Jul 102015
 
 July 10, 2015  Posted by at 11:04 am Finance Tagged with: , , , , , , , ,  


Wynand Stanley Ice-packed Buick motor stunt, San Francisco 1922

Stock Slide Ruins China’s Illusion of Control (Bloomberg)
Greece Seeks €53.5 Billion Bailout in Effort to Keep Euro (Bloomberg)
France Intercedes on Greece’s Behalf to Try to Hold Eurozone Together (WSJ)
The Big Achievement Of Tsipras’s Proposal Is To Sow Division (Münchau)
Galbraith: Greek Revolt Against Bad Economics Threatens EU Elites (Parramore)
The US Must Save Greece (Joe Stiglitz)
Greece Presents €2 Billion Russian Gas Deal (FT)
Germany Concedes Greece Needs Debt Relief, Greek Plan Awaited (Reuters)
Germany Failed To Learn From Its Own History-And Greece Pays The Price (WaPo)
Weidmann Warns Greek Banks Concerns Rising By Day (FT)
Greek Government Insider On 5 Months Of ‘Humiliation’ And ‘Blackmail’ (MP)
Swiss Poised To Support Greek Tax Amnesty (SI)
The Lesson for the World Coming from Greece (Martin Armstrong)
Varoufakis: Schäuble Wants Grexit, I Prefer Be an MP Known as Yanis (GF)
Max Keiser and Yanis Varoufakis Retrospective (2012 footage)
Darwin’s Casino (John Michael Greer)
Pope Calls For New Economic Order, Criticizes Capitalism (Reuters)

And that is nigh impossible to regain.

Stock Slide Ruins China’s Illusion of Control (Bloomberg)

The other, grander gamble that Xi has taken is to keep the Chinese economy growing. Of course, the Communist Party since Deng Xiaoping has staked its legitimacy on economic growth, so far to good effect. But Jiang Zemin and Hu Jintao governed through a broad-based consensus of senior party leaders, which meant that the risks of legitimacy and delegitimacy were spread across the group and the institution they represented. Xi, in contrast, has taken more power – and therefore the risks of economic growth – onto his shoulders. There are many tools central government can use to keep an economy growing, and China under Xi will use them all. State-owned enterprises may be less efficient in the long run than truly private companies, but they have the enormous political benefit of responding to centralized state directives.

With good economists advising him, Xi stands a reasonable chance of transitioning China into a more consumer-driven economy, thereby assuring a source of modest continued growth even as the export-driven economy slows down. But that task, too, depends on the individual purchasing decisions of ordinary Chinese – that is, success of China’s economy, and therefore of Xi’s presidency, ultimately depends on the domestic consumer market. This brings us back to the stock market. Sure, Xi has to worry that the correction will spook emerging consumers, encouraging them to sit on their cash rather than spending it. But the much bigger political problem is that ordinary Chinese, watching the market fall, will experience the certain knowledge that Xi can’t really do anything about it.

Short-term stopgaps like closing markets during sell-offs or ordering state-owned enterprises not to sell their shares won’t address market fundamentals – because they can’t. In confirmed capitalist societies, we long ago learned that the government can’t stop the market from going where it believes it must. The reason, of course, is that the market isn’t a single entity that can be forced to take collective action. It’s an aggregation of individual decision-makers, all of whom share a competitive interest in achieving gain and limiting loss. For that reason, governments in experienced capitalist countries know that the only meaningful, long-term way to respond to market declines is by trying to create economic conditions that will restore faith in the markets.

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A whole long weekend of this. And then votes on Mon-Tue in national parliaments.

Greece Seeks €53.5 Billion Bailout in Effort to Keep Euro (Bloomberg)

The government of Greek Prime Minister Alexis Tsipras sought a three-year bailout loan of at least €53.5 billion ($59.2 billion), in a last-ditch effort to keep the country in the euro. In exchange, it offered a package of reforms and spending cuts, including pension savings and tax increases, similar to the one presented by creditors last month. The proposal was submitted to European institutions late Thursday and will be presented to the Greek Parliament Friday. It is set to be discussed at a summit of European Union leaders Sunday to determine whether Greece gets a new bailout, or be forced to leave the single currency. Greece offered measures that almost mirrored a proposal from creditors on June 26, which was rejected by voters in a July 5 referendum.

In return, it asked for its long-term debt to be made more manageable to allow it to rebound from a crisis that has erased a quarter of its economy. It is unclear if the proposal is enough to clinch a deal with creditors amid signs of economic deterioration since banks were closed and capital controls imposed 12 days ago. “The Greeks appear to have made significant concessions, apparently accepting much of the most recent creditor proposal,” Chris Scicluna, head of economic research at Daiwa Capital Markets in London, wrote in a note. “It remains to be seen whether creditors will want even more austerity.” The Greek government said it would use the three-year loan from the European Stability Mechanism to cover debt repayments between 2015 and 2018, mostly to the International Monetary Fund and the European Central Bank.

It will then be left with debt owed only to European Union institutions. Greece’s proposal includes creditors’ longstanding demands for sales tax increases and cuts in public spending on pensions. Greece also proposes the restructuring of its debt and a package of growth measures of €35 billion. Pressure has been mounting on Greece’s creditors to make the country’s debt more manageable. “A realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors,” European Union President Donald Tusk told reporters in Luxembourg Thursday. “Only then will we have a win-win situation.”

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“French leaders have waxed poetic in recent days about the special place Greece holds. Greek independence was celebrated by French writers and artists from Victor Hugo and to Eugene Delacroix..”

France Intercedes on Greece’s Behalf to Try to Hold Eurozone Together (WSJ)

The race to come up with a last-minute proposal to keep Greece in the eurozone began with a Sunday night phone call from Greek Prime Minister Alexis Tsipras to French President Francois Hollande, moments after Greece’s referendum dealt a near-fatal blow to the talks. If Greece wanted to remain in the eurozone, Athens must make ambitious proposals to its creditors quickly, Mr. Hollande told him, adding: “Help me help you.” That advice was part of an urgent French campaign to salvage months of negotiations from the wreckage of the Greek referendum. After long staying out of the fray, Mr. Hollande was scrambling to keep the discussions alive. His strategy: to press Mr. Tsipras for stronger economic overhauls while persuading Angela Merkel to give Greece more time and, ultimately, hope for debt relief.

The stance reflects a particularly French vision of the eurozone as a grand political project, with strategic benefits for Europe worth defending even at high cost. A Greek exit from the eurozone would set a dangerous precedent, French officials say, turning the currency bloc into little more than an arrangement of fixed currency exchange rates that governments could discard. French leaders have waxed poetic in recent days about the special place Greece holds. Greek independence was celebrated by French writers and artists from Victor Hugo and to Eugene Delacroix, Prime Minister Manuel Valls told lawmakers Wednesday in explaining why France refuses to accept a Greek exit from the euro. “Greece is a passion for France and Europe,” Mr. Valls said.

“The goddess that gave its name to our continent is at the heart of our mythology.” Domestic politics is also at work. Mr. Hollande, a Socialist, faces a rebellion from members of his parliamentary majority who accuse him of abandoning his 2012 election pledge to push for pro-growth policies in Europe. Standing up to Berlin on behalf of Greece is a chance to brandish his leftist credentials for party hard-liners, analysts say. It is unclear whether France’s triage will lead to a deal by Sunday, when European Union leaders are due to decide Greece’s fate. But France’s intervention has helped keep the talks on life support.

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“.. there is now the acute problem of an insolvent banking system..” A problem all of the Troika’s own design.

The Big Achievement Of Tsipras’s Proposal Is To Sow Division (Münchau)

I do not have the foggiest whether these latest Greek proposals will be enough to secure a deal. There are still very big obstacles to overcome. But Alexis Tsipras has achieved something that has eluded him in the past five months: he has managed to split the creditors. The IMF insists on debt relief. The French helped the Greek prime minister draft the proposal and were the first to support it openly. President François Hollande is siding with Mr Tsipras. And that changes the stakes for Angela Merkel. If the German chancellor says no now, she will stand accused of taking reckless risks with the eurozone and the Franco-German alliance. If she says yes, her own party might divide similarly to the way the British Conservatives divided over Europe. I have always predicted that the moment of truth for the eurozone will come eventually. It will come this weekend.

The financial markets seemed to have made up their mind that a deal will happen. But beware the many landmines on the path to a deal. Of those, only the first has been sidestepped with Mr Tsipras’ offer. What he is now proposing is, economically, not fundamentally different from what he, and the Greek electorate, rejected in Sunday’s referendum — but it works politically for him. The phase-in period of some of the harder measures is longer. And if there is a deal, there will have to be an explicit reference to debt relief this time. The IMF insists on it. And even Donald Tusk, the president of the European Council, says so. This is an important development, but it is not clear that all creditors will, or can, agree.

By tomorrow, the technical people and the finance ministers will need to discuss whether the Greek numbers add up. The answer is almost certainly no, not least because of the rapid deterioration of the country’s economy. The imposition of capital controls and bank withdrawal limits brought most economic activity to a standstill. Any macroeconomic adjustment programme will have to start with a realisation that the situation is worse today than two weeks ago. The Greek list takes account of this in terms of slower adjustment periods. This is economically sensible. But Ms Merkel has already said she wanted this problem taken care of through additional austerity. For a programme to be agreed, one side will have to back down here.

On top of this, there is now the acute problem of an insolvent banking system — one that is totally reliant on a special lifeline by ECB called emergency liquidity assistance. The ECB will find it hard to increase ELA. So apart from agreeing on a macroeconomic stabilisation programme, European leaders will this weekend need to answer the more immediate question of what to do with the Greek banks. This is possibly the single most complicated question because there are no easy and fast answers. What may have to happen is that the number of banks will have to shrink to three or two, and that depositors may have to be “bailed in”. I cannot see that the creditors would agree to a further bank restructuring programme, in addition to the €53.5bn in new loans currently under discussion.

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The superego paradox again.

Galbraith: Greek Revolt Against Bad Economics Threatens EU Elites (Parramore)

Lynn Parramore: What’s your view of the attitudes of the creditor powers?
Jamie Galbraith: What happened on the 26th of June was that Alexis (Tsipras) came to realize, at long last, that no matter how many concessions he made he wasn’t going to get the first one from the creditors. That’s something Wolfgang Schäuble had made clear to Yanis (Varoufakis) months before. But it was hard to persuade the Greek government of this because its members naturally expected, as you would when you’re in a negotiation, that if you make a concession the other side will make a concession. That isn’t the way this one worked. The Greeks kept making concessions. They’d present a program and the other side would say —as you can read in the press — oh, no, that’s not good enough. Do another one. Then they’d complain that the Greeks were not being serious. What the creditors meant by that was this: when you come around and agree to what we tell you, then you’re serious. Otherwise not. This is the way bad professors treat extremely recalcitrant students. You come in with a paper draft and they say, no, that’s not good enough. Do another one.

LP: Have the individual creditors differed on how to treat Greece?
JG: There are some divisions amongst the creditors that are well known. But they’re all variations on the theme of insular, sheltered, cloistered people who do not understand what is happening in Greece and do not know the economics. So, for example, the European Commission tends to be a little bit nicer, the IMF tends to be better on debt restructuring but worse on the structural issues, and the ECB was infuriated by the fact that its technocrats couldn’t walk into any ministry in Athens and make demands and be paid attention to. So there were different aspects of this that seemed to trouble different creditors, but it all amounted to the fact that between them there was no basis for arriving at anything other than the original Memorandum of Understanding (bailout program).

LP: What exactly triggered the breakdown that led to the referendum?
JG: What happened was that the IMF took the staff level agreement draft that the Greeks had presented, and marked it up in red ink and presented it back to the Greeks as an ultimatum— this is what we will accept. Or rather (EC president) Juncker presented it back to the Greeks as an ultimatum. And Yanis was told, take it or leave it. So they basically had no choice but to walk away from it, to leave it.

LP: How do you think the referendum has changed the situation? Has it given the Greeks leverage or not?
JG: That’s a difficult question. The recent Ambrose Evans Pritchard piece is very much on the mark. The Greek government, and particularly the circle around Alexis, were worn down by this process. They saw that the other side does, in fact, have the power to destroy the Greek economy and the Greek society — which it is doing — in a very brutal, very sadistic way, because the burden falls particularly heavily on pensions. They were in some respects expecting that the yes would prevail, and even to some degree thinking that that was the best way to get out of this. The voters would speak and they would acquiesce. They would leave office and there would be a general election. But civil society took this over in the most dramatic and heroic fashion. It was an incredible thing to see. The Greeks, amazingly, voted 61% no. That, momentarily, gave a jolt of adrenaline to everybody in the government. But the next morning, they were back where they were before. And that’s why, of course, Yanis left at that point.

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What’s the use with Spain and Italy waiting in the wings?

The US Must Save Greece (Joe Stiglitz)

As the Greek saga continues, many have marveled at Germany’s chutzpah. It received, in real terms, one of the largest bailout and debt reduction in history and unconditional aid from the U.S. in the Marshall Plan. And yet it refuses even to discuss debt relief. Many, too, have marveled at how Germany has done so well in the propaganda game, selling an image of a long-failed state that refuses to go along with the minimal conditions demanded in return for generous aid. The facts prove otherwise: From the mid-90’s to the beginning of the crisis, the Greek economy was growing at a faster rate than the EU average (3.9% vs 2.4%). The Greeks took austerity to heart, slashing expenditures and increasing taxes.

They even achieved a primary surplus (that is, tax revenues exceeded expenditures excluding interest payments), and their fiscal position would have been truly impressive had they not gone into depression. Their depression—25% decline in GDP and 25% unemployment, with youth unemployment twice that—is because they did what was demanded of them, not because of their failure to do so. It was the predictable and predicted response to the austerity. The question now is: What’s next, assuming (as seems ever more likely) they are effectively thrown out of the euro? It’s likely that the European Central Bank will refuse to do its job—as the Central Bank for Greece, it should do what every central bank is supposed to do, act as a lender of last resort.

And if it refuses to do that, Greece will have no option but to create a parallel currency. The ECB has already begun tightening the screws, making access to funds more and more difficult. This is not the end of the world: Currencies come and go. The euro is just a 16-year-old experiment, poorly designed and engineered not to work—in a crisis money flows from the weak country’s banks to the strong, leading to divergence. GDP today is more than 17% below where it would have been had the relatively modest growth trajectory of Europe before the euro just continued. I believe the euro has much to do with this disappointing performance. [..]

The U.S. was generous with Germany as we defeated it. Now, it is time for the U.S. to be generous with our friends in Greece in their time of need, as they have been crushed for the second time in a century by Germany, this time with the support of the troika. At a technical level, the Federal Reserve needs to create a swap line with Greece’s central bank, which—as a result of the default of the ECB in fulfilling its responsibilities—will have to take on once again the role of lender of last resort. Greece needs unconditional humanitarian aid; it needs Americans to buy its products, take vacations there, and show a solidarity with Greece and a humanity that its European partners were not able to display.

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“Greece is no-one’s hostage,” he said. “The Greek people’s No vote, and I am referring to all of the people, is not going to become a humiliating Yes.”

Greece Presents €2 Billion Russian Gas Deal (FT)

Greece has mapped out details of a landmark €2bn gas project with Russia, a scheme that could stir tensions with Brussels just as Athens seeks a third bail-out. Panayiotis Lafazanis, the firebrand leftist energy minister, presented the project to Greek energy executives on Thursday in a defiant speech, vowing that Athens would not be pushed around by EU institutions, writes Christian Oliver. EU policymakers are concerned that Russia could take advantage of the crisis to pull Greece deeper into its orbit and pipeline politics is critical to relations between the two nations. Athens and Moscow say their new project, the so-called South European Pipeline, will bring 47 billion cubic metres of Gazprom’s gas into Europe by 2018.

Mr Lafazanis promised that it would create 20,000 much needed jobs in Greece. This promised deal with Russia is a sharp rebuke to Brussels, which wants to reduce dependence on Gazprom and argues that southeastern Europe should diversify its supply by prioritising gas from Azerbaijan. Opening his remarks with pugnacious references to the eurozone crisis, Mr Lafazanis said that Greece was aiming to secure a deal with Brussels as quickly as possible. However, he then warned EU institutions that Athens was not about to roll over. “Greece is no-one’s hostage,” he said. “The Greek people’s No vote, and I am referring to all of the people, is not going to become a humiliating Yes.”

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Only 5 months late. Or is that 5 years?

Germany Concedes Greece Needs Debt Relief, Greek Plan Awaited (Reuters)

Germany conceded on Thursday that Greece would need some debt restructuring as part of any new loan programme to make its economy viable as the Greek cabinet raced to finalize reform proposals to avert an imminent economic meltdown. The admission by German Finance Minister Wolfgang Schaeuble came hours before a midnight deadline for Athens to submit a reform plan meant to convince European partners to give it another loan to save it from a possible exit from the euro. Greece has already had two bailouts worth €240 billion euros from the eurozone and the IMF, but its economy has shrunk by a quarter, unemployment is more than 25% and one in two young people is out of work.

Schaeuble, who has made no secret of his scepticism about Greece’s fitness to remain in the currency area, told a conference in Frankfurt: “Debt sustainability is not feasible without a haircut and I think the IMF is correct in saying that. But he added: “There cannot be a haircut because it would infringe the system of the European Union.” He offered no solution to the conundrum, which implied that Greece’s debt problem might not be soluble within the eurozone. But he did say there was limited scope for “reprofiling” Greek debt by extending loan maturities, shaving interest rates and lengthening a moratorium on debt service payments.

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Germany resists all real history. Inferiority complex?

Germany Failed To Learn From Its Own History-And Greece Pays The Price (WaPo)

One of the great paradoxes of our time is how Germany has done so exemplary a job in recent decades of understanding and accepting responsibility for the horrors of the Nazi era while continuing to entertain a willful ignorance of the economic policy errors that paved the Nazis’ path to power. The solution to this riddle is that Germans’ deep-seated debt obsession (in German, the words for “debt” and “guilt” are the same) has blinded them to the consequences of that obsession. You’d think, for instance, that Germans would have learned from John Maynard Keynes’s 1920 book “The Economic Consequences of the Peace,” which correctly predicted that the onerous reparations inflicted on Germany by the Treaty of Versailles were economically unsustainable and politically perilous to the prospects for German democracy.

You’d think they’d have learned from their own descent into Nazism that balancing budgets when unemployment is at record heights can undermine a democracy’s viability. You’d think they’d have learned from the London debt agreement of 1953 that debt forgiveness and reasonable repayment terms can foster prosperity and strengthen democracy in the debtor nation — which, in this case, happened to be Germany. That Germans have learned none of these lessons is now — tragically, for Greece — apparent. Germany’s insistence that Greece continue to slash services and social investment if it is ever to qualify for debt forgiveness remains unaltered, even though Greek unemployment stands at 25%, even though 40% of Greek children live in poverty, even though a neo-Nazi party (Golden Dawn) has come out of nowhere to win seats in Greece’s parliament.

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Weidmann is saying weird things, as always.

Weidmann Warns Greek Banks Concerns Rising By Day (FT)

Jens Weidmann, the president of Germany’s Bundesbank, has said doubts about Greek banks solvency are legitimate and rising by the day. Mr Weidmann also said the majority of Greeks who had voted ‘no’ in Sunday’s referendum had spoken out .. against contributing any further to the solvency of their country through additional consolidation measures and reforms. The Bundesbank president, a member of the governing council of the European Central Bank who has called for Greek banks ¨ 89bn liquidity lifeline to be scrapped, said in needed to be crystal clear that responsibility for Greece lay with Athens and international creditors, and not the ECB.

The Eurosystem [of eurozone central banks] should not increase the liquidity provision, and capital controls need to stay in force until an appropriate support package has been agreed by all parties and the solvency of both the Greek government and the Greek banking system has been ensured. The Bundesbank president hit out at Athens for causing economic ruin. [Eurozone member states] can decide for themselves not to service their debts, to collect taxes inadequately, and this is something I particularly fear in the case of Greece to lead their country s economy into deep trouble, he said in Frankfurt on Wednesday. The Syriza-led government had not only walked out on the previous agreements, but has been widely criticised as an unreliable negotiating partner. Mr Weidmann’s comments came as France s finance minister Michel Sapin, who is pushing for a deal that would allow Greece to stay in the eurozone, emphasised the greater cost of a Grexit.

“What s costlier? That Greece exits the eurozone and defaults on all its debt? Asking the question is answering it”, Mr Sapin told Radio Classique on Thursday. “A deal is the best solution for Greece and Europe.” “Greek banks have been closed for more than a week. Greece is already in a pre-chaos stat”e, he said. “How history will judge us?” However, Mr Sapin reiterated the need for the Greek government to present credible reforms as well as difficult decisions to balance the budget. “There are taxes to raise, it’s difficult,” he said. Mr Sapin saluted the good attitude of Greek Finance Minister Euclid Tsakalotos at the latest eurogroup meeting of finance ministers. “He came with a lot of modesty”, he said.

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“How much money do you want to leave the euro?”

Greek Government Insider On 5 Months Of ‘Humiliation’ And ‘Blackmail’ (MP)

A senior member of Greece’s negotiating team with its European creditors agreed to a meeting last week in Athens with Mediapart special correspondent Christian Salmon. Speaking on condition that his name is withheld, he detailed the history of the protracted and bitter negotiations between the radical-left Syriza government, elected in January, and international lenders for the provision of a new bailout for the debt-ridden country. The almost two-hour interview in English took place just days before last Sunday’s referendum on the latest drastic austerity-driven bailout terms offered by the creditors, and opposed by Prime Minister Alexis Tsipras, and which were finally rejected by 61.3% of Greek voters.

While the ministerial advisor slams the stance of the international creditors, who he accuses of leading a strategy of deliberate suffocation of Greece’s finances and economy, he is also critical of some of the decisions taken by Athens. His account also throws light on the personal tensions surrounding the talks led by former Greek finance minister Yanis Varoufakis, who resigned from his post on Monday deploring “a certain preference by some Eurogroup participants, and assorted ‘partners’, for my ‘absence’ from its meetings”. The advisor cites threats proffered to Varoufakis by Eurogroup president Jeroen Dijsselbloem, warning he would sink Greece’s banks unless the Tsipras government bowed to the harsh deal on offer, and by German finance minister Wolfgang Schäuble, who he says demanded: “How much money do you want to leave the euro?”

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“..amnesties generally favour wealthy people who can pay accountants to exploit loopholes..”

Swiss Poised To Support Greek Tax Amnesty (SI)

Struggling to pay off more than €300 billion in debts, Greece is banking on Switzerland to help it recover a treasure trove of undeclared assets that tax cheats have stashed in alpine vaults. But anti-tax haven campaigners are sceptical about “undemocratic” tax amnesties that are prone to loopholes, allowing many tax dodgers to wriggle out of their obligations. “The devil is always in the detail with these deals. If Switzerland can claim it is helping to clear untaxed assets out of its banks, this could provide it with a public relations service,” Nicholas Shaxson of Tax Justice Network told swissinfo.ch. “But amnesties generally favour wealthy people who can pay accountants to exploit loopholes, such as insurance wrappers and discretionary trusts.”

Such “slippery structures” render assets “technically declared”, allowing them to remain offshore under the radar of amnesties, Shaxson added. “Tax amnesties only make a difference if the public believe that, once they have ended, the government will assertively go after people who did not disclose,” Heather Low of Global Financial Integrity (GFI) told swissinfo.ch. “Tax cheats in the United States would be afraid of the authorities if they did not disclose during an amnesty. I’m not so sure this would be the case in Greece.” In April, former Greek Finance Minister Yanis Varoufakis announced plans for a global tax amnesty to repatriate overseas funds to Greece. It is believed the government has settled for a one-off 21% levy on those who come clean, pending parliamentary approval of the proposal.

Negotiations between Greece and Switzerland on how best to recover black money hidden in Swiss banks have been ongoing since 2012. But the two sides are reported to be edging closer to a solution that would allow banks to cooperate. While Switzerland would not be an official partner to a Greek tax amnesty, the approval and cooperation of the Swiss authorities would be integral to the scheme working. To this end, two meetings were arranged between the countries in March and April to discuss the practical details of persuading Greek tax cheats to sign up to the amnesty. While not yet concluded, Varoufakis felt encouraged enough to announce Greece’s intended global tax amnesty following a meeting with Swiss officials in April.

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“If Russia really wants to take Europe, all they have to do is be patient.”

The Lesson for the World Coming from Greece (Martin Armstrong)

The mainstream news is painting the Greeks as the bad guys, and the Troika as the savior of Europe. Quite frankly, it is really disgusting. Pictures of an elderly Greek pensioner have gone viral, depicting what the Troika is deliberately doing to the Greek people by punishing them for their own failed design of the euro in a system that is just economically unsustainable. The heartbreaking photographs circulating are of 77-year-old retiree, Giorgos Chatzifotiadis, after he collapsed on the ground openly in tears, driven to despair, outside a Greek bank with his savings book and identity card strewn next to him on the ground. This illustrates the horror the Troika is deliberately inflicting upon the Greek population.

This image illustrates the core of the issue: ordinary Greeks tormented by EU politicians who pretend to care about people. This is not a Greek debt crisis, this is a Euro Crisis and they refuse to admit that what they designed was solely for the takeover of Europe at the cost of the future of everyone, from pensioners to the youth. Chatzifotiadis queued up at three banks in Greece’s second city of Thessaloniki on Friday in the hope of withdrawing pensions on behalf of him and his wife. When he went to a fourth bank, he was told he could not withdraw his €120; the ordeal simply became too much and he fell down in tears in total desperation. His comments were simply that he “cannot stand to see my country in this distress”. He continued to say, “That’s why I feel so beaten, more than for my own personal problems.”

This is just the tip of the iceberg. We are facing terrible times ahead because socialism is completely collapsing. Government employees have lined their pockets, which is precisely the endgame and how Rome collapsed. It was not the barbarians at the gate. It was that the Roman army was not paid and they began hailing their various generals as emperor and they attacked cities who did not support their choice. Only after weakening themselves, then the barbarians came in for easy pickings. If Russia really wants to take Europe, all they have to do is be patient. They will self-destruct for the Troika cannot see any change in thinking for that means they must admit that they were wrong from the outset.

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“Schaeuble has a plan for Greece’s exit from the Eurozone,” and added, “this is his best chance to succeed.”

Varoufakis: Schäuble Wants Grexit, I Prefer Be an MP Known as Yanis (GF)

Former Greek Finance Minister Yanis Varoufakis admitted that Germany appears to have a plan to force Greece outside the Eurozone, even though while he was in office he insisted that Grexit scenarios were a bluff to push the Greek government to accept harsh austerity measures. Talking with reporters at the Greek Parliament café, Varoufakis noted that Wolfgang Schaeuble is the only Eurozone Minister with a specific plan. He also said that the German Finance Minister completely controls the majority of the Eurogroup except for French Finance Minister Michel Sapin.

“Schaeuble has a plan for Greece’s exit from the Eurozone,” and added, “this is his best chance to succeed.” When asked if he believes the Germans are taking into account the estimated cost of a Grexit, Varoufakis argued that Schaeuble believes losses can be controlled. Furthermore, the former Greek Finance Minister stated that it is possible that his exit from the Greek government was due to Schaeuble’s pressure.

As for whether he believes that a deal will be achieved in the next 24 hours, he initially said “no comment” but later added: “I would like an agreement to be reached but only if it is also a solution. At the moment, we cannot judge the outcome.” People at the café called him “Minister” but he always answered: “I’m not a Minister. I’m a member of Parliament.” “Once a Minister, always a Minister,” he said, adding that he prefers to be an MP and be called Yanis. Asked to comment on the recent referendum results, he stated that the outcome was epic and grandiose, although he avoided to answer the question about whether the citizens voted “No” but the government is following the “Yes” direction.

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Nice compilation.

Max Keiser and Yanis Varoufakis Retrospective (2012 footage)

Taken from Keiser Report episode 247 & 301 a look back at the dialogue between Max & Yanis in 2012 which should give some insight into the battle with financial terrorism unfolding in Greece.

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“There’s quite precisely no common ground between the two belief systems, and yet self-proclaimed Christians who spout Rand’s turgid drivel at every opportunity make up a significant fraction of the Republican Party just now.”

Darwin’s Casino (John Michael Greer)

Our age has no shortage of curious features, but for me, at least, one of the oddest is the way that so many people these days don’t seem to be able to think through the consequences of their own beliefs. Pick an ideology, any ideology, straight across the spectrum from the most devoutly religious to the most stridently secular, and you can count on finding a bumper crop of people who claim to hold that set of beliefs, and recite them with all the uncomprehending enthusiasm of a well-trained mynah bird, but haven’t noticed that those beliefs contradict other beliefs they claim to hold with equal devotion. I’m not talking here about ordinary hypocrisy. The hypocrites we have with us always; our species being what it is, plenty of people have always seen the advantages of saying one thing and doing another.

No, what I have in mind is saying one thing and saying another, without ever noticing that if one of those statements is true, the other by definition has to be false. My readers may recall the way that cowboy-hatted heavies in old Westerns used to say to each other, “This town ain’t big enough for the two of us;” there are plenty of ideas and beliefs that are like that, but too many modern minds resemble nothing so much as an OK Corral where the gunfight never happens. An example that I’ve satirized in an earlier post here is the bizarre way that so many people on the rightward end of the US political landscape these days claim to be, at one and the same time, devout Christians and fervid adherents of Ayn Rand’s violently atheist and anti-Christian ideology. 

The difficulty here, of course, is that Jesus tells his followers to humble themselves before God and help the poor, while Rand told hers to hate God, wallow in fantasies of their own superiority, and kick the poor into the nearest available gutter. There’s quite precisely no common ground between the two belief systems, and yet self-proclaimed Christians who spout Rand’s turgid drivel at every opportunity make up a significant fraction of the Republican Party just now. Still, it’s only fair to point out that this sort of weird disconnect is far from unique to religious people, or for that matter to Republicans. One of the places it crops up most often nowadays is the remarkable unwillingness of people who say they accept Darwin’s theory of evolution to think through what that theory implies about the limits of human intelligence.

If Darwin’s right, as I’ve had occasion to point out here several times already, human intelligence isn’t the world-shaking superpower our collective egotism likes to suppose. It’s simply a somewhat more sophisticated version of the sort of mental activity found in many other animals. The thing that supposedly sets it apart from all other forms of mentation, the use of abstract language, isn’t all that unique; several species of cetaceans and an assortment of the brainier birds communicate with their kin using vocalizations that show all the signs of being languages in the full sense of the word—that is, structured patterns of abstract vocal signs that take their meaning from convention rather than instinct.

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“Quoting a fourth century bishop, he called the unfettered pursuit of money “the dung of the devil”..”

Pope Calls For New Economic Order, Criticizes Capitalism (Reuters)

Pope Francis on Thursday urged the downtrodden to change the world economic order, denouncing a “new colonialism” by agencies that impose austerity programs and calling for the poor to have the “sacred rights” of labor, lodging and land. In one of the longest, most passionate and sweeping speeches of his pontificate, the Argentine-born pope also asked forgiveness for the sins committed by the Roman Catholic Church in its treatment of native Americans during what he called the “so-called conquest of America.” Quoting a fourth century bishop, he called the unfettered pursuit of money “the dung of the devil,” and said poor countries should not be reduced to being providers of raw material and cheap labor for developed countries.

Repeating some of the themes of his landmark encyclical “Laudato Si” on the environment last month, Francis said time was running out to save the planet from perhaps irreversible harm to the ecosystem. Francis made the address to participants of the second world meeting of popular movements, an international body that brings together organizations of people on the margins of society, including the poor, the unemployed and peasants who have lost their land. The Vatican hosted the first meeting last year. He said he supported their efforts to obtain “so elementary and undeniably necessary a right as that of the three “L’s”: land, lodging and labor.”

“Let us not be afraid to say it: we want change, real change, structural change,” the pope said, decrying a system that “has imposed the mentality of profit at any price, with no concern for social exclusion or the destruction of nature.” This system is by now intolerable: farm workers find it intolerable, laborers find it intolerable, communities find it intolerable, peoples find it intolerable … The earth itself – our sister, Mother Earth, as Saint Francis would say – also finds it intolerable,” he said in an hour-long speech that was interrupted by applause and cheering dozens of times.

The pontiff appeared to take a swipe at international monetary organizations such as the IMF and the development aid policies by some developed countries. “No actual or established power has the right to deprive peoples of the full exercise of their sovereignty. Whenever they do so, we see the rise of new forms of colonialism which seriously prejudice the possibility of peace and justice,” he said. “The new colonialism takes on different faces. At times it appears as the anonymous influence of mammon: corporations, loan agencies, certain ‘free trade’ treaties, and the imposition of measures of ‘austerity’ which always tighten the belt of workers and the poor,” he said.

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Jun 272015
 
 June 27, 2015  Posted by at 12:17 pm Finance Tagged with: , , , , , , , ,  


Lewis Wickes Hine Workshop of Sanitary Ice Cream Cone Co., OK City 1917

A Gay-Rights Decision for the Ages (Bloomberg)
An End to the Blackmail (Alexis Tsipras)
Tsipras Calls Referendum on Greek Debt Deal for July 5 (Bloomberg)
An Alternative Version Of How The Greek Crisis Could Have Played Out (Whelan)
“With The Euro, We’ll Forever Have A Noose Around Our Necks” (WSJ)
Creditors To Ringfence Greek Economy If Tsipras Refuses To Give In (Guardian)
Why It Won’t Be a Default If Greece Misses IMF Payment Next Week (Bloomberg)
Is The Greek Crisis Too Big For Europe’s Most Powerful Woman? (Augstein)
Tsipras Rejects Bailout Extension, “Won’t Be Blackmailed” (ZH)
Paul Craig Roberts: Greek Government May Be Assassinated If They Pivot East (KWN)
There Will Be No “Grexit” (Jim Rickards)
Greece Will Survive, But Will The Euro Or The EU? (MarketWatch)
Euro-Area Bank Lending Grows at Fastest Pace Since February 2012 (Bloomberg)
China Politburo Opines On Market Crash: “Black Friday Massacre” (Zero Hedge)
For The First Time Ever, QE Has Officially Failed (Zero Hedge)
Dutch City Utrecht To Try Out Universal, Unconditional ‘Basic Income’ (Ind.)
Half Of Europe’s Electricity Set To Be From Renewables By 2030 (Guardian)

Wow, look at that. Even Bloomberg manages to get it right. Congrats to all my gay friends- happy to say they are plentiful. Big day no matter how you look at it.

A Gay-Rights Decision for the Ages (Bloomberg)

This one is for the ages. Justice Anthony Kennedy’s opinion for the U.S. Supreme Court announcing a right to gay marriage in Obergefell v. Hodges will take its place alongside Brown v. Board of Education and Loving v. Virginia in the pantheon of great liberal opinions. The only tragic contrast with those landmarks in the history of equality is that both of those were decided unanimously. Friday’s gay-rights opinion went 5-4, with each of the court’s conservative justices writing a dissent of his own. Eventually, legal equality for gay people will seem just as automatic and natural as legal equality for blacks. But history will recall that when decided, Obergefell didn’t reflect national consensus, much less the consensus of the court itself.

Kennedy’s opinion offered two different yet interrelated constitutional rationales, one focused on the institution of marriage, the other on the equality of gay people. First, he made the case that marriage is a fundamental liberty right under the due process clause of the Constitution, which says no one may be deprived of life, liberty or property without due process of law. Applying what’s known as “substantive” due process analysis, Kennedy held that the government may not infringe the liberty to marry absent a compelling interest and along narrowly tailored lines to achieve that interest. Because no such interest exists, gay people as well as straight people must have the right to marry. This same approach was used by the court in the Loving case, which struck down laws barring interracial marriage.

It was symbolically important for Kennedy to connect same-sex marriage to marriage between the races. Kennedy’s favorite concept of dignity figured large in the finding that marriage is a fundamental right. “The lifelong union of a man and a woman always has promised nobility and dignity to all persons, without regard to their station in life.” The reference to dignity connected the decision to Kennedy’s earlier gay-rights decisions, which featured the concept centrally. It is now an important part of our constitutional law — no matter that it doesn’t appear in the Constitution. Another crucial feature of the opinion was Kennedy’s recognition that marriage has evolved over time. This acknowledgement counteracted the conservatives’ emphasis on tradition in their dissents.

It also resonated with the doctrine of due process, which looks to evolving tradition to identify the content of protected liberty. When it came to equality, Kennedy avoided announcing that laws burdening gay people would be subject to especially strict scrutiny, like laws burdening racial minorities, or even what’s called intermediate scrutiny, like laws differentially burdening the sexes. Instead, he spoke of the “synergy” between due process and equality. In legal terms, this almost certainly meant that once a fundamental right is invoked, any distinction between people for any reason requires strict scrutiny – a longtime doctrinal norm.

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Integral text. Worth the space.

An End to the Blackmail (Alexis Tsipras)

Televized speech, Athens, June 27, 2015, 1 AM local time. For six months now the Greek government has been waging a battle in conditions of unprecedented economic suffocation to implement the mandate you gave us on January 25. The mandate we were negotiating with our partners was to end the austerity and to allow prosperity and social justice to return to our country. It was a mandate for a sustainable agreement that would respect both democracy and common European rules and lead to the final exit from the crisis. Throughout this period of negotiations, we were asked to implement the agreements concluded by the previous governments with the Memoranda, although they were categorically condemned by the Greek people in the recent elections. However, not for a moment did we think of surrendering, that is to betray your trust.

After five months of hard bargaining, our partners, unfortunately, issued at the Eurogroup the day before yesterday an ultimatum to Greek democracy and to the Greek people. An ultimatum that is contrary to the founding principles and values of Europe, the values of our common European project. They asked the Greek government to accept a proposal that accumulates a new unsustainable burden on the Greek people and undermines the recovery of the Greek economy and society, a proposal that not only perpetuates the state of uncertainty but accentuates social inequalities even more. The proposal of institutions includes: measures leading to further deregulation of the labor market, pension cuts, further reductions in public sector wages and an increase in VAT on food, dining and tourism, while eliminating tax breaks for the Greek islands.

These proposals directly violate the European social and fundamental rights: they show that concerning work, equality and dignity, the aim of some of the partners and institutions is not a viable and beneficial agreement for all parties but the humiliation of the entire Greek people. These proposals mainly highlight the insistence of the IMF in the harsh and punitive austerity and make more timely than ever the need for the leading European powers to seize the opportunity and take initiatives which will finally bring to a definitive end the Greek sovereign debt crisis, a crisis affecting other European countries and threatening the very future of European integration.

Fellow Greeks, right now weighs on our shoulders the historic responsibility towards the struggles and sacrifices of the Greek people for the consolidation of democracy and national sovereignty. Our responsibility for the future of our country. And this responsibility requires us to answer the ultimatum on the basis of the sovereign will of the Greek people. A short while ago at the cabinet meeting I suggested the organization of a referendum, so that the Greek people are able to decide in a sovereign way. The suggestion was unanimously accepted.

Tomorrow the House of Representatives will be urgently convened to ratify the proposal of the cabinet for a referendum next Sunday, July 5 on the question of the acceptance or the rejection of the proposal of institutions. I have already informed about my decision the president of France and the chancellor of Germany, the president of the ECB, and tomorrow my letter will formally ask the EU leaders and institutions to extend for a few days the current program in order for the Greek people to decide, free from any pressure and blackmail, as required by the constitution of our country and the democratic tradition of Europe.

Fellow Greeks, to the blackmailing of the ultimatum that asks us to accept a severe and degrading austerity without end and without any prospect for a social and economic recovery, I ask you to respond in a sovereign and proud way, as the history of the Greek people commands. To authoritarianism and harsh austerity, we will respond with democracy, calmly and decisively. Greece, the birthplace of democracy will send a resounding democratic response to Europe and the world. I am personally committed to respect the outcome of your democratic choice, whatever that is. And I’m absolutely confident that your choice will honor the history of our country and send a message of dignity to the world.

In these critical moments, we all have to remember that Europe is the common home of peoples. That in Europe there are no owners and guests. Greece is and will remain an integral part of Europe and Europe is an integral part of Greece. But without democracy, Europe will be a Europe without identity and without a compass. I invite you all to display national unity and calm in order to take the right decisions. For us, for future generations, for the history of the Greeks. For the sovereignty and dignity of our people.

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Still no debt relief proposed, though troika has knpwn all along that would break any deal. Not in good faith.

Tsipras Calls Referendum on Greek Debt Deal for July 5 (Bloomberg)

Greek Prime Minister Alexis Tsipras called a referendum on the terms offered by creditors for the latest aid package, saying they’re seeking to humiliate the Greek people who must provide a democratic response. The vote will take place on July 5, Tsipras said in a televised address in the early hours of Saturday. A Greek government official said the country’s banks will open as normal on Monday and no capital controls are planned, asking not to be identified in line with policy. Tsipras said that German Chancellor Angela Merkel and European Central Bank chief Mario Draghi have been informed of the plan, and he’ll request an extension of Greece’s existing bailout, due to end June 30, by a few days to permit the vote. Further details weren’t immediately clear.

Later on Saturday, European finance ministers were due to discuss details of their latest proposal, which would unlock €15.5 billion and extend Greece’s program through November, in return for a commitment to pension cuts and higher taxes that Tsipras opposes. While German Chancellor Angela Merkel touted the five-month bailout extension as “very generous,” Tsipras compared its terms to an “ultimatum” and “blackmail.” It doesn’t include the debt relief that his government seeks.

Tsipras came to power with a mandate to end the austerity imposed by Greece’s creditors while keeping the country in the euro. By calling a referendum on the latest EU offer, his government “will argue that it does not have the mandate to sign it without consulting the Greek people,” said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington. “I am convinced that such a referendum would be comfortably won,” he said. “However, it will be risky as the uncertainty is likely to see deposits flee and deposit controls imposed until the result.” Failure to reach a Greek deal also puts at risk a payment due June 30 to the International Monetary Fund.

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Must read.

An Alternative Version Of How The Greek Crisis Could Have Played Out (Whelan)

The Grexit scenario relies crucially on the Eurozone not having a proper lender of last resort or a functioning banking union. It is easy to imagine an alternative scenario to the current one. Consider the following alternative version of how the Greek crisis could have played out. As tension builds up in Greece prior to the Greek election in early 2015, Mario Draghi assures depositors in Greece that the ECB has fully tested the Greek banks and they do not have capital shortfalls. For this reason, their money is safe. Draghi announces that the ECB will thus provide full support to the Greek banks even if the government defaults on its debts, subject to those banks remaining solvent.

Eurozone governments agree that, should Greek banks require recapitalisation to maintain solvency, the European Stabilisation Mechanism (ESM) will provide the capital in return for an ownership stake in the banks. Provided with assurances of liquidity and solvency support, there is no bank run as Greek citizens believe there banking system is safe even if the government’s negotiations with creditors go badly. The ECB stays out of the negotiations for a new creditor deal for Greece (because they are not a political organisation and are not involved in directly loaning money to the government) and its officials assure everyone that the integrity of the common currency is in no way at stake. There are no legal impediments to this scenario.

Despite the constant blather from ECB officials about how it is constantly constrained by its own persnikety rules, it is well known that the ECB can stretch these rules pretty much as far as it likes. Supporting banks that you have deemed solvent is pretty standard central banking practice. So Draghi’s ECB could have provided full and unequivocal support to the Greek banks if they wished. They just chose not to. Similarly, procedures are in place for the ESM to invest directly in banks so a credible assurance of solvency could have been offered. Why did this not happen? Politics. European governments did not feel like providing assurances to Greek citizens about their banking system at the same time as their government was openly discussing the possibility of not paying back existing loans from European governments. Indeed, the ability to unleash the bank-driven Grexit mechanism has been the ace in the creditors’ pack all along.

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And you children too.

“With The Euro, We’ll Forever Have A Noose Around Our Necks” (WSJ)

CHALKIDA, Greece—This small city once had a major cement plant, timber mill and ironworks. All are gone. It is trying to develop a tourism industry, but there is no money to upgrade hotels or roads. This week, as with most places in Greece, it is waiting for the country’s future to be decided in meeting rooms in Brussels. Many here are urging Prime Minister Alexis Tspiras to stand firm in his battle with Europe. “He’s doing the right thing,” said Yannis Liopides, a retired electrician in a textile factory, sitting in a square on Thursday afternoon. The square abuts a promenade fronting onto a crystalline sea. “If Tsipras doesn’t do anything, the only ones left are Golden Dawn,” he said, referring to the far-right party whose leaders are on trial for allegedly running a criminal organization.

Mr. Tsipras may be isolated in negotiations with his fellow European leaders, but he still has plenty of friends here. Many Greeks—and many well beyond Mr. Tsipras’s coterie on the far left—have adopted a mood of resistance, forged by a perception that the country’s European creditors are pushing their demands too far. Europe and the IMF “want a country that is a colony,” said Thanasis Stratis, a cement-plant worker laid off in September. “They want to squeeze every last drop from it.” Chalkida sits at the neck of a narrow sea channel that separates a long island from the Greek mainland. Outside the city, patchwork fields lead to pine forests and on to rocky mountains. Along the coast is a port and shipyards and the hulking cement plant where Mr. Stratis once worked in the accounting department.

A big wave of industrialization came to Chalkida in the 1970s, said Mayor Christos Pagonis. Deindustrialization began in the 1990s and accelerated. “It has created thousands of unemployed,” said Mr. Pagonis, who puts the unemployment rate at more than 30%. The cement plant shut in spring 2013. The economic crisis had all but stopped construction activity in Greece. The plant was incurring losses, said a spokeswoman for Lafarge SA, which owned the facility. At the time, the company estimated that closure would save it €18 million ($20 million) a year. Prevented by Greek labor law from firing the 236 workers en masse, the French industrial company instead has laid them off in small chunks of a dozen or so each month. Only a few remain on the payroll to guard the now-quiet plant, where dogs nap in the sun and eucalyptus trees flutter in the sharp breeze.

Mr. Stratis and a handful of other plant workers man a kiosk in the city center, where they post the number of days the plant has been closed (821, as of Thursday). The names of the laid-off workers are stapled to the wall on 16 laminated sheets. Elias Koukouras, the union president and one of the few still remaining on the payroll, said Greece should quit the eurozone. “The country needs to be rebuilt. With the euro, we’ll forever have a noose around our necks.”

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Wishful fencing.

Creditors To Ringfence Greek Economy If Tsipras Refuses To Give In (Guardian)

Eurozone finance ministers and Greece’s creditors are to draw up plans for emergency measures to ringfence the country’s financial system unless the Greek prime minister, Alexis Tsipras, accepts the creditors’ terms for a five-month extension of Athens’ bailout on Saturday. Greece has its last chance to bow to the lenders’ terms following five months of stalemate at a meeting of eurozone finance ministers in Brussels on Saturday afternoon, the fifth such session in 10 days. Fearing a financial implosion and social unrest in the event of the negotiations collapsing, the ministers are scheduled to draw up plans on Saturday that could involve Greece imposing capital controls, including curbs on ATM withdrawals, to stem a flood of funds out of the ailing Greek financial system.

“Game over”, said senior EU officials engaged in back-to-back meetings and negotiations for the past 10 days, as the brinkmanship in the Greek negotiations reached breaking point. If no deal is agreed at the weekend, Greece will miss a €1.6bn payment due to the International Monetary Fund next Tuesday, along with access to emergency support from the ECB that is keeping the Greek banking system afloat. The creditors have prepared a new funding offer, providing a lifeline to keep Greece afloat until the end of November by extending the bailout by five months and supplying €15.5bn in loans tied to budget cuts and tax rises.

As a two-day EU leaders’ summit ended in Brussels on Friday, several senior officials said Tsipras had to make a choice between accepting the creditors’ ultimatum or embarking on a road that could take Greece out of the euro. The chances of saving Greece were put at 50-50. Angela Merkel, the German chancellor, who talked privately with the Greek leader in Brussels on Friday morning, urged him to go the “extra step” and accept what she described as “a very generous offer”. She ruled out any more emergency summits on the Greek crisis and delivered a pointed message to Tsipras by stressing how, during the Cyprus bailout two years ago, Cypriot banks had to be closed “for a few days”, forcing the political leaders to come to Brussels to deal with the creditor institutions and the Eurogroup finance ministers in order to resolve the issue.

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The refrendum trumps all this. Let’s see of Lagarde has the guts to get even more political.

Why It Won’t Be a Default If Greece Misses IMF Payment Next Week (Bloomberg)

If Greece fails to pay the $1.7 billion it owes the IMF on Tuesday, it might be worse for the lender than for Greece. There’s a difference between missing a payment to bond investors, and to an official institution such as the IMF. Under the fund’s policy, countries that miss payments are deemed to be in “arrears.” The lender plans to stick to that language, rather than using the term “default,” IMF spokesman Gerry Rice said Thursday. The three major credit-rating companies have also said failure to pay the IMF wouldn’t constitute a formal default. So while the practical consequences for Greece may be temporary and small as long as the nation remains in talks with creditors for an accord, the blow to the IMF’s reputation as the world’s lender of last resort could be longer-lasting, making it tougher for the fund to win support for some future bailouts.

“There’s going to be severe scrutiny of interventions in countries that can either be considered wealthy in their own right or are part of a larger geo-economic structure like the euro zone,” Benn Steil, director of international economics at the Council on Foreign Relations in New York. Non-payment would land Greece in a club of countries in arrears that currently includes Zimbabwe, Sudan and Somalia. The three nations have combined overdue payments of about $1.8 billion. The bottom line is that a missed IMF payment probably won’t trigger a wave of defaults on other loans provided by the country’s other official creditors or debt held by private investors. “Non-payment of the IMF is unlikely to cause a catastrophic cascade of other liabilities,” said Zoso Davies, a credit strategist at Barclays Plc in London.

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Good to see some incisive words on the disaster that’s fast enveloping Merkel and her legacy. Can you save that legacy in the next 7 days?

Is The Greek Crisis Too Big For Europe’s Most Powerful Woman? (Augstein)

nngela Merkel has recently been making much use of the old cliche, “Where there’s a will, there’s a way”. She has rolled it out to Alexis Tsipras and the Greek people, and David Cameron has heard it fall from her lips at least once – because, of course, she knows all too well that a Greek exit from the euro would hardly bolster Britain’s enthusiasm for the EU. The Greek crisis is the biggest challenge Merkel has had to face in the 10 years of her chancellorship. If Greece had to exit the single currency, Merkel would go down in history as the one politician who had the power to stop the EU’s decline but failed to do so. Some experts believe that to a large extent she contributed to the crisis: had she wholeheartedly backed a full bailout in 2010, the collapse of the Greek economy might have been averted.

Instead, Merkel involved the IMF– against the advice of her finance minister, Wolfgang Schäuble. Those well disposed towards the German chancellor say she brought in the IMF to prevent Greece from putting the European commission under too much pressure. But at least as important is the less flattering interpretation: that the most powerful woman in Europe (if not the world) shied away from taking sole responsibility for Greece’s fate because sharing it out among as many players as possible was a way of protecting herself from any blame. Unlike her mentor, the former German chancellor Helmut Kohl, Merkel did not embark on her political career with much instinctive passion for the European project.

During her childhood in the GDR, her mother’s praise of the west coloured Merkel’s view of the world – but the west then was the United States. Realising that the EU is worth every political effort has been something she has had to learn. Added to the reticence with which Merkel approaches any momentous decision, it is easy to see why the German government did so little to nip the Greek crisis in the bud. Acting in unison, the German leader and her finance minister, the IMF, the European commission and the European Central Bank forced an austerity programme on the Greek people based on the principles of neoliberal economics. In the former eastern bloc states such shock therapy had succeeded in returning struggling economies to growth. However, it generated immense hardship and created profound social divisions: the well-off benefited because investments became cheaper, but the bulk of the population suffered.

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“We will not accept the proposal, as we said, we were waiting to bring us another proposal tomorrow.”

Tsipras Rejects Bailout Extension, “Won’t Be Blackmailed” (ZH)

Update: Protothema now says the Greek parliament will meet on Saturday and a referendum will be called as early as next week. Whether this is simply a last minute attempt to put pressure on EU finance ministers ahead of Saturday’s Eurogroup meeting remains to be seen, but one thing is for sure: Tsipras is playing a dangerous game with the ECB ahead of a difficult week that could very well see the imposition of capital controls. Update: Protothema is reporting that Tsipras has confided in a fellow EU official that if the country’s creditors insist on sticking to pension and VAT red lines and if Friday’s bailout extension proposal (which the Greek government apparently views as a patronizing stopgap) is the troika’s final offer, he is prepared to call for snap elections. Via Protothema (Google translated):

“The dramatic developments of the last few hours, following the government’s move to reject the proposal of the creditors may conceal preparation for use of the popular verdict, a decision which is expected to be finalized in the next few hours if the lenders do not move from its rigid positions. According secure information protothema.gr, a few hours ago he Prime Minister Alexis Tsipras European leader confided in Eurozone member country adjacent friendly in Greece that the data are up to this moment is ready even to call early elections. This revelation of thought by the Greek prime minister to the foreign leader can be interpreted in two ways: Either Mr. Tsipras is ready for “plan B” if tomorrow the negotiation fails or leaked deliberately in order to exert indirect pressure on lenders to mitigate their requirements.

Upon completion of the meeting Mr. Tsipras with Angela Merkel and Francois Hollande, the Greek side revealed that the Prime Minister pointed out to the leaders of Germany and France that he does not understand why the institutions insist on so hard measures. The prime minister insisted his decision to reject the proposal of the creditors for a five-month extension of the existing agreement with a funding of €15.5 billions. “The proposal does not cover us, because the financial part of barely meets the needs for payment of installments to the lenders, not help anywhere else the economy,” emphasized a close associate of Alexis Tsipras and adds: “We will not accept the proposal, as we said, we were waiting to bring us another proposal tomorrow.”

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And then there’s this.

Paul Craig Roberts: Greek Government May Be Assassinated If They Pivot East (KWN)

The Greek people and the Greek government have before them the unique opportunity to prevent World War III. All the Greek government needs to do, if the Greek people will get behind the government, is to default on the loans, resign from the EU and from NATO, and accept the deal that the Russians have offered them This would begin the unraveling of NATO. Very quickly Spain and Italy would follow. So southern Europe would desert NATO and so would Austria, Hungary and the Czech Republic. NATO is the mechanism that Washington uses to cause conflict with Russia. So as the EU and NATO unravel, the ability of Washington to produce this conflict disappears. The Greek government understands that what is being imposed on Greece is not workable.

Since the (implementation of) austerity the Greek economy has declined by 27%. That’s a depression. And they keep hoping that the Germans wake up one day and realize that austerity is not the way you cure debt, and that the Greek government cannot agree to conditions that drive the Greek population into the ground. They (the troika) are talking about (a) genocide (of the Greek population). The Russians understand that Greece is being plundered by the West and met with the leader of Greece and offered him a deal. They said: “We’ll finance you. But not to pay off the German and Dutch banks, the New York hedge funds or the IMF”. [..]

The troika has no interest in the facts of the matter. They have another agenda that we already discussed. And the Greek government has to see that there is no interest on the part of the troika to resolve the issue. That does suggest they understand that the real solution is not open to them. That they will not be permitted to leave the EU and NATO and make this deal with the Russians. I wouldn’t be surprised if they have simply been told, ‘You can make a good show of it, but if you leave (the EU,) you are dead.’

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Don’t think this is Jim’s strongest field.

There Will Be No “Grexit” (Jim Rickards)

Let me spend a minute on what I call the game theoretic approach. It will show why this scenario is unlikely. Europe would like to tell Greece to just put up or shut up. And Greece would like to tell Europe that they’re not going to put up with any more austerity. But what you have to do is you have to think two or three moves ahead. You have to say, “What would that actually mean? How will that actually play out? If one side acts that way, what does it mean for their constituency? Or other people — will the rest of the European Union or, for that matter, Austrian, Dutch, or German citizens be on the receiving end of any bad consequences?” Some analysts claim “Greece leaving the euro is no big deal.” I couldn’t disagree more.

Think of such a situation three steps ahead from the Institutions’ perspective. It is true that Greece is not a big part of the world economy. It is true that if Greece’s GDP disappeared, that, by itself, it wouldn’t make that large of an impact on the world. But that’s not the danger. The danger is contagion. The danger is that dominos that start falling. Going back to 2007, 2008, I remember when JPMorgan rescued Bear Stearns in March 2008. Everyone said, “The crisis is over.” Then Fannie and Freddie were rescued in July of 2008, and everybody said, “The crisis is over.” And I kept looking at the situation and saying, “This crisis is not over. These are dominoes that are falling. Each one’s hitting the next one and taking the crisis further. We don’t have resolution.”

As I expected, Lehman Brothers was next, and then AIG behind that. Then we saw how bad things got between October of 2008 and the stock market bottom in March 2009 when investors lost 30 to 50 percent of their net worth on that market decline. Not just stocks, but real estate and other assets across the board. So I see these dominos falling if Greece goes. It’s not about Greece — it’s about Spain, Italy, Portugal, Ireland. It’s about the whole eurozone. It’s about confidence. That doesn’t mean that if Greece quits the euro, that the next day Italy says, “Oh, we’re quitting too.” I’m not saying that. What I’m saying is that markets will do the job for them.

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“This artificial construct foisted on a European public by a political elite far less idealistic than it pretended is wearing out its welcome.”

Greece Will Survive, But Will The Euro Or The EU? (MarketWatch)

Whatever happens with the bailout talks, the one certain thing is that Greece will survive, in or outside the eurozone. One of the most beautiful countries in the world in an incredibly strategic location, it will remain a world-class tourist destination and a sought-after ally. In the past century alone, the country has survived Nazi occupation, civil war, military dictatorship, and decades of a political class riven with corruption. It will survive European Union’s austerity policies, or Grexit, or default. So don’t cry for Greece — the country has been there for millennia and it’s not going anywhere. What is far less certain is whether the euro and the EU will survive. This artificial construct foisted on a European public by a political elite far less idealistic than it pretended is wearing out its welcome.

With its bloated and corrupt bureaucracy in Brussels, the craven submission of its political leaders to a dominant reunified Germany, its increasingly obvious disrespect for democratic principles, the EU has strayed far from the founders’ concept of a free-trade zone designed to contain a defeated Germany. It is not just about Greece — or Portugal, which MarketWatch columnist Matthew Lynn identified as the next country to fall, or Spain, or Italy — but about the whole concept of political and economic integration across the entire continent, the so-called “European project.” It is difficult to see how Britain can retreat from David Cameron’s rejection of the “ever closer union” enshrined in the EU treaties as he seeks to renegotiate the terms of his country’s membership.

And without this goal — or without Britain — how can the EU hope for anything but sliding back into a loose trade confederation? The British are so done with the EU, as the Greek debacle confirms all their worst fears about the ever closer union and the joint currency. Last week, former Chancellor of the Exchequer Norman Lamont celebrated his decision in 1991 to opt out of the euro in an op-ed titled “The euro was doomed from the start.” “The creation of the euro has been an error of historic dimensions and done great harm to the EU,” Lamont wrote in The Telegraph. The early decades of European integration helped bring prosperity to Europe, Lamont continued, as rich and poor countries alike benefited from lower tariffs and increased internal trade.

“Britain is extremely fortunate that it is not at the ‘heart of Europe,’” this Conservative politician wrote, “but it still needs a real, robust renegotiation to make sure it is protected against Europe’s dangerous dreams and visions.” Telegraph columnist Ambrose Evans-Pritchard, a longtime opponent of monetary union, was even less measured in his comments on the bullying tactics employed against Greece by the EU, the ECB and the IMF. “Rarely in modern times have we witnessed such a display of petulance and bad judgment by those supposed to be in charge of global financial stability, and by those who set the tone for the Western world,” he railed in a column last week.

He took particular umbrage at the report from the Greek central bank — a component after all of the European System of Central Banks — that undermined the government’s negotiating position by warning that failure to reach a deal could lead to an “uncontrollable crisis.” The report, as it no doubt was intended to do, drove capital flight out of Greece to a new level, an unconscionable act of sabotage, Evans-Pritchard felt, by an institution that is supposed to be a “guardian of financial stability.” “If we want to date the moment when the Atlantic liberal order lost its authority — and when the European Project ceased to be a motivating historic force — this may well be it,” he concluded.

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The new normal doesn’t look very solid. If the recovery must be borrowed, then where are we?

Euro-Area Bank Lending Grows at Fastest Pace Since February 2012 (Bloomberg)

Euro-area banks expanded lending at the fastest pace in more than three years in a sign that credit is starting to support the region’s recovery. Bank loans to companies and households increased 0.5% in May from a year earlier, the most since February 2012, ECB data showed on Friday. Loans posted annual declines every month from May 2012 until February 2015. The ECB has deployed a range of unconventional tools to promote lending, including targeted long-term loans to banks and government-bond purchases that cut market borrowing costs. After deleveraging since the financial crisis, banks are showing an increasing appetite for supplying credit to the region’s fragile recovery.

“The lending aggregates to the real economy still have ample scope to improve in the months ahead, so financial conditions should support growth,” said Colin Bermingham, an economist at BNP Paribas SA in London. In June, euro-area banks took up almost €74 billion of targeted central-bank loans, known as TLTROs, that they can access if they increase lending to companies and households. Since the start of the program last year, the ECB has handed out €384 billion in total. The ECB’s measures have contributed to “more favorable borrowing conditions for firms and households,” ECB President Mario Draghi said in a press conference on June 3. “The effects of these measures are working their way through to the economy and are contributing to economic growth, a reduction in economic slack, and money and credit expansion.”

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Monday will be interesting.

China Politburo Opines On Market Crash: “Black Friday Massacre” (Zero Hedge)

[..] as Xinhua reports (via Google Translate): Shanghai and Shenzhen stock markets plunged more than 7% today fall 4200, over 1500 stocks daily limit. Will this “roller coaster” market stop there? Will history continue to repeat itself? How much further will it fall after the massacre on the A-share stock market day and after. In this rampant speculation, full of legends of the stock market wealth, wealth and opportunities and risks coexist forever; while everyone wants to share the wealth with this situation in the stock market to make a profit, we hope investors can have more risk awareness!

Local analysts are much more concerned… “It’s a do-or-die moment for all investors,” said Dong Jun, a Shanghai-based hedge fund manager. “If retail investors become skittish now, panic selling will continue next week.” “I think this is a very dangerous moment,” says Anne Stevenson-Yang of J Capital Research, the Beijing-based research firm. She’s right. Not only are there the technical liquidity factors she cites, but anything could further rock confidence. “The tide is going to go out, and there’s going to be a lot of people without their swimming trunks on,” Ewen Cameron Watt, chief investment strategist at BlackRock — which oversees $4.8 trillion as the world’s biggest money manager — said in an interview on Bloomberg Television in London. “We’re seeing it deflating quite rapidly.”

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Unofficially, it has done nothing else.

For The First Time Ever, QE Has Officially Failed (Zero Hedge)

Over two years ago in “Desperately Seeking $11.2 Trillion In Collateral”, Zero Hedge first warned that as a result of relentless central bank monetization of debt, liquidity in bond markets would decline at an ever faster pace even as, paradoxically, these same central banks added “phantom liquidity” (the topic of another post from two years ago) to equity markets in their attempt to artificially inflate stock prices to record levels without fundamental justification. Sure enough, with the usual 2-5 year delay, in 2015 the primary financial topic sweeping the mainstream financial media and all the “serious” pundits, is the collapse in bond market liquidity. Some, the more naive ones, blame regulation.

Others, such as iconic Citigroup credit strategist Matt King strategist explained – once again – that Dodd Frank is a negligible reason for the total plunge in bond market liquidity which is the result of, just as we warned, central bank intervention and the relentless ascent of algorithmic trading. But even as everyone is finally arguing about the cause of the plunging bond market liquidity and has no clue how to resolve this biggest nightmare for what once used to be the deepest and most liquidity of markets (at least not without forcing central banks to sell the trillions in bonds they hold, a step which would free up collateral but also result in the biggest market crash ever), a far more ominous question has reappeared. One which, as usual, we asked nearly three years ago: what happens when central banks soak up too much liquidity.

Our answer, at that point, QE will have officially failed, because instead of lowering bond yields – which as a reminder is the primary QE transmission mechanism, one which forces investor to reach not only for yield but also for risk in other asset classes such as equities – any incremental bond purchases will start raising yields as the adverse impact from the illiquidity “premium” surpasses the price appreciation benefit from frontrun central bank buying. Impossible, you say? Not only not impossible but in one country it just happened. Sweden, and as Bloomberg sarcastically notes, “It’s probably not what the Riksbank expected.”

What is “it”? Precisely what we said would happen three years ago: Quantitative easing is supposed to drive down longer-dated yields. But as investors obsess over market depth, the Riksbank’s bond purchases are undermining liquidity and driving Swedish yields higher. The financial conditions — the currency and the bond yields — are moving in the wrong direction,” Roger Josefsson, chief economist at Danske Bank A/S in Stockholm, said by phone. The assumption is that “the Riksbank wants yields to go down and the krona to weaken, but it’s been the opposite direction recently. That should pose a problem.”

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This should be a huge, widespread project all over Europe. Greece and Italy!

Dutch City Utrecht To Try Out Universal, Unconditional ‘Basic Income’ (Ind.)

The Dutch city of Utrecht will start an experiment which hopes to determine whether society works effectively with universal, unconditional income introduced. The city has paired up with the local university to establish whether the concept of ‘basic income’ can work in real life, and plans to begin the experiment at the end of the summer holidays. Basic income is a universal, unconditional form of payment to individuals, which covers their living costs. The concept is to allow people to choose to work more flexible hours in a less regimented society, allowing more time for care, volunteering and study. University College Utrecht has paired with the city to place people on welfare on a living income, to see if a system of welfare without requirements will be successful.

The Netherlands as a country is no stranger to less traditional work environments – it has the highest proportion of part time workers in the EU, 46.1%. However, Utrecht’s experiment with welfare is expected to be the first of its kind in the country. Alderman for Work and Income Victor Everhardt told DeStad Utrecht: “One group is will have compensation and consideration for an allowance, another group with a basic income without rules and of course a control group which adhere to the current rules.” “Our data shows that less than 1.5% abuse the welfare, but, before we get into all kinds of principled debate about whether we should or should not enter, we need to first examine if basic income even really works. ”

What happens if someone gets a monthly amount without rules and controls? Will someone be sitting passively at home or do people develop themselves and provide a meaningful contribution to our society?” The city is also planning to talk to other municipalities about setting up similar experiments, including Nijmegen, Wageningen, Tilburg and Groningen, awaiting permission from The Hague in order to do so.

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Don’t believe the hype.

Half Of Europe’s Electricity Set To Be From Renewables By 2030 (Guardian)

Europe will likely get more than half of its electricity from renewable sources by the end of the next decade if EU countries meet their climate pledges, according to a draft commission paper. A planned overhaul of the continent’s electricity grids will now need to be sped up, says the leaked text, seen by the Guardian. “Reaching the European Union 2030 energy and climate objectives means the share of renewables is likely to reach 50% of installed electricity capacity,” says the consultation paper, due to be published on 15 July. “This means that changes to the electricity system in favour of decarbonisation will have to come even faster.”

The EU has set itself a goal of cutting emissions 40% on 1990 levels by 2030, and an aspiration for a 27% share for renewables across Europe’s full energy mix, which includes sectors such as transport, agriculture and buildings that do not necessarily rely on electricity. Around a quarter of Europe’s electricity currently comes from renewable sources. Oliver Joy, a spokesman for the European Wind Energy Association welcomed the draft text but noted the 27% goal for 2030 was non-binding, and some countries were looking likely to even miss an earlier goal, for 2020, that is binding. “Even with a binding provision, we are seeing the Netherlands, UK and France potentially missing their 2020 target [to source a fifth of energy provision from renewables].”

Joy called for the commission to deliver a governance system for renewables that prevented slacker states from hiding behind the more fast-moving ones. Downing Street would almost certainly resist more stringent oversight from Brussels on renewable energy. Other measures put up for discussion in the paper could be an anathema to the government’s eurosceptic backbenchers.

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