Greece

[Parodite]

I know that cheerleaders love to keep score.. even the smallest of irrelevancies is being presented as a victory or loss over the other. Also in this case I don't see anything bad or good in Greece becoming an energy hub transporting Russian gas. What matters is to finally acknowledge that Greece is bankrupt and that everybody is best served to acknowledge that. They will not and never pay back most of their debt.

The need for Europe to shift east in energy is difficult to dispute. Since Greece is the current focal point, why not use that as a sounding board?

No doubt Syriza and the EU have extensive backchannel connections, and the EU benefits by making Greece the 'bad boy' stalking horse. The bottom line is the EU and Russia need each other, but the EU also needs her big brother the US to defend her honor. I think Syriza is playing its role well, and that it has coordinated well with the EU in this Grecian comedy.

No need for the EU to shift more East or West. Russian gas is flowing West and EU money is flowing East. Sanctions, threats.. the calculus and sound bites of the various cheerleaders of either side.. these are irrelevancies. Only big wars may reconfigure things, disrupt existing economic inter-dependencies. Nothing wrong or bad Greece becoming an energy hub for Russian gas. There are no free lunches of course, so maybe Russia wants some favors in return from Greece. How that will work out remains to be seen.

[Endovelico]

Germany Prepares For "Plan B", Says Greece Would "Need Not Only A Third Bailout, But Fourth, Fifth Or Even More"
Submitted by Tyler Durden on 04/25/2015 16:24 -0400
http://www.zerohedge.com/news/2015-04-2 ... h-fifth-or

It has been a very disturbing 24 hours for Greece.

It all started during yesterday's surprisingly short, just one hour long Eurozone finmin meeting in Riga, where Yanis Varoufakis not only got the most "hostile" reception yet being called "a time-waster, gambler, and amateur", but for the first time one minister openly said that maybe it was time governments prepared for the plan B of a Greek default. This happened after Jeroen Dijsselbloem slammed the door on Varoufakis' proposal for early cash after partial reforms.

"A comprehensive and detailed list of reforms is needed," Dijsselbloem told a news conference following a meeting in Riga. "A comprehensive deal is necessary before any disbursement can take place ... We are all aware that time is running out."

And so, what was once anathema, namely the official hints that a Grexit is being contemplated at the highest ranks, has now become almost commonplace, courtesy of the backstop provided by the ECB's QE, which has lulled everyone into a sense of calm because somehow the hope has been kindled that the ECB (which is rapidly running out of government bonds to buy) can offset the realization that what was once an "unbreakable union" is suddenly not only breakable, but no longer a union. As such the trillions in deposit outflows that will sweep the periphery are somehow to be ignored because, well, "Draghi."

(...)

Germany and partners may have a nasty surprise coming their way:

Greece defaults on all debts and will not leave the euro!...

All it needs is to balance its foreign trade and keep a budget primary surplus, no matter how small. If it does, then it will be able to pay all its imports - cash, if necessary - and all obligations towards Greeks will be met. As long as its receipts - in euros - are as large as its payments, Greece can stay away from financial markets as long as it is necessary. It will be fun to watch...

And, for a while, it may be necessary for all withdrawals above 50 euro from bank accounts to be forbidden - with all payments to be made by debit and credit card - and transfers to foreign accounts to be subject to approval by the Bank of Greece.

[Nonc Hilaire]

[HAL 10000]

Here is a very accurate article by George Friedman where he explains what Germany is really afraid of: it is not the possibility that Greece will abandon the euro currency, but rather the more serious possibility that Greece will exit the free trade zone, imposing protectionist barriers to German goods. This is because 50 % of the German GDP is exported, and nearly half the German exports are consumed in the European free trade zone. Once Greece gets out of the free trade zone, several other countries might follow, and this would be a disaster for Germany.

The article is so well written that I am quoting it completely:

<a href="https://www.stratfor.com/weekly/grexit- ... trade">The 'Grexit' Issue and the Problem of Free Trade</a> is republished with permission of Stratfor.

https://www.stratfor.com/weekly/grexit- ... free-trade

The 'Grexit' Issue and the Problem of Free Trade
Geopolitical Weekly APRIL 21, 2015 | 08:01 GMT Print Text Size

By George Friedman

The Greek crisis is moving toward a climax. The issue is actually quite simple. The Greek government owes a great deal of money to European institutions and the International Monetary Fund. It has accumulated this debt over time, but it has become increasingly difficult for Greece to meet its payments. If Greece doesn't meet these payments, the IMF and European institutions have said they will not extend any more loans to Greece. Greece must make a calculation. If it pays the loans on time and receives additional funding, will it be better off than not paying the loans and being cut off from more?

Obviously, the question is more complex. It is not clear that if the Greeks refuse to pay, they will be cut off from further loans. First, the other side might be bluffing, as it has in the past. Second, if they do pay the next round, and they do get the next tranche of funding, is this simply kicking the can down the road? Does it solve Greece's underlying problem, which is that its debt structure is unsustainable? In a world that contains Argentina and American Airlines, we have learned that bankruptcy and lack of access to credit markets do not necessarily go hand in hand.

To understand what might happen, we need to look at Hungary. Hungary did not join the euro, and its currency, the forint, had declined in value. Mortgages taken out by Hungarians denominated in euros, Swiss francs and yen spiraled in terms of forints, and large numbers of Hungarians faced foreclosure from European banks. In a complex move, the Hungarian government declared that these debts would be repaid in forints. The banks by and large accepted Prime Minister Viktor Orban's terms, and the European Union grumbled but went along. Hungary was not the only country to experience this problem, but its response was the most assertive.

A strategy inspired by Budapest would have the Greeks print drachmas and announce (not offer) that the debt would be repaid in that currency. The euro could still circulate in Greece and be legal tender, but the government would pay its debts in drachmas.

The Deeper Questions

In considering this and other scenarios, the pervading question is whether Greece leaves or stays in the eurozone. But before that, there are still two fundamental questions. First, in or out of the euro, how does Greece pay its debts currently without engendering social chaos? The second and far more important question is how does Greece revive its economy? Lurching from debt payment to debt payment, from German and IMF threats to German and IMF threats is amusing from a distance. It does not, however, address the real issue: Greece, and other countries, cannot exist as normal, coherent states under these circumstances, and in European history, long-term economic dysfunction tends to lead to political extremism and instability. The euro question may be interesting, but the deeper economic question is of profound importance to both the debtor and creditors.

In our time, economic and financial questions tend to become moralistic. On one side, the creditors condemn Greek irresponsibility. The European Union has dropped most pretenses about this being a confrontation between the European Union and Greece. It is increasingly obvious that although the European Union has much at stake, in the long term this is about Germany and Greece, and in the short term it has become about the IMF and Greece. Germany feels that the Greeks are trying to take advantage of its good nature, while the IMF has institutionalized a model in which sacrifice is not only an economic tonic to debtors but also a moral requirement. This is not frivolous on the part of Germany and the IMF. If they give Greece some leeway, other debtors will want the same and more. Giving Greece a break could lead to Italy demanding one, and Italy's break could swamp the system.

On the Greek side, the Syriza party's leaders are making the decisions. Those leaders have only limited room to maneuver. They came to power because the mainstream eurocratic parties had lost their legitimacy. Since 2008, Greek governments appeared to be more concerned with remaining in the eurozone than with the spiraling unemployment rate or a deep salary cut for government workers. That stance can work for a while, if it works. From the Greek public's point of view, it didn't; many Greeks say they did not borrow the money and they had no control over how it was spent. They are paying the price for the decisions of others, although in fairness, the Greeks did elect these parties. The Greeks do not want to leave the euro, interestingly. They want to maintain the status quo without paying the price. But in the end, they can't pay the price, so the discussion is moot.

The Greek government is thus calculating two things. First, would covering the next payment be better or worse than defaulting? Second, will behaving like the eurocratic parties they forced to the wall leave Syriza internally divided and ripe for defeat by a new party? The German calculation has to be whether a default by the Greeks, one that doesn't cause the sky to fall, would trigger recalculations in other debtor countries, causing a domino effect.

The Future of Free Trade

The more fundamental issue concerns neither the euro nor the consequences of a Greek default. The core issue is the future of the European free trade zone. The main assumption behind European integration was that a free trade zone would benefit all economies. If that assumption is not true, or at least not always true, then the entire foundation of the European Union is cast into doubt, with the drachma-versus-euro issue as a short footnote.

The idea that free trade is beneficial to all sides derives from a theory of the classical economist David Ricardo, whose essay on comparative advantage was published in 1817. Comparative advantage asserts that free trade allows each nation to pursue the production and export of those products in which the nation has some advantage, expressed in profits, and that even if a nation has a wide range of advantages, focusing on the greatest advantages will benefit the country the most. Because countries benefit from their greatest advantages, they focus on those, leaving lesser advantages to other countries for which these are the greatest comparative advantage.

I understate it when I say this is a superficial explanation of the theory of comparative advantage. I do not overstate it when I say that this theory drove the rise of free trade in general, and specifically drove it in the European Union. It is the ideology and the broad outlines of the concept that interest me here, not the important details, as I am trying to get a high-level sense of Europe's state.

To begin with, the law of comparative advantages does not mean that each country does equally well. It simply means that given the limits of geography and education, each nation will do as well as it can. And it is at this point that Ricardo's theory both drives much of contemporary trade policy and poses the core problem for the European Union. The theory is not, in my opinion, wrong. It is, however, incomplete in looking at the nation (or corporation) as an integrated being and not entities made up of distinct and diverse interests. There are in my mind three problems that emerge from the underlying truth of this theory.

The first is time. Some advantages manifest themselves quickly. Some take a very long time. Depending on the value of the advantage each nation has, some nations will become extremely wealthy from free trade, and do so quickly, while others will do less well, and take a long time. From an economic point of view this may still represent the optimal strategies that can be followed, but from a more comprehensive standpoint this distinction creates the other two problems with the law of comparative advantage.

The first of these is the problem of geopolitical consequences. Economic power is not the only type of power there is. Disparate rates of economic growth make the faster growing economy more powerful in its relation to the slower growing economy. That power is both political and military and can be used, along with economic advantage, to force nations into not only subordinate positions but also positions where their lesser comparative advantage diminishes even further. This does not have to be intentional. Maximizing comparative advantage makes some powers stronger than others, and over time that strength can leave the lesser power crippled in ways that have little to do with economics.

The last problem is the internal distribution of wealth. Nations are not independent beings. They are composed of autonomous human beings pursuing their interests. Depending on internal economic and political norms, there is no guarantee that there will not be extreme distinctions in how the wealth is distributed, with a few very rich people and many very poor people. The law of comparative advantage is not concerned with this phenomenon and therefore is not connected to the consequences of inequality.

Breaking the Law of Comparative Advantage

In looking at the European Union, the assumption is that each nation pursuing its comparative advantage will maximize its possibilities. By this I mean that each country will export that thing which it does best, importing things that others produce more efficiently. The comparative aspect is not only between nations but also between the products within the nation. Therefore, each nation is focusing on the things that it does best. But "best" does not tell us how well they do it. It merely tells us that it's the best they can do, and from that they will prosper.

The problem is that the time frame might be so long that it will take generations to see a meaningful result of this measure. Thus, Germany sees the results faster than Greece. Since economic power can translate in many ways, the power of Germany limits the practical possibilities of Greece. Moreover, whatever advantage there is in free trade for the Greeks, it flows unequally.

This is when comparative advantage runs as it should. But it has not run that way in Europe, because Germany has been forced by its economic reality to pursue exports of not only those products where it has a comparative advantage internally, but many products for which it lacks an internal advantage but has a comparative advantage externally — these are not necessarily the things it does best, but it does them better than others. Since Germany is efficient in multiple senses, it has advantages in many products and takes that advantage. Germany has a staggering export rate of more than 50 percent of gross domestic product. Comparative advantage assumes it will want to export those things that it produces most efficiently. It is instead exporting any product that it can export competitively regardless of the relative internal advantage.

Put another way, Germany is not following the law of comparative advantage. Social scientists have many laws of behavior that are said to describe what people do and then turn into moral arguments of what they should do. I am not doing that. Germany empirically is not driven by Ricardo's theories but by its own needs. In other words, the law of comparative advantage doesn't work in Europe. As a result, Germany has grown faster than other European countries, has accumulated more power than other countries and has managed to distribute wealth in a way that creates political stability.

Comparative Advantage and the Greek Issue

The result is that Greece is answerable to Germany on its debts. In the same way that no moral judgment can be drawn about Germany, none can be drawn about Greece. It is what it is. However, whatever problem it has in maximizing its own exports, doing so in an environment where Germany is pursuing all export possibilities that have any advantage decreases Greece's opportunity to export, thereby creating a long-term dysfunction in Greece. The German superiority perpetuates itself.

It is important to note that Germany did not operate without protections after World War II. It protected its recovering industries from American competition. The United States, an economic colossus that exports a relatively small amount of its production, also was heavily protectionist in the late 19th century. Similarly, the United Kingdom maintained tariffs to protect the British Empire's markets. Greece has no such protection.

The theory of comparative advantage is generally true, but it doesn't take into account time disparities, the geopolitical consequences of time lags or internal social dislocation. That is why I said it was both true and incomplete. And that is also why the European Union, however it might have been conceived in its simplest sense, suffers from massive disparities in the speed that nations accumulate wealth, has nations that do not behave as the theory predicts they should, and creates geopolitical imbalances externally and social dislocation internally. It's not that free trade doesn't work. It's that it has unintended consequences.

This is why I would argue that the Sturm und Drang over Greece's debt and the future of the euro misses the point. The fundamental point is that the consequences of free trade are not always positive. It is not clear to me how Greece ever recovers without the protections that Germany or the United States had during their early growth period. And since nations do what they have to do, the issue is not the euro, but free trade.

And this is Germany's dread. It is a nation that exports as much as it consumes, and half of that goes to the European free trade zone. More than anyone, it needs the free trade zone for its own well-being. This is why, however the Germans growl, it is not the Grexit they fear but rising tariffs. The European Union already allows substantial agricultural tariffs and subsidies. If they allow broader tariffs for Greece, then when does it stop? And if they don't, and Greece crumbles socially, where does that stop? Free trade can be marvelous or dreadful, depending on circumstances, and sometimes both at the same time.

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[YMix]

However, whatever problem it has in maximizing its own exports, doing so in an environment where Germany is pursuing all export possibilities that have any advantage decreases Greece's opportunity to export, thereby creating a long-term dysfunction in Greece. The German superiority perpetuates itself.

He should have added that German companies operate many plants in Eastern Europe, moving the work abroad, but keeping the profits at home. This also strengthens Germany's hand, while making things worse not only for Greece, but for the entire Eastern Europe. Moreover, Germany's economic success attracts workers from across the region, especially the skilled ones.

[Parodite]

However, whatever problem it has in maximizing its own exports, doing so in an environment where Germany is pursuing all export possibilities that have any advantage decreases Greece's opportunity to export, thereby creating a long-term dysfunction in Greece. The German superiority perpetuates itself.

He should have added that German companies operate many plants in Eastern Europe, moving the work abroad, but keeping the profits at home. This also strengthens Germany's hand, while making things worse not only for Greece, but for the entire Eastern Europe. Moreover, Germany's economic success attracts workers from across the region, especially the skilled ones.

But this drainage can be slowed down and reversed.

[Parodite]

lol.. indeed.

[Endovelico]

But this drainage can be slowed down and reversed.

Please let us know how, under present conditions, such reversal might be achieved. Let's not forget that excessive economic power by Germany and other northern European countries are leading southern Europe to an almost colonial situation. Things may be reversed, yes, but not by market forces alone.

[YMix]

But this drainage can be slowed down and reversed.

In theory, yes. In practice... it's a bit hard to do. I keep trying to promote a population exchange plan under which Western Europe would relocate their elderly (and their pensions) here to compensate for the drain, but no one in Brussels will take my calls.

[Parodite]

But this drainage can be slowed down and reversed.

In theory, yes. In practice... it's a bit hard to do. I keep trying to promote a population exchange plan under which Western Europe would relocate their elderly (and their pensions) here to compensate for the drain, but no one in Brussels will take my calls.

I can only wish you well with your endeavors.

[Parodite]

But this drainage can be slowed down and reversed.

Please let us know how, under present conditions, such reversal might be achieved. Let's not forget that excessive economic power by Germany and other northern European countries are leading southern Europe to an almost colonial situation. Things may be reversed, yes, but not by market forces alone.

I believe, as I said many times before, that Southern EU countries are better off outside the Eurozone and having their own currency. That is one requirement but there are a few more tips on top of that:

1. the voting southerners/easterners should force their gvts to stay out of debt. Too much debt kills any chance the reverse the drainage trend from the get go.
2. the voting southerners/easterners should force their gvts not to allow foreign investors/oligarchs to buy/own productive agricultural lands and natural resources like oil, gas, minerals etc. These are national property of the people and all revenue should flow back into the community (minus expertise hired from abroad of course)
3. keep your gvts small, lean, effective and avoid your markets and economy being polluted by the wrong gvt interferences.
4. create joint ventures with the best universities in the world and businesses that have in interest in those universities.
5. aim for an indexed sort of basic income via the tax system for all citizens and avoid bureaucratic complex forms of social security that only produces and overhead and overkill of bureaucratic gvt officials that only costs the people.
6. invite the Icelanders to consult them on how they overcame their financial crisis and national bankruptcy.
7. Create some incentives to reverse the "brain drain" of higher educated people who otherwise seek a career and life abroad.
8. avoid doing business with speculating gambler-banks.. who are configured to make money not only when you make money.. but even when you are losing.

Nothing is rocket science here me thinks.

Now of course.. for as long as the voting people don't give a damn in these countries, are badly informed or just whine and complain about the evil-others instead of getting into action... their ship will just sink all the same, while the oligarch richies will always have the money and resources to save their own asses in time.

[Endovelico]

But this drainage can be slowed down and reversed.

Please let us know how, under present conditions, such reversal might be achieved. Let's not forget that excessive economic power by Germany and other northern European countries are leading southern Europe to an almost colonial situation. Things may be reversed, yes, but not by market forces alone.

I believe, as I said many times before, that Southern EU countries are better off outside the Eurozone and having their own currency. That is one requirement but there are a few more tips on top of that:

1. the voting southerners/easterners should force their gvts to stay out of debt. Too much debt kills any chance the reverse the drainage trend from the get go.
2. the voting southerners/easterners should force their gvts not to allow foreign investors/oligarchs to buy/own productive agricultural lands and natural resources like oil, gas, minerals etc. These are national property of the people and all revenue should flow back into the community (minus expertise hired from abroad of course)
3. keep your gvts small, lean, effective and avoid your markets and economy being polluted by the wrong gvt interferences.
4. create joint ventures with the best universities in the world and businesses that have in interest in those universities.
5. aim for an indexed sort of basic income via the tax system for all citizens and avoid bureaucratic complex forms of social security that only produces and overhead and overkill of bureaucratic gvt officials that only costs the people.
6. invite the Icelanders to consult them on how they overcame their financial crisis and national bankruptcy.
7. Create some incentives to reverse the "brain drain" of higher educated people who otherwise seek a career and life abroad.
8. avoid doing business with speculating gambler-banks.. who are configured to make money not only when you make money.. but even when you are losing.

Nothing is rocket science here me thinks.

Now of course.. for as long as the voting people don't give a damn in these countries, are badly informed or just whine and complain about the evil-others instead of getting into action... their ship will just sink all the same, while the oligarch richies will always have the money and resources to save their own asses in time.

Things may be simpler than that. In my opinion all available resources should be directed at investment meant to modernize firms, by enabling them to obtain state of the art technology and equipment, and to improve managers skills. Resist the temptation to significantly increase salaries until modernization has been achieved and productivity has been increased. If your country is smallish, like Portugal, the local market will never be sufficient to bring you the desired prosperity. But there are 6 billion consumers out there so direct your attention to selected segments of that market and only allow for a moderate rate of increase in consuming at home. Keep salaries at home lower than in the competitor countries, but don't try to compete with developing countries on the basis of salaries. If you are a southern European country, associate with other southern European countries until you have reached critical mass - around 150 to 200 million people, so that you are not overdependent on foreign markets. If we had a bit more enlightened rulers this would not be too hard to achieve.

[Parodite]

Things may be simpler than that. In my opinion all available resources should be directed at investment meant to modernize firms, by enabling them to obtain state of the art technology and equipment, and to improve managers skills. Resist the temptation to significantly increase salaries until modernization has been achieved and productivity has been increased. If your country is smallish, like Portugal, the local market will never be sufficient to bring you the desired prosperity. But there are 6 billion consumers out there so direct your attention to selected segments of that market and only allow for a moderate rate of increase in consuming at home. Keep salaries at home lower than in the competitor countries, but don't try to compete with developing countries on the basis of salaries. If you are a southern European country, associate with other southern European countries until you have reached critical mass - around 150 to 200 million people, so that you are not overdependent on foreign markets.

All good and well.. but indeed:

If we had a bit more enlightened rulers this would not be too hard to achieve.

Rulers are no more enlightened than any of us and to be on the safe side I wouldn't expect them to do better out of their own noble free will. Usually politicians in democratic countries who beg for our votes try to sell and convince us with their marvel plans and insights, telling us what is good for us but hardly ever able or willing to live up to their promises. Maybe we should just reverse this and just put/vote them into office, tell them to shut up and listen when we tell them what we want them to do that is good for us. After all...in a democracy we are boss and they are just hired for a few years to do the job we gave them.

[Endovelico]

Russia invites Greece to join BRICS Development Bank
Posted by keeptalkinggreece in Economy
http://www.keeptalkinggreece.com/2015/0 ... ment-bank/

Russian Deputy Finance Minister Sergei Storchak picked up the phone on Monday and dialed the number of Greek Prime Minister Alexis Tsipras. After the traditional small talk about health condition and weather, Storchak extended an invitation to Greece to become the sixth member of the New Development Bank of BRICS countries.

Tsipras reportedly thanked, said that he was pleasantly surprised by the invitation and that Greece was interested in the offer, while he promised to thoroughly examine it. “He will have a chance to discuss the invitation with the other BRICS leaders during the St. Petersburg International Economic Forum (SPIEF) in June 2015,” media report.

The bank is expected to be one of the largest financial institutions to fund various infrastructure projects in the BRICS countries and emerging economies.

On July 15, 2014, in Fortaleza, Brazil, the BRICS member countries signed an agreement to establish the $100 billion New Development Bank, formerly referred to as the BRICS bank, and a reserve currency pool set at $100 billion. Russia will contribute $18 billion to the pool, along with India and Brazil. China is expected to contribute the largest share of $41 billion, with South Africa chipping in the remaining $5 billion.

The bank is expected to be one of the largest financial institutions to fund various infrastructure projects in the BRICS countries and emerging economies.

The BRICS group of prominent emerging economies was established in 2010, when South Africa joined Brazil, Russia, India and China in what was previously known as the BRIC nations. The BRICS countries represent 3 billion people making about 40 percent of the world’s population and a combined economy of about $16 trillion.

Russia currently holds the chair of the BRICS group and Segei Storchak is a representative of the BRICS Bank.

The BRICS members are all developing or newly industrialized countries, but they are distinguished by their large, fast-growing economies and significant influence on regional and global affairs. The five founding member are also G-20 members.

PS A euro member in the BRICS? Is this possible? And how shall we call BRICS then? Something like BRICSG?

[Endovelico]

Meanwhile, what’s left for Greece in Brussels that is beneficial to the country? I don’t see it. It makes me think more of a Stockholm syndrome by the hour. Get out, get your own currency, negotiate a treaty with Italy and Spain, maybe France. But don’t stay in a ‘union’ with outsiders who think they can tell you, Greeks, how to run a democracy, or when to hold a referendum. That can only be a road to nowhere.

http://www.zerohedge.com/news/2015-05-1 ... -democracy

That's about it, I would say. Hopefully the Southern European countries will soon realize that the EU is dead and that it is time to create the Mediterranean Union...

[Simple Minded]

Meanwhile, what’s left for Greece in Brussels that is beneficial to the country? I don’t see it. It makes me think more of a Stockholm syndrome by the hour. Get out, get your own currency, negotiate a treaty with Italy and Spain, maybe France. But don’t stay in a ‘union’ with outsiders who think they can tell you, Greeks, how to run a democracy, or when to hold a referendum. That can only be a road to nowhere.

http://www.zerohedge.com/news/2015-05-1 ... -democracy

That's about it, I would say. Hopefully the Southern European countries will soon realize that the EU is dead and that it is time to create the Mediterranean Union...

remember, language first!

[Endovelico]

https://www.project-syndicate.org/comme ... os-2015-05

(...)

Export performance is thus the key to escaping the austerity trap. The problem for Greece is that what little export growth it has experienced lately is largely illusory, as it has come mostly from petroleum products. Since Greece does not produce oil, this can mean only that Greek refiners, which now have considerable excess capacity, are simply exporting imported crude oil in a slightly different form. With refinery margins typically less than 5%, the economy is gaining little added value from these exports. Other exports that have increased, such as metals, raise a similar problem.

Moreover, Greece’s largest services export, maritime shipping, has few real links with the rest of the economy, given that companies in the sector pay no taxes and employ few Greeks (the crews hail from low-wage countries). Undermining the sector’s economic contribution further is the fact that global commodity prices, on which shipping rates depend, have lately been declining. Meanwhile, manufactured goods, which do add domestic value and employment, form only a small share of Greece’s overall exports.

In fact, Greece’s total foreign trade, if properly measured, amounts to only 12% of its GDP, much less than what one would expect from such a small economy. More jarring is the fact that Greece’s total trade deficit (including both goods and services), was even higher in 2008, amounting to 13% of GDP, implying that, in order to avoid a subsequent decline in imports and thus in domestic demand, exports would have had to more than double.

In Portugal, by contrast, the trade deficit amounted to only about one-third of exports in 2008, meaning that exports had to increase by one-third to close the external deficit, without reducing imports. Since then, Portugal has increased exports cumulatively by more than one-quarter, so that, despite a slight increase in imports since 2007, it runs a trade surplus.

To be sure, Greece’s trade deficit has declined, but only because imports collapsed. Meanwhile, exports stagnated, even as wages declined by more than 20%. That, not austerity, is Greece’s real problem. If Greece had experienced the same growth in exports as Portugal (a country of similar size and per capita income), it would not have experienced such a deep recession, and tax revenues would have been higher, making it much easier for the government to achieve a primary budget surplus.

This suggests that a combination of fiscal consolidation, lower wages, and export-oriented reforms could have enabled Greece to move toward a sustainable recovery. This approach has been tried before, and it has failed only once, when Argentina had to default on its foreign debt in 2002 and break a decade-long 1:1 peg to the US dollar.

(...)

Very interesting. It reflects very much what I think on this matter. That's why I feel that the only way out for Greece or Portugal is strong investment in modernizing firms which may sell their products abroad. And to do this these countries should not hesitate in defaulting, if necessary, on all their debt payments.

[Heracleum Persicum]

64934a6e-04a9-4c8d-a9e6-d5b1b8ab7aa6.jpg (41.72 KiB) Viewed 1103 times

Angela seems havin fun

Hollande looks "pissed off"

.

[Heracleum Persicum]

Nnh4EfSuLSo

[Endovelico]

The Heat Is on Greece’s Alexis Tsipras, From Inside and Out
By NIKI KITSANTONIS - MAY 24, 2015
http://www.nytimes.com/2015/05/25/busin ... .html?_r=0

ATHENS — With Greece in the final stretch of negotiations with its creditors, aimed at unlocking rescue loans the country needs to avert an imminent default, Prime Minister Alexis Tsipras faces growing pressure from the ranks of his own party.

After weeks of simmering dissent among the more radical elements of his leftist Syriza party, Mr. Tsipras on Sunday faced his biggest challenge from within the party since taking office in January. A faction known as the Left Platform proposed that Greece stop paying its creditors if they continue with “blackmailing tactics” and instead seek “an alternative plan” for the debt-racked country.

The proposal came as the interior minister, Nikos Voutsis, told Greek television that Athens would not be able to make debt repayments of 1.6 billion euros, or nearly $1.8 billion, that are due next month to the International Monetary Fund, one of Greece’s three international creditors.

“The money won’t be given,” Mr. Voutsis said. “It isn’t there to be given.”

The proposal by the Left Platform, which is led by Panagiotis Lafazanis, the energy minister, and represents around 30 of Syriza’s 149 representatives in the Greek Parliament, was rejected by the party’s central committee late Sunday by a vote of 95 to 75.

That Mr. Tsipras’s more moderate stance prevailed represented a small victory for the prime minister. But the strong support for the Left Platform’s proposal indicates that Mr. Tsipras faces a difficult balancing act as he tries to seal a deal with creditors and bring it to Parliament.

Syriza came to power on a promise to take a hard line with creditors in debt negotiations and resist the type of austerity measures that are blamed for driving up unemployment to 25 percent and slashing household incomes by a third. But Mr. Tsipras has had to soften his approach as he has worked for months to reach an agreement with the country’s three international creditors — the I.M.F., the European Commission and the European Central Bank — and unlock €7.2 billion in bailout funds that Greece needs to meet debt repayments over the summer and remain solvent.

His challenge now is to keep the backing of a majority of Syriza’s party officials and legislators as he moves ahead.

In a speech to the central committee on Saturday, Mr. Tsipras told party officials that Greece was “in the final stretch of negotiations.” He said he would not submit to creditors’ “irrational demands” on value-added tax rates, further liberalization of the labor market and changes to the pension system — the main sticking points.

The party’s central committee on Sunday voted in favor of Greece reaching a “mutually beneficial deal” with creditors that was not based on further austerity measures.

Such a deal, the committee said, should set low targets for Greece’s primary budget surplus, avoid further cuts to pensions and government salaries, restructure Greece’s debt and introduce a strong investment plan to help the country emerge from years of recession. The text of the decision did not rule out halting payments to creditors, “if things reach a marginal point.”

Mr. Lafazanis, the Left Platform leader, suggested that the impact of Greece’s exit from the eurozone could be manageable. “Who says an exit from the euro and return to the national currency would be catastrophic?” he said, adding that the government should start preparing Greeks for the possibility of an “alternative solution” to avert the imposition of new austerity measures and privatization of government assets.

The growing resistance from within Syriza comes as Wolfgang Schäuble, the German finance minister, has taken a harder line on Greece, insisting that the country commit to reforms in return for the funds and refusing to rule out the possibility that Greece could default on its debt.

In the meantime, more voices have been added to the discussions about a possible Greek exit from the eurozone. Over the weekend, Alan Greenspan, the former Federal Reserve chairman, said it was only a matter of time before Greece left the euro, while Warren E. Buffett, the billionaire investor, indicated that the euro could benefit from a Greek exit.

It's quite simple, really. Greece must default and stay in the euro, in order to have an acceptable means of payment. The real challenge is balancing trade, so that Greece has money to pay for necessary imports. Once that has been achieved default is no longer Greece's problem, but the creditors'. The EU will still regret not having been a bit more flexible...

[Endovelico]

Survey: 48% support SYRIZA, 54% approve Gov’t negotiations attitude

Posted by keeptalkinggreece in Politics

Despite all odds. Despite all pressure and “bankruptcy” threats and blackmails. 48% of Greeks support left-wing SYRIZA and 54% approve the government’s approach in negotiations with lenders, while 58% want that the Government does not step back under the creditors’ pressure. The majority of respondents reject the additional austerity measures the lenders want to impose to Greeks.

According to the latest public opinion survey conducted by the Public Issue for Avgi, a newspaper affiliated to SYRIZA, respondents said they supported:

SYRIZA 48.5%

NEA Dimocratia 21%

KKE 6%

Golden Dawn 6%

To Potami 5.5%

PASOK 4%

Independent Greeks 3.5%

Other parties 5.5%

In the crucial negotiations with the country’s lenders, 58% said that they support the government’s approach, while 37% said that they disagree. The same 37% said that the government has to step back, while 58% said, the government has to keep the tough attitude.

71% said they favor the Euro and 19% said that they favored return to Drachma.

50% have negative opinion about the European Union and 48% positive.

The majority of respondents reject many of the additional austerity measures the country’s creditors demand from the Greek government:

89% is against cuts to pensions, 79% against cuts in supplementary pensions

84% is against mass lay-offs

57% against the Unified Property Tax (ENFIA)

53% against a flat Value Added Tax of 18%

43% against the privatization of regional airports

The majority of respondents reject the option of snap elections so that the Government would seek new public mandate:

Only 10% support the idea of early elections

56% want that the new deal between Greece and it creditors would be voted in the Palriament

34% want referendum

As for economic situation and insecurity:

48% of respondents said that they were afraid their economic situation would worsen (30% in April 2015)

39% believe that it would remain the same (51% in April) and just 15% believe that it would improve (19% in April.)

Greeks worry about the security of their deposits at the banks with 58% saying they believe that they are not absolutely guaranteed.

Regarding the Mainstream Media’s attitude towards the government, 49% say they were “hostile”, 28% “friendly”, 20% “neutral”.

The survey was conducted 13-19 May 2015.

Sondagem Grécia (05-2015).JPG (36.16 KiB) Viewed 1084 times

If the idea was to split the Greeks from their government, it's not working. If elections were held now, Syriza would get a much bigger majority.

[Endovelico]

Austerity, Economics and Religion
May 27, 2015 - Posted by Raúl Ilargi Meijer at 11:38 pm
http://www.theautomaticearth.com/2015/0 ... -religion/

There are many things going on in the Greece vs Institutions+Germany negotiations, and many more on the fringe of the talks, with opinions being vented left and right, not least of all in the media, often driven more by a particular agenda than by facts or know-how.

What most fail to acknowledge is to what extent the position of the creditor institutions is powered by economic religion, and that is a shame, because it makes it very difficult for the average reader and viewer to understand what happens, and why.

Greek FinMin Yanis Varoufakis has often complained that he can’t get the finance ministers and others to discuss economics. As our mutual friend Steve Keen put it:

Steve Keen said the finance minister was frustrated with the progress of Greece’s talks with the euro zone, adding Varoufakis had compared the talks to dealing with “divorce lawyers”. Keen said the finance ministers of Europe refused to discuss certain euro policies, according to Varoufakis. [..] When asked what [Varoufakis and he] mainly discuss at the moment, Keen said, “Mainly his frustration, the fact that the one thing that he can’t discuss with the finance ministers of Europe is economics..”

“He goes inside, he is expected to be discussing what the economic impact of the policies of the euro are and how to get a better set of policies, living within the confines of the euro and the entire European Union system, and he said they simply won’t discuss it. He said it is like walking into a bunch of divorce lawyers, it is not anything like what you think finance ministers should be talking about..”

They won’t discuss these things because they have found religion, in the sense that there is for them only one truth, to the exclusion of all others. They toe the preconceived line, because if they didn’t they would lose their positions.

They are undoubtedly also very hesitant to discuss economics with Varoufakis because they are aware of his prowess in the field. They are much less knowledgeable, which makes it tempting to hide behind numbers, behind Germany, and behind their faith that their views are the only right ones. Which is precisely what Varoufakis challenges.

You won’t see the Pope in a muslim prayer five times daily with his face to Mecca, or an imam celebrating Holy Mass. And that’s sort of alright, there’s nothing that says everyone should have the same religion. But when it comes to a field such as economics, and certainly when multi-trillion dollar decisions are being taken, and people in the streets are already going broke and hungry, that is definitely not alright.

The number one priority under such circumstances absolutely must be to find a solution, find it fast, and alleviate the suffering. Not to push through any particular policy or vision. Now, you can accuse Greece of not doing that, and the institutions and their pundits in the press do that on a 24/7 basis, but that view lacks substance.

The institutions demand more austerity measures for Greece, whereas it’s plain to see that austerity is what has led to the misery of the people. In particular, pensions cuts are apparently still a point neither side wants to give in on. But not only have Greek pensions already been cut by 40% or so, they are the last straw for many entire families.

Which means the entire pension system would need to be thoroughly reformed, not just pensions cut, or more, and more widespread, misery is in the offing. And there simply is no time to achieve that thorough reform before Greek repayment deadlines set in. Don’t forget, the entire Syriza government hasn’t been able (allowed) to do anything but negotiate. And is then accused of not doing enough.

This inflexible insistence on more austerity, and hence more misery, for the Greek people, is a good example of how religion driven the IMF, EU and ECB are. As I’ve written many times, it’s about power, not about money; it wouldn’t cost all that much, but could achieve a lot, to let Greeks off the austerity hook for a bit. All it takes is flexibility when entering the negotiations. But there ain’t much of that, if any, on the creditors’ side.

Which is why this Bloomberg piece on the IMF’s ‘enforcer’ for Greece Poul Thomsen should bring a smile to our faces.

A former IMF colleague of Thomsen’s, Ashoka Mody, last month in a Bloomberg View column called for the fund to “recognize its responsibility for the country’s predicament” and forgive much of Greece’s debt. There’s little sign that the IMF and Thomsen might bend the rules or cross their red lines now. While some issues such as short-term budget targets may be negotiable, the fund’s position is that any Greek agreement must bring debt down to sustainable levels and include concrete commitment to reforms, especially cuts to public pensions.

“We are open to new ideas and different ways to achieve a country’s economic goals. We are a pragmatic institution,” Thomsen said in a statement to Bloomberg News. “But we also need to be mindful of economic realities. At the end of the day it needs to add up. And we need to ensure that we treat our member states equally, that we apply our rules uniformly.”

For all we know that’s even the way he sees things. But the IMF is neither a flexible nor a beneficial institution. It’s a power tool for the wealthy. The philosophy behind the institutions’ view of the negotiations, and indeed their entire view of economics in general, is constructed to follow the preferences of the wealthy, who have a strong vested interest in centralized control over just about everything, because more centralization makes it easier for them to exert this control.

Syriza getting its way on reforms doesn’t fit in that picture; before you know more parties want some say in their futures too. Most of all, though, different ideas on economics in general cannot be accepted. Everybody has to follow the IMF line of ‘reforms’, asset sales, privatizations, labor protection and austerity. Certainly everyone who owes the Fund money. That’s its ultimate power tool.

That the EU follows that line merely means it’s and immoral and amoral institution, and a union only in name. The ECB follows the IMF line on economics, which means there’s no room for aberrant views, no matter how well founded and thought through. There’s no place in there for people like Varoufakis, or Steve Keen.

It’s not about knowledge or brilliance, it’s about keeping the faith, because that keeps the power where it’s at. Yeah, there’s a hint of Galileo in there somewhere. The ‘philosophy’ is neo-liberal mixed with let’s say, Keynes-for-the-rich, aka QE.

A nice example of how the IMF operates, and how far its power tentacles reach, came in a Guardian piece on Chapter 11 bankruptcy for countries, and why Argentina took its case to the UN, not the IMF:

When Argentina tabled a motion calling for the UN to examine the issue of sovereign debt restructuring last autumn, 124 countries voted for it; 11, including the UK and the US, with their powerful financial lobbies, voted against; and there were 41 abstentions. Llorenti, who is chairing the UN “ad hoc committee” set up as a result of that vote, says the 11 countries that objected hold 45% of the voting power at the IMF. He believes they would prefer the matter to be tackled there, where they can shape the arguments: “It’s a matter of control, really.”

Another thing I‘ve said before is that the IMF is a prime example of why we should steer away from supra-national organizations. We can’t make them run for our own benefit, they invariably end up being run for the benefit of the few, because their inherent lack of transparency and democracy makes them an irresistible target for sociopathic individuals, who seek control, not democracy, and for the elites whose interests they invariably end up representing.

There’s the World Bank, NATO, the IMF, the EU. The UN is somewhat more democratic, but only somewhat. Behind the veil it’s not at all.

Amongst the European finance minsters there should still be a few who may have doubts about what’s happening to Greece, what’s being demanded of it. And who realize that the purely political decision to bail out the banks that had lent to Greece, and shove their debts into the lap of all Europeans, who in turn pushed it right back into Greece’s lap, is at best highly questionable.

If these Europeans want to save their union, they need to be told that what they’re doing right now is the exact wrong way to go about that, 180º wrong. What happens today is not holding or pulling the member states together, it’s driving them apart.

Perhaps it is indeed ultimately a choice between the banks and the people. And perhaps it scares them stiff not to choose the banks. With their limited knowledge of how economies function, they must believe the story of how everything will fall to pieces if the banks fail. Besides, if they question it, they’re out.

But economics cannot be a religion, it cannot have this inflexibility and resistance to change. And neither can politics, not if we want our unions, our countries and our societies to survive, if we want to survive, and our children. Economics is not a science, though it very much longs for that status. It shouldn’t be a religion either, however.

There is nothing that says, or proves, that bailing out banks and forcing austerity on people (note the combination) is the best, or only, way to rescue an economy in trouble. That austerity is the way to rebuild an economy. These are mere ideas, conceived by people who studied textbooks.

What Greece is asking for is a simple bottom beneath its society, lest it completely falls to bits, lest all it’s left with is some right wing movement or another. But instead, the institutions’ approach to economics, to democracy and to power look to make a true solution for the Greek problem impossible.

That in turn would seem to make a Grexit, in some shape or another, the only way left to go. Why would anyone want to live in a world dominated by religious fanatics and their henchmen?

Finally, as for what the euro, and hence the eurozone, were intended to do, here’s Greg Palast from 2012, talking about father of the euro, Robert Mundell:

Robert Mundell, Evil Genius Of The Euro

“It’s very hard to fire workers in Europe,” he complained. His answer: the euro. The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

“It puts monetary policy out of the reach of politicians,” he said. “[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.” He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing. [..]

The supply-side economics pioneered by Mundell became the theoretical template for Reaganomics – or as George Bush the Elder called it, “voodoo economics”: the magical belief in free-market nostrums that also inspired the policies of Mrs Thatcher.

Mundell explained to me that, in fact, the euro is of a piece with Reaganomics: “Monetary discipline forces fiscal discipline on the politicians as well.” And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.

Thoughtful. Worth reading.

[noddy]

in the russian post we have claims of gold as a wise hedge against the stupidity of politics driven paper money and on this post we have desires for more political intervention into paper money that makes it worthless.

an amusing dichotomy wot wot.

[Simple Minded]

in the russian post we have claims of gold as a wise hedge against the stupidity of politics driven paper money and on this post we have desires for more political intervention into paper money that makes it worthless.

an amusing dichotomy wot wot.

where some see dichotomy, others see balance!

[noddy]

in the russian post we have claims of gold as a wise hedge against the stupidity of politics driven paper money and on this post we have desires for more political intervention into paper money that makes it worthless.

an amusing dichotomy wot wot.

where some see dichotomy, others see balance!

where others see balance some see aesops wolf boy