Another month another cliffhanger

[Suff]

Well it all becomes clear now.

No amount of debt forgiveness on the bailout will fix Greece unless they restructure. Because we'll just be back here again in 25 years time when the bonds they deferred for 30 years expire and Greece is still carrying 175% (and climbing), of GDP, debt.

It's all going the wrong way. Greece has 25 years to reduce it's debt from 175% or so, down to below 100%. This is not going to happen and the $200bn or so of bonds which are zero interest bonds will have to be exchanged for interest bearing bonds. Which Greece will not be able to do whilst still carrying more than 100% of GDP in debt.

So the EU has to force Greece to adhere to the plan and produce a budget surplus which will, over the next 25 years, allow them to reduce their primary debt enough to cover the 30 year bond fudge done in 2012.

In other words, there is a crunch coming one way or another. There are two options. Syriza capitulates. Or. Greece defaults. The fairy story of Greece passing enough laws to write down their debt enough to swap all those 30 year bonds for newer short term debt in 25 years time is just that, a fairy story.

The article I linked is clear on one thing..

The timing and design
of the restructuring left money on the table from the perspective of Greece, created a large risk for European taxpayers,
and set precedents—particularly in its very generous treatment of holdout creditors—that are likely to make future debt
restructurings in Europe more difficult..

The two points there are the risk to European tax payers and the generous treatment of holdout creditors.

The EU taxpayers (including the UK), have funded the fudge. The holdout creditors were mainly German and French banks who could not be allowed to fail. Hence the "very generous" settlement for them.

So, in the end, the restructuring fixed the rest of the EU and left the Greeks hung out to dry funding it. The IMF wanted a much deeper default and for creditors to bear the bulk of the restructuring. This was unacceptable to the EU and, especially, the ECB who could have failed due to the fallout.

In light of that information, the position of the EU finance ministers is not quite as honest and above board as we are led to believe.

[Workingman]

Breaking news yesterday and today is that the Greeks have had enough and want their creditors to "get real" and suddenly this makes Greece an "emergency area" for EU finance ministers.

Greece could now default and leave the Euro and the cost will be much greater than if the creditors had not been so damned bloody minded. There will be a crash in some sections of stock markets, but nothing that a bit of short selling won't mitigate. Always an upside from a disaster for some, eh?

There would also be an upside for the Greeks. Lessons have been learned about spending money you do not have on an unnecessarily large public sector. A return to the Drachma under such conditions would make holidays to Greece as cheap as chips. People would flock there with their £, $ and € and spend like there was no tomorrow. The hotels and restaurants would be full, with staff needed to be taken on. Farmers would be able to produce food from the Garden of Eden and again would need workers. Banks would be busier than ever. Fishermen would be out day and night to meet demand. Handled with care the Greek economy could be in for a boom time.

[Suff]

Handled with care the Greek economy could be in for a boom time.

I think this is part of what they fear. The other part is that they made all the EU taxpayers take a chunk of the Greek sovereign debt. Eventually someone is going to ask "where did that money go"? The answer is going to be "to the EU banks which we bought it from". That is not going to please people much at all.

When it was a case of the PIIGS paying to recapitalise the banks which they had borrowed from it was not an issue. If there is a default and EU taxpayers foot the bill, there will be more questions asked.

In simple EU fashion they chose to lie first and cover up after. Never having been beaten by the honesty stick, they've never seen a reason to tell the truth and fight their corner as being "better" to do what they are doing.

I do wonder what the bleating noises will be like. Of course the outrage and breast beating will come first. But will they actually throw Greece out of the EU? I don't think so. But given that the EU is a petulant pram/toys out of, throwing, organisation, it's not to be discounted. At least initially...

[Workingman]

Greece could be kicked out of the Euro but not out of the EU, there is no mechanism for that to happen. I suppose life could be made so tough for them that they choose to leave, but it would always be their choice.

[Suff]

Not quite. Almost the opposite. The only way, supposedly, to leave the Euro is to leave the EU, because there is no mechanism for leaving the Euro except by leaving the EU. Leaving the EU, on the other hand, is a well defined process in which exiting the Euro is also well defined.

This, of course, is total BS as there are plenty of countries in the EU who are not in the Euro.

But, consider this. The way the treaties are written, sooner or later, everyone will have to join the Euro or leave the EU and that is only going to become more mandated as each treaty change happens. Expect the UK to have to veto the next treaty or negotiate an opt out because we are certainly NOT joining the Euro. We'd never vote for it and it would be political suicide for any government to force it on us.

So I see Greece being allowed to leave the Euro but I see a fudge around Greece leaving the EU, allowing them to stay.

What I don't see is any treaty update that allows a country to stay in the EU and leave the Euro once joining it. They are in it for the long game and the long game is total political and financial control in Brussels and Frankfurt respectively.

[Workingman]

See this article:

Can Europe actually kick Greece out?

In a word, no. EU bylaws provide no mechanism for expelling a member state. Indeed, the EU’s laws in spirit are integrative and unifying, "conciliatory" rather than "punitive." Therefore, in letter, they provide no option for kicking a country out, no matter how much other member countries might want to.

And this

Eurozone countries are formulating plans to boot Greece out of the single currency, as expectations grow that Athens may default on its debts next month.
...
By tacit approval of the other Eurozone countries a process is started that in effect results in Greece being expelled from the euro.

Not able to be kicked out of the EU, but possible to be expelled from the €zone.

[Suff]

There is a simple process of kicking them out of the EU.

They block the banks from issuing Euro, block them from buying Greek € debt and then tell Greece the only way they can get a functioning system working again is to request that they leave the EU and, by default, the Euro.

I'm not sure how far this is going to go. They need to make it punitive so that nobody else wants to walk that path. The question is: What are they more scared of? Losing Greece from the EU? Or losing Italy, Portugal and Spain from the Euro, possibly followed by Ireland?

That is a very hard question to answer. I'm sure that they don't even know the answer and won't look into that particular Pandora's box until Greece forces them to.

In the end their easiest path, without setting a precedent, is to force Greece to request that they leave the EU.....

[Suff]

Everyone is getting the twopenneth worth in.

I note this comment

One diplomat described as amateurish Greece's attempts to unlock bailout funds from the EU and IMF.

I'm reminded of a Tom Clancy statement in his Executive Orders book.

If you want to know what the Presidents policy is all you have to do is listen and take notes...

Nobody is listening and taking notes. All they want to do is try and "interpret" what is being said so that they can "force" Greece to do what they want.

It's like the highwayman shouting "Stand and Deliver". The person in the coach says "No". And the highwayman discovers that his blunderbuss is a peashooter....

More fun and games this week. More times Schuman is going to be shut off, I get a faster metro transit to work as it doesn't stop at Schuman and I have to go 3km further to get fuel for the bike.

I'm sure it's all in a good cause.... Not!

[Suff]

I've been reading all the press about the finance ministers meeting today.

It seems to me that they are finally getting to the point. Let's review the lexicon of an EU debate.

Agreement == Do as you are told
Mutual benefit == You do as you are told, no matter the cost and we give you a few crumbs of money which will fix nothing.
Discourse == Lecture
Mutual == My benefit, your loss
Up to Greece (as in the resolution is) == Capitulation
Negotiations == Dressing down
Clowns == Greeks who won't capitulate
Debtor defiance == Questioning the sanity of the Troika
Talk == Lecture

So, as we can see and as I have been saying since February. The EU will not negotiate, it's stand and deliver. The Greeks cannot deliver what is asked, they have already given up every single thing they can. Yet the "negotiation" stance from the creditors is "do as I say and we'll discuss it".

Anyone think that Cameron has a snowballs chance in hell of getting solid treaty change??? Greece can't even get a teaspoon full of money to tide them over till a true discussion on their debt can happen, without taking all their clothes off and running naked down the street....

[Suff]

During this type of thing I like to read the sidebars and less "popular" articles to see what the alternate view to the slavering pack is.

This article is highly enlightening... Especially this part

Zsolt Darvas of Bruegel, the Brussels-based think tank, says that Greece’s labor market is now more flexible than the German one and that the adjustments in unit labor cost and ease of doing business have made the country potentially more competitive.

Also the other part which is floating around, but many news outlets are still in "bad Greece" mode so won't mention it, is that the pension load of Greece, based on pre crash economy, is pretty much exactly the same as Germany and France. It is, in fact, only the massive unemployment and economic crash, with makes the pensions 16% of GDP. The changes already made to the pensions, if also balanced by a recovery in the economy and a reduction in unemployment, would put Greece exactly on a par with Germany and somewhat more flexible.

Yet, what does Germany want? More pension cuts, More VAT rises and more deregulation of the jobs market and more sell offs of Greece national assets.

At some point, you do need to ask yourselves "what exactly is the goal of the Troika"? Is it to rescue Greece and reconstitute it's finances and economy to allow it to pay it's debts with pride? Or is it to have a whipping boy who pays the price for the next 50 years. Greece will be paying the bailout back for the next 42 years (that's the terms), but it will be paying it back with borrowed money which will almost certainly be at a higher interest rate than the bailout.

Personally I'm in skeptic mode....