Greece is in reverse. Greek Unemployment Rose to 23.1%, GDP contracted 1.2% last quarter, and now the US is pressuring the IMF to back away from continued bailouts.
4th “Bailout” Needed
Greece’s labor market seems immune to the broader improvements in jobs growth seen elsewhere in Europe where average unemployment has now fallen to a four-year low of 9.8 percent.
The economy, which has the highest debt burden in the bloc at 180 per cent, also suffered a sharp growth setback in the last three months of the year, contracting by 1.2 per cent.
It was the worst GDP performance since the height of its debt crisis in the summer of 2015 and reflects renewed uncertainty in its bailout talks. Average eurozone GDP rose 0.4 percent in the fourth quarter of 2016.
“Bailout” History
US Pressures IMF to Walk Away From Greece
Now, conservatives in US Congress say Europeans should solve the crisis on their own. This puts the IMF Under Pressure Over the Greek Bailout.
In what was labeled an “America First” budget revealed on Thursday, the president proposed a $650m cut in US funding over the next three years for multilateral development banks including the World Bank. He also this week nominated two conservative economists with a history of criticizing the IMF and the Bank for the two top international posts at the US Treasury.
But conservative Republicans in Congress are eager for him to go a step further. They want him to assert US power over such bodies by taking a hard line and opposing further IMF involvement in Greece, which is sliding towards another crisis this summer unless its European creditors agree to cover billions more in debt payments.
A bill introduced on Thursday by Bill Huizenga, a Michigan conservative who was first elected to Congress with Tea party backing in 2011, calls for the Trump administration to oppose any further IMF participation in a Greek bailout. Should the US fail to achieve that aim, the bill would also require the US to oppose any broader IMF quota reforms until Greece had repaid all of its debts to the IMF.
“The IMF is supposed to be a lender of last resort, not a fig leaf of first resort for eurozone members,” Mr. Huizenga said.
“The IMF isn’t a fund to rescue political parties in creditor nations, nor should it be a junior partner to outside organizations that lack the commitment to do their work,” he said. “For seven years now, the IMF has been used to shield eurozone officials from their voters, which has tarnished the fund’s reputation, prolonged Greece’s misery, and put off hard choices about Europe’s future that must be made regardless.”
Grexit Déjà Vu
The Council on Foreign Relations writer Robert Kahn reports Greece on the Brink: Déjà Vu, All Over Again.
Greece appears to have neither the will nor the resources to make its payments, so avoiding default will require European creditors to disburse from their existing loan programs.
Bottom Line: Greece and its creditors are again locked in a showdown over reforms, cash, and debt relief. Another cliff-hanger ahead of heavy July debt payments looks likely. Extend-and-pretend is a dead end for Greece and an increasingly populist Europe, and a more ambitious agreement seems ruled out by bailout fatigue in creditor countries. Markets are once again underestimating the risks of “Grexit.”
Conclusion: All of this suggests that, for economic and political reasons, the window may be closing on a comprehensive resolution of Greece’s crisis. I would not bet against a deal to buy time, though probably without the involvement of the IMF. With each showdown, the risk increases that the Greek government will decide that its economic future is better outside the eurozone.
Key Differences This Time
In regards to bailouts, Kahn notes two key differences between now and past last minute deals.
- The IMF has taken a much firmer stance against the current program, and its fire has been aimed at both the creditors and the debtor.
- The second new element is the rising populist backlash against continued bailouts in the European Union (EU). Notably, it is extraordinarily difficult for a Dutch or German policymaker, pressured by anti-immigration and anti-EU sentiments at home during an election period, to make precedent-setting concessions to Greece on debt.
Greece is Hopeless
Clearly, Greece is hopeless.
But nothing has changed. Greece is no more hopeless today than it was in 2009, three “bailouts” ago.
Of course, those bailouts were never designed to help Greece. They were designed to help Greece’s creditors and to calm down Eurozone fissures.
With new and more important fissures to worry about, Germany and the rest of the Eurozone countries are increasingly prepared to throw Greece under the bus. On its part, Greece was never willing to implement much-needed reforms.
So here we are, Grexit has been staved off so many times now, most think it can never happen.
Mike “Mish” Shedlock
what is that definition of insanity?
to persist with a confirmed failure.
Greece private sector is barely € 100 bn in GDP terms. Total govt debt is getting closer to € 500 bn when adding Target 2 debt, contingent liabilities to the € 320 bn official debt. The EU has to keep the show going because a € 500 bn default would destroy Brussels.
The € and the EU have been a disaster for Greece. Wealth destruction and suffering with 25% of population below the € 370 a month poverty line.
and they were supposed to absorb immigrants too?
that shows you the complete insanity of the European Union right there.
Huizenga for Secretary of Treasury
Reads like he speaks some sense.
What cannot be paid back, will not be paid back.
I’m for term limits for all government office holders in the western democratized world. That means everybody, both left and right.
“Whatever cannot be voted for, will not be elected.”
“So here we are, Grexit has been staved off so many times now, most think it can never happen.”
Five years of 23% or higher unemployment. Has it been worth it?
Of course it has. Merkel can claim victory.
And blame Trump when it implodes
and blame Trump when it implodes
and nationalist/populist movements in general.
Merkel has assured the taxpayers that a) it’s a great deal and b) that every € will be reapid. c) German parliament’s support hinges on continued IMF involvement.
Has any one seen an enumeration of lies by Schäuble (“aka Gollum”) and Merkel? It’s astonishing :—(
They won’t even mention Greece’S i. Target 2 debt or ii. ECB debt.
All these lies: the day of reckoning will be ugly. and the lenders will be n a k e d
“As long as the money rolls in…and goes to bank accounts outside Greece”
All the money being ‘lent’ to Greece goes to pay debt issued by Greece’s creditors, after it was moved off insolvent Euro banks onto Euro taxpayers… if you don’t know that you haven’t been paying attention. But of course, you quote, as if it is relevant that:
“Greece was the very first country to default on its debt since 377BC”
Greeks are as about the same people in 2016 as they were in 377bc. Just like Americans are exactly the same people in 2017 as they were in 377bc.
This level of discourse….
Oops meant to reply this further below, apologies.
Why is American money being used to bail out European banks? That’s all this is. Germany has huge trade surpluses. Surely it can afford to spend some to avert a financial crisis. Let them pay for their mistakes. It’s the only way they’ll learn.
It’s circular. EU money is used to bail out US banks whose money is used to bail out EU banks. Rinse. Repeat. Those who cannot see the wisdom in this are either unfit for their positions, stupid, or incompetent. While contemplating which one(s) you are, please marvel at the emperor’s new clothes.
Exactly.
“You’re gonna need a bigger bail-out.”
this time around Schäuble will be having a little collateral call. The bankers will then sell the greek
assets to pay down debt.
schäuble happy
deutsche bank happy
Paris banks happy
goldman, blackstone, and carlyle the happiest
It’s about time the US quit being the world’s policeman AND the world’s sugardaddy. In some ways Trump is better than I expected; now if he can just get the RINOs to go along with him.
And like always, the Greek debt links to Goldman Sachs fraud during the 2008-9 crisis. This was released today from James Corbett:
What part did Draghi have to play in it when at GS?
“now if he can just get the RINOs to go along with him”
Considering that the vast majority of pols from both major parties cannot run self-funded campaigns, they’re all owned by pretty the same special interests and, as a result, are pretty much just two sides of the same bought and paid for coin. Besides, to make any significant dents re: swamp draining, HUGE changes would be required to HUGE and powerful sectors like the VAST armies of fed bureaucrats, insurance, finance, pharma and even to the dominant GARBAGE economic theory. We will be very lucky to get even minor ones.
An excerpt from “Post-Soviet Lessons for a Post-America Century” by Dmitry Orlov, someone who experienced the collapse of the Soviet Union and the various effects of that collapse on life there:
People in the United States have a broadly similar attitude toward politics with people of the Soviet Union. In the U.S., this is often referred to as “voter apathy”, but it might be more accurately described as non-voter indifference. The Soviet Union had a single, entrenched, systemically corrupt political party, which held a monopoly on power. The U.S. has two entrenched, systemically corrupt political parties, whose positions are often indistinguishable, and which together hold a monopoly on power. In either case, there is, or was, a single governing elite, but in the United States it organized itself into opposing teams to make its stranglehold on power seem more sportsmanlike. (Actually, it’s to maintain the ILLUSION of voter control, that illusion revealed by the results of the 2014 Princeton University study I’ve previously quoted here – Winston)
Although people often bemoan political apathy as if it were a grave social ill, it seems to me that this is just as it should be. Why should essentially powerless people want to engage in a humiliating farce designed to demonstrate the legitimacy of those who wield the power? In Soviet-era Russia, intelligent people did their best to ignore the Communists: paying attention to them, whether through criticism or praise, would only serve to give them comfort and encouragement, making them feel as if they mattered. Why should Americans want to act any differently with regard to the Republicans and the Democrats? For love of donkeys and elephants?
Probably the explanation of current situation I’ve ever read.
Greek culture is corrupt on par with Nigeria and Russia, and has been so for some time. Beware of a Greek bearing gifts goes back to the Peloponnesian wars 2,500 years ago. The Greeks got themselves into this fix by their own deceit, and the Germans are snickering at their just reward. When the Greeks decide to reform their culture then their suffering will end. Reforms would include paying taxes, an end to socialist welfare, honoring debt, honoring contracts, and fair value work for honest wages.
1/2 of americans pay no income taxes
IMF as been in love with the Euro project and thereby over involved itself.
I don’t think EU populists would be anti Greek assistance. There is considerable sympathy to the plot of the Greeks.
It’s the foundations of the Euro that it’s to blame and slack vetting on the admission of Greece that was assisted to join by a well known global bank outfit. A bank outfit that is well represented at the top table in Europe – political and financial.
As stated these bailouts were never intended to help Greece; As usual it is about making the interest payments and bailing out the creditors. I would be the worlds best investor if someone else picked up all the risk.
I’ve been to Greece.
33% say: “All I really want is a decent job”
67% say: “I want a government check every month– it’s my birthright”
or—- “I want a government job doing pretty much nothing”
Until these percentages change, nothing will ever really change.
I’ve also been to Greece many times and met some decent hardworking people including those involved in rejecting the push for development of Vidos Island into an Arab playboy centre in exchange for cash. Russians were all over the place offering this, that and the other. To their credit the Greeks put value before price.
There are problems there but a good proportion of people very willing to work and do their part and proud to be Greek and considered part of Europe. A beautiful country with big economic problems.
As is common elsewhere, they have also been let down by their politicians, cronyism and corruption in high places. Deals behind closed doors with banks etc.
There are problems with tax evasion but less so in the real working class, more so further up the pyramid in the professional classes. Unfortunately it’s those at the bottom that suffer the most.
The people of Greece understand that their government is hopelessly corrupt — as in honest people do not go into politics (in Europe or in the USA). Honest people go into banking or organized crime or prostitution — but not politics.
Greece the country collapsed some 2000 years ago, and it hasn’t had an honest or functioning government since (except in the imagination of big corrupt government advocates).
Somehow, houses get repaired and rebuilt. Late at night, little elves and minotaurs sneak in and do all the repairs / construction — because they are invisible and don’t have to pay fees and taxes and bribes to corrupt government officials.
Greece (the people) have better longevity than many first world nationals. But Greece the government is a hopeless cause that will never take care of the people of Greece, never mind repay the clueless wonders in Brussels.
The IMF is as corrupt as the French government, because it essentially is the rejects from French elections.
All together now:
“The Greek insolvency is resolved ONCE AND FOR ALL.”
— Mario Draghi
As usual with politicians you can never be sure which way they will turn. At the last minute they will do a deal because otherwise stock market will plunge and that is something our present masters of the universe read central bankers will not allow at any cost. It will have nothing to do with Greece.
The notion that Greece hasn’t undertaken reforms is unbelievably wrong. The structural changes it has undertaken have never before been accomplished by an economy to this level in this short a period of time without a revolution or likewise catastrophic event. This is a myth that I simply don’t understand how it perpetuates.
” the risk increases that the Greek government will decide that its economic future is better outside the eurozone”
This is 1000% wrong. Greece and the Greek people are wholeheartedly committed, absolutely and with no hesitation, to the EU. This is why there has been no revolt. Even those hardest hit by the crisis are in favor of remaining. The political class which is also the elites and wealthy, will never intentionally exit the EU either as they exploit the relationship to their own benefit (and to the detriment of Greek people at large).
What people don’t understand is just how bad the lack of control over your own Central Bank is. Three examples of recent events in Greece:
1) Tax refunds for overpayment: All have been eliminated from the books. Anyone who overpaid (as certain people known to me have) and due a refund cannot and will not recieve it.
2) “Solidarity” tax: This was also actually a ‘net-worth’ tax that required anyone with anyone with a certain level of assets to make a payment to the tax coffers to keep Greece current on its obligations, above and beyond any existing legal and in-force tax charges.
3) Elimination and recapture of Business Development funds: The government ran grant programs to match private investment of business development with government funds of up to 20% of the total investment. First they reduced the percentage. Then they eliminated it. Then they sent out notices to those who had received some funds that they had to pay it back.
Explain to me, in light of the above, how anyone can invest or generate business in the current economy, with no access to lending (capital controls), government subsidies, and onerous taxation…
“Greece and the Greek people are wholeheartedly committed, absolutely and with no hesitation, to the EU.”
As long as the money rolls in…and goes to bank accounts outside Greece. Just to that point and then it’s insolvency and default time.
“A few days ago, I was speaking to a friend of mine who had decided to go back in economic history and do some research on defaults. Turns out, Greece was the very first country to default on its debt since 377BC. Moreover, since its independence in 1829, Greece has spent around half its time in default on its sovereign debt.”
http://www.cnbc.com/id/47814564
“As long as the money rolls in…and goes to bank accounts outside Greece”
All the money being ‘lent’ to Greece goes to pay debt issued by Greece’s creditors, after it was moved off insolvent Euro banks onto Euro taxpayers… if you don’t know that you haven’t been paying attention. But of course, you quote, as if it is relevant that:
“Greece was the very first country to default on its debt since 377BC”
Greeks are as about the same people in 2016 as they were in 377bc. Just like Americans are exactly the same people in 2017 as they were in 377bc.
This level of discourse….
Buy stock in the banks.