Jun 192015
 June 19, 2015  Posted by at 7:42 am Finance Tagged with: , , , , , ,

G.G. Bain Three-ton electric sign blown into Broadway, New York. 1912

The troika of Greek creditors has gone into full-frontal morals-be-damned attack mode, handpicking arms from a weapons arsenal we haven’t seen used before, and that we never should have seen in an environment that insists – and prides – on presenting itself as a union, both in name and in spirit. Now that they are being used, there no longer is such a union other than in name, in empty words.

This has turned into the kind of economic warfare one would expect to see between sworn and lethal enemies, that the US would gladly use against Russia for instance, but not between partners in a union founded on principles based entirely and exclusively on being mutually beneficial to everyone involved.

Those principles, and everything that has been based on them, the common currency, the surrender of ever more sovereignty on the part of the nations involved, the relinquishing of national powers to the various supra-national bodies in Brussels, has for everyone involved been based on trust. Nobody would ever have signed up to any of it without that trust. But just look where we are now.

When spokespeople at the troika side of the table stated on Thursday that they don’t know if Greek banks will be open on Monday, they crossed a line that should never even have been contemplated. This is so far beyond the pale, it should by all accounts, if everyone involved manages to keep a somewhat clear head, blow up the union once and for all. If a party to a negotiation that can’t get its way stoops to these kinds of tactics, there is very little room left for talk.

And all EU nations should understand by now that this is not about Greece anymore, it’s about all of them. Any member nations that does not fall into -goose- step with Brussels must from here on in be prepared to deal with attempts to crush it economically and politically.

Whatever trust there once was is now gone. And trust, once blown, is painfully difficult to regain. The negotiations on the Greek debt crisis have become just another dirty business deal, and have nothing to do anymore with conversations between equal partners in a union. Even though that is still what they’re supposed to be. Officially.

Translation: there are no equal partners in Europe. There only ever were in name. When people thought they signed up for a tide to lift all boats. The Greek crisis has destroyed that lift-all-boats notion once and for all. All that’s left of the union is power politics, of those (s)elected to represent all member nations, working to crush one of them with all weapons at their disposal.

One of those weapons is utilizing the media to incite a bank-run in Greece, aimed at paralyzing the Greek government into full submission. The run-up to the bank-run has been building up steam ever since Syriza took over 5 months ago, but apparently not fast enough for the troika.

The threat has always been simmering below the surface; what changed is that the moral constraint which kept the creditors from speaking out loud in public about it, was dropped yesterday. And that changes everything.

The European Union cannot deliberately aim at a bank-run in an individual eurozone member nation without quashing the very trust that holds the union together. The only remaining question after this is: who’s next in line?

This is from the Guardian:

Greece Faces Banking Crisis After Eurozone Meeting Breaks Down

Greece is facing a full-blown banking crisis after a meeting of eurozone finance ministers broke down in acrimony and recrimination on Thursday evening, bringing the prospect of Greek exit from the eurozone a step nearer. Some €2bn of deposits have been withdrawn from Greek banks so far this week – including a record €1bn yesterday – triggering fears that a breakdown in talks would spark a further flight of funds.

[..] leaders of the eurozone and the IMF aimed bitter criticism at the leftwing Greek government, accusing it of lying to its own people, misrepresenting and misleading other EU leaders, refusing to negotiate seriously, and taking Greece to the brink of catastrophe.

‘Not negotiating seriously’ translates as ‘not doing what we tell you to do’. It’s absurd to claim that Syriza, which has tabled an entire range of proposals, one even more detailed than the other, does not attempt to negotiate seriously. It’s a claim the Greek side can make just as well. The underlying tendency is that the troika does not see the talks as taking place between equal partners. And that is lethal for the whole idea behind the European Union. It’s its instant death even if people will be slow to realize it.

Christine Lagarde, the head of the IMF, said there was an urgent need for dialogue “with adults in the room”. She added: “We can only arrive at a resolution if there is a dialogue. Right now we’re short of a dialogue.”

This is something only a juvenile mind would come up with. Lagarde is obviously not worried about her reputation, she feels -nigh- omnipotent, but she really should be. She’s causing enormous damage to the IMF, and its future standing in the world. There are many IMF member nations who now know they can and must expect to be treated in the same way should there ever be a conflict involving their nation and the Fund.

Lagarde has taken a tough line on debt talks with Athens over the past four months, since the radical leftist Syriza government took control and insisted creditors drop proposals for further austerity as the price of releasing the last tranche of bailout funds. At the talks in Luxembourg she reportedly introduced herself to Greek finance minister Yanis Varoufakis as “the criminal in chief”, in reference to Tsipras’s claim earlier this week that the IMF bore “criminal responsibility” for the situation in Greece.

Pierre Moscovici, the European commissioner for economic affairs, who has been more sympathetic to the Greek case, said: “There’s not much time to avoid the worst.” He appealed to the Tsipras government to return to the negotiating table, making it plain that Athens has been treating its creditors and EU partners with contempt.

Who’s been treating whom with contempt? Have the Syriza team ever been treated as equal partners in the conversation? This is perhaps best expressed by Bob Dylan’s “It’s a restless hungry feeling that don’t mean no-one no good; when everything I’m-a-sayin’, you can say it just as good”.

Dijsselbloem demanded that the Greek government act quickly to restore trust and stem the haemorrhaging of deposits. “It’s a sign of great concern for the future,” he said. “It can be dealt with, but it requires quick action.”

It’s Greece that caused the deposit flight? The only sense in which that could be true is that is has refused to bend over and let the troika have its way with its democratically elected government.

Top officials from the ECB told the meeting that Greece might need to impose capital controls within days. They said the banks would be open on Friday. “On Monday, I don’t know,” Benoit Coeure from the ECB board was said to have told the ministers.

There is no longer even any semblance of equality among partners either in the eurozone or at the negotiating table. It’s important to see this not just in the light of the current talks, but in that of future of the European Union as a whole, and in that of future talks about debts that EU member nations have incurred with any of the troika parties.

What the antagonism is about is really quite simple. Though the fact that the troika is split doesn’t make it any simpler. The IMF won’t budge on imposing additional austerity measures, but wants Europe to execute debt relief. Europe is more flexible on austerity but refuses debt relief.

Or, actually, it says debt relief can be discussed, but only after Greece has signed on for a list of demanded ‘reforms’. For the Greeks, that’s the wrong way around. Not in the least because the EU floated debt relief back in 2012 but has never delivered.

Politicians and media in countries like Germany and Holland have engaged in so much rhetoric about Greeks living lavishly off other nations’ taxpayers’ money that they fear for their political careers if they were to offer an overt restructuring and tell the truth about wat actually happened in the bailouts.

The IMF’s Olivier Blanchard this week held out some vague idea of even longer maturities and even lower interest rates as the definition of debt relied for Greece, but what is needed is a much more comprehensive restructuring. Along the lines of a 50% or so reduction of the debt.

The problem is that Germany, France and Holland used the money that Greece now supposedly owes, to bail out their own banks. And never presented it domestically this way. But that is not Greece’s fault, or its responsibility.

The second main issue, austerity measures, comes in the shape of ‘reforms’ to the Greek pension system. Which badly needs a revamp, and Syriza is the first to acknowledge that. What it doesn’t want, though, is for the system to be cut first, and changed only later. Because that would mean that many Greeks who are already in dire need would from one day to the next be made even poorer.

And since any comprehensive change to the pension system would be laborious and time consuming even under advantageous circumstances, and there is little faith that Europe wouldn’t stretch it out even further, cutting now and talking about it later is not acceptable for Varoufakis and his people.

To add to the vicious irony of the situation, as Paul De Grauwe noted, Greece is illiquid -it has no access to capital markets-, but it’s not insolvent.

Greece Is Solvent But Illiquid. What Should The ECB Do?

[Greece’s] headline debt burden of 175% of GDP in 2015 vastly overstates the effective debt burden. The latter can be defined as the net present value of the expected future interest disbursements and debt repayments by the Greek government [..] Various estimates suggest that this effective debt burden of the Greek government is less than half of the headline debt burden of 175%.

[..] the effective debt burden of the Greek government is lower than the debt burden faced by not only the other periphery countries of the Eurozone but also by countries like Belgium and France. This leads to the conclusion that the Greek government debt is most probably sustainable provided Greece can start growing again[..]. Put differently, provided Greece can grow, its government is solvent. [..]

Today Greece has no access to the capital markets except if it is willing to pay prohibitive interest rates that would call into question its solvency. As a result, it cannot rollover its debt despite the fact that the debt is sustainable. There is something circular here. If Greece is unable to find the liquidity to roll over its debt it will be forced to default. [..] The expectation that the Greek government will be faced with a liquidity problem is self-fulfilling.

If the ECB would simply include Greece in its €60 billion a month QE bond-buying scheme, and buy Greek bonds as well as allow Athens to access international capital markets through one of Mario Draghi‘s whatever-it-takes statements, the crisis would be lifted in very substantial ways, in a heartbeat.

Instead, the troika part of the ‘negotiations’ does not involve trying to find such a solution, what they want is for Greece to give in, give up, bend over, and take it up the …

The powers that be are so full of hubris and of themselves that they ignore the fact that their actions today sow the seeds for the demise of all three of their constituencies, IMF, ECB and EU.

None of these institutions has any raison d’être or any claim to fame unless there is explicit trust in what they represent. That trust is now gone, and it’s hard to see how it can ever be recovered.

Whatever happens to Greece going forward, that is perhaps the biggest gain its dramatic crisis will gift to the rest of Europe, and indeed the world. Which therefore owe it a debt of gratitude, and of solidarity.

Home Forums Inciting Bank Runs as a Negotiating Tactic

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  • #21724

    G.G. Bain Three-ton electric sign blown into Broadway, New York. 1912 The troika of Greek creditors has gone into full-frontal morals-be-damned attack
    [See the full post at: Inciting Bank Runs as a Negotiating Tactic]

    Formerly T-Bear

    Don’t overlook the two times the Irish were polled about changes necessary to their constitution to accommodate both Nice and Lisbon Treaties and were obliged to vote again to obtain the correct result. At least the Netherlands and France were allowed to avoid the shameful necessity of reversing their votes, but Ireland is so small that doesn’t count.

    Best of luck and fortune to Greece, may the wind be at your back and your road eased …

    Dr. Diablo

    And now we hear Greeks are being paid to protest FOR austerity! You can’t make this up. Classic repeat of Venezuela, which didn’t work, Ukraine, which didn’t work, and Hong Kong, which didn’t work. Let’s try it here! Yes, I can see it now:

    “What do we want? Less!! When do we want it? Now!”
    “2, 4, 6, 8, We will not recuperate!”
    “Say no to income, no to pensions!”

    The IMF and EU deals were always lethal of course, as demonstrated by a sister country, Ukraine. Ukraine, which likewise violates every EU and IMF rule, mandate, and constitution, including not funding war zones, not funding military coups, and only lending to solvent nations, didn’t need to ask or negotiate to get all the money they needed. Now they are being ordered to default on their creditors (Russia, of course). Nothin’. Not a hint of self-awareness crosses anyone’s mind. Not enough remaining sense shame of hypocrisy to even hide or spin it. Doesn’t even occur. The one thing they have in common, of course, is that the IMF uses their billions to savage, impoverish, and murder both peoples. As they have all along, everywhere they’ve ever been. Google “IMF successes” and you’ll find basically zero, none, nada, ever in their long and checkered history. Greece is not an accident. Every country that has ever followed IMF advice has languished in crippling debt, eternally subservient to colonial powers. Those that refused or shake off the IMF method quickly recover. Funny coincidence, no? You can find out more by reading John Perkins.

    With a 50 year history of 100% death and failure, 0% help, so easily researched and proven, I’m at a loss to why every nation doesn’t publish exactly the Greek Special Committee conclusions which states

    “the Committee considers that Greece has been and still is the victim of an attack premeditated and organized by the International Monetary Fund, the European Central Bank, and the European Commission. This violent, illegal, and immoral mission aimed exclusively at shifting private debt onto the public sector.”

    Why they don’t just report and repeat this every day, before every meeting, at every press conference, until the world finally gets it through their petrified skulls, I don’t know. Protecting the lies is protecting the liars. It’s high time somebody told the truth before we drown.


    There was never any real trust, only a premeditated nihilistic agreement based upon deceit by the NWO globalists whose goal has always been and always will be destruction of individual nations and abolition of the rule of law so that ultimately the unworthy will be mere subhumans crawling at the feet of the chose few. And of course the other nations sooner or later will find themselves in the position of Greece. One can only hope that the extreme hubris of TPTB will be counterproductive and instill in the middle classes a better understanding of the current precarious state of civilization.

    Formerly T-Bear

    @ Diablo

    You are no Dr. you bring discredit to that honorific appellation, given to those who actually earn such through their intellectual efforts. You disgrace the intelligence of the human species.

    The world as known is dying. For those who have eyes to see and minds to know, the evidence is mounting daily. But you insist on your mindless word games and spew your intellectual sewage at every opportunity, to mislead, to confuse, to dissemble, to obfuscate, to misdirect, to spread untruths which may be as little as hidden facts to the contrary of your opinions. You are a pure shit, one can only wonder how much the Koch brothers are subsidising your existence. Why don’t you take your bilge and spew it from your own site – the answer would be that there would be so little traffic as to make it worthless, so reveals your presence here.

    It is notable that your efforts here at TAE, with precious few exception involve links to productions you have ‘found’ that support your ‘opinions’ though rarely found within accredited sources. These especially constructed tracts are almost always professionally produced, costing someone a dear penny, but curiously never having neither who produced nor who financed the production. That is the modus operandi of the Koch’s subvention against a once democratic state, a war they have won with the help of ignorant fools as yourself. Please tell us how it feels to have lived your life without an original idea ever crossing your mind? Is it pleasant? Or does it leave an empty feeling? Come on and tell us, you are so facile with rattling the letters on your keyboard, telling others of your opinion at every turn. You are still a shit.

    It is curious your use of Dr. as if just the presence of that symbol of earned excellence would give your presentations a validity that would not be questioned – like Dr. Goebbels. What institute issued your Doctorate? What accreditation does that institute have? Or are those things made up as well? Do tell us about yourself, your accomplishments, your expertise, your raison d’être, or are you actually low scum, barely of stature to be accorded bipedal recognition, a fraud, a creature from the black cesspool of self deceit, a floating turd.

    Formerly T-Bear

    Addendum link:


    which identifies three universities issuing the report as well as a forth that had made the same report earlier as BBC’s sources – if links are needed for credibility.

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