious to require comment. Burdened with debts that are worth 175% of its national output and rising, Greece faces a vain struggle to escape from the economic Hades in which it has been struggling these past five years. So when Alexis Tsipras, head of Greece’s new Syriza coalition government, says his country not only needs debt relief but demands it, he is right. Under the austerity conditions of the past half-decade, the Greek economy has shrunk by 25%. Living standards were 85% of the European average before the financial crisis; they are now down to 60%.

The surprising thing about Greece is not that the people have voted for a radical alternative to the status quo, but that they were stoical for so long. Tsipras’s challenge to the economic orthodoxy also makes sense. What Greece – and the indeed the entire eurozone – needs is not more austerity but stronger demand. Two numbers illustrate the abject failure of economic policy in the 19-nation single currency area: -0.6% and 11.4%. The first is the current inflation rate; the second the current jobless rate. The new government in Athens has made its intentions clear. It has shelved privatisation plans. It has raised the minimum wage and announced moves to hire more civil servants. The message from Tsipras is that we want debt relief and an end to the economic squeeze, and we want them now. There is, though, a complication. Greek voters also want to stay in the eurozone and the EU, which means that Tsipras can get what he wants only through negotiations with his country’s creditors. That means doing a deal with the ECB, the other members of the EU and the IMF.

Ultimately, it means doing a deal with Angela Merkel. David Marsh of the Official Monetary and Financial Institutions Forum wonders how Syriza is going to reconcile these three aims. Merkel and the other EU hardliners can see the inconsistency in Tsipras’s negotiating position. They are relatively relaxed about Greece because they know the tough talking has yet to start. Then they will say that if Greece wants to stay in the euro and wants ECB support for its shaky banks, it has to accept the terms set by its creditors, perhaps with some minor modifications. Tsipras’s best chance of avoiding a humiliating climbdown is to toughen his stance and threaten to leave the euro unless he gets Greece’s official debt reduced by, say, 50%. Indeed, unless he is prepared to do this, it’s hard to see why this leftwing prime minister chose a rightwing anti-German party as his coalition partner.

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“They make a desert and call it peace.”

As In 1942, Germany Must Show Restraint Over Greece (Cockburn)

Here are some quotes from the diaries of Count Ciano (Mussolini’s foreign minister and son-in-law), referring to Greece a year and a half after it was invaded and occupied by Germany. 6 October 1942: “Clodius [the Third Reich’s economics minister] is in Rome to discuss the Greek financial question, which is very bad. If it continues at this rate, sensational and unavoidable inflation will result, with all its consequences… “All this is absurd, but the German army does not intend to reduce its interest rate.” 8 October 1942 [Ciano tells Mussolini about the Greek situation and quotes his reply]: “If we lose this war it will be because of the political stupidity of the Germans who have not even tried to use common sense, and have made Europe as hot and treacherous as a volcano.” “He [Mussolini] is thinking of speaking to Himmler about this… but he will not get anywhere.”

In 2015, as in 1942, the Germans tend to overplay a strong hand. They insist that the Greeks abide by austerity agreements that have just been rejected by Greek voters in the general election on 25 January. The reason there was an election at all was that the previous Greek government, drawn from the conservative New Democracy and nominally socialist Pasok parties, could not get enough support in parliament to select a new president because eurozone leaders and the IMF would not relax their terms. The clear message from Greece is that no Greek government can satisfy the demands of the troika and expect to survive. The Greeks have every reason to reject the troika’s austerity programme. If ever an economic plan failed, it is this one. When the EU and IMF took control of Greek economic policy five years ago, they were meant to solve its debt crisis, modernise the economy and restore it to health.

They have demonstrably failed. A quarter of the economy has been destroyed, 26% of the workforce and 57.5% of youth is unemployed, and the economy is in crisis still. Listening to EU officials speak of “progress made”, one is reminded of Tacitus’s line, spoken by a British insurgent leader resisting the Roman occupation, which has echoed down the centuries: “They make a desert and call it peace.” Do the EU, ECB and IMF officials who visit Athens, often displaying an arrogance and contempt for the views of the Greeks that Tacitus would have found familiar, have much idea of what is happening there? Megan Greene, chief economist for the Portfolio Solutions Group, has studied economic relations between Greece and Germany since 2006. Reflecting on the past five years, she wonders if IMF officials “surrounded by security men in dark glasses” ever met any ordinary Greeks. She recalls an ECB official in Athens being astonished when she told him that many Greeks simply did not have the money to pay their taxes.

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“..a central bank which was not accountable to any national authority and which would push countries merely to become hostages to the whims of the financial markets.”

The Country That Refuses to Bow Down to Western Bankers (AlterNet)

Mario Seccareccia, a professor of economics at the University of Ottawa, has been outspoken in his warnings that austerity policies have the potential to smash economies and spread human misery. In his work supported by the Institute for New Economic Thinking and elsewhere, he has challenged deficit hawks and emphasized the need for strong government investment in things like jobs, education, healthcare, and infrastructure if economies are to prosper. In the following interview, he talks about why what happened to Greece was entirely predictable, why the Greeks were right to reject austerity in the recent election, and what challenges the country faces in forging a sustainable path forward with the left-wing Syriza party at the helm.

Lynn Parramore: You have long been warning of problems in the Eurozone. What do the Greek elections mean to the debate about austerity and how it impacts economies?
Mario Seccareccia: I actually began warning about problems in the Eurozone even before they launched the Euro in 1999! A couple of years after the adoption, in 1992, of the Maastricht Treaty, which was the initial step in the creation the European Economic and Monetary Union or the Eurozone, I happened to be in Paris for the launch of a book that I had co-edited in French titled Les Pièges de l’Austérité (The Austerity Traps) that had been published in November 1993. During the discussions, a number of us were already raising very serious questions about a treaty which prevented national governments from doing what they needed to do to stabilize their economies — namely engage in needed deficit spending, regardless of the magnitude, during times of recession for the purpose of stabilizing income and employment.

Some of us at the book launch warned of problems that could arise from a European supranational currency and a central bank which was not accountable to any national authority and which would push countries merely to become hostages to the whims of the financial markets. Along with many others, I’ve also raised concerns over what economists call “deflationary bias” in the structure of the Eurozone — that is, the tendency for policies to focus on lower inflation instead of more jobs and growth and to prevent greater public spending as a means to achieve growth. I could see that Greece would be the country that would be hit first by these problems because it is financially the weakest link in the euro chain, and because of the high public debt ratio when it joined the Eurozone in 2002. What is surprising is that it took until 2010 to reach such a crisis even though the warnings had been there for a long time.

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Big name. Interesting choice.

Greece Hires Lazard To Advise On Debt (FT)

The Greek government has hired investment bank Lazard to advise it on managing sovereign debt in a sign that Syriza is serious about honouring its election pledge to restructure its debt pile—despite EU officials warning against it. Tensions have been high since the country’s newly-elected far-left party came to power after winning elections a week ago, with German chancellor Angela Merkel on Saturday reiterating that Greece’s European creditors would not consider forgiving part of the debt-ridden country’s rescue loans. “I don’t see a further debt haircut,” she said. News of the move to hire Lazard came as Erkki Liikanen, an ECB governing council member, warned that Greek banks would be cut off from ECB lending if no deal was reached by the end of February when Greece’s support programme expires.

“We (the ECB) have our own legislation and we will act according to that. . . Now, Greece’s programme extension will expire at the end of February so some kind of solution must be found, otherwise we can’t continue lending,” Mr Liikanen said. Meanwhile, prime minister Alexis Tsipras on Friday called ECB president Mario Draghi to reassure him that his new government wanted to reach a “mutually beneficial” solution with international partners over the renegotiation of Greece’s bailout. A Greek official, who spoke to Bloomberg on condition of anonymity, said Mr Tsipras called Mr Draghi following a tense meeting between his new finance minister Yanis Varoufakis and Jeroen Dijsselbloem, the head of the eurozone group of finance ministers.

Mr Varoufakis had said that Greece would no longer co-operate with the troika of international lenders and would not accept an extension of its EU bailout. “This position enabled us to win the trust of the Greek people,” he said. Mr Dijsselbloem in return rejected the new Greek government’s call for an international conference that would consider writing off part of Greece’s debt, which last year amounted to 175% of national output. The exchange, along with tough words from Berlin, captured an adversarial mood as the new Greek government and its eurozone partners made their first formal contact and set the stage for tense negotiations that could decide Greece’s future in the European bloc.

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Weighing very word is crucial: “I am absolutely confident that we will soon manage to reach a mutually beneficial agreement..”

Greece Will Repay ECB, IMF, Reach Deal With EU, Tsipras Says (Bloomberg)

Greek Prime Minister Alexis Tsipras sought to repair relations with creditors after a week-long selloff in bonds and stocks, triggered by his pledge to end the country’s bailout agreement. Greece will repay its debts to the European Central Bank and the International Monetary Fund and reach a deal soon with the euro area nations that funded most of the country’s financial rescue, Tsipras said Saturday in an e-mailed statement. “My obligation to respect the clear mandate of the Greek people with respect to ending the policies of austerity and returning to a growth agenda, in no way entails that we will not fulfill our loan obligations to the ECB or the IMF,” Tsipras said.

Greece may soon be operating without a financial safety net for the first time in five years after Tsipras said he won’t respect the conditions of the country’s €240 billion rescue. He’s asking euro area officials to endorse an alternative program of economic revival that would allow increases in spending and wages to boost growth. “We need time to breathe and create our own medium-term recovery program, which amongst other things will incorporate the targets of primary balanced budgets and radical reforms to address the issues of tax evasion, corruption and clientelistic policies,” Tsipras said. “I am absolutely confident that we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole.”

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“As a last act of resistance the victims sang, breaking into the Greek national anthem, as they were lined up before the firing squad.”

Barricades Down, Ties Off: Welcome To Greece’s Style Revolution (Guardian)

Barely 20 minutes after being sworn in, Tsipras was standing before a large slab of marble in the rifle range of Kaisariani holding a clutch of red roses. The slab commemorates 200 resistance fighters killed by Nazi SS officers as the war neared its end on 1 May 1944. The youngest was 14. The red roses, gingerly placed on top of the memorial, represented the “rivers of blood” that some in Kaisariani, an Athens suburb, still recall flowing through the streets that day. The massacre, in reprisal for the fatal ambushing of a German general, would end up being among the worst committed by Nazi forces feeling the heat of resistance. The victims were almost all communists interned in Athens’ infamous SS-run Haidari concentration camp. If memory is the stomach of the mind, as St Augustine once noted, for Greek leftwingers Kaisariani is a visceral reminder of what so many endured during the “stone years” of the 20th century.

Civil war, military dictatorship, persecution under rightwing governments ensued. As a last act of resistance the victims sang, breaking into the Greek national anthem, as they were lined up before the firing squad. Tsipras did not speak. He did not have to. The monument spoke for him. And its message was twofold: the left had finally achieved power, and Germany should never forget how much the Greeks had suffered. Just as they had done under occupation, they would continue to resist Germany’s hegemony and its perceived attempts at subjugation through economically disastrous austerity.

Two days after overthrowing the old political order, the young revolutionaries insisted that barricades protecting the Greek parliament –ostensibly from furious protesters – be brought down. Under Syriza’s stewardship, Athens’s new civil protection minister felt fit to announce that the cradle of democracy no longer needed to be iron clad. The biting cuts and tax rises that had pushed Greeks on to the streets, in massive demonstrations when the crisis first hit, now belonged to the past. Under azure skies – for the sun had come out – I watched as workmen dismantled the barriers with an alacrity not known to most labourers in Greece.

A riot bus, parked alongside the building at the behest of the previous conservative-led coalition, was gone by the time the sun had come up. A band of American tourists, taking in the sight as they watched the slow-motion dance of the ceremonial guards outside the parliament, began to applaud. Inside, as the government held its first cabinet meeting, the cameras rolled. Looking straight up at them, Tsipras declared: “We do not have the right to disappoint our voters.” By day’s end, the anti-austerians had delivered on their promises, reinstating the minimum wage, rehiring public sector employees, and rolling back on all manner of reforms.

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“Tick tock, tick tock, Mariano – you won’t survive till summer..”

Podemos Looks to Capture Tsipras Momentum to Oust Rajoy (Bloomberg)

Thousands of supporters of Spanish anti-austerity party Podemos converged on Madrid today to kick off a year of campaigning they hope will end with the ouster of Prime Minister Mariano Rajoy. The group, which has led in most recent opinion polls, has been energized by the election victory of its ally Syriza in Greece, where Prime Minister Alexis Tsipras is challenging the European Union’s insistence on spending cuts after a seven-year recession that wiped out 25% of the economy. “Greece, brothers, here we come,” the crowd shouted. “Tick tock, tick tock, Mariano — you won’t survive till summer.” Podemos emerged over the past year, matching similar movements in Italy, Ireland and Greece, where many voters have grown tired after years of austerity.

While Spain’s economy is growing at the fastest pace in seven years, its 24% unemployment rate means many voters are still to feel the effects of the recovery. “Change has already started,” Juan Carlos Monedero, a member of Podemos’s executive committee, said in comments broadcast on the Internet. The anti-establishment party’s march started outside the central bank and the headquarters of the army in Cibeles square in the center of the capital and then headed down to the Puerta del Sol, the plaza colonized by the so-called indignados in 2011. Most demonstrators wore stickers with the party’s purple logo, a reference to Spain’s second republic brought to an end by the civil war in 1936.

Podemos grew out of the indignados movement – many of its leaders and party workers were involved in the 2011 demonstrations – and won five seats in the European elections in May just four months after it was created. Since then the party’s popularity has surged. A Jan. 10 survey published by El Pais showed the party on 28.2% with Prime Minister Rajoy’s People’s Party in third place on 19.2%. A Sigma Dos poll published by TV station Telecinco on Jan. 20 showed the PP leading Podemos by 29.4% to 26.2%. “Podemos has become a force in Spanish politics and need to be taken seriously,” said Tom Rogers, senior economist at Oxford Economics. “However, as radical parties get closer to government, they tend to get the most radical elements out and become more pragmatic.”

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“In Greece, more has been done in six days than in many years..”

Spain’s Anti-Austerity Podemos Stages Show Of Force Before Elections (Reuters)

Tens of thousands marched in Madrid on Saturday in the biggest show of support yet for Spanish anti-austerity party Podemos, whose policies and surging pre-election popularity have drawn comparisons with Greece’s new Syriza rulers. Crowds chanted “yes we can” or “tic tac tic tac” to suggest the clock was ticking for Spain’s scandal-ridden political elite. Many waved Greek and Republican flags and banners reading “the change is now” or “Pablo president”. Podemos (“We Can”) was formed just a year ago by university professor Pablo Iglesias, but produced a major shock by winning five seats in elections for the European Parliament in May.

Tapping into Spaniards’ austerity fatigue and widespread anger at “la casta”, as it calls the country’s business and political elites, it is currently topping opinion polls in the run-up to local, regional and national elections this year. “People are fed up with the political class,” said Antonia Fernandez, a 69-year-old pensioner from Madrid who had come to the demonstration with her family. Fernandez, who lives with her husband on a €700-a-month combined pension cheque, said she used to vote for the Socialist Party but had lost faith in it because of its handling of the economic crisis and its austerity policies. “If we want to have a future, we need jobs,” she said. Spain is emerging from a seven-year economic slump as one of the euro zone’s fastest growing countries.

But the exit from recession has yet to ease the hardship for millions of households, in a country where nearly one in four of the workforce remains out of a job. Addressing the crowd in the Puerta del Sol square in central Madrid, the 36-year-old, pony-tailed Iglesias said 2015 would be the “year of change” in Spain. “The wind of change is starting to blow in Europe,” he said in Greek, as he praised Greek leftist leader Alexis Tsipras’ first decisions as prime minister. Tsipras promised that five years of austerity, “humiliation and suffering” imposed by international creditors were over after his Syriza party romped to election victory on Jan. 25. “Who said it was impossible? Greece today has a government of change. In Greece, more has been done in six days than in many years,” Iglesias said.

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Der Spiegel defends Angela.

Merkel’s Unintended Creation: Tsipras Win To Upset EU Power Balance? (Spiegel)

Tsipras never tires of saying that he wants to “give the Greeks back their dignity.” And dignity is an important word for those who seek to understand what has happened in Greece. If so many Greeks didn’t feel humiliated by their own corrupt political class, by their dwindling prosperity – but also by the Germans and the other Europeans – Tsipras would have never been elected. Tsipras is a man whose career was spawned by the euro crisis. The currency that was designed to unite Europe has effectively divided its people. In an economic community in which some feel that they have been hoodwinked and others feel oppressed, Tsipras’ fans revere him as a rebel. Many Greeks see him as a man who has what it takes to free them from oppression.

At the same time, many Germans see him as a terrifying extremist. They view Tsipras as Europe’s nightmare. Tsipras is the anti-Merkel, and he never would have achieved this kind of political success were it not for the German chancellor. And now these individuals constitute the two antipodes in a Europe in which there is a growing lack of mutual understanding. How could it come to this point? Right from the start, the euro was more than just a currency. It was a pledge to heal the rifts created by war and blind nationalism in Europe. When then-German Chancellor Helmut Kohl signed the Maastricht Treaty on Feb. 7, 1992, he hoped that the common currency would irreversibly unite the Continent.

Now, the euro appears to be stirring up the very antagonistic sentiments that it was supposed to eliminate. In Greece the crisis has brought a government to power that features an entirely new mixture of left-wing radicals and right-wing populists, whose only common ground is the joint struggle against Merkel’s austerity dictate. But Tsipras is also Merkel’s unintended creation. His rise to power cannot be explained without a deep understanding of the frustration that Europe’s policy of austerity has sparked. This may seem irrational. After all, it was the Greeks who amassed such huge debts that their country could no longer bear the burden in April 2010. But by morphing Merkel into an austerity dominatrix, Tsipras has created an artificial figure upon whom he can project all of the Greeks’ negative feelings.

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“..and whispered…”you have just killed the Troika,” to which Varoufakis responded… “wow!”

Dijsselbloem To Varoufakis: “You Just Killed The Troika” (Zero Hedge)

Amid ‘turmoiling’ stock markets on Friday, CNBC’s Simon Hobbs summed up the status quo’s thinking on the new Greek leadership when he noted, somewhat angrily and shocked, “The Greeks are not even trying to reassure the markets,” seeming to have entirely forgotten (and who can blame him in this new normal the world has been force-fed for 6 years) that political leaders are elected for the good of the people (by the people) not for the markets. Yesterday saw the clearest example yet of Europe’s anger that the Greeks may choose their own path as opposed to following the EU’s non-sovereign leadership’s demands when the most uncomfortable moment ever caught on tape – the moment when Eurogroup chief Jeroen Dijsselbloem stood up at the end of the EU-Greece press conference, awkwardly shook hands with Greece’s new finance minister, and whispered…”you have just killed the Troika,” to which Varoufakis responded… “wow!”

As Keep Talking Greece reports: The joint press conference was concluding, when Greek Finance Minister Yanis Varoufakis droped a last bombshell. “…and with this if you want – and according to European Parliament – flimsily-constructed committee we have no aim to cooperate. Thank you.” Varoufakis was referring to the famous Troika, the country’s official creditors consisting of the European Union, the International Monetary Fund and the European Central Bank.. After concluding with a “Thank you” Varoufakis gives the word to Eurogroup Chief Jeroen Dijsselbloem, who wants to hear the translation first. Then he takes off the ear phones, he stands up and sets to leave. An enforced-looking shaking of hands delays the departure of the Dutch FinMin. Dijsselbloem quickly whispers something to Varoufakis’ ear, he briefly replies back and the Eurogroup chief leaves the press conference hall as soon as it was possible.

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“We’re in for at least half a decade of turbulence and uncertainty in Europe.”

Greece Shakes Europe’s Political Kaleidoscope – Expect The Unexpected (Reuters)

By catapulting to power an improbable alliance of the hard left and nationalist far right, Greece has shaken up Europe’s political kaleidoscope and may have signaled the end of an era of centrist consensus. With eight general elections due in the European Union this year, as well as regional votes, the earthquake in Athens may be a harbinger of other shocks to come. Expect the unexpected in 2015 from Britain to Finland and Denmark to Spain as voters who have endured five years of economic crisis, falling real incomes and welfare cuts vent their anger, anxiety or apathy at the ballot boxes. Mainstream center-right and center-left parties that have dominated European politics since the end of World War II are bleeding support to populists at both ends of the spectrum, and to mavericks like Italian comic-turned-politician Beppe Grillo.

This theme will be prominent during Reuters’ annual euro zone summit this week which will interview a host of policymakers from Brussels and key EU capitals. In many countries, voters feel the established parties offer no real alternative. Many are keen to punish a ruling “caste” perceived as out of touch with ordinary people’s concerns, and as helping themselves rather than their electors. What unites many of the new forces is hostility to the EU and to policies of austerity driven from Brussels and Berlin. “We’ve reached the end of a 30-year cycle of liberal individualism and wealth accumulation that began with Ronald Reagan and Margaret Thatcher,” former British Europe minister Denis MacShane said in an interview. “We’re in for at least half a decade of turbulence and uncertainty in Europe.”

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This is not just growth contraction, it’s actual contraction. Things get worse fast.

China Manufacturing Shrinks For The First Time In Two Years (Guardian)

China’s manufacturing activity contracted for the first time in more than two years in January, an official survey showed on Sunday, signalling further downward pressure on the world’s second-largest economy. The official purchasing managers’ index (PMI) released by the national bureau of statistics came in at 49.8 last month, down from the 50.1 recorded in December. The index, which tracks activity in factories and workshops, is considered a key indicator of the health of China’s economy. A figure above 50 signals expansion, while anything below indicates contraction. January’s figure was the first contraction for 27 months. The British bank HSBC said last month that a preliminary reading of its own PMI edged up to 49.8 in January from a final reading of 49.6 in December. It was at the break-even point of 50.0 in November.

The bank is scheduled to release its final PMI figure on Monday. ANZ Banking Group said in a research report that the NBS figures were unexpected, particularly given “favourable seasonal factors”. “The Chinese New Year falls into late February this year, while it was in late January last year,” ANZ said. “Past experience suggests that there could be significant front loading effect before the Chinese New Year, which would provide short-term impetus to the manufacturing industry.” China’s central bank surprised economists in November by cutting benchmark interest rates for the first time in more than two years, in a move interpreted as an attempt to shore up flagging growth. The People’s Bank of China lowered its one-year rate for deposits by 25 basis points to 2.75% and its one-year lending rate by 40 basis points to 5.6%.

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“The prior question is, ‘what are we trying to achieve with our lives?’”

Beyond GDP: UK Greens Spark Debate On A Better Measure Of Progress (Guardian)

Daffodils do it; babies do it; kittens do it: growing seems like the most natural thing in the world, and over the years we’ve come to understand growth as the normal state for economies, too. Recessions, when GDP temporarily declines, are an aberration, imperilling human progress and interrupting the natural order. And chancellors are keen to trumpet Britain’s success when, as in 2014, our growth rate races ahead of the competition. So when the Green party suggested last week that it might abandon the idea of targeting GDP growth as a public policy aim, it caused a storm of indignation with some commentators fearing that the environmentalist party – which has been registering support of more than 10% in some recent polls – would catapult Britain back to the dark ages.

Caroline Lucas, the Green MP for Brighton and the party’s spokeswoman on the economy, is keen to play this down, stressing that any shift to a new way of gauging economic success would have to be gradual. She argues, for example, that a more rounded view of progress might incorporate a measure of how much Britain is depleting or polluting its “natural capital” – resources such as rivers, forests and oceans. The independent Natural Capital Committee, chaired by academic Dieter Helm, already produces regular reports for the government on sustainable use of resources.

“I don’t think it’s unreasonable to say that – at the very least to begin with – alongside GDP, we might also begin to have a measure of the depletion of resources,” Lucas says. “Once people get more used to that, you could imagine bringing in two or three more indicators: health, community cohesion, equality and so on.” She argues that GDP – which measures all kinds of economic activity, but misses out “bad” factors such as pollution, is “a very, very flawed measure: all it’s measuring is the amount of money revolving around the economy, without ascertaining whether or not it’s being used to good or bad ends. The prior question is, ‘what are we trying to achieve with our lives?’

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Britain’s great recovery.

The Rise Of The Working Poor: When Having A Job Cannot Prevent Poverty (Ind.)

The “vast majority” of veterans who need financial aid to prevent them from slipping into homelessness are unable to make ends meet despite having jobs, the head of a leading military charity has revealed. Hugh Milroy, the CEO of Veterans Aid, a front-line charity fighting homelessness among the country’s ex-servicemen and women, said about 80 per cent of its active cases could be described as “working poor” – people who are in employment but still fall below the poverty line. Staff at the charity, one of two being supported by The Independent on Sunday’s charity appeal, have observed a marked change in the kind of person seeking help over the past two years. The proportion of working poor on the charity’s books has been rising rapidly, they said.

“They are people who simply cannot afford to live and work. We’ve had one or two really bad cases where whole families could have ended up on the streets if we hadn’t intervened,” Dr Milroy said. “This is a really serious issue, and it isn’t going away. Life in Britain is complex and expensive. Some people simply can’t afford their rent and end up sleeping in their car, even though they’ve got a job. You cannot sustain your life like that.” The charity recently helped a single father with three young children who had been given 24 hours to move out of his flat after accruing debts through a payday loans company. Veterans Aid gave him money for a deposit on a new property and guaranteed his rent for six months. “Had we not, they would have been on the streets,” Dr Milroy said.

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“..in the United States at present, the policies being pursued by too many wealthy people and decision makers are ones that, as in the case of the Mayan kings, preserve their interests in the short run but are disastrous in the long run.”

10 Reasons You Don’t Hear The Doomsday Clock Ticking (Paul B. Farrell)

The Doomsday Clock was just reset: It’s now “Three Minutes to Midnight,” warns the Bulletin of Atomic Scientists. It’s loud ticking is a grim reminder, as Joe Romm put it on ClimateProgress, that “Earth’s rate of global warming is 400,000 Hiroshima bombs a day.” Yes, a civilization-ender, and yet, Gallup polls dismiss the warning — the public doesn’t consider climate change a major national priority. The threat was also summarized in Scientific American: The Doomsday Clock is “a visual metaphor to warn the public about how close the world is to a potentially civilization-ending catastrophe. Experts on the board said they felt a sense of urgency this year because of the world’s ongoing addiction to fossil fuels, procrastination with enacting laws to cut greenhouse-gas emissions and slow efforts to get rid of nuclear weapons.” Yes, global warming is as powerful and lethal as 400,000 atomic bombs exploding daily, said James Hansen, former head of NASA Goddard Institute of Space Studies.

America is addicted to Big Oil. But paradoxically, that’s numbing us to the terminal ticking sound of the disasters ahead. Our brains are trapped in denial — not just Big Oil and their right-wing climate-science deniers — but more than 100 million average Americans. We’re deaf. Dumb. Blind. To the threats. This is a problem of psychology, behavioral economics and the neurosciences. As anthropologist Jared Diamond, author of “Collapse: How Societies Choose to Fail or Succeed,” put it: Our brains still haven’t learned the lessons of history. Remember, centuries ago two million people lived in the Mayan civilization. But like “so many societies the elite made decisions that were good for themselves in the short run and ruined themselves and societies in the long run.”

As a result, the Mayan civilization collapsed “because of a combination of climate change, drought, water-management problems, soil erosion, deforestation.” Diamond added the rulers “managed to insulate themselves from the consequences of their actions.” Forests being chopped down. But “the kings didn’t recognize that they were making a mess until it was too late.” Flash forward, “similarly, in the United States at present, the policies being pursued by too many wealthy people and decision makers are ones that, as in the case of the Mayan kings, preserve their interests in the short run but are disastrous in the long run.” Yes, today the old pattern is repeating. Listen to 10 excuses Americans make. All of us, not just Big Oil but all across America, Washington, Wall Street, and yes, all over Main Street. Here’s why we are already repeating the same fate as the Mayans in today’s world of endless hypocrisy and denials about global warming, failing to prepare, oblivious of the coming storms.

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Home Forums Debt Rattle February 1 2015

This topic contains 4 replies, has 5 voices, and was last updated by  Greenpa 4 years, 6 months ago.

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  • #18794

    William Henry Jackson Steamboat Metamora of Palatka on the Ocklawaha, FL 1902 • Europe’s Creditors Play With ‘Political Fire’ Pushing Greece To The Br
    [See the full post at: Debt Rattle February 1 2015]

    #18797

    Ken Barrows
    Participant

    It’s clear that austerity is bad for the Greeks, but theirs and the world’s economic problems developed out of “anti-austerity,” taking on too much debt. If Greece (or the world soon enough) cannot “grow” out of its problem and austerity is a no-go, what’s left?

    #18809

    Gravity
    Participant

    Essentially, the monetary system is a volatile pyramid scheme requiring continuous increase of debt-based money to avoid self-liquidating collapse. This system used to work when credit was productively allocated, affording growth in GDP, but not anymore.
    None can borrow their way to growth if interest payments on debt continue to outweigh the marginal productivity of spending credit, in such a debt-saturation any additional debt cannot be serviced and will directly contract productivity instead of growing it.

    In the past 5 years Greece’s economy has contracted more than under a destructive military occupation, so genocidal austerity hasn’t paid off to make the country more solvent. Default has actually become more likely since the country has diminshed capacity to service its expanded debt. And much of this debt is totally odious.

    There’s a persistent idea that greeks, especially the rich, don’t pay enough taxes, that tax collection is not efficient enough to minimally fund government programs. Its at least evident that productive activities have been taxed more than unproductive ones.
    Syriza’s program does state that they intend to increase the upper income tax bracket to 75%, while property taxes have already outrageously increased to fund municipalities, which will only make the rich flee the country or hide their income and assets.
    Instead, a 30% flat tax on all forms of activity but not property may be more equitable, since the secondary function of taxation is to finance government programs but its primary function is to diminish activity, and if no economic rationality exists to distinguish the quality of productive or consumptive activity, all should be diminshed equally.

    Greece’s labor stimulus must focus on whatever productive activity its remaining social and industrial infrastructure is most uniquely suited to, excluding debt-fueled consumerism.
    Its still a sunny country, besides promoting tourism, massively expanding solar generation could lessen reliance on costly electricity imports, and modernising agricultural production, water availability permitting, could help to create food and jobs. Some of the unemployed youth could be stimulated to emigrate to wherever demand for labor is higher, but there’s insufficient demand for labor in most of europe.

    Growth cannot continue on its previous unsustainable trajectory, so therefore it can only continue in another direction entirely, financed by radical honesty instead of deception.
    Thus, a comprehensive financial reformation encompassing the entire international banking system is necessary.

    https://varoufakis.files.wordpress.com/2013/07/a-modest-proposal-for-resolving-the-eurozone-crisis-version-4-0-final1.pdf
    This program proposes mechanisms to finance greece’s sovereign debt less deceptively, but it fails to adress the financial hegemony of the banking system or the notion of odious debt.

    #18831

    davidveale
    Participant

    Farrell’s article is excellent, but I do find it highly ironic that it appears in MarketWatch, where the readers are all presumably interested in investment in public corporations. This is the very force (the exclusive expectation of shareholder returns, sans any human ethos or morality) which drives much of the destruction and also much of the media meant to mislead us on these subjects.

    #18832

    Greenpa
    Participant

    We’re in one of those phases where significant news happens hourly; this just in:

    https://www.bloomberg.com/news/articles/2015-02-02/consumer-spending-decreased-in-december-by-most-in-five-years

    The real picture is complex; spending was up well for the quarter; but down in December. Eh? Basically retailers have been forced into a cycle of mutual throat cutting earlier and earlier; and instead of paying premium prices for last-minute gifts, consumers don’t bite unless offered 40%-60% discounts on such items – in November. And current bean-counters prefer to boost corporate profits by firing employees and cutting their wages, rather than boosting sales (“making” something of value is long, long gone.).

    How soon before the newspapers adopt a “Greek Spring!” chant? If Spain follows- and they look like it to me- things will change. I would not be so rash as to predict an improvement in life for Everyman, however. The Owners certainly have contingency plans; including which of them will be dumped out of their lifeboats first…

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