May 232016
 
 May 23, 2016  Posted by at 8:56 am Finance Tagged with: , , , , , , , , , ,  


Harris&Ewing Hancock’s, the Old Curiosity Shop, 1234 Pennsylvania Avenue 1914

Japan April Imports Fall 23.3%, Exports Drop 10.1% (BBG)
Japan May Factory Activity Shrinks Most In Over Three Years (R.)
Investors Check Out of Europe (WSJ)
US Dollar Will Be The Winner When The EU Volcano Erupts (CNBC)
Saudi Financial Crisis ‘Could Leave Oil At $25’ As Bills Get Paid In IOUs (AEP)
The IMF And Calling Berlin’s Bluff Over Greece (Münchau)
Athens Agrees Fiscal Measures In Exchange For Debt Relief Talks (FT)
China Steps Up War On Banks’ Bad Debt (FT)
We MUST Quit The EU, Says Cameron’s Guru (DM)
Support For EU Falls Sharply In Britain’s Corporate Boardrooms (G.)
Swiss To Vote On $2,500 a Month Basic Income (BBG)
Snowden Calls For Whistleblower Shield After Claims By New Pentagon Source (G.)
R.I.P., GOP: How Trump Is Killing the Republican Party (Taibbi)
Turks Won’t Get EU Visa Waiver Before 2017: Bild (R.)
Greek Police Poised To Evacuate Idomeni Refugee Camp (Kath.)

In praise of Abenomics…

Japan April Imports Fall 23.3%, Exports Drop 10.1% (BBG)

Japan’s exports fell for a seventh consecutive month in April as the yen strengthened, underscoring the growing challenges to Prime Minister Shinzo Abe’s efforts to revive economic growth. Overseas shipments declined 10.1% in April from a year earlier, the Ministry of Finance said on Monday. The median estimate of economists surveyed by Bloomberg was for a 9.9% drop. Imports fell 23.3%, leaving a trade surplus of 823.5 billion yen ($7.5 billion), the highest since March 2010. Even after coming off an 18-month high earlier this month, the Japanese currency has gained 9% against the dollar this year, eroding the competitiveness of the nation’s products overseas and hurting the earnings of exporters.

Concern about the impact of the yen was on show over the weekend as Finance Minister Taro Aso and his U.S. counterpart disagreed over the seriousness of recent moves in the foreign-exchange market. “Exports are getting a hit from the yen’s gains and weakness in overseas demand, especially in emerging nations,” said Yuichi Kodama at Meiji Yasuda Life Insurance in Tokyo, who added that last month’s earthquakes in Kumamoto also will likely slow exports. “There’s a high chance that Japan’s economy will return to contraction in the April-June period as domestic consumption and exports look weak.”

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Calling Peter Pan!

Japan May Factory Activity Shrinks Most In Over Three Years (R.)

Japanese manufacturing activity contracted at the fastest pace in more than three years in May as new orders slumped, a preliminary survey showed on Monday, putting fresh pressure on the government and central bank to offer additional economic stimulus. The Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index (PMI) fell to 47.6 in May on a seasonally adjusted basis, from a final 48.2 in April. The index remained below the 50 threshold that separates contraction from expansion for the third month and showed that activity shrank at the fastest since December 2012. The index for new orders fell to a preliminary 44.1 from 45.0 in the previous month, also suggesting the fastest decline since December 2012.

The aftermath of earthquakes in southern Japan in April may still be weighing heavily on some producers, a statement from Markit said, while foreign demand also contracted sharply. Japan escaped a technical recession in the first quarter, GDP data showed last week, but economists warned the underlying trend for consumer spending remains weak. There are also concerns that companies have already started to delay business investment due to uncertainty about overseas economies. Speculation is growing that Prime Minister Shinzo Abe will delay a nationwide sales tax hike scheduled for next April to focus on measures that will strengthen domestic demand. Economists also expect the Bank of Japan will ease monetary policy even further by July as a strong yen and still-sluggish economy threaten its ability to meet its ambitious inflation target, a Reuters poll showed.

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“Banks are Europe’s worst-performing sector, having fallen nearly 19%.”

Investors Check Out of Europe (WSJ)

Investors are fleeing Europe. Fund managers are pulling cash out of European equity and debt markets in response to concerns about the continent’s fractious politics, ultralow interest rates and weak banks, and relentless economic malaise. Investors have sold exchange-traded funds tracking European shares for nearly 15 weeks—the longest stretch since 2008—according to UBS. Meanwhile, annual net outflows from eurozone bonds were running at over half a trillion euros as of the end of March, according to a Pictet Wealth Management analysis of data from the ECB. That is happening as investors are turning away from Europe’s growing pool of negative-yielding debt. The money is finding a home in places from U.S. Treasurys to emerging economies, helping to push up prices in those markets.

Just last year, Europe was a top pick by global fund managers as it recovered from the sovereign-debt crisis of 2010 to 2012. The current retreat shows that this rehabilitation has faded, and fast. “It’s a one-way flow out of Europe,” said Ankit Gheedia, equity and derivatives strategist at BNP Paribas SA. “You buy something that doesn’t give you a return, you sell.” Last year, ECB monetary stimulus and a fledgling economic recovery brought investors back to Europe after they fled during the eurozone debt crisis. The Stoxx Europe 600 gained 6.8% in 2015, while the S&P 500 lost almost 1%. Now people are leaving again. In recent weeks, investors have been selling equities around the world over concerns about the global economy. But the selling in Europe has been particularly pronounced.

Funds have sold around $22.6 billion worth of ETFs that track European equity since March, which is equivalent to roughly 9.4% of the total held of these investments, according to Mr. Gheedia. Meanwhile, global fund managers’ allocation to eurozone equities dropped to 17-month lows in May, according to a survey by Bank of America Merrill Lynch. When prospects seemed sunnier last year, a net 55% of fund managers favored the region. This is already taking a toll on European markets. The Stoxx Europe 600 is down nearly 8% this year, compared with a roughly flat S&P 500. Banks are Europe’s worst-performing sector, having fallen nearly 19%.

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And when the China Ponzi bursts.

US Dollar Will Be The Winner When The EU Volcano Erupts (CNBC)

Europe’s apparent inability to secure its monetary union leaves the world without any credible dollar alternatives. Those who were expecting that a legal tender of an economic system nearly matching the size of the American economy would offer an effective instrument of portfolio diversification have to accept a simple reality: The dollar remains an irreplaceable global transactions currency and, by far, the world’s most important reserve asset. The pious hopes of the French President François Mitterrand and the German Chancellor Helmut Kohl that a common currency would bond their countries and the rest of Europe into a peaceful and prosperous union could soon be dashed. Their political offspring has become a symbol of European discord and a cause of seemingly irreconcilable French-German economic and political divisions.

These historical divides are now aggravated by violent street demonstrations and frightening civil war rhetoric in France, where the country’s mainstream politicians are trying to fight off extreme right and left parties, commanding nearly half of the popular vote and demanding an immediate exit from the EU and the euro. Investors would be well advised to take this seriously. Even if relatively moderate French center-right forces were able to keep the anti-EU parties at bay, a long-brewing clash with Germany appears inevitable. For many French politicians of all stripes, Germany has gone too far in bossing the rest of Europe around, and in causing a huge economic, social and political damage to France, Italy, Spain, Portugal and Greece with the imposition of its mean-spirited and misguided fiscal austerity.

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It’s a bout the dollar peg, again. Said ages ago it would be untenable.

Saudi Financial Crisis ‘Could Leave Oil At $25’ As Bills Get Paid In IOUs (AEP)

Saudi Arabia faces a vicious liquidity squeeze as capital continues to leak out the country, with a sharp contraction of the money supply and mounting stress in the banking system. Three-month interbank offered rates in Riyadh have suddenly begun to spiral upwards, reaching the highest since the Lehman crisis in 2008. Reports that the Saudi government is to pay contractors with tradable IOUs show how acute the situation is becoming. The debt-crippled bin Laden group is laying off 50,000 construction workers as austerity bites in earnest. Societe Generale’s currency team has advised clients to short the Saudi riyal, betting that the country will be forced to ditch its long-standing dollar peg, a move that could set off a cut-throat battle for global share in the oil markets.

Francisco Blanch, from Bank of America, said a rupture of the peg is this year’s number one “black swan event” and would cause oil prices to collapse to $25 a barrel. Saudi Arabia’s foreign reserves are still falling by $10bn (£6.9bn) a month, despite a switch to bond sales and syndicated loans to help plug the huge budget deficit. The country’s remaining reserves of $582bn are in theory ample – if they are really liquid – but that is not the immediate issue. The problem for the Saudi central bank (SAMA) is that reserve depletion automatically tightens monetary policy. Bank deposits are contracting. So is the M2 money supply. Domestic bond sales do not help because they crowd out Saudi Arabia’s wafer-thin capital markets and squeeze liquidity. Riyadh now plans a global bond issue.

While crude prices have rallied 80pc to almost $50 a barrel since mid-February, this has not yet been enough to ease Saudi Arabia’s financial crunch. The rebound in crude is increasingly fragile in any case as tough talk from the US Federal Reserve sends the dollar soaring, and Canada prepares to restore 1.2m barrels a day (b/d) of lost output. “We feel that markets have moved too high, too far, too soon. We still face a large inventory overhang and supply outages are reversible,” said BNP Paribas. Total chief Patrick Pouyanne told the French senate last week that prices could deflate as fast as they rose. “The market won’t come back into balance until the end of the year,” he said.

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Germany is blowing up the EU, step by step. There is no other way out of this. Berlin has become the schoolyard bully. And not everyone bends over for the bully.

The IMF And Calling Berlin’s Bluff Over Greece (Münchau)

At one level, the recurring Greek crises fit the idea from Karl Marx of history repeating itself, first as tragedy then as farce. Greece came close to a eurozone exit last summer. While it will probably come close this year, it is unlikely to leave. But prepare for some tense moments in the next few weeks and months as Greece and its creditors struggle to agree the first review of last year’s bailout. The IMF has concluded that Greek public debt, at 180% of GDP is unsustainable; as is the agreed annual primary budget surplus, before interest payments, of 3.5% of GDP. The fund insists on debt relief, but Germany resists. A year ago Angela Merkel and Wolfgang Schäuble, her finance minister, sold the Greek bailout to their party and parliament as a loan only. They argued that once you accept a debt writedown, you turn a loan into a transfer.

And once you accept the principle of a one-off transfer to Greece, you are on a slippery road to what the Germans call a transfer union, one where they pay and others receive. In private, senior German government officials agree that Athens needs debt relief. They are not blind. But they are trapped in the lie that Greece is solvent, which is what their own backbenchers were told. Without that lie, Greece would no longer be a eurozone member. But the lie cannot be sustained. IMF insistence on debt relief is what could expose this lie. Christine Lagarde, managing director, last year set debt relief talks as a condition for the fund’s participation in a bailout. Mr Schäuble reluctantly agreed yet managed to insert the words “if needed”, which give him wriggle room. But Berlin imposed another condition: the IMF must participate in the bailout, too. This is what makes the German position vulnerable.

We know IMF staff are steadfast in their opposition to being involved in a bailout without an agreement on debt relief. The trouble is that the policies are not determined by the staff but by the IMF shareholders. The Europeans and the US are the dominant shareholders so the outcome of this battle will depend to a large extent on the view taken by Washington. To get himself out of a hole, Mr Schäuble recently made a counterproposal: Germany accepts debt talks in principle but only from 2018. The date was chosen with care. It is well after the next federal elections. It is not clear whether he will still be finance minister or indeed in government. I suspect the Christian Democratic Union, his party, will lead the next government; the electoral arithmetic makes other constellations improbable. Nevertheless, he is proposing to commit any successor to this course of action. Such a commitment has no credibility.

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Why Tsipras keeps doing these things is hard to fathom.

Athens Agrees Fiscal Measures In Exchange For Debt Relief Talks (FT)

Alexis Tsipras has defended his leftwing government’s adoption of new fiscal measures in return for talks on debt relief, saying Greece was “turning a page” after an unprecedented six-year recession “Spring may be almost over but we are looking forward to an economic spring and a return to growth this year,” the prime minister told parliament, wrapping up a two-day debate on a €1.8bn package of indirect tax increases. As expected, all 153 legislators from the premier’s Syriza party and its coalition partner, the rightwing Independent Greeks, backed the bill, while 145 opposition deputies voted against. There were two abstentions. The latest measures complete a €5.4bn package of fiscal reforms aimed at ensuring a primary budget surplus, before payments of principal and interest on debt, amounting to 3.5% of national output by 2018.

But the legislation also included a provision for “contingency” measures, including wage and pension cuts, that would take effect automatically if budget targets were derailed next year. An upbeat Mr Tsipras insisted that budget projections would be outperformed, saying: “Greece has shown it keeps its promises..I’m certain [contingency] measures will not have to be put into effect.” A senior Greek official said after the vote he was confident that eurozone finance ministers would unlock up to €11bn from Greece’s €86bn third bailout at a meeting scheduled for Tuesday. The funding, to be disbursed in several tranches linked to implementing the reforms, would enable Athens to meet sovereign debt repayments for the remainder of the year and also channel funds to public services such as the healthcare system.

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This is getting weird. It’s like Beijing is reinventing finance. The government is paying off debt to the shadow banks.

China Steps Up War On Banks’ Bad Debt (FT)

Beijing has stepped up its battle against bad debt in China’s banking system, with a state-led debt-for-equity scheme surging in value by about $100bn in the past two months alone. The government-led programme, which forces banks to write off bad debt in exchange for equity in ailing companies, soared in value to hit more than $220bn by the end of April, up from about $120bn at the start of March, according to data from Wind Information. Industry watchers have fiercely debated how far Beijing will go to recapitalise the financial system, with bad loans taking up an ever higher percentage of banks’ balance sheets — as much as 19% by some estimates. The latest figures for the debt-to-equity swap, and a debt-to-bonds swap initiated last year, show a subtle bailout is already under way.

“One can argue the government-led recapitalisation is already happening in an atypical way and thus reducing the need for recapitalisation in its written sense,” said Liao Qiang at S&P Global Ratings in Beijing. Chinese media reported that up to Rmb4tn ($612bn) had been approved in 2015 for the debt-to-bonds swap, which has seen state-controlled banks trade short-term loans to companies connected to local governments in exchange for bonds with much longer maturities. That programme has been hailed a success in that it relieved the pressure on local governments that were forced to take out bank loans to proceed with public works projects in the absence of municipal bond markets.

The debt-to-equity project has received far less enthusiasm from analysts, who say that coercing banks to become stakeholders in companies that could not pay back loans will further weigh down profits this year. Instead of underpinning stability at banks, Mr Liao says the efforts undermine it. The programmes are just two fronts in Beijing’s battle against bad debt. The state-controlled asset management companies that bailed out the country’s four national commercial banks 15 years ago have become increasingly active over the past two years in buying up portfolios of bad debt. Regional asset managers run by provincial governments are doing the same business on a local level. The government is also reopening the market for securitising bad debt with two deals worth Rmb534m due this month.

The efforts have even gone online, with debt managers hawking off bad loans on China’s biggest online retail site. The average rate of non-performing loans at China’s commercial banks hit an official 1.75% at the end of March, according to the banking regulator. That marks the 11th straight quarter that the government-approved figures have risen. But the official data does not include a much larger stockpile of so-called zombie loans that some analysts say could in future require a more formal bailout for the banks. Francis Cheung, analyst at CLSA, estimates that bad debt accounted for 15-19% of banks’ loan books at the end of last year and that the government may have to add Rmb10.6tn of new capital to the banking system, or 15.6% of GDP.

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“As I say to my American friends who don’t really get what the EU is: ‘All you need to know is that it has three presidents, none of whom is elected.’”

We MUST Quit The EU, Says Cameron’s Guru (DM)

David Cameron’s closest friend in politics today breaks ranks to say Britain must leave the ‘arrogant and unaccountable’ EU. In a shattering blow to the Prime Minister, Steve Hilton claims the UK is ‘literally ungovernable’ as a democracy while it remains in a club that has been ‘corruptly captured’ by a self-serving elite. And in an attack on Project Fear, the former No 10 adviser dismisses claims by Mr Cameron, the IMF and the Bank of England that being in the EU makes us more secure. In an exclusive Daily Mail article, Mr Hilton – who persuaded Mr Cameron to stand for Tory leader – also delivers a devastating assessment of the PM’s referendum deal. He says Mr Cameron made only ‘modest’ demands of Brussels – and that even these were swatted contemptuously aside.

He also warns that Brussels will take revenge on Britain for the referendum if it votes to stay, by imposing fresh diktats. Mr Hilton concludes: ‘A decision to leave the EU is not without risk. But I believe it is the ideal and idealistic choice for our times: taking back power from arrogant, unaccountable, hubristic elites and putting it where it belongs – in people’s hands.’ His declaration for Brexit with exactly a month to go until polling day will send tremors through No 10. Along with Michael Gove, he provided the intellectual heft behind Mr Cameron’s rise to power. Both men now argue that the PM is wrong to urge voters to remain in what Mr Hilton condemns as the ‘grotesquely unaccountable’ Brussels club.

[..] Mr Hilton, who remains close to the Prime Minister, had previously declined to be drawn into what is already a bitter ‘blue on blue’ row. But today he claims the key issue for him is that Britain cannot make its own laws and control its own destiny from inside the EU. Mr Hilton says Brussels directives have crept into every corner of Whitehall and that less than a third of the Government’s workload is the result of trying to fulfil its own promises and policies. The rest is generated either by the ‘anti-market, innovation-stifling’ EU or a civil service dancing to the tune of Brussels, he says. Mr Hilton continues: ‘It’s become so complicated, so secretive, so impenetrable that it’s way beyond the ability of any British government to make it work to our advantage.

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The vote is not done yet.

Support For EU Falls Sharply In Britain’s Corporate Boardrooms (G.)

The number of FTSE 350 company boards that believe EU membership is good for their business has dropped significantly over the past six months, with just over a third now saying the EU has a positive impact. The biannual FT-ICSA boardroom bellwether survey, which canvasses the views of the FTSE 350, reported a substantial fall in the number who believe their company benefits from EU membership to 37%, down from 61% in December 2015. It found many were indifferent to a Brexit, with barely half (49%) of boards having considered the implications of the UK leaving the EU. Approximately 43% said they believe a UK exit from Europe would be potentially damaging. Respondents from the FTSE 100 regarded EU membership more favourably than the 250, with more than twice as many (55%) of FTSE 100 companies believing that EU membership has a positive impact.

This compared with 24% of the FTSE 250. John Longworth, chairman of the Vote Leave business council, said the survey findings showed that the remain camp’s economic argument was failing. “The remain camp’s concerted campaign to do down the economy has failed. In fact it has had the opposite effect as the EU supporters have failed to make a positive case for continuing to hand Brussels more control of our economy, our democracy and our borders. He added: “Business recognises it is possible for Britain to continue trading across Europe, part of the free trade zone that exists from Iceland to Turkey, without handing Brussels £350m a week and EU judges ultimate power over our laws. On 23 June the safe option is to take back control.”

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Switzerland is notoriously expensive to live in.

Swiss To Vote On $2,500 a Month Basic Income (BBG)

The Swiss are discussing paying people $2,500 a month for doing nothing. The country will vote June 5 on whether the government should introduce an unconditional basic income to replace various welfare benefits. Although the initiators of the plan haven’t stipulated how large the payout should be, they’ve suggested the sum of 2,500 francs ($2,500) for an adult and a quarter of that for a child. It sounds good, but — two things. It would barely get you over the poverty line, typically defined as 60 percent of the national median disposable income, in what’s one of the world’s most expensive countries. More importantly, it’s probably not going to happen anyway. Plebiscites are a common part of Switzerland’s direct democracy, with multiple votes every year. The basic income initiative is taking place after the proposal gathered the required 100,000 signatures, though current polls suggest it won’t get any further.

The idea of paying everyone a stipend has also piqued interest in other countries, such as Canada, the Netherlands and Finland, where an initial study began last year. The initiators say the sum they’ve mentioned would allow for a “decent existence.” Still, on an annual basis, it would provide only 30,000 francs — just above the 2014 poverty line of 29,501 francs. Nearly one in eight people in Switzerland were below the level in that year, according to the statistics office. That’s more than in France, Denmark and Norway. Among those over 65, one in five were at risk of being poor. “It’s not like you see abject poverty in Switzerland,” said Andreas Ladner, professor of political science at the University of Lausanne. “But there are a few people who don’t have enough money, and there are some people who work and don’t earn enough.”

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But it won’t materialize.

Snowden Calls For Whistleblower Shield After Claims By New Pentagon Source (G.)

Edward Snowden has called for a complete overhaul of US whistleblower protections after a new source from deep inside the Pentagon came forward with a startling account of how the system became a “trap” for those seeking to expose wrongdoing. The account of John Crane, a former senior Pentagon investigator, appears to undermine Barack Obama, Hillary Clinton and other major establishment figures who argue that there were established routes for Snowden other than leaking to the media. Crane, a longtime assistant inspector general at the Pentagon, has accused his old office of retaliating against a major surveillance whistleblower, Thomas Drake, in an episode that helps explain Snowden’s 2013 National Security Agency disclosures. Not only did Pentagon officials provide Drake’s name to criminal investigators, Crane told the Guardian, they destroyed documents relevant to his defence.

Snowden, responding to Crane’s revelations, said he had tried to raise his concerns with colleagues, supervisors and lawyers and been told by all of them: “You’re playing with fire.” He told the Guardian: “We need iron-clad, enforceable protections for whistleblowers, and we need a public record of success stories. Protect the people who go to members of Congress with oversight roles, and if their efforts lead to a positive change in policy – recognize them for their efforts. There are no incentives for people to stand up against an agency on the wrong side of the law today, and that’s got to change.” Snowden continued: “The sad reality of today’s policies is that going to the inspector general with evidence of truly serious wrongdoing is often a mistake. Going to the press involves serious risks, but at least you’ve got a chance.”

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Excellent Taibbi, once again.

R.I.P., GOP: How Trump Is Killing the Republican Party (Taibbi)

If this isn’t the end for the Republican Party, it’ll be a shame. They dominated American political life for 50 years and were never anything but monsters. They bred in their voters the incredible attitude that Republicans were the only people within our borders who raised children, loved their country, died in battle or paid taxes. They even sullied the word “American” by insisting they were the only real ones. They preferred Lubbock to Paris, and their idea of an intellectual was Newt Gingrich. Their leaders, from Ralph Reed to Bill Frist to Tom DeLay to Rick Santorum to Romney and Ryan, were an interminable assembly line of shrieking, witch-hunting celibates, all with the same haircut – the kind of people who thought Iran-Contra was nothing, but would grind the affairs of state to a halt over a blow job or Terri Schiavo’s feeding tube.

A century ago, the small-town American was Gary Cooper: tough, silent, upright and confident. The modern Republican Party changed that person into a haranguing neurotic who couldn’t make it through a dinner without quizzing you about your politics. They destroyed the American character. No hell is hot enough for them. And when Trump came along, they rolled over like the weaklings they’ve always been, bowing more or less instantly to his parodic show of strength. In the weeks surrounding Cruz’s cat-fart of a surrender in Indiana, party luminaries began the predictably Soviet process of coalescing around the once-despised new ruler. Trump endorsements of varying degrees of sincerity spilled in from the likes of Dick Cheney, Bob Dole, Mitch McConnell and even John McCain.

Having not recently suffered a revolution or a foreign-military occupation, Americans haven’t seen this phenomenon much, but the effortless treason of top-tier Republicans once Trump locked up the nomination was the most predictable part of this story. Politicians, particularly this group, are like crackheads: You can get them to debase themselves completely for whatever’s in your pocket, even if it’s just lint.

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Greece should brace itself for a huge new influx of refugees.

Turks Won’t Get EU Visa Waiver Before 2017: Bild (R.)

The German government does not expect Turks to get visa-free entry into the European Union before 2017 because Ankara will not fulfil the conditions for that by the end of this year, newspaper Bild cited sources in Berlin as saying on Monday. Turkey and the EU have been discussing visa liberalisation since 2013 and agreed in March to press ahead with it as part of a deal to stop the flow of illegal migrants from Turkey to the EU. EU officials and diplomats say the EU is set to miss an end-June deadline due to a dispute over Turkish anti-terrorism law. [..] Turkey’s government says it has already met the EU’s criteria for visa-free travel.

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Another thing Tsipras should simply refuse to do.

Greek Police Poised To Evacuate Idomeni Refugee Camp (Kath.)

It appears that Greek authorities are poised to put into action a plan to evacuate the refugee camp in Idomeni, on the border with the Former Yugoslav Republic of Macedonia. According to sources, nine squads of riot police received orders on Monday to travel from Athens to Kilkis so they can take part in the operation if their contribution is needed. Authorities will attempt to move the refugees from the unofficial camp to other sites that have been made ready in various parts of northern Greece. Police sources told Kathimerini that the plan to remove people from Idomeni would be put into action in the coming days, although no decision has been as to exactly when the operation will take place. One source said that it is most likely the orders will be given on Wednesday.

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Jul 062015
 
 July 6, 2015  Posted by at 12:23 pm Finance Tagged with: , , , , , , ,  


DPC ‘On the beach, Palm Beach’ 1905

Minister No More! (Yanis Varoufakis)
Our NO Is A Majestic, Big YES To A Democratic, Rational Europe! (Varoufakis)
Yanis Varoufakis: Why Bold, Brash Greek Finance Minister Had To Go (Guardian)
Discussing Syriza’s Stunning Victory On The BBC (Steve Keen)
Defiant Greeks Reject EU Demands As Syriza Readies IOU Currency (AEP)
Yanis Varoufakis: Greece’s ‘Erratic Marxist’ (AFP)
What Are the Geostrategic Implications of a Grexit? (Foreign Policy)
Greece Votes No — Now What? (Peter Spiegel)
Why The Yes Campaign Failed In Greece (Wolfgang Münchau)
UN Debt Expert Says Greece Can’t Take More Austerity (Reuters)
Europe Wins (Paul Krugman)
Ending Greece’s Bleeding (Paul Krugman)
Thomas Piketty: “Germany Has Never Repaid.” (Medium)
We May Soon Be Able To See Polar Bears Only In Picture Books (MD)

Sorry to see him go, but he may be better able to lead things from the background.

Minister No More! (Yanis Varoufakis)

The referendum of 5th July will stay in history as a unique moment when a small European nation rose up against debt-bondage. Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today. I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum. And I shall wear the creditors’ loathing with pride.

We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government. The superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning.

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There is no democratic rational Europe.

Our NO Is A Majestic, Big YES To A Democratic, Rational Europe! (Varoufakis)

On the 25th of January, dignity was restored to the people of Greece. In the five months that intervened since then, we became the first government that dared raise its voice, speaking on behalf of the people, saying NO to the damaging irrationality of our extend-and-pretend ‘Bailout Program’.

We
• spread the word that the Greek ‘bailouts’ were exercises whose purpose was intentionally to transfer private losses onto the shoulders of the weakest Greeks, before being transferred to other European taxpayers
• articulated, for the first time in the Eurogroup, an economic argument to which there was no credible response
• put forward moderate, technically feasible proposals that would remove the need for further ‘bailouts’
• confined the troika to its Brussels’ lair
• internationalised Greece’s humanitarian crisis and its roots in intentionally recessionary policies
• spread hope beyond Greece’s borders that democracy can breathe within a monetary union hitherto dominated by fear.

Ending interminable, self-defeating, austerity and restructuring Greece’s public debt were our two targets. But these two were also our creditors’ targets. From the moment our election seemed likely, last December, the powers-that-be started a bank run and planned, eventually, to shut Greece’s banks down. Their purpose?
• To humiliate our government by forcing us to succumb to stringent austerity, and
• To drag us into an agreement that offers no firm commitment to a sensible, well-defined debt restructure.

The ultimatum of 25th June was the means by which these aims would be achieved. The people of Greece today returned this ultimatum to its senders; despite the fear mongering that the domestic oligarchic media transmitted night and day into their homes. Today’s referendum delivered a resounding call for a mutually beneficial agreement between Greece and our European partners. We shall respond to the Greek voters’ call with a positive approach to:
• The IMF, which only recently released a helpful report confirming that Greek public debt was unsustainable
• The ECB, the Governing Council of which, over the past week, refused to countenance some of the more aggressive voices within
• The European Commission, whose leadership kept throwing bridges over the chasm separating Greece from some of our partners.

Our NO is a majestic, big YES to a democratic Europe. It is a NO to the dystopic vision of a Eurozone that functions like an iron cage for its peoples. It is a loud YES to the vision of a Eurozone offering the prospect of social justice with shared prosperity for all Europeans.

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Curious piece by Helena Smith

Yanis Varoufakis: Why Bold, Brash Greek Finance Minister Had To Go (Guardian)

When historians look back at the great Greek debt crisis, the figure of Yanis Varoufakis will feature large. Bold and brash, he did more to internationalise the folly of austerity politics than any other member of the radical left government of Athens. Alexis Tsipras, the young prime minister, was much indebted to him, and Varoufakis’s resignation was quickly followed by effusive praise. “The prime minister feels the need to thank him for his ceaseless effort to promote the positions of the government and the interests of the Greek people under very difficult circumstances,” government spokesman Gavriel Sakellaridis announced.

Varoufakis may have been forced to leave front-line politics, but he does so hugely vindicated by the historic no vote delivered by Greeks on Sunday. There are not a few in Athens today who believe he is also a victim of his own success. The resounding rejection of further belt-tightening in a referendum that pitted Greece against all its eurozone partners was a high-stakes gamble associated squarely with the 54-year-old’s penchant for game theory and buccaneering style. The morning after, he had to go. In announcing his resignation, the controversial finance minister recognised that of all the impediments to a prospective deal (and there are still many) he would be the biggest.

Even by the standards of a crisis that long ago dispensed with diplomatic niceties, the combative politician had pushed the boundaries of acceptable fighting talk too far. On the eve of the vote, he accused Europe of indulging in terrorism, saying it was instilling fear in people in its bid to get Greece to acquiesce to “neoliberal dogmas.” In April, when eurozone counterparts expressed exasperation at his hectoring and lecturing style after an especially explosive Eurogroup, Varoufakis had felt fit to announce: “They are unanimous in their hate for me – and I welcome their hatred.”

By June, when it became apparent that Varoufakis would take things to the brink, senior Greek government officials in Athens were also finding it hard to contain their consternation. Many were enraged by tactics they saw as deliberately confrontational and a danger to the country’s relationship with Europe. Varoufakis’s showy lifestyle and shameless narcissism also jarred. But his apparent endorsement of a parallel currency and IOUs appears to have been the straw that broke the camel’s back. His ability to represent Greece abroad was over. Ever the maverick, Varoufakis is unlikely to vanish overnight. Although never a member of the ruling Syriza party, he remains an MP and, very possibly, will continue to influence Tsipras behind the scenes. There are few who doubt he will also be working on an unexpurgated version of the euro crisis, Varoufakis style.

He has already said he is looking forward to life on the backbenches. But will his sacrifice be enough to placate creditors? Varoufakis leaves an economy in meltdown, banks closed, capital controls imposed and shortages growing by the hour. If his removal is not enough, the mess that has also been the price of his brinkmanship may well end up being his lasting legacy – a legacy that historians will not forget.

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On the nose.

Discussing Syriza’s Stunning Victory On The BBC (Steve Keen)

After yesterday’s remarkable victory in the Referendum, I was interviewed on the BBC News Channel. Someone has posted a recording from the BBC News Channel stream on YouTube.

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The parallel currency issue is a big one.

Defiant Greeks Reject EU Demands As Syriza Readies IOU Currency (AEP)

Greek voters have rejected the austerity demands of Europe’s creditor powers by a stunning margin, sweeping aside warnings that this could lead to the collapse of the banking system and a return to the drachma. Early returns in the historic referendum showed the No side -Oxi in Greek =- running at 61pc versus 39pc for the Yes side as the Greek people turned out en masse to vent their anger over six years of economic depression and national humiliation. A volcanic revolt appeared to have swept through Greek islands. The shock result effectively calls the bluff of eurozone leaders and the heads of the European Commission and Parliament, forcing them either to back down or carry out drastic threats to eject Greece from monetary union.

The European Central Bank faces an immediate decision over whether to continue freezing emergency liquidity assistance (ELA) for Greek banks at €89bn, a stance that would amount to liquidity suffocation. “If they do that, the situation would be very serious. That would be pretty close to trying to bring down the government,” said Euclid Tsakalotos, the country’s chief debt negotiator. The Bank of Greece (BoG) said on Sunday evening that it will make a formal request to the ECB for fresh support. The EU’s leadership was in utter confusion as it became clear during the day that support was swinging back to the “No” camp, despite blanket coverage from the private TV stations warning that a “No” meant Armageddon. “The Greek people have proven that they cannot be blackmailed, terrorized, and threatened,” said Panos Kammenos, the defence minister and head of the coalition’s ANEL party.

French president Francois Hollande said he would bend over backwards to keep Greece in the euro despite voting no. He is to meet German Chancellor Angela Merkel in Paris on Monday to draw up a joint response to what has turned into the biggest EU fiasco since the rejection of the European constitution by France and Holland in 2005. Martin Schulz, head of the European Parliament, was still insisting on Sunday that a “No” vote must mean expulsion from the euro, but his view is becoming untenable. Jean-Claude Juncker, the Commission’s chief, is equally trapped by his own rhetoric after warning last week that a No vote would be a rejection of Europe itself, leading to calamitous consequences. Top Syriza officials say they are considering drastic steps to boost liquidity and shore up the banking system, should the ECB refuse to give the country enough breathing room for a fresh talks.

“If necessary, we will issue parallel liquidity and California-style IOU’s, in an electronic form. We should have done it a week ago,” said Yanis Varoufakis, the finance minister. California issued temporary coupons to pay bills to contractors when liquidity seized up after the Lehman crisis in 2008. Mr Varoufakis insists that this is not be a prelude to Grexit but a legal action within the inviolable sanctity of monetary union. Mr Varoufakis and ministers will hold an emergency meeting tonight with the private banks and the governor of the Greek central bank, Yannis Stournaras, to decide what to do before the cash reserves of the four big lenders dry up tomorrow. Louka Katseli, head of the Hellenic bank Association, said ATM machines will run out of money within hours of the vote. One official say that Eurobank was “flat out of money” late on Sunday, even though Greek depositors have been limited to €60 a day since capital controls were imposed a week ago.

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“Varoufakis’s father Giorgos told the Greek daily Ethnos that his son’s critics “want to run him down because he is competent.”

Yanis Varoufakis: Greece’s ‘Erratic Marxist’ (AFP)

Yanis Varoufakis, Greece’s finance minister who resigned on Monday despite the government having secured a resounding victory in a weekend referendum, rose to fame and infamy this year for his urban-cool look, his abrasive style, and acerbic attacks on austerity. In a shock announcement just hours after Sunday’s referendum results on bailout terms were announced, Varoufakis said he was quitting to help Prime Minister Alexis Tsipras in ensuing negotiations with creditors. “Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today,” Varoufakis said on his blog.

During the past five months of negotiations between Athens and its international creditors, the self-described “erratic Marxist” seemed more at ease chatting with unemployed anarchists than with fellow European finance ministers, who often groaned about his blunt negotiating tactics. European Economic Affairs chief Pierre Moscovici commented that Varoufakis “is a smart person, not always easy, but smart.” His straight-talking style produced notable moments including his characterisation of the austerity imposed on Greece as “fiscal waterboarding”. After negotiations broke down between Greece and its creditors, Varoufakis slammed Europese governance. “This is not the way to run a monetary union. This is a travesty. It’s a comedy of errors for five years now, Europe has been extending and pretending,” Varoufakis said in a BBC interview.

After becoming finance minister in January, there were some growing pains as he adapted to the burning glare of the global media spotlight. He allowed himself to be pictured in Paris Match magazine at a piano and dining in style with his wife on the roof terrace of his “love nest at the foot of the Acropolis”, while telling the magazine how he abhorred the “star system”. Though the maverick minister has always taken a stance protecting ordinary Greeks, his background was anything but common. He is the son of Giorgos Varoufakis, who at 90 still heads one of Greeces leading steel producers, Halyvourgiki. He also attended the Moraitis School, which has alumni including prominent Greek leaders and artists.

His early career was spent at the English universities of Essex, East Anglia and at Cambridge, and he has often been linked with research into game theory. In 1998 Varoufakis moved to Australia, and he is now a dual Greek and Australian citizen. He moved back to Greece in 2000 to teach at the University of Athens, and in January 2013 accepted a post at the University of Texas in Austin. Varoufakis has had a rebellious streak since a young age. He told the BBC he has deliberately misspelled his name Yanis, writing it with one “n”, since a confrontation with a teacher in elementary school. “I had an aesthetic problem with the double ‘n’, he said. “So I decided to write my name with one. My teacher gave me a bad grade, which made me very angry and I’ve kept writing my name with one ‘n’ ever since.”

As finance minister Varoufakis, his head shaved clean, shook up the staid world of EU summits by arriving to meetings in rock-star-style leather jackets and untucked shirts. He was quickly dubbed “Greece’s Bruce Willis”. His swagger and penchant for lecturing annoyed some EU counterparts at meetings on Greece’s debt and he was eventually pulled from frontline negotiations. Varoufakis’s father Giorgos told the Greek daily Ethnos that his son’s critics “want to run him down because he is competent.” “Yanis is a very good boy, and is always telling the prime minister what to do, which is why he adores him,” he said. A prolific blogger, Yanis Varoufakis has written several books, including “The Global Minotaur: America, Europe and the Future of the Global Economy”.

Varoufakis has said he believes his shattered country can only recover once it has rejigged the terms of an international bailout, and said early on that Greece’s massive debt could not be paid back in full. The minister said he would step down if disavowed by Greek voters who vote Sunday on whether they accept or reject bailout conditions that are no longer on the table. In his latest blog, Varoufakis gave reasons why Greeks should vote ‘no’ in the referendum, one being that the country “will” stay in the euro regardless of the outcome. He told Bloomberg TV that he would rather “cut my arm off” than stay on as minister in the case of a ‘yes’ vote.

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NATO worries.

What Are the Geostrategic Implications of a Grexit? (Foreign Policy)

At the moment, it is unclear how Greece will ultimately fare in the current duel of wills with the Troika over its technical default, the upcoming referendum, and the possibility of a continuation of the long-running bailout drama. The two sides are locked in acrimonious finger-pointing, Greek banks are shuttered for the week, and the logical but ever elusive diplomatic and economic solution — a reasonable negotiation between the parties — seems further away than ever. As a proud Greek-American, I am saddened by the situation. Meanwhile, the July 5 referendum is judged too close to call at the moment, and most Greeks will likely be confused about the implications and uncertain how to vote.

Macroeconomic theory appears to have been the first casualty of the process, and the doomsday economic scenarios — a crashed Greek economy, a battered if not broken euro, and a deeply shaken European project — are looming large on the horizon. But in the midst of all of the appropriate Sturm und Drang of the Greek financial and economic crisis, it is worth considering the geostrategic implications of the “Grexit” — which have been largely ignored. Let’s face it: A Greece that goes crashing out of the eurozone will be an angry, disaffected, and battered nation — but one that will continue to hold membership in the European Union and NATO, both consensus-driven organizations. (“Consensus-driven” means that without unanimous consent among all members, the organization cannot take decisions or execute effective operational actions.)

Many times in NATO councils as the supreme allied commander I watched the agonizing process of building consensus, one compromise at a time. In both the EU and NATO, an uncooperative Greece in the future could time and time again put the organizations “in irons,” which is to say becalmed and not moving effectively forward. This could manifest itself very quickly in, for example, decisions about sanctions against Russia (from which Greece is avidly courting support and funding, logically enough). It could easily affect day-to-day governance in the European Union over issues from negotiating the Transatlantic Trade and Investment Partnership to agricultural subsidies to what should be done about refugee flows across the Mediterranean. Greece could become a troublesome and obstructionist actor in complex negotiations involving the EU, such as the Iranian nuclear treaty efforts.

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More Troika hubris.

Greece Votes No — Now What? (Peter Spiegel)

Even before the polls closed in Greece, Emmanuel Macron, the French economic minister, insisted that even with a No vote in Sunday night’s referendum, talks must resume between the leftwing government in Athens and its eurozone creditors. But despite predictions by Greek ministers that a new bailout deal could be just days away, other than Mr Macron and his French colleagues, there are few elsewhere in the eurozone who predicted a resounding No would lead to much more than continued stalemate. If that is the result of overwhelming rejection of creditors’ terms, it would mean a slow march to Greece exiting the eurozone. “Greece has just signed its own suicide note,” predicted Mujtaba Rahman, head of European analysis at the Eurasia Group risk consultancy.

“Only the French will want to salvage something from this vote, but they’re unlikely to win the debate in the eurogroup.” Angela Merkel, the German chancellor, is due to fly to Paris on Monday for consultations with President François Hollande on what steps to take next. The most critical immediate response to the vote is likely to be in Frankfurt, where the European Central Bank’s policy making governing council is due to meet on Monday afternoon. With Greek voters unequivocally rejecting the bailout proposal, ECB policy makers may find it difficult to resist the argument made by council hardliners, particularly Jens Weidmann, the Bundesbank president, that the Greek government-backed securities the country’s banks use as collateral for emergency loans are heading to default.

The key date in the crisis is now July 20, when Greece owes €3.5bn on a bond held by the ECB. If Athens defaults on that bond, it would be almost impossible for the ECB to continue accepting collateral from Greek banks, and the €89bn in emergency liquidity assistance (ELA) would be withdrawn, devastating Greece’s banking sector. Without central bankers providing euros, Athens would be forced to print its own currency to reopen banks, and the dice would be cast on the path to “Grexit” from the eurozone.

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“Contempt for democracy and economic illiteracy are not merely tactical errors.”

Why The Yes Campaign Failed In Greece (Wolfgang Münchau)

It is not that hard to explain why Alexis Tsipras won the referendum by a landslide. It is a lot harder to see what’s going to happen now. His opponents, both inside Greece and in the European Union went wrong because of serial misjudgments, ranging from the petty to the monumental. For me, three stand out. The biggest was the clearly concerted intervention by several senior EU politicians, who said that a No vote would lead to Grexit, a Greek exit from the eurozone. One of them was Sigmar Gabriel, the German economics minister and SPD chief. He even doubled up on this threat right after the results came out. The Greeks correctly interpreted these threats as an attempt to interfere in the democratic process of their country.

The news last week that eurozone officials tried to suppress the latest debt sustainability analysis of the International Monetary Fund did not help either. The IMF report essentially revealed that the Greek government had been right after all to demand debt relief. The rest of the EU gave the impression that it wanted to rig the referendum, and it did not even bother to conceal this. If you have been unemployed for five years, with no prospect of a job, it makes no difference whether the money you do not get is denominated in euros, or in drachma.

The second error of the Yes campaign was a failure to explain how the bailout programme could work economically. This is not a debate between Keynesian and neoclassical economics, the kind that keeps us endlessly busy on these pages. The Greek referendum united economists with very diverse views of how the world works, including Paul Krugman, Jeffrey Sachs and Hans-Werner Sinn. There is no reputable economic theory according to which an economy that has experienced an eight-year-long depression requires a new round of austerity to bring about economic adjustment.

The third monumental error was arrogance. The Yes supporters thought they had it nailed. Like the British Labour party before the last general election, they had been relying on polls, which turned out to be wildly inaccurate. What I found most galling was the argument that Grexit would bring about an economic catastrophe, as though the catastrophe had not already happened. If you have been unemployed for five years, with no prospect of a job, it makes no difference whether the money you do not get is denominated in euros, or in drachma. Contempt for democracy and economic illiteracy are not merely tactical errors. Those two “qualities” are now the remaining ideological planks of what is left of the European project. Greece is a reminder that the European monetary union, as it is constructed, is fundamentally unsustainable. This means it will need to be fixed, or it will end at some point.

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“..if the parties involved in the Greek tragedy paid more serious attention to what human rights law has to say, everything would be easier..“

UN Debt Expert Says Greece Can’t Take More Austerity (Reuters)

Greece cannot take any more austerity as it will cause more social unrest and lessen the chance of an economic recovery, a United Nations debt expert said on Monday. Greeks overwhelmingly rejected conditions of a rescue package from creditors on Sunday, throwing the future of the country’s euro zone membership into further doubt and deepening a standoff with lenders. Juan Pablo Bohoslavsky, the U.N. Independent Expert on Foreign Debt, told reporters in Beijing that Greece’s creditors in the European Union should have paid more attention to what international law says on the matter of debt. “I have the impression that the EU had forgotten that international human rights law plays and should play a key role in finance. The international community attaches great importance to the interlinks between human rights and finance,” said Bohoslavsky, who operates under the auspices of the U.N.’s High Commissioner for Human Rights.

“The message here is that if the parties involved in the Greek tragedy paid more serious attention to what human rights law has to say, everything would be easier, for the Greek population particularly,” he added. Bohoslavsky said the austerity demanded of Greece had not worked, adding he will visit Greece later in the year. “It’s very clear the message from the Greek population – no more austerity measures. Actually if you look at the figures, austerity measures didn’t really help the country to recover.” In a separate statement, Bohoslavsky said he was concerned at reports of food and medicine shortages, and that he was asking to meet EU officials to remind them of their human rights obligations to Greece.

Bohoslavsky, visiting at the invitation of China’s government, said he carried a message of the need for human rights to be considered in global lending, something important for China which is setting up two new multilateral lenders – the Asian Infrastructure Investment Bank and the New Development Bank. “A narrow idea of efficiency in which human rights plays a limited role should not find its way into these two banks,” he said. China has promised that the infrastructure bank will follow global best practices in transparency and governance. Rights groups often criticize China for its “no-strings” loans to countries, especially in Africa, for encouraging corruption and abuses with a lack of oversight.

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“.. European institutions have just been saved from their own worst instincts..”

Europe Wins (Paul Krugman)

Tsipras and Syriza have won big in the referendum, strengthening their hand for whatever comes next. But they’re not the only winners: I would argue that Europe, and the European idea, just won big — at least in the sense of dodging a bullet. I know that’s not how most people see it. But think of it this way: we have just witnessed Greece stand up to a truly vile campaign of bullying and intimidation, an attempt to scare the Greek public, not just into accepting creditor demands, but into getting rid of their government. It was a shameful moment in modern European history, and would have set a truly ugly precedent if it had succeeded.

But it didn’t. You don’t have to love Syriza, or believe that they know what they’re doing — it’s not clear that they do, although the troika has been even worse — to believe that European institutions have just been saved from their own worst instincts. If Greece had been forced into line by financial fear mongering, Europe would have sinned in a way that would sully its reputation for generations. Instead, it’s something we can, perhaps, eventually regard as an aberration. And if Greece ends up exiting the euro? There’s actually a pretty good case for Grexit now — and in any case, democracy matters more than any currency arrangement.

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ECB needs to start acting as a central bank.

Ending Greece’s Bleeding (Paul Krugman)

Europe dodged a bullet on Sunday. Confounding many predictions, Greek voters strongly supported their government’s rejection of creditor demands. And even the most ardent supporters of European union should be breathing a sigh of relief. Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice. But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.

What’s more, they weren’t. The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients — and when their treatment made the patients sicker, demanded even more bleeding. A “yes” vote in Greece would have condemned the country to years more of suffering under policies that haven’t worked and in fact, given the arithmetic, can’t work: austerity probably shrinks the economy faster than it reduces debt, so that all the suffering serves no purpose. The landslide victory of the “no” side offers at least a chance for an escape from this trap. But how can such an escape be managed? Is there any way for Greece to remain in the euro? And is this desirable in any case?

The most immediate question involves Greek banks. In advance of the referendum, the European Central Bank cut off their access to additional funds, helping to precipitate panic and force the government to impose a bank holiday and capital controls. The central bank now faces an awkward choice: if it resumes normal financing it will as much as admit that the previous freeze was political, but if it doesn’t it will effectively force Greece into introducing a new currency. Specifically, if the money doesn’t start flowing from Frankfurt (the headquarters of the central bank), Greece will have no choice but to start paying wages and pensions with i.o.u.s, which will de facto be a parallel currency — and which might soon turn into the new drachma.

Suppose, on the other hand, that the central bank does resume normal lending, and the banking crisis eases. That still leaves the question of how to restore economic growth. In the failed negotiations that led up to Sunday’s referendum, the central sticking point was Greece’s demand for permanent debt relief, to remove the cloud hanging over its economy. The troika — the institutions representing creditor interests — refused, even though we now know that one member of the troika, the International Monetary Fund, had concluded independently that Greece’s debt cannot be paid. But will they reconsider now that the attempt to drive the governing leftist coalition from office has failed?

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Good analysis.

Thomas Piketty: “Germany Has Never Repaid.” (Medium)

In a forceful interview with German newspaper Die Zeit, the star economist Thomas Piketty calls for a major conference on debt. Germany, in particular, should not withhold help from Greece. This interview has been translated from the original German. Since his successful book, “Capital in the Twenty-First Century,” the Frenchman Thomas Piketty has been considered one of the most influential economists in the world. His argument for the redistribution of income and wealth launched a worldwide discussion. In a interview with Georg Blume of DIE ZEIT, he gives his clear opinions on the European debt debate.

DIE ZEIT: Should we Germans be happy that even the French government is aligned with the German dogma of austerity?
Thomas Piketty: Absolutely not. This is neither a reason for France, nor Germany, and especially not for Europe, to be happy. I am much more afraid that the conservatives, especially in Germany, are about to destroy Europe and the European idea, all because of their shocking ignorance of history.

ZEIT: But we Germans have already reckoned with our own history.
Piketty: But not when it comes to repaying debts! Germany’s past, in this respect, should be of great significance to today’s Germans. Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe. “Germany is the country that has never repaid its debts. It has no standing to lecture other nations.”

ZEIT: But shouldn’t they repay their debts?
Piketty: My book recounts the history of income and wealth, including that of nations. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.

ZEIT: But surely we can’t draw the conclusion that we can do no better today?
Piketty: When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.

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Unspeakable sadness fills my heart.

We May Soon Be Able To See Polar Bears Only In Picture Books (MD)

According to a recent report, polar bears may soon go extinct if global warming continues at the current flabbergasting rate. And about one third of the furry animals face risk of extinction in no more than ten years, the report also showed. Study authors said that reducing the rate of climate change may save polar bears on the long run. Other methods of trying to shield them from an ever warming ocean and dwindling food stocks have only short-term effects, researchers explained. As ice sheets continue to melt, polar bears are forced to retreat inland to find something to eat. While that may be a temporary solution during winter time, in summer months the move is no longer viable.

Loss of sea ice, which the bears use in their hunt for prey, and fewer food sources both inland and out in the sea are two major factors that may force polar bears to soon go extinct. But there are also some other threats including oil rigs, new diseases and trans-Arctic vessels. Yet these factors only pose a “negligible” threat on polar bear populations, study authors wrote in their report. The hidden enemy, authors claim, are greenhouse emissions. In an attempt to assess their effects on the bears’ habitat loss, scientists employed two models. In the first model, emissions were at the current levels we all experience. The second model tried to simulate Arctic conditions if those emissions were lower and climate change more stable.

The first model showed that at the current pace of sea ice loss and food stock reduction some polar bear populations would soon reach a dramatic decline by 2025. In the second model, the scenario emerged roughly 25 years later. Yet both models shared the same conclusion – some polar bear populations may soon go extinct. Even though we may reduce harmful gas emissions by that time, populations would still be affected, scientists said,

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