The crisis in Greece goes on, and on, and on, and on, and on.
Greece still needs another debt relief extension, but as expected in this corner, another battle is brewing. Talks are cancelled.
This time, the battle is over pensions.
Please consider European Bailout Chiefs Suspend Greek Debt-Relief Measures.
European bailout monitors have suspended planned debt-relief measures for Greece in response to the surprise move by Athens to spend an additional €600m on poorer pensioners in breach of its international commitments.
European finance ministers this month agreed to a series of short-term debt relief measures that would cut Greece’s debt-to-GDP ratio by up to 20 percentage points.
But Athens’ announcement last week that it would allocate €600m to more than 1m low-income retirees and halt a planned VAT increase “appear to not be in line” with Greece’s commitments under its €86bn bailout programme, a spokesman for Jerome Dijsselbloem, eurogroup president, said on Wednesday.
Under the terms of its bailout, Greece is obliged to notify euro area authorities of such changes to its spending plans, something it failed to do in this case.
Greek 10-year government bond yields surged more than 30 basis points to 7 per cent after the suspension, their highest level in three weeks, while Athens’ benchmark stock index fell 3.5 per cent.
Hans Michelbach, one of several sceptical parliamentarians in Ms Merkel’s CDU/CSU bloc, on Wednesday told the Bundestag that they could no longer accept Greece’s “orgy of empty promises”.
The clash also adds to the complications around an ongoing policy review of the Greek programme that needs to be concluded before the IMF can decide whether to join in with the bailout.
In a blog post this week senior IMF officials reiterated warnings that they fear Greece’s debt is deeply unsustainable and that the best course would be to rethink key aspects of the programme.
The post sparked a backlash from Athens and euro area policymakers who accused the fund of being unduly pessimistic.
Peculiar Setup
Not that I like the IMF (in fact I cannot stand them), but the only player halfway in Greece’s court is the IMF.
The IMF has been arguing for seversal years that Greece needs debt reduction.
Curiously, Greece wants the IMF out of the picture. Why? Is Greece going to win a battle with Germany on its own?
Something is going on that does not add up. But what?
Snap elections are a possibility.
It doesn’t really matter what the battles are over, eventually some politician in Greece will have had enough.
When Greece has finally had enough of servitude, I do not know. But I am confident that time will come.
Unfortunately, I do not expect Greek politicians to play the crisis correctly. Everyone will lose.
Mike “Mish” Shedlock.
CB chief Stournaras says in a Bloomberg interview that “worst is behind us”. How can he possibly be wrong? Go to bank of Greece website. Pure comedy. Total govt debt close to € 500 bn (including Target 2). GDP around € 160 bn? Continued capital controls. € 90 bn for the banks through Target 2. NPLs of 35% or more.
Only solution is € exit.
The IMF admitted they prioritised creditors (northern European banks) over Greece and made mistakes. It could be the Greeks want the IMF out of the way having been offered some carrot by Germany or some deal with France and Southern Europe on side but it would be better for Greece to have a ‘sorry’ IMF doing their job properly.
Read this – worth it, Greece will be made to suffer to terrorise others. It is not a joke. Greek politicians may even be on side thinking the best way out is this.
https://financialguy.blogactiv.eu/2015/07/27/who-runs-europe/
IMF would help reduce terrorising power so Schauble doesn’t want them in the picture.
It’s taking a beating alone or take 10 if you involve the IMF in my know nothing opinion.
The only carrot in the Euro is with Northern Europe, the rest get the stick.
While mostly French and German banks got bailed out (getting about 200 bn of the biggest “bailout”), not it’s Northern European taxpayers who will get shafted.
Target 2 – you think the Bank of Greece will ever h o n o r those obligations?!? Dream on!
German tadxpayers have been deceived. I recall brochures by the CDU proclaiming there would never be a situation where we would have to pay for another country’s debt bla bla
It’s sickening – and the gloabal financial markets like to ignore the rot.
Greece will be squeezed until Golden Dawn wins. The current regime, like that of Italy, doesn’t have the guts yet to do what is necessary. That time will come, when people realize new boss is same as the old boss, and when they reject their major parties as echos.
A Golden Dawn win is a win for Greek nationalism.
Golden Dawn are a bunch of incompetent crazies.
Greece needs a competent immigration critic and euro critic and eu critic party.
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Greece should make clear that there is ABSOLUTELY NO WAY thru Greece to welfare europe so only few would come and for those few just a tent, food and water and school for kids like Turkey offers and the tent area should be fenced because EU law allows 18 month detention and Greece used 18 month detention before leftist-communist Tsipras stopped border control and stopped detention and freed everybody previously put in detention and started shipping people from Greek islands near Turkey to Greeces mainland and bussing people to the Macedonian border.
Tsipras and Syriza CREATED the 2015 nightmare together with Germany and Sweden who lured people to come and Italy who also just pushed people to the north like Greece did.
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The asylum application processing in Greece should be strict so that lies and fairytales are picked apart in several interviews and failed asylum seekers are sent home.
The total incompetence of EASO modules and EASO guidelines (European Asylum Support Office) ,which were originally developed in the loose, lax and incompetent Swedish immigration bureaucracy and made EU wide by stupid EU-Commission, should be thrown into the pile of stupid ideas and forgotten.
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Real asylum seekers should get asylum in Greece but with NO welfare and NO way to move to Welfare europe and IF they commit crimes the asylum should be CANCELLED as allowed by treaties but used only rarely by stupid european bureaucrats.
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Greece needs to get out of euro or the country will destroy themselves.
If Greece stays in euro the pain will get so bad that Golden dawn will get in power if a credible anti-euro and anti-immigration party does not develop.
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If EU federalization fever dreams by LIAR Juncker continue then Greece and rest of EU countries will need to leave EU and leave EU to be an Union of Germany, Luxemburg and Sweden.
Greece doesn’t want the IMF out. Certain Greek leaders who are benefitting from the existing situation want the IMF out.
Greece should take all new treasury bonds, print them, re-name them to Drachma, make them legal tender and make them usable for the payment of taxes. Then instead of selling them, use them to pay obligations to the populace. After a few years the Drachma will be the new currency and Greece can default on its Euro debt.
A hairdresser in greece can retire at 52 on government pension……ridiculous.
The EU will dissolve and the southern periphery will default on 3TRIL$ debt taking the developed world banking system with it.
Coming reset makes ’09 look like a garden party.
Sorry.
Why should anyone be in Greece’s corner? Greece reminds me of a debtor that parties and parties on credit cards, then says “I never dreamed I would have to pay it all back”, and blames the bank for their debt.
Go after those that helped them join the Euro and those that let them. Malfeasance and incompetence.
Wanting to join isn’t the crime, facilitating might be.
“Why should anyone be in Greece’s corner?”
Because those Greeks who are supposed to voluntarily submit to a life as feudal serfs to “pay down the debt”, mostly weren’t born when the partying was going on. And those minimum wage pensioners, weren’t invited to the party anyway.
Valid debts dies with you when you die. They don’t magically become the obligations of your, or even worse other people’s, children. Based on that, it shouldn’t be too hard to work out the actual validity of debt “backed by the full taxing authority”……….
“A hairdresser in greece can retire at 52 on government pension……ridiculous.”
European banks encouraged this (and other things) by continually lending Greece more money which Greece cannot repay. And the supposed bailouts of Greece are really bailouts of the lenders.
According the Tsipiras Greece has a budget surplus based on the EU accounting LOL!!!! What started out with a 70 billion bailout is now over 300 billion owed. Gotta love all of these magical numbers. Many forget the old and retired had their pensions and SS cut in half. Remember this all it will be coming to the USA and other countries in the future.
If your not debt free at retirement age and own your stuff free and clear including your home do not retire period.
Lars spot on and I too was shaking my head when the Greek Prime Minister stated the worst was behind us!! Many of us long timers here stated time and time again Greece will never be repaired until they leave the EMU. The EMU needs to stop saving the French and German banks for making stupid loans to people that could never pay them back. Oh well a BMW for every Greek, and fine French wine instead of cake this time for the poor.
Greece can be used to pull Paris into line.
Certain attitudes in Germany never change.
Greece will be let go when letting go involves an example to terrorise others.
Until then Schauble will play with them like a cat with a mouse.
https://financialguy.blogactiv.eu/2015/07/27/who-runs-europe/
Don’t forget the hopeless situation for the youths. EU at its best (sarcasm off)
Yes Chris – unhappily youths have a habit of growing up and they won’t have any sympathy left for Eurocrats. More happily Greeks are generous and genuinely nice people who tend to enjoy life and hopefully will thrive away from the jackbooted suppressers. Same for the Italians 🙂
Tsipras is an atheist marxist who spurred the traditional role of the Greek Orthodox Church from the first day he took power. Greece has been on the highway to hell ever since.
Junker to German media, 14th Dec 2016.
“I do not believe that Italy could be the origin of something which could resemble a new euro crisis.”
It won’t be a new Euro crisis but a continuation of the old one not yet put to bed.
Until they unify budgets with transfers, or develop some exit mechanism, it will not end. There is little growth to help Greece or Italy. Unifying budgets could be explosive when southern European spending in controlled by shadow Germany or the German populace realise they are paying southern European pensions/benefits.
Cuts = revolution down south or at ballot box.
No cuts = German rebellion at ballot box.
Something has to give or exit. Get rid of democracy!
The Germans have to man up as the only nation able to do anything meaningful about this death by a thousand cuts.
Schaeuble was recorded… it’s on Youtube. “We need crises”.. to push out agenda (my words). What might this agenda be?
He is a deeply dishonest man. And don’t mention his boss, the ruthless childless Federal Pant-Suit. Her promises and assurances to the voters: Mish should enumerate those, it would make it an epic post when he throws in Schaeubles lies, too.
to set the tone, how about Ulbricht? ” We don’t intend to build a wall” (2 weeks later, the Wall was built)
A crisis is a tool. It can’t be ignored so if someone can make you think they have influence over the crisis and can make sense of it, then they have control over you. Then it amounts to reeling you in. Chances are the crisis will resolve on its own without any efforts from anyone. The crisis manager is simply an opportunist who wants something from you and is using the crisis as a personal rainmaker.
The moral of the story is – Sovereignty is expensive but giving it away leads to slavery.
Keep control of your coinage.
Keep control of you borders.
Keep control of your legal system.
Pool sovereignty only when it makes absolute sense and only when you can withdraw from the pool when that makes sense.
There’s a lesson in this for individuals as well as countries.
Duh
Sounds hard.
Slavery is sooo convenient
I think you figured it out. Greece needs to work the debt off. After a few generations, they can apply for a ‘paid in full’ receipt. Greek laborers can be ‘imported’ and put up in row houses. After expenses are deducted for their upkeep, the balance can be used to pay down Greek outstanding balances. Making the debt serf row houses preferable to living free in Greece is the last challenge.
But the joke will be on the Greeks. Debt will be financing the cost of the Greek labor gangs and row houses. The ECB will, of course, be purchasing it. The Greeks will be guarantors. Perfect symmetry.
If Hillary won, I think the fix would have been in for another 8 years. I see is as world wide, with each large player doing its part. Sometime down the road, someone from the troika would have floated a trial balloon about ‘What if the Greeks could work off the debt in some way??’ Friendly supporters would gush positively at the great new idea. This was probably what the Greeks would have had to look forward to if Clinton won. (The US would get something in return for setting the stage for this idea to even be proffered.)
It’s a lesson for the individual states as well, where the many small states risk being subject to the whims of the few populous ones. Fortunately the the founding fathers added the Senate, which gives some power to the many small states, and the Electoral College, which does as well. Even then there are states that routinely get more from the the Federal government than they pay in, and states who always pay in more than they get back.
Getting back to the EU, the individual countries have far more power than the individual states in the US. Those countries in the EU that are fiscally prudent have no problems that I am aware of, save for the burden of supporting the fiscally imprudent ones. I believe that the EU should not bail countries like Greece and Spain out, but rather take their losses, and stop giving them more money. Simply let them run out of reserves and be forced to leave the EU when they can no longer pay bills. Once out, they can go back to their own currency, and spend themselves into poverty at their leisure. The eventual result would be to have the prosperous fiscally prudent countries left in the EU, and the poverty stricken fiscally imprudent ones outside.
Picture Europe with a system like the US. In that case, Italy and Greece could be like California, and wield the political power, and force Northern Europe to send them all their money, and then mock and make fun of the stupid conservative values in the north.
I don’t agree with everything he says but the Euro is an ‘Asymmetrical Monetary Union’. It will only be fixed when there is surplus recycling along with budget unification.
Problem states give up control of spending, surplus states transfer funds.
Southern states lose more sovereignty, German works for them in exchange.
Great in theory.
https://yanisvaroufakis.eu/2013/09/15/why-asymmetrical-monetary-unions-are-bound-to-fail-unless-they-feature-an-effective-extra-market-surplus-recycling-mechanism/
Maybe a political sideshow and domestic ‘concession’ after just voting in other unpopular cuts, but would think there is a wider political/financial motive also.
“Curiously, Greece wants the IMF out of the picture. Why? Is Greece going to win a battle with Germany on its own?
Something is going on that does not add up. But what?”
…
Good question
The only thing I can think of is that Greece will have more leverage with EU. IMF is the brass knuckle guy who takes senior debt question. IMF not euro centric (US big dog here) and might not care as much if European banks blow up. Germany knows its taxpayers on the hook to bail out its banks if Greece defaults.
aside … $US soaring …. DXY > 103 … things will Blow Up if this continues.
IMF ‘in love with the Euro’.
Lagarde at the helm, that won’t change.
Time for head of the IMF that is not European, certainly not French.
Lagarde and Strauss-Kahn should be the nails in that coffin.
Maybe so … BUT United States provides about 17% of IMF funding (and about the same in voting rights) … and any funding must be approved by Congress. With Republicans controlling Congress, I don’t see US doing anything to change “brass knuckles” policy of IMF … better for Greece to blackmail Europe where it has advantage.
Clog dancing in the Netherlands, school shootings in the USA, debt panic management in Greece, searching for a country in the EU, playing chess in Russia….everyone has its folklore, I guess. Sometimes it’s fun!
Something is going on that does not add up. But what?
So you noticed?
In this case, this list is a long one. All reasons are interrelated.
1) European Kick the Can. Nothing that costs actual money for Eurozone countries gets approved. Appearance of action preferred over real action. Extend and pretend has worked in the past to this end. If anyone pays anything in real money, it will be the Greeks. Debt coming due will be refinances and so will all interest payments on existing debt. The only debate is who will issue the debt and how much can the ECB be stuck with.
2) Continued existence of the EU and Eurozone is paramount. The reasons vary but many agree on this goal. Make no mistake, they will do what it takes to keep it running at any cost, as long as no real money in the form of identifiable direct cost is involved for existing EU members. Debt and ECB support required for most costs.
3) First, the mafia used Las Vegas as a money machine. Then the mafia used pension funds as money machines. Today, somebody is emulating that model and using central banks as money machines. Economists, government officials, and media have been captured to support them. One agenda is the continued existence of the EU. Another is to make the rich far richer. Another is political control over others. Figure out this bunch and you have the keys to the full organization. (My personal belief is negative rates and removal of cash will allow governments to potentially turn debt into revenue if rates are negative enough and actual inflation is high enough and the term of the debt is long enough. For 30 year debt, you need negative rates and a rate of inflation that creates a total of a little over 2% combined total for the NPV of the debt to show a positive return – debt becomes revenue.)
Your debts become an asset when rates go negative.
Everything flips.
Moving backwards becomes moving forward.
It’s the ultimate pig lipstick.
Yeah, and society heads back towards the middle ages
Maybe, but some would make out really well.
Or, a Utopian might say it’s nothing more than tax collection. This is the only way to pay for benefits, accrued interest, and ‘free stuff from the government’ that would otherwise go on the national credit card. The only way to beat the system is to not save anything yet hope the government will support you after you age past the point of usefulness. Or flip stock market paper while crossing your elderly fingers.
Trump is right about shouldering costs. In Europe only the UK and Poland meet their obligation of 2% of GDP being spent on defence in NATO.
Now, the German side will be spending more for the EU army and HQ will be outside Germany but Verhofstadt statement below sounds like they have no intention of increasing spending on defence. What gives?
He basically saying no new money, in the same speech he says elimination of unnecessary duplication to increase effectiveness. That’s still not 2%. Just reallocation.
Trump is right or the Germans have to pony up big time on defence, carrying Greece, Spain, Italy, Portugal, Ireland etc.
“He said: “You have two options.
“That’s to increase your budget and I don’t think it’s possible because every EU country has difficulties with its public finances.
“Secondly, you can make an effort to create a European defence union where you can increase the effectiveness of your defence operations.””
I just don’t understand why Greece has chosen payments to retirees as the weapon of choice to fight the EU. Why this? Why now?
There are so many other ways they could more effectively defy their creditors. Is this method more politically acceptable to the Greek people? Maybe Tsipras thinks he can more easily blame the EU for punishing the elderly than something else.
Still, I just don’t see why this particular issue and time would be the most advantageous for Greece. It makes me wonder if perhaps there isn’t any real strategy at all and that some ministry just decided to make payments without any kind of broad coordination or “plan’.
This is a fair assesment of what, when and consequence.
http://www.euractiv.com/section/euro-finance/news/eurozone-puts-greek-debt-relief-on-hold-in-christmas-bonus-row/
I read the article but am still confused. It still doesn’t explain why the Greek government chose this issue to fight on. It could have picked any number of other ways to defy creditors. And why now? Why not months ago? Why not in January?
As far as Greece is concerned they have defied no one.
Low Income Pensioners because they have seen cuts for about 7 yrs.
It’s a matter of where you stand to watch.
“Greece had exceeded its 2016 primary surplus target” – they see this surplus as available and the use of it should not be dictated by the creditors. Creditors see it otherwise.
What’s the small print?
Greek leaders know their country supports unsustainable social programs. They know the programs must be reduced. They can not possibly speak of program reductions and stay in power. Loud toothless opposition to their conqueror may allow them to do best for Greece and do best for themselves.
I often assume crookedness politicians. Maybe I ought to give them the benefit of doubt. (Ducks flying tomatos).
Those evil public pensions rear their ugly heads once again in the news.
You have to stamp out the evil public unions and the evil complicit ‘pay to play’ relationship between the public unions and the politicians before you can kill the evil public pensions are are dragging the rest of us down.
Trump is our last hope. But I didn’t hear him mention public pensions or the evil public unions even once during his campaign tour. So perhaps he knows that’s a tall order that even he can’t tackle.
Greece is done. Let it burn. Concentrate on the homeland.
If Trump doesn’t focus his energy on repealing Obamacare, it won’t matter. Even Obama’s mathematically challenged supporters are conceding that no one can afford to keep the affordable care act even if they wanted to.
Medicare goes cashflow bankrupt in 2018, according to the US government itself. Pushing people off Obamacare onto Medicare won’t help. Levying higher payroll taxes on underemployed millennials living in their parents’ basement won’t help.
Pensions are underfunded based on absurd assumptions and overpayments. Sooner or later, the crying will wear itself out and the lazy bureaucrats will get the current cash value of their pensions dumped into a 403(b) plan … its the same outcome the private sector was forced to accept a decade and a half ago. There is no “pension crisis” — its all over except for the temper tantrums from lazy public unions. The longer they throw temper tantrums, the less they will net into their 403(b) plans.
The COST of healthcare (not illegal alien’s access to insurance) is a regime ending event. Period. I don’t know if Trump wants to deal with health costs, but the can has been kicked down the road for too long already. Trump doesn’t have a choice, and neither do “we the people”.
The US will repeal Obamacare and work on lowering health costs… or the US government goes bankrupt like Greece. Decide and implement by 2018, or the default outcome is bankruptcy.
Trump is playing the role of Lou Gerstner rescuing IBM in the 1990s — too many IBM’ers were in denial about how little time IBM had left. They were going to make radical changes to their business model, or else. IBM retirees weren’t asked if they wanted to have their pensions paid (present cash value) into IRAs — the alternatives were far worse, and two court rulings ratified the fait accompli decision.
Eastman Kodak didn’t want to make any radical changes (Kodak was still the “global super power” in cameras and film at the time).
Trump will get rid of Obamacare, or Obamacare will get rid of the US government. Simple as that.
“The COST of healthcare (not illegal alien’s access to insurance) is a regime ending event. Period.”
!Yes!
I know that all the Euro nations spend much less than we do on a per capita basis for healthcare. And their citizens live longer than ours. Go figure. We’re getting screwed on both ends. We pay more and we our average life spans are shorter.
Few of us like socialized medicine. But much of our healthcare system is socialized today. Much more than half is socialized.
The problem is that we’re subsidizing the rest of the civilized and uncivilized world by selling our medical equipment and pharmaceuticals at a huge discount compared to what we pay for them in our own country.
I could fly to India and get a five-star quadruple bypass in a first class hospital by a US trained cardiothoracic surgeon for 10%-15% of what I would pay stateside.
Something is wrong with that picture.
PS — agree with you 100% on Greece. Its going to burn. That decision was made by the Greeks and the EU two decades ago.
The EU/ECB can order the tide not to come in, and such a decision is “legal” in their courts (not that this matters at all). The tide is going to happen anyway.
Public pensions are small-government demons funded out of towns, cities and counties.
e.g. North Carolina prohibits collective bargaining by public employees.
I’d rather Trump focus on big-government problems.
PS — I also agree with you 100% on Greece. Its going to burn.
So the EU’s most stubbornly socialist/communist nation just can’t seem to get it’s economic affairs in order. What a (shocking!) surprise!
Too bad for Venezuela that they can’t join the EU and get in on the welfare for sick countries program.
Tsipras is an atheist marxist who SPURNED the traditional role of the Greek Orthodox Church from the first day he took power. Greece has been on the highway to hell ever since.
There are a few people smiling over this… Lord Rothchild, Goldman Sachs, et al.
Just yesterday, a commenter on this website (TosTrader?) was lecturing me about how the ECB had everything under control. Drahgi was doing whatever it takes; Juncker or some other drunk was telling us the Greek crisis was resolved once and for all; Italian banks were solvent; the French and Germans were BFFs; illegal immigrants were helping little old ladies cross the road without raping or robbing them…
How many times is this fascist nightmare called the EU going to be fixed “once and for all”???
This isn’t “another Greece crisis” as the blog post title suggests. Its the same stupid nonsense, again and again and again. Its the same crisis, and it will never be resolved by central bankers and drunk bureaucrats that no one elected.
Now Euro bankers are getting more overt in trying to oppress helpless Greek elders to bail out bankers. Printing has been secretly oppressing elders for years with QE inflation of Euro pensions. Will bankers ever stop oppressing the poor and elderly?