Feb 122015
 
 February 12, 2015  Posted by at 4:02 pm Finance Tagged with: , , , , , ,


Dorothea Lange Water supply in squatter camp near Calipatria CA 1937

It was already present over the past two weeks, for example in Yanis Varoufakis’ meetings with Eurogroup head Jeroen Dijsselbloem and German FinMin Schäuble, awkwardly obvious in facial expressions and body language. A touch of personal discomfort. A touch of a threat that required chest-thumping and hubris to be brushed off. ‘You better do what we say or else’. Back then, perhaps it was still experienced from a political, deal-making, perspective. But in the course of yesterday it became clear something has changed.

It has become personal, you could feel it in the air, and that raises the danger level considerably. It’s not personal from the Greek side; Alexis Tsipras and Varoufakis merely act according to – their interpretation of – the mandate handed them by their voters. It’s the other side(s) that have started making it personal. They see themselves, their positions, as being under attack. And they blame Greece’s new Syriza government for that. Which may seem logical at first blush, but that doesn’t make it true. The people sitting on the other side from Varoufakis have dug themselves into these positions.

Which, as they rightfully fear, are now threatened. Not because Syriza means to do so, but because they come to the table with that mandate, to put an end to what has caused Greece to sink as deep as it has. There’s nothing personal about that, it’s democracy at work, it’s politics. Still, it’s perceived as personal, because it makes the ‘old’ leadership uncomfortable. They haven’t seen it coming, they were convinced, all the way, that they would prevail. They mostly still are, but in a now much more nervous fashion.

It’s started to dawn on them that perhaps Syriza will not back down on its demands, that yet another – mostly superficial – political deal is not in the cards. CNBC reported last night that a deal on an extension of the existing bailout was near, and markets reacted quite strongly. It would appear, therefore, that both media and investors have been as deaf as the EU to what Syriza has been consistently saying, that it’s not interested in such an extension. It was never on the table, not from the Greek point of view.

Perhaps a headline such as yesterday’s ‘Greece Warned To Expect No Favors’ sums it up best. The EU side sees – or at least publicly presents – any negotiation with Greece as handing out favors, while Syriza says it doesn’t want any favors, it wants something that will give the Greek people back a future. And there is nothing that will make them not want that.

There is of course a fear within the EU that what is granted to Greece will eventually also have to be handed to other countries. Interestingly, though, the incumbent governments of the countries involved, Spain, Portugal, Italy, have a vested interest in Syriza failing. Because if it doesn’t, their powers are set to dwindle. This is most urgently obvious in Spain, where PM Rajoy’s ruling party is already way behind Podemos in the polls.

Podemos leader Pablo Iglesias, writing in the Guardian, made his position very clear:

If The Greek Olive Branch Is Rejected, Europe May Fall

During his swearing-in speech as Greece’s prime minister, Alexis Tsipras was clear: “Our aim is to achieve a solution that is mutually beneficial for both Greece and our partners. Greece wants to pay its debt.” The European Central Bank’s response to the Greek government’s desire to be conciliatory and responsible, was also very clear: negative. Either the Greek government abandons the programme on which it was elected, and continues to do the very thing that has been disastrous for Greece, or the ECB will stop supporting Greek debt.

The ECB’s calculation is not only arrogant, it is incoherent. The same central bank that recognised its mistakes a few weeks ago and began to buy government debt is now denying financing to the very states that have been arguing for years that the role of a central bank should be to back up governments in protecting their citizens rather than to rescue the financial bodies that caused the crisis.

And though Portugal may not – yet – have a full-fledged Syriza or Podemos, it’s economy is in straits as dire as those of its peers, as Ambrose EP explains today:

Germany Faces Impossible Choice As Greek Austerity Revolt Spreads

It is unfair to pick on Portugal but its public and private debts are 380% of GDP – the highest in Europe and higher than those of Greece – making is acutely vulnerable to toxic effects of deflation on debt dynamics. Portugal’s net international investment position (NIIP) – the best underlying indicator of solvency – has reached minus 112% of GDP. Public debt has jumped from 111% to 125% of GDP in three years. The fiscal deficit is still 5%. The country’s ranking in global competitiveness is close to that of Greece.

“The situation in Portugal is very different,” says Paulo Portas, the deputy premier. Sadly it is not. Once you violate the sanctity of monetary union and reduce EMU to a fixed-exchange system, the illusion that Portugal is out of the woods may not last long. Markets will test it. Only two people can now stop the coming train-wreck. Chancellor Angela Merkel and her finance minister Wolfgang Schauble, a man who masks his passion for the EU cause behind an irascible front.

Ambrose also quotes Italy’s Beppe Grillo:

Beppe Grillo’s Five Star movement – with 108 seats in parliament – is openly calling for a return to the lira. Mr Grillo proclaims that Syriza is carrying the torch for all the long-suffering peoples of southern Europe, as it is in a sense. “What’s happening to Greece today, will be happening to Italy tomorrow. Sooner or later, default is coming,” he said.

Maybe for the reigning ‘kings and queens’ of the EU and its member states it’s inevitable that all this should become personal at some point. They’ve certainly tried hard enough to trivialize Grillo as some kind of clown through the years. Perhaps, also, it’s the demeanor, the popularity and the person of Varoufakis, the ‘new heart-throb of the thinking German woman’, as Ambrose characterized him. And I don’t think he meant Angela Merkel. Christine Lagarde, perhaps, who showed up yesterday in the sort of attire that seemed designed to blend in with Yanis.

But I still think the main reason things got personal is that with the arrival of Syriza on the scene, the ‘kings and queens’ can just ‘intuitively smell’ the changes that are afoot, and that don’t spell anything good for their own plush seats. For a while they could pretend it was all only – mostly right-wing – extremists that expressed feelings critical of the EU. And of course, Syriza is still habitually labeled ‘extreme left wing’ and ‘Marxist’, but Varoufakis clearly isn’t seen by people in Germany et al as some extremist nutcase.

The usual bag of tricks no longer works. And the subject Varoufakis brings to the table, that the EU and ECB economical policies have been an abject failure – at least for the people in Greece’ Main Street – is not some extreme notion either. Schäuble and Dijsselbloem can try and cling to the idea that Greece seeks to swindle German and Dutch voters out of even more money than they already have, and that still works to an extent, but it is wearing thin.

The contagion from Syriza success can be considerable, and though it pretends otherwise, the EU has no idea what it would mean down the line. Every single option they look at that is NOT Varoufakis surrendering, must scare them out of their socks. Anything they give up will be seen as a sign of weakness, and it will encourage parties for which Syriza ‘carries the torch’, and likely raise their support and votes.

However, if the Eurogroup don’t give up anything at all in the negotiations, there may be a Grexit, even with Russia and/or China stepping in to fund Athens. While there are all sorts of reports claiming that Grexit is manageable for the EU, don’t believe a word of them: nobody knows. And none of the present big shots wants to be held responsible for blowing up the common currency.

They have come to the realization over the past week that Syriza can be a ground-breaking force in Europe, not just a minor nuisance. They will have to adapt their attitude and their way of thinking, real fast. Monday February 16 comes to mind. Because Syriza will not back down and go for a bailout extension. For the simple reason that it is not what they see as their mandate. The Eurogroup had better be prepared for that, or it might become irrelevant in no time.

And no, no matter what they think, it’s not personal. Not for Varoufakis it isn’t. He merely represents the Greeks without access to health care who line up at soup kitchens. But you’re right, for those people, living in the third world that Europe has created within its borders, it’s very personal.

Home Forums The Greek Issue Just Got Personal

This topic contains 9 replies, has 9 voices, and was last updated by  GeoLib 4 years, 5 months ago.

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  • #19135

    Dorothea Lange Water supply in squatter camp near Calipatria CA 1937 It was already present over the past two weeks, for example in Yanis Varoufakis’
    [See the full post at: The Greek Issue Just Got Personal]

    #19136

    John Day
    Participant

    The wrong model is currently prevalent, but changing to the right model will benefit all parties.
    The current model in western business, politics and war is basically the Roman model, of predator and captured prey, of absolute ownership of the individual or entity (corporation, nation, etc.).
    That’s not the only model. In Islamic banking, for instance, money is not lent at a set interest, to be paid, come hell or high water, or assets forfeited to the lender. That is a one-sided predatory model, where all the risk is born by the junior partner. Even without compound interest, lenders would eventually come to own everything, if they lived long enough (corporations, families).
    In Islamic banking, there is no periodic “Jubilee” of debt and slavery forgiveness, but there is a shared distribution of benefit and risk in any loan. The lender profits if the venture profits. The lender takes losses if the venture takes losses.
    The predatory model has been able to “thrive” in this time of massive resource exploitation, since coal-fired steam engines began the industrial revolution and the age of empire.
    Empire is everywhere and resources are depleted. We are at peak everything. There will not be plentiful resources for any possible survivors to exploit after WW-3.
    Plan-B?
    Information symmetry is necessary for trust to exist in a new game based upon fairness and mutual benefit.
    The internet is pretty good for that, but needs to be fed nutrition, not poison.
    We all sort out some wheat from the chaff already. It is possible for there to be pretty good information symmetry in the world, once it is seen as clearly in the best interests of all.
    Do you think Russia and China, Israel, Germany, Japan, Brazil, etc all know approximately the same truths about what is going on in our world behind the scenes?
    It’s gotta’ be pretty close, because they are all monitoring highly filtered and processed information feeds, eliminating most of the disinformation, which is used to herd the “sheeple”.
    Their information feeds tell them which player has the fatal-advantage in which economic, political or military venue at any given time.
    They all still spring some traps on each other, but mostly on us.
    Big military and big covert operations networks provide the ability to spring traps, and that includes predatory finance, of course. (please phase out)
    Resetting the rules to phase out predation, benefiting by the bleeding of another entity, is what is needed.
    Greece, Ukraine, Palestine, Syria, Iran Iraq, etc. all have solutions which can be approached in the cooperative framework, which is what is often pretended, anyway…

    #19137

    Growth of the kind needed to service the highly leveraged debt we now have is no longer possible due to resource contraints.

    The financial institutions have created supersaturated levels of risk and false accounting in order to pretend growth is happening. This has accelerated an international catabolism where the strongest economies have to destroy and feed on smaller economies just to give them enough resource to pretend for another day. This would explain the frantic geopolitics happening at the moment. It’s all to maintain the economies in their precarious dream state.

    I think this system is so fragile and out of equilibrium that it will not be able to withstand Greece’s challenge to the european looting of their country.

    There will be price discovery in 2015, hold onto your hats!

    #19138

    Professorlocknload
    Participant

    Just kick the can onto the next watch. Nothing new here but a different set of pandering politicians.

    Would a Grexit really have any more impact on Europe than a Detroit bankruptcy would have on North America? Did the Detroit mess cause a domino reaction here?

    Seems to me TPTB have such a tight rein on it all that we could go for years before they “lose it.” Hell, we’re 7 years into the “imminent” total implosion which was supposed to happen back in 07/08. What’s another decade? That said, we haven’t even entered Full on Japan Phase yet, which can extend the circus another many years.

    Demand being unlimited, and Central Banks and their governments believing money creation can always feed demand,,,well, I guess all one can do is sit tight and wait for that monetary blizzard. From FF rates of zirp, where will they peak in the eventual money storm coming up? 18%? 25%? Maybe 80%, before full reset?

    QE4>> is going to be big! Really big!

    #19140

    palloy
    Participant

    We haven’t had China dropping its Dollar-Yuan peg, dumping its Dollar-denominated assets and pulling out of the Dollar/IMF/World Bank/SWIFT system yet. It is all set up and waiting for some event to blame it all on. The break-up of the EuroZone would do it.

    Every country that has been hurt by the old system, like Greece, Cyprus, Iran and Syria, will be eager to join the new system of Yuan/BRICS-Bank/RosSWIFT and start afresh, hopefully with a little less superpower domination.

    US/EU/Japan will have no alternative but to hyperinflate their debts into worthlessness with QE4-5-6.

    #19141

    rapier
    Participant

    The Ukraine is personal too. I’m agnostic on Putin at best. He’s a politician right? However he is held in total contempt by our foreign policy elites and where the elites go Obama follows. It has been apparent from Obama’s rhetoric that he holds Putin in total contempt also.

    I think it got worse when Russia brokered a sort of deal when the US was just about to commit to directly working with the Syrian opposition fighters. Among which was what is now ISIS you may recall. (We were training these guys in Jordan before that) While any more Syrian involvement had almost no popular support and not that much in congress the moment Russia got involved it was seen as a humiliation for Obama. Go figure. I think the NY Times constant and absurd Ukraine narratives can be understood to reflect what is coming from the White House. The dodgy cease fire just announced will settle nothing. The US position is that the rebels have to surrender control and unbelievably, that Russia has to give Crimea back to Ukraine. Since that will never happen say hello to another several decades of cold war with Russia. Which is the point. We will not stop until Russia is a neo liberal paradise so global corporations can ‘own’ Russian oil and gas.

    #19142

    Ken Barrows
    Participant

    I agree with Professorlocknload. Maybe I am conditioned to expect can kicking, but I think Syriza will agree to an extension. Of course, the rationale for the agreement is that the EU has made some sort of concession.

    #19143

    Sir George Knibbs
    Participant

    I am just a humble blog reader, not a Big Expert on these matters. However I have some sympathy with the points made by Professorlocknload and Ken Barrows. Yes we can see there are massive, contradictory and unstable forces at work. The question is one of timing. The history of the past 7 years shows these contradictions can be papered over, at the expense of most of the ordinary folks who don’t have millions of $$ stashed away. Who is to say they cannot be papered over for another 7 years?

    #19151

    rapier
    Participant

    The rest of the world may have to deal with rising rates but probably not the US.With trillions of excess US bank reserves and the strong dollar and markets attracting money here the Fed is not going to be able to raise rates. They don’t have a magic wand. They can raise the Fed Funds rate,that’s it. As I said the world is awash with money looking for a short term home so there is no reason why US short rates should rise and the US safe haven status will put a bid under longer term rates.

    One can imagine that this could create a circular reinforcing cycle for awhile with the strong dollar being a primary driver. We are in a currency war after all and the US to my mind is playing hardball now. King dollar is the policy. That’s why we are working to destroy the ruble and all that stuff about a dollar alternative system. They system only really works unless the dollar is king. Such is an existential necessity for the continuation of the status quo in all its forms and to the benefit of those now at the top.

    #19153

    GeoLib
    Participant

    How we cling to our bureaucracies. Europe will not “fall” simply because it’s bureaucracy changes.

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