Tuesday, August 11, 2015

Germany Balancing Budget On Greek Crisis

Neo Communist party leader Alexis Tsipras set up a confrontation with the transnational elites as he is making good on his promise to end economic reforms. In the meantime national sovereignty and the democratic process have been suspended by the euro group, who in effect are trying to run the country instead of the elected government. 

Stefan Molyneux explains why the current system is a prop up for the Socialist system of private money controlled by governments.
"The Tragedy of the Euro" by Philipp Bagus is a Must Read for all students of the euro disaster area. The book explains the history of banking and why current monetary system is so corrupt, that it is bound to collapse sooner or later. The Mises Institute has kindly released a free PDF of the book. 
UPDATE: Germany, which has taken a tough line on Greece, has profited from the country's crisis to the tune of 100 billion euros ($109 billion), according to a new study Monday. The sum represents money Germany saved through lower interest payments on funds the government borrowed amid investor "flights to safety", the study said. "These savings exceed the costs of the crisis -- even if Greece were to default on its entire debt," said the private, non-profit Leibniz Institute of Economic Research in its paper. "Germany has clearly benefited from the Greek crisis." When investors are faced with turmoil, they typically seek a safe haven for their money, and export champion Germany "disproportionately benefited" from that during the debt crisis, it said. "Every time financial markets faced negative news on Greece in recent years, interest rates on German government bonds fell, and every time there was good news, they rose." (Source)

July 31, 2015

Tsipras Defends Varoufakis' Plan B In Parliament

Progress on securing a third international bail-out for Greece hit the rocks on Wednesday night after the International Monetary Fund said it was unwilling to consider providing any more money until the reforms were agreed (...) Mr Tskalatos, who was brought in to replace Mr Varoufakis as a seemingly more conciliatory negotiator, said talks would continue through the weekend. (...) Greek prime minister Alexis Tsipras launched a staunch defence of his embattled former finance minister on Friday (...) Mr Tsipras told his parliament he had authorised preparations for a system of "parallel liquidity" should the European Central Bank pull the plug on the Greek banking system. "I personally gave the order to prepare a team to prepare a defence plan in case of emergency," said Mr Tsipras, who compared Greece's situation with being on a war footing. "If our creditors were preparing a Grexit plan, should we not have prepared our defences?" But the prime minister said he "did not have, and never prepared, plans to take the country out of the euro". (...) (Source) On Wednesday the bookkeepers of the occupying powers arrived. These are the most hated people in Athens.

July 27, 2015


Varoufakis has posted a statement by Professor Galbraith. In fact, it would have been surprising and indeed gross negligence, had no Plan B been made. A poblem may be that the occupation by the troika of the Inland Revenue would have required hacking into the system, which would have constituted an illegal act. But the plan was never put into action.

July 26, 2015


Varoufakis on CNN last Monday July 20, discussing Plan B. (Source)

We will have to wait for Varoufakis’ recorded audio to be  published to confirm if the transcript is correct.

According to conservative newspaper Kathimerini Yanis Varoufakis told a group of investors in London that a five-man team under his control had been working for months on a contingency plan to create euro liquidity if the European Central Bank cut off emergency funding to the Greek financial system, as it in fact did after talks broke down and Syriza called a referendum. The telephone allegedly took place a week after he stepped down as finance minister. This would constitute a criminal act, even treason. Varoufakis is denying the charges:

In the article Varoufakis confirms Schaeuble's plan for ejecting Greece from the euro zone, which will enable further European integration, but not going as far as total federalization:
"Schauble believes that the eurozone is not sustainable as it is. He believes there has to be some fiscal transfers, some degree of political union. He believes that for that political union to work without federation, without the legitimacy that a properly elected federal parliament can render, can bestow upon an executive, it will have to be done in a very disciplinary way," "And he said explicitly to me that a Grexit is going to equip him with sufficient terrorising power in order to impose upon the French, that which Paris has been resisting: a degree of transfer of budget making powers from Paris to Brussels." Mr Varoufakis told the Telegraph that the Mr Schauble has made up his mind that Greece must be ejected from the euro, and is merely biding his time, knowing that the latest bail-out plan is doomed to failure. "Everybody knows the International Monetary Fund does not want to take part in a new programme but Schauble is insisting that it does as a condition for new loans. I have a strong suspicion that there will be no deal on August 20," he said. He said the EU authorities my have to dip further into the European Commission's stabilisation fund (EFSM), drawing Britain deeper into the controversy since it is a contributor. By the end of the year it will be clear that tax revenues are falling badly short of targets - he said - and the Greek public ratio will be shooting up towards 210pc of GDP. "Schauble will then say it is yet another failure. He is just stringing us along. he has not given up his plan to push Greece out of the euro," he said. (Source)


As part of his national rescue mission former Greek FinMin Varoufakis has admitted a secret cell at the Greek finance ministry hacked into the government computers and drew up elaborate plans for a system of parallel payments that could be switched from euros to the drachma at the "flick of a button". He told a group of investors in London that a five-man team under his control had been working for months on a contingency plan to create euro liquidity if the European Central Bank cut off emergency funding to the Greek financial system, as it in fact did after talks broke down and Syriza called a referendum. Mr Varoufakis claimed the cloak and dagger methods were necessary since the Troika had taken charge of the public revenue office within the finance ministry. "It’s like the Inland Revenue in the UK being controlled by Brussels. I am sure as you are hearing these words your hair is standing on end,” he said in the leaked transcripts. Mr Varoufakis said any request for permission would have tipped off the Troika immediately that he was planning a counter-attack. He was ready to activate the mechanism the moment he received a "green light" from the prime minister, but the permission never came. "I always told Tsipras that it not be plain sailing but this is the price you have to pay for liberty," he told the Daily Telegraph. (Source)

July 25, 2015


In the aftermath of the haggling over de "3rd Greek bailout" a few interesting observations have been made. For one, the FT has a cloak and dagger story straight from the Athens gossip columns. Another article is a bit of an eye-opener that describes the tension between Angela Merkel and her FinMin, Schaeuble who, in a former existence collected taxes for a living! Sometimes things are not that hard to understand.
Arresting the central bank’s governor. Emptying its vaults. Appealing to Moscow for help. These were the elements of a covert plan to return Greece to the drachma hatched by members of the Left Platform faction of Greece’s governing Syriza party. They were discussed at a July 14 meeting at the Oscar Hotel in a shabby downtown district of Athens following an EU summit that saw Greece cave to its creditors, leaving many in the party feeling despondent and desperate. The plans have come to light through interviews with participants in the meeting as well as senior Greek officials and sympathetic journalists who were waiting outside the gathering and briefed on the talks. They offer a sense of the chaos and behind-the-scenes manoeuvring as Greece nearly crashed out of the single currency before prime minister Alexis Tsipras agreed to the outlines of an €86bn bailout at the EU summit. With that deal still to be finalised, they are also a reminder of the determination of a sizeable swath of Mr Tsipras’ leftwing party to return the country to the drachma and increase state control of the economy. (Source

July 20, 2015


With the issue of Greece settling down for now, positions are being taken for the final battle for the soul of Europe. On the one hand we have the internationalist stance as defended by the President of France, Hollande, using the crisis as a wedge to ever further integration. A new "us" is indeed what the euro zone requires if the single currency stands a chance of success. That is the cunning of this project. It was top down, undemocratically foisted on Europeans who failed to listen to Margaret Thatcher.

In a policy paper Dominic Strauss Kahn is taking his "German friends" to task in the language of glorious French vistas. (Source) The position of Germany is more complicated. They want the same centralist model, but monetarily dominated by themselves. Which, with the euro zone intact, still requires fiscal integration. But they can't have their cake and eat it too.
Those who seek Liberty are the losers on this continent. We may end up with the choice of National Socialism in the North versus International Socialism in the South. The first dominated by France, the other by Germany. But both belonging to a family of state concepts born of feudalism: the collective, central state.
Those banking on the Euro skeptic movement are in for a nasty surprise. While Nigel Farage's UKIP may be Libertarian in nature, this cannot be said of the likes of Marine Lepen's Front National, the Belgian Vlaams Belang, the Dutch Freedom Party led by Wilders, or the Italian Lega Nord. In the background the authoritarian, Russian leader Putin is pulling their strings. Deterministically speaking these populist parties are no different from the Socialist transnationlists. The only difference being, they rather want their "us" defined on an ethnic basis.
Ideologically speaking we're basically back at the interbellum.

July 19, 2015


The banks in Greece are opening again tomorrow after three weeks of closure. Capital controls remain in place until October at least. The general feeling is that elections will be called by then. PM Tsipras has reshuffled his Cabinet. Nothing spectacular there.

Germany and France pushing their historic love affair on the peoples of Europe.

The EU leaders in the meantime are acting true to type: never a crisis goes to waste to push even further integration against the will of the people. Anders Borg, Sweden's former finance minister, says the eurozone crisis has created a climate where forcing countries to cede sovereignty could trigger a right-wing backlash across Europe. Oh noes!..

July 15, 2015



While Parliament is preparing for rounds of voting until well into the night, Athens' many anarchists (Leftist variety) took to Syntagma Square to face the riot police with petrol bombs. Arrests were made. A satellite truck belonging to an unknown TV network was set ablaze. Reuters has great pictures! Presently things have quieted down.


The Greek Parliament is bracing for 2nd session of the marathon assembly to vote through a series of EU regulations and creditor demands, partly unrelated to economic issues at all. In the meantime Yanis Varoufakis has posted this weekend's "3rd bailout" agreement with his own annotations:


The Greeks are in shock. The speed with which these measures are rammed through have not given them time to take in the depth of this humiliation. But when it does their fury will be terrible. Perhaps the proper solution requires descend into chaos. In the meantime there's following article from an anarcho-capitalist view. It offers a very succinct, short history of Greece that is worth a read in itself. The piece is also providing a refreshing analysis of the present situation. But true to the nature of anarcho-capitalism the solution is based on fallacies and rationalizations. (Source) Nevertheless, it comes highly recommended.

July 14, 2015


The "third" bailout deal is a time bomb and as we posted yesterday, a ruse to push Greece out of the euro zone. It's done so cleverly, Greece will be blamed for it. This is not just bad faith, it is a hostile act. Never mind this piece of personal vindictiveness. This is who the eurocrats are.

Frances Coppola on Forbes explains it in Dr. Schaeuble's Master Plan:
The humiliation of Greece at the summit was not an accident. It is part of an agenda that Wolfgang Schäuble has long pursued: he considers the EU in its current form non-functional. He is committed to establishing a close political union. This is only possible with selected countries. At the end will be seen who fits with Germany and who does not. Grexit is already planned. Other states will follow. The tablecloth is cut. Irrevocably. (...)  The Greeks will either be forced to leave because they failed to comply with program requirements (in which case it is their fault), or the whole program will fail because the IMF refuses to contribute. Either way, he will achieve his objective of eliminating Greece from the Eurozone. And – importantly – Germany will escape blame. (Source)


Nothing to add to his first thoughts, accept perhaps that tanks are a rough substitute for real power, and that is banks, or economic power. Varoufakis is channeling the liberal sociologist Ralf Dahrendorf, finally admitting that economic and  monetary union would split Europe. This is no more than common sense: solidarity requires a political union, an "us". Otherwise the other isn't a brother, but a rival. Postmodernists understand there is a relationship between political union and a single currency, but they reverse cause and effect (as usual). They thought that the currency would be the catalyst for political union. This was evil manipulation on their part. Nigel Farage recently debated the issue in the EP. (Source) This is the hard truth that Leftist romanticists will have to come to terms with. Some lessons can only be learnt the hard way.

July 13, 2015


In case you're wondering how we got here, this is the root of the narrative from which every "mixed economy" is reasoning. Debt as such was never seen as a problem. It was racked up and cumulated in large quantities on the advice of postmodern Keynesians who reject contradictions. So when did it become a problem? It became a problem in the single currency, where one country lives in the pocket of the other. As Dan Hannan has it:

  • It was only the idea that Greek and German bonds were interchangeable that allowed such eye-watering debts to be racked up in the first place. When the crash came, Greece was unable to do what every other stricken country does, namely to devalue. (Source)


Dan Hannan makes the moral case for Greece against the European extortion:


The question is, how did Greece end up with a worse deal than the people voted on in the Greferendum? Germany has now demanded the impossible. Parliament must pass within the next 2 days fiscal and pension tightening laws as well as comply with a number of totally unrelated EU demands, just to make clear who is in power. A quarter of Greece's GDP to be placed in a Luxembourg account as collateral with Europe exercising control and first refusal rights (not the Parthenon, but airplanes, airports, infrastructure and banks). Otherwise "the Germanics" have no confidence they'll get their money back. (Source) Democracy and national sovereignty are dead. But that was a fact long before it was proved by the Greek affair.

The vista of Grexit from the single currency mechanism is so daunting, that Tsipras has lost heart. Politically the damage is already done. And it is minor stuff compared to the social and economic reality. Fifteen of Syriza MPs, including two ministers, revolted by voting against Saturday's authorization bill, abstaining or staying at home, and another 15 signed a letter saying they only voted for the bill in order to protect the government’s majority. Without the support of these defectors, Mr Tsipras in effect no longer holds a parliamentary majority.

To regain it he has a few options. He could reshuffle his cabinet and demand that the defectors resign and hand over their votes. He could call for a new election, which he may do anyway later in the year. Or he could form a new coalition to make the numbers add up with ND or Potami and PASOK. Or European creditors may force his hand, calling for a technocratic government. They would certainly find a new, broader coalition more assuring of the Greek commitment to implementing reforms.

Call it a coup, call it extortion, virtual annexation or whatever. What it really is, is an offer the Greeks MUST refuse. Yanis Varoufakis was right on many fronts, except perhaps the key question: that Greece on the long run is better off on its own. Grexit was not his first choice, but as now transpires it was his Plan B. In an interview with the New Statesman Varoufakis explains it all.

The reality of the situation is this: the Greek Government wanted to negotiate a better deal and stay in the euro, as they have always said. The creditors, led by Germany, on the other hand wanted Greece out, but they have never said so openly. Instead they have made offer upon offer, the second worse than the first, until it is now so bad, that Greece simply can't do anything else but refuse and leave the euro zone. Still, they are clinging to a deal that would enslave them.

There are no provisions in the treaties to remove a member country from the euro zone. But you can make it practically impossible for them to stay. That is what is going on. We will now see how deep Greek pride really goes and when enough humiliation will be enough. Germany does not come out of these negotiations with hidden agenda, smelling of roses. Those reasoning from a stance of debt absolutism may admire the hard line, but Germany may well have saved the euro but broken the EU. (Source)

The schism does not run along a clear Left/Right line. Especially the Left is divided on the issue. Especially true euro ideologues are disgusted beyond belief foreshadowing a return of the bad old days of national darwinism. Some are urging post haste integration as the fix, as if it is not too late to pull off such a coup. (Source)

Debt absolutists of course are painted as "neo liberals". Liberals and Libertarians are giving them plenty of run for their money, not realizing that in true Liberalism, the state isn't justified at all being in the money business. That is the business of banks that ought to go bust if their decisions suck.

As for the banks, well, they're essentially wandering aimlessly through a minefield (...) Lacking sufficient collateral to keep the ELA game up for much longer, Greece's banks will need to be recapitalized in short order barring a dramatic decrease in ECB haircuts. Even in the most optimistic scenario, capital controls are likely here to stay for the foreseeable future. (Source)

The disaster on the human scale is far from over.

July 12, 2015


The conclusion must be that Yanis Varoufakis was right. The demands on the Greek Government have nothing to do with solvency or economic considerations. It is a product of the Germanic tribal culture that is simply making demands because it can from a position of power. Talks are still ongoing. Greece will probably be required to pass these laws in advance of an agreement, and if the creditors can help it, the Tsipras Government will make place for a regime of technocrats. It would not be the first time such a coup is pulled. It's unbelievable that no one appears to see this is a problem!
In the end it's a clash of cultures. This may sound like a contradiction, but in spite of its tendency towards Socialism, Greece is basically an empty space where free people interact on the basis of mutual benefit. Modern Greece is very much a product of the European Enlightenment.

North western Europe on the other hand is an ether filled with state, where a collective people act according to laws and state regulations. It's a fundamentally different view on reality and the nature of state and Government.


One small precondition in the partial draft Eurogroup statement (point 3) pertains to Sunday trade. This is not organized in Greece as is usual in north western countries, specifically Germany where until recently shops were obliged to close their doors on Saturday as of 3PM. Many pop-and-mom shops, of which Greece has a great many, set their own opening hours. This is an excellent example of Liberty in Greece. H/t @Nielsevier This is proof that Sunday trade is NOT the eurocrats' objective! It's control! Sunday trade in Greece must be regulated in order to satisfy the creditors!


Germany wants hundred percent security. Therefore it wants to rule Greece over the graves of all Greek Governments for the next half a century or so. No one gets that level of security. This is why Governments should not be in the money business in the first place. This stance of Germany is tyrannical and fundamentally anti democratic. Greece would be mad to accept these conditions. Germany first outsourced their security requirements to a bunch of "tax advisors". When Greece threw them out of the country, Germany sent the troika. We'll see how they will operate this time. Probably Germany will try to 'force' the Greek Parliament to pass a number of irrevocable laws. Nothing good will come of this.


Tusk has called off the meeting of political leaders, sequestering the Eurogroup FinMins until agreement on Greece has been reached. The informal group has now issued a partial statement:

July 12, 2015


The meeting of the Eurogroup has been concluded. The EZ FinMins will reconvene tomorrow morning at 11:00


Initially it was just an unconfirmed report circulating in the German FAS media that the local FinMin had proposed a "temporary Grexit" option. Then it got some more traction when a ZDF journalist reported that it was much more than just speculation... It now appears that this was not only not a rumor, but Schauble's sentiment is contagious: moments ago Finnish broadcaster MTV reported that first Finland, and then the Eurozone's smaller, if somewhat more solvent nations, Estonia, Lithuania, Slovakia, Slovenia and even the Netherlands, support the German position on temporarily suspending Greece' Euro membership. There is no provision in any of the treaties to leave the euro zone. But staying in the single currency mechanism can be made technically impossible.


If we understand Varoufakis correctly, is the German fear of having to yield to Southern 'frivolous' monetary culture, behind the German intransigency.


Germany's Finance Ministry believes Greece's latest reform proposals do not go far enough and has suggested two alternative courses for Athens including a "timeout" from the euro zone, the Frankfurter Allgemeine Sonntagszeitung (FAS) reported. (...) Instead, the ministry set out two alternative courses for Greece. Under the first, Athens would improve its proposals quickly and transfer assets worth 50 billion euros ($56 billion) to a fund in order to pay down its debt. Under the second scenario, Greece would take a "timeout" from the euro zone of at least five years and restructure its debt, while remaining a member of the European Union. The Finance Ministry declined to comment on the FAS report. (Source)


According to a snap poll by Bridging Europe, a whopping 79% of respondents said they are against the Third bailout proposal of the Greek government, with a further 74% stating they believe that the Greek government's proposals go against the 61% of the Greeks who voted "No" in the referendum. (...) 51% believe that Greece will have snap elections in the "next couple of months."It is that last question that will be of greatest interest to Merkel and the Troika, because if indeed there is another imminent change in Greek government, either peacefully or less so, then the entire Third bailout, and the €74 billion in debt that the Troika may hand over to Greece next week, will be promptly voided and overruled by the next anti-austerity party (...) (Source)


It's crunch time for Greece and the euro. It would be best for all parties if Greece left the euro. Greece would eventually recover. And so would the rest of the euro zone after the single currency collapses. But it is understandable that the Greek Government does not want to sacrifice the country and its people to such a noble cause. Bookies estimate the chances currently at 50/50.

July 9, 2015


A senior adviser to the Greek government, who has been at the heart of the past five months of negotiations between Athens and its international creditors, reveals the details of what resembles a game of liar’s dice over the fate of a nation that has been brought to its economic and social knees. His account gives a rare and disturbing insight into the process which has led up to this week’s make-or-break deadline for reaching a bailout deal between Greece and international lenders, without which the country faces crashing out of the euro and complete bankruptcy. He describes the extraordinary bullying of Greece’s radical-left government by the creditors, including Eurogroup president Jeroen Dijsselbloem’s direct threat to cause the collapse of the Hellenic banks if it failed to sign-up to a drastic austerity programme. “We went into a war thinking we had the same weapons as them”, he says. “We underestimated their power”. (...)
An excerpt:
The Eurogroup is not a proper democratically-functioning body. They [the Greek government of Alexis Tsipras] discovered that, again, very late, when they [the Eurogroup] wanted to throw Varoufakis out after the referendum announcement. Which was basically a gesture to humiliate. Varoufakis says "Who decides that?" Dijsselbloem says "I decide". Shouldn't there be a vote, shouldn't there be unanimity? Yes but it's not necessarily recorded, there are no minutes taken. (...) 
The other countries in such a set-up had to think [German finance minister Wolfgang] Schäuble is the king, he controls the others, he can raise his voice and say “no". Varoufakis has described incidents that show really how the Eurozone is completely undemocratic, an almost neo-fascist euro dictatorship. (...) 
You cannot argue too much with Schäuble. It would be dangerous, because you won't get finance, German banks will want their money back, and so on. (...) Schäuble has said "How much money do you want [in order] to leave the euro?" He doesn't want Greece in the euro at all. He was the first to raise the issue of a Grexit back in 2011. We went to a war thinking we had the same weapons as them. We have underestimated their power […] It's a power that enters the very fabric of society, the way people think. It controls and blackmails. We have very few levers. The European edifice is already Kafkaesque. (Source)

July 8, 2015


In an 11th-hour attempt at making fast-approaching debt repayments and avoiding a disastrous exit from the eurozone, the Greek government has formally filed a request for support from Europe’s bailout fund. The one-page letter outlining the request, leaked to the media Wednesday, gives a broad overview of the bailout’s proposed terms and the economic reforms Greece promises to make. Without going into specifics, the letter states Greece would immediately overhaul parts of its tax and pension systems, with changes coming down “as early as the beginning of next week.” Greece’s creditors at the European Central Bank have made tax and pension reforms paramount to extending its support program to Greece, which recently missed a scheduled 1.5 billion euro ($1.7 billion) payment to the International Monetary Fund. According to the request, the Greek government would seek a three-year lending facility, an increase from last month’s two-year request. (Source)


Guy Verhofstadt, the leader of the Liberal voting bloc in the European Parliament is one of the worst offenders against Liberty and democratic principles in the organization. Today he scolded the elected Prime Minister of Greece as if he is a school boy. (Source) July 

7, 2015


The agenda has changed. Greece has now a week to work out a plan that will be decided on during a extra euro summit on Sunday. Juncker says the EU has worked out a Grexit scenario in detail. Merkel has turned the screws on Greece: there is money, but the deal is much harsher now. She has ruled out a haircut.(Source) In the meantime Ambrose Evans-Pritchard has worked out what may have occurred during the last week. Shockingly he states that Syriza never expected to win the referendum. According to this scenario this is the reason Greece was unable to table a plan today. One wonders on what planet Evans-Pritchard has been. But the man is no fool by any stretch of the imagination. True or not, confusion reigns, certainly in Greece!


About the fiscal situation in Greece the following. A huge chunk of the country's tax-collection problems stem from the fact that there are two and a half times more self-employed and small-business people in Greece than there are in the average country. And small businesses are expert at avoiding tax, Greece's former tax collector told Business Insider's Mike Bird recently. Conservatives who hate paying taxes and urge small businesses to pursue tax-avoidance strategies take note: Your dream just came true in Greece. If Greece were more socialist — more like Germany, with its giant corporations that have massive unionised workforces paying taxes off their payrolls — then tax collection would be a lot higher in Greece.

Greece is crap at collecting taxes. 

These numbers come from the evil pro tax think tank, the OECD, the Organization for Economic Cooperation and Development, and they show what an outlier Greece is when it comes to tax collection.

To the above we can attest. This goes for all of western Europe. Decades of Socialist policies have killed the mom-and-pop stores that are still the norm in Greece. It's called Liberty! These retail businesses have been regulated out of existence precisely for this reason. They are far more difficult to regulate than organized chain stores and big corporations. This goes to the heart of the problem in the EU: the business world in the service of the state is the reason this crisis is going on in the first place: Governments and financial organizations together in a revolving door was Mussolini's definition of fascism.


Initially this is coming out of the Eurogroup meeting that was just completed. Greece has tabled a new proposal for ESM support that will be discussed tonight at the EU summit among the political leaders. Final decisions will be taken tomorrow in the Eurogroup after a quick assessment of the situation and the requirements. In the meantime here's the crisis explained in maps and charts:

If you had to pick one chart that encapsulates Greece's crisis, it would be this one.

The roots of Greece's crisis are simple. Before Greece joined the Eurozone, investors treated it as a middle-income country with poor governance — which is to say, a credit risk. After Greece joined the Eurozone, investors thought that Greece was no longer a credit risk — they figured, if push came to shove, other Eurozone members like Germany would bail Greece out. They were wrong. As this chart, via the American Enterprise Institute's Desmond Lachman, shows, after Greece joined the Eurozone, investors began lending to Greece at about the same rates as they lend to Germany. Faced with this sudden availability of cheap money, Greece began borrowing like crazy. And then, when it couldn't pay back its debts, it turned out financial markers were wrong: Germany and other Eurozone nations weren't willing to simply bail Greece out. That led the market to panic around 2010, and you can see interest rates on Greek debt spike once again. Those high interest rates make it basically impossible for Greece to borrow, and that makes it impossible for Greece to pay its debts. The result: Greece is insolvent and the Eurozone isn't as tight a union as the financial markets — and maybe the Eurozone's member states — believed. That's the crisis. (Source)


Here's the analysis on the points raised in these primers. Only statists are able to commit the enormities as described in the last two articles. Governments should not be in the money business. Value is added to raw materials in the private sector by scientists and producers, and is paid for by private consumers. Governments are parasites on that system: they don't add value, they just spend and redistribute. The morality of taxes is debatable, but Governments certainly have no moral right to donate or risk said tax money outside the circle in which it was levied. As the articles by @Jim_Edwards and Ambrose Evans-Pritchard are pointing out, Greece's debt to the banks would have become a footnote in history if it wasn't for the bail-outs by taxpayer funded Governments. Some believe those debts are 'forever'. No, they're not. That would render us with ludicrous claims made by postmodernists that we, today, owe some debt to the descendants of slaves. Only one individual is responsible for immoral acts, the person committing them. Original group sin is no part of reality. The intent with which the euro was founded was evil in the highest degree. Trade was not the issue. It was to create a situation of interdependence that would "make war impossible", or so the postmodern reasoning was. But interdependence isn't voluntary and it certainly isn't freedom. If anything, the EU (of which the currency is a major part) in fact guarantees disaster and conflict by its very nature.


As the eurogroup ministers are gathered for a D-Day decision on Greece and the Euro, a number of Must Read articles are emerging. The Irish Times sheds some astoning light on some arcane intricacies involving the Eurogroup and the EFSF:
Firstly, the (now former) Greek finance minister, Yanis Varoufakis, was excluded from the eurogroup of finance ministers. When he sought legal advice on what rules allowed the group to exclude him, he was told: “The eurogroup is an informal group. Thus it is not bound by treaties or written regulations. While unanimity is conventionally adhered to, the eurogroup president is not bound to explicit rules.” This is the very definition of arbitrary rule – decisions of vast consequence are being taken by a group that does not consider itself bound by treaties or regulations. 
Secondly: a question. Who are the following people? Harald Waiglein, Thomas Steffen, Isabelle Goubin, Hans Vijlbrief, Alenka Jerki?. If you recognise these names, allow me to present you with this golden Euroanorak award. These, along with a bunch of others, form the board of the European Financial Stability Facility (EFSF). Last week, they issued a formal threat to call in Greece’s loans from the EFSF early, thus forcing a member state into bankruptcy and out of the euro. So, again: who the hell are these people? Every one of them is a civil servant. None, so far as I know, has ever been elected by anybody. (Source)
Ambrose Evans-Prichard in The Telegraph offers us this bridge to the third and final insightful article.
The root problem is that the debt is no longer owed to banks, funds and private investors, who know that losses are part of normal business when mistakes are made. In Greece’s case, the money is owed to the taxpayers of other EMU states. The two rescues of 2010 and 2012 - primarily designed to save the European financial system - roped in taxpayers from Germany, France, Spain, Italy and the rest of EMU to provide loans to a Greek state that was already bankrupt. It has transformed a normal clash between creditors and debtors into a fratricidal dispute between European nations. The result of this toxic arrangement is the disaster unfolding before our eyes in Greece. (Source
It is followed seamlessly by a brilliant 'razor' written by @Jim_Edwards, Editor of the Business Insider UK.
(...) The vote is huge lesson for conservatives and anyone else who thinks this is about a dilettante government of left-wing idealists who think they can flout the law while staging some kind of Che Guevara-esque dream: Wrong. This is what capitalism is really about. GREECE JUST TAUGHT CAPITALISTS A LESSON ABOUT WHAT CAPITALISM REALLY MEANS From the beginning, Merkel and the EU have operated from the position that because Greece took on debt, Greece now needs to pay it back. That position assumed — bizarrely, in hindsight — that debt works only one way: If you lend someone money, that money is repaid. But that is NOT how free markets work. Debt is not a guarantee of future payments in full. (...) More astonishing still is that Merkel et al knew Greece could not pay back this debt before these negotiations started. (...) (Source)

July 6, 2015


The latest! The banks will stay closed until Friday at least. ZeroHedge is concluding furthermore that the ECB has "clearly signalled" that unless a deal is done tomorrow, bail-ins will begin. Also that in such case small depositors of savings under E100K will not be spared. (Source) Everyone with savings over E8,000 is likely to have "his hair cut". The rules and policies are unclear and inconsistent.


Varoufakis may be a Marxist, but so is his successor. But he lacks his charm and intelligence. Meet Euclid Tsakalotos. From the 5:00 mark.


However nonconformist, sympathics and clever, Yanis Varoufakis is reasoning from the Marxist world view, divorced from reality. After his exit (declaration on his blog) we will enjoy him from hereon from the political sidelines where he will probably feel more at home. The economics professor has played his role: throwing a giant boulder in the pond of the eurocratic elites. Some have taken his comments personally, the hallmark of the mediocre mind. We can hardly wait for the Varoufakis memoirs to be published! Rumor has it, the contract with a publisher has already been signed.


More on the Varoufakis exit later on, but here's this! The effect of the bank bailouts, was basically moving the loss from the banks to the tax payer. Many people are confusing these bailouts with the Greek sovereign debt. For the record, here are the amounts politicians paid the banks under their bait-and-switch scheme, so they could keep on selling them their bonds. The link in Tarek's tweet is pointing to the official Fed investigation carried out by the auditor.

July 5, 2015


Expect the tone to be somewhat more conciliatory on both sides. Hollande and Merkel are to meet tomorrow night to discuss the issue, and the Eurogroup is scheduled to meet on Tuesday. A split is likely. The Commission and France (and possibly others) will argue that negotiations should resume immediately, while others will be more hawkish towards Greece. In Germany the Bundestag has to be consulted before Mr Schauble can enter into discussions about a new program for Greece. But the Bundestag has just broken for summer recess, so any such vote will require a recall.

There are reports of an emergency meeting between the ECB, Bank of Greece and Finance Ministry tonight, and at the latest the ECB will likely have to take a decision about ELA support tomorrow (if not tonight). The ELA will probably simply be rolled on a day-to-day basis for now. The Greek banks are likely to run increasingly short of cash, and the acceptability of electronic forms of payments will diminish rapidly. The Bank of Greece and Finance Ministry has a joint committee working to prioritize payments out of Greece for essential imports.

The logistical problems arising from these procedures are biting. Importers are facing delays in seeing their requests to make purchases processed. And Greek exporters are finding it hard to get payment in euros from buyers, as their customers do not want to hold any euro balances within the Greek banking system. These issues will multiply in the days ahead.

The July 20th payment of €3.5bn to the ECB as Greek bonds mature creates one possibly fixed point as we look forward. A number of mechanisms may be called into force in Greece: issuing I-O-Us or similar and giving these some status as legal tender. To the extent that pensioners and public sector employees find themselves being paid with such instruments, it takes the banks further away from solvency (they have liabilities in euros, but will have loans to individuals being paid or receiving “i-o-u” s which will be worth a lot less). (Source)


The basic question scrawled on the Central Bank of Greece:


The Greek Government has a meeting tonight with representatives of the system banks. On that basis decisions will be taken how to go from there.


Present count: Yes: 40,2%. No: 59,8%.


A pollster thinks the No vote will be over 53%. At least one disaster we escape: a murky result. For tomorrow evening a posthaste meeting has been scheduled in Paris with Messrs Merkel and Hollande.