Time to burn Greece?

beeftotheheels · 24-05-2011 5:10pm #1

There was an interesting suggestion in the Lex column of the FT today that the ECB could do worse than learn from the American settlers and fight fire with fire by burning Greece to protect the rest of the Eurozone.

There is a certain logic to the notion that you can separate Greece from the other peripherals on the basis that the source of their problem is illegality (telling lies in their budgets), and one of the reasons they are not meeting their bailout terms is additional illegality (rampant tax evasion).

If the markets would accept this decoupling then by leaving Greece to their own devices we would also have a nice little European example of what a Eurozone default looks like which may be instructive for the Spaniards.

Undoubtedly as the largest holder of Greek bonds the default would hurt the ECB and require recapitalization of that institution. It would also hurt many European banks and financials, but not by as much as Ireland or Portugal would.

It would be a gamble, but the logic is appealing to me. The markets are jittery, nothing that has been done to date has calmed them, so perhaps it is time for more drastic action from the ECB.

jmayo · 24-05-2011 5:33pm

beeftotheheels wrote: »

There was an interesting suggestion in the Lex column of the FT today that the ECB could do worse than learn from the American settlers and fight fire with fire by burning Greece to protect the rest of the Eurozone.

There is a certain logic to the notion that you can separate Greece from the other peripherals on the basis that the source of their problem is illegality (telling lies in their budgets), and one of the reasons they are not meeting their bailout terms is additional illegality (rampant tax evasion).

If the markets would accept this decoupling then by leaving Greece to their own devices we would also have a nice little European example of what a Eurozone default looks like which may be instructive for the Spaniards.

Undoubtedly as the largest holder of Greek bonds the default would hurt the ECB and require recapitalization of that institution. It would also hurt many European banks and financials, but not by as much as Ireland or Portugal would.

It would be a gamble, but the logic is appealing to me. The markets are jittery, nothing that has been done to date has calmed them, so perhaps it is time for more drastic action from the ECB.

Jsut a few questions...
Firstly what facilities are in place to force a Eurozone member to exit or to kick them out involuntarily ?
Are there any ?
Secondly what political reprecussions on the EU project would this have ?

Why should Ireland or Portugal support such a move when they could be next ? Would such a move just not make Ireland's and Portugal's position more unstable ?

Do not underestimate the affect this would have on European banks (British included) and the affect it would have on other European states like Spain and Italy.

beeftotheheels · 24-05-2011 5:45pm

jmayo wrote: »

Jsut a few questions...
Firstly what facilities are in place to force a Eurozone member to exit or to kick them out involuntarily ?
Are there any ?
Secondly what political reprecussions on the EU project would this have ?

Why should Ireland or Portugal support such a move when they could be next ? Would such a move just not make Ireland's and Portugal's position more unstable ?

Do not underestimate the affect this would have on European banks (British included) and the affect it would have on other European states like Spain and Italy.

There are no provisions for leaving the euro. It is kind of like a marriage without provision for a divorce because at the time of the marriage no one thought it would go wrong. So we don't know what will happen.

What distinguishes Greece is that they lied at the alter. They didn't meet the criteria for joining the euro but told everyone that they did, so a fudge may be easier for Greece than for us or Portugal - an annulment as it were rather than a divorce.

The argument only has merits if you believe that the markets will accept the specifics of Greece rather than seeing it as a precedent for other Eurozone countries.

But I found myself scared when reading the papers earlier, Greece is causing a hell of a lot of instability and even the Fed are starting to get nervous about the knock on effect of the eurozone crisis on the US economy.

The Spaniards didn't help matters with their local elections.

Default is now being talked about in Ireland and elsewhere as a solution rather than a problem and a Greek default is looking more and more likely. So rather than allowing the Greek's default why not force their hand which strengthens the moral hazard arguments, and if it goes catastrophically then others (like us) will continue trying to avoid default at all cost.

http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults/

Tora Bora · 24-05-2011 6:10pm

I get confused when I hear the Greeks, cooked the books, and lied their way into the Euro club.
Surely, there should have been elegibility rules, which there was.
And surely, there should have been some sort of independent verification by the ECB, of the books of all would be members, BEFORE, granting full membership status.
Seems like more ineptitude on behalf of the Eurocrats, if you ask me.

Scofflaw · 24-05-2011 7:26pm

Tora Bora wrote: »

I get confused when I hear the Greeks, cooked the books, and lied their way into the Euro club.
Surely, there should have been elegibility rules, which there was.
And surely, there should have been some sort of independent verification by the ECB, of the books of all would be members, BEFORE, granting full membership status.
Seems like more ineptitude on behalf of the Eurocrats, if you ask me.

If one believes that the EU is some kind of immense bureaucracy with extraordinary fiat powers over the helpless member states and a lot of time on its hands to poke and pry where it's not wanted, that explanation would make sense. However, the EU is in fact a very small bureaucracy (smaller than the HSE, for example) with very limited powers, and whose officials pretty much have their hands full just carrying out the duties they've been tasked with. As such, it doesn't have any way of "independently verifying" the books of a member state - it has to act on the basis that the data it's given are not fraudulent.

Finding out whether a national government is cooking the books is really beyond the powers of anybody bar that national government - if the government wants to hide the fact, it can and will do so. So, in the case of Greece, it was only when a new and reforming government was elected to office that the fraud committed by the previous governments came out - and I suspect that had the fraud been sustainable the current Greek government might also have decided just to keep quiet about it.

It was up to the member states at the time of the creation of the euro to decide whether they would give the EU the legal power and the necessary resources to independently verify whether the member states were being honest about the convergence criteria, presumably through some kind of hostile audit procedure. Opposition from a single member state would have been sufficient to put an end to any such plan, although there's no particular sign that the member states did anything bar say "well, we're all grown-up First World countries, right? I'm sure we're all telling the truth..." rather than go down the road of putting themselves in a position where they too would be audited.

This seems to be a regular theme, by the way - the EU has fantastical powers attributed to it by people, and then has negligence attributed to it because it doesn't use the imaginary powers it doesn't have. The EU isn't Europe's federal government - it's a relatively small bureaucracy with rather strictly circumscribed powers at the service of a framework for joint European action by the member states.

cordially,
Scofflaw

Prakari · 24-05-2011 8:47pm

The Greeks imported accounting fraud from Goldman Sachs, an expert in this area.

Tora Bora · 24-05-2011 8:51pm

Scofflaw wrote: »

If one believes that the EU is some kind of immense bureaucracy with extraordinary fiat powers over the helpless member states and a lot of time on its hands to poke and pry where it's not wanted, that explanation would make sense. However, the EU is in fact a very small bureaucracy (smaller than the HSE, for example) with very limited powers, and whose officials pretty much have their hands full just carrying out the duties they've been tasked with. As such, it doesn't have any way of "independently verifying" the books of a member state - it has to act on the basis that the data it's given are not fraudulent.

Finding out whether a national government is cooking the books is really beyond the powers of anybody bar that national government - if the government wants to hide the fact, it can and will do so. So, in the case of Greece, it was only when a new and reforming government was elected to office that the fraud committed by the previous governments came out - and I suspect that had the fraud been sustainable the current Greek government might also have decided just to keep quiet about it.

It was up to the member states at the time of the creation of the euro to decide whether they would give the EU the legal power and the necessary resources to independently verify whether the member states were being honest about the convergence criteria, presumably through some kind of hostile audit procedure. Opposition from a single member state would have been sufficient to put an end to any such plan, although there's no particular sign that the member states did anything bar say "well, we're all grown-up First World countries, right? I'm sure we're all telling the truth..." rather than go down the road of putting themselves in a position where they too would be audited.

This seems to be a regular theme, by the way - the EU has fantastical powers attributed to it by people, and then has negligence attributed to it because it doesn't use the imaginary powers it doesn't have. The EU isn't Europe's federal government - it's a relatively small bureaucracy with rather strictly circumscribed powers at the service of a framework for joint European action by the member states.

cordially,
Scofflaw

Well the poor underresourced, beurocrats found time to pass assenine laws and regulations, regarding the legal size and weight of cucumbers. The shape of carrots. The curvature of bananas. FFS!
Laws draconianaly applied in Ireland and other states, and blithely ignored in the Republic of France. But hey, silly regulations are for Paddy, not Sarkozy.

Shoulda gone to specsavers, most of those eurocrats.:cool:

beeftotheheels · 24-05-2011 8:53pm

Prakari wrote: »

The Greeks imported accounting fraud from Goldman Sachs, an expert in this area.

Huh??? Where on earth did that come from?

Goldman Sachs are a reputable Wall Street bank who produce their accounts under US GAAP. There have been suggestions of manipulation thrown at many of the finance houses due in no small part to the complexity of the accounting standards dealing with financial transactions.

Greece, as a sovereign state produces cash accounts which are black and white unlike the grey area of trying to comply with accounting standards and they misstated them.

beeftotheheels · 24-05-2011 9:03pm

Tora Bora wrote: »

Well the poor underresourced, beurocrats found time to pass assenine laws and regulations, regarding the legal size and weight of cucumbers. The shape of carrots. The curvature of bananas. FFS!
Laws draconianaly applied in Ireland and other states, and blithely ignored in the Republic of France. But hey, silly regulations are for Paddy, not Sarkozy.

Shoulda gone to specsavers, most of those eurocrats.:cool:

What on earth does an archaic and repealed regulation on bananas have to do with Greece leaving the euro or otherwise?

later12 · 24-05-2011 9:32pm

I haven't read the Lex yet but the first question I would ask is who this plan would really help. It is, on the face of it, a fine idea. A fine idea, that is, if one's aim is to bring about a strong and stable Europe impenetrable to, and safe from, the scallywags... but what if we are one of the scallywags? And are we not?

The question arises whether the markets would look on Ireland, Portugal, Spain, and maybe Italy, as a risk of being the next out in their tails, and stay firmly away, creating yet another self fulfilling prophecy cycle with negative feedback loops to sovereigns funding themselves. It could end up in a progressive cleaning up and clearing out of the periphery, leaving only the healthy core, which doesn't need saving to begin with.

I think this would be an option if contagion were to start to infiltrate the financial health of the core, but as yet there is no real question of that happening, and I don't think this would be a particularly helpful move to us in the periphery.

Of course, that doesn't mean that it wouldn't be wise or clever, from an objective market standpoint it sounds like it might be both.

later12 · 24-05-2011 9:35pm

beeftotheheels wrote: »

What on earth does an archaic and repealed regulation on bananas have to do with Greece leaving the euro or otherwise?

Crooked and inclined to cause accidents?

Or perhaps the poster is trying to suggest that straightening out Greece's problems is as hopeless as enacting laws to straighten bananas.

This should be the subject of a Liveline text poll. love those.

Finnbar01 · 24-05-2011 9:46pm

Sacrificing the weakest ones to the wolves aye?

jmayo · 24-05-2011 9:56pm

beeftotheheels wrote: »

There are no provisions for leaving the euro. It is kind of like a marriage without provision for a divorce because at the time of the marriage no one thought it would go wrong. So we don't know what will happen.

That is my point of question, there is no mechanism and at the moment it requires state to ask to leave AFAIK.
Thus you gotta convince the Greeks to go and probably get the other members to condone strong arm pressure.

beeftotheheels wrote: »

What distinguishes Greece is that they lied at the alter. They didn't meet the criteria for joining the euro but told everyone that they did, so a fudge may be easier for Greece than for us or Portugal - an annulment as it were rather than a divorce.

Ehh this isn't the vatican we are talking about where canon law can be shaped and bent to suit particular cases.

beeftotheheels wrote: »

The argument only has merits if you believe that the markets will accept the specifics of Greece rather than seeing it as a precedent for other Eurozone countries.

And what are the chances that markets will reckon that Ireland, Portugal are even worse bets because they are going to be cast adrift and whatabout Spain and Italy ?

beeftotheheels wrote: »

But I found myself scared when reading the papers earlier, Greece is causing a hell of a lot of instability and even the Fed are starting to get nervous about the knock on effect of the eurozone crisis on the US economy.

Listen if you have only got scraed lately about the mess the Euro is heading for, then I reckon you are a bit late climbing aboard the bandwagon.

beeftotheheels wrote: »

The Spaniards didn't help matters with their local elections.

Wait for the cajas/caixas to start tumbling.

beeftotheheels wrote: »

Default is now being talked about in Ireland and elsewhere as a solution rather than a problem and a Greek default is looking more and more likely. So rather than allowing the Greek's default why not force their hand which strengthens the moral hazard arguments, and if it goes catastrophically then others (like us) will continue trying to avoid default at all cost.

You see this is the weird thinking that will cost us very dear and give us the death by a thousand cuts.
You actually believe that somehow we can avoid defualt with the deals that we are currently getting, especially from our so called friends in Europe.
You still believe that we have to avoid default at all costs ? :rolleyes:

Tora Bora wrote: »

Well the poor underresourced, beurocrats found time to pass assenine laws and regulations, regarding the legal size and weight of cucumbers. The shape of carrots. The curvature of bananas. FFS!

You forgot the decade it took to decide what was and was not chocolate. :rolleyes:

beeftotheheels wrote: »

What on earth does an archaic and repealed regulation on bananas have to do with Greece leaving the euro or otherwise?

I believe Tora Bora is countering the argument made by one of pro EU posters that the EU has neither the time or resources to examine the accounts of countries applying for membership of Euro or anything else.

According to that ever so cordial poster, the EU is a small bureaucracy that has to take countries on trust.

But yet we can point out they have had time to tie themselves in knots making decision on vegetables, fruit and don't forget chocolate.

And I am not even going to go on about their extremily daft fishing quota laws.

beeftotheheels · 24-05-2011 9:58pm

I don't know why I am finding the discussions today so unnerving, but it is feeling a bit like August 2007 all over again. Up until yesterday I kept hoping that we would survive this but something changed today, I think it is possibly the involvement of the equities markets and the Fed, it could be the position of the Greek opposition, it could be Moody's position on default.

We knew the risk of contagion, we knew the ECB's position on burden sharing, we knew that the Greeks were struggling to meet the terms of their bailout. But this is all seeming more real today, that Trichet could destroy the ECB over burden sharing to try and prevent the fallout, that Greece will default one way or another and the question then is just how bad the fallout is and what can be done to manage it.

Sand · 24-05-2011 10:51pm

I don't know why I am finding the discussions today so unnerving, but it is feeling a bit like August 2007 all over again. Up until yesterday I kept hoping that we would survive this but something changed today, I think it is possibly the involvement of the equities markets and the Fed, it could be the position of the Greek opposition, it could be Moody's position on default.

We knew the risk of contagion, we knew the ECB's position on burden sharing, we knew that the Greeks were struggling to meet the terms of their bailout. But this is all seeming more real today, that Trichet could destroy the ECB over burden sharing to try and prevent the fallout, that Greece will default one way or another and the question then is just how bad the fallout is and what can be done to manage it.

Theres been an attempt to constantly play for time, to deny the possibility of anyone being allowed to lose money, to hope and pray for something to come and save us. A terrible inertia has taken over decision making, with people increasingly aware of the disastrous course we are on, but unable or unwilling to face the idea of changing course.

Its important to remember we are here because it was impossible for an Irish bank to be allowed to fail, and impossible for a stupid guarantee to be revoked before all private bondholders had been cashed out of their stupid investments.

And so here we are. But congratulations on the breakthrough.

But I found myself scared when reading the papers earlier, Greece is causing a hell of a lot of instability and even the Fed are starting to get nervous about the knock on effect of the eurozone crisis on the US economy.

I wonder if the ECB is scared too - afterall, the problem about making hysterical, unthinkable threats is that you might have to back them up to maintain credibility. And whose going to recapitalise the ECB? Germany? Doubt it.

Mr.Crinklewood · 24-05-2011 10:52pm

Do not burn Greece, it will lead to smoke and further Airplane delays.

beeftotheheels · 24-05-2011 11:14pm

Sand wrote: »

I wonder if the ECB is scared too - afterall, the problem about making hysterical, unthinkable threats is that you might have to back them up to maintain credibility. And whose going to recapitalise the ECB? Germany? Doubt it.

I would think they are terrified right now.

I don't think I spelled out the nature of my fears. Not for Ireland, not much has changed for us this week, we are still funded until the middle of next year. The US had returned to growth, Germany and France had returned to growth, the UK was getting by. My fears are that this could undo much of that, that we are back in August 2007 and have no idea where this thing will end.

Even if we are in recession if the global economy is not then we have a market for our exports. If the US and EU succumb to recession again that makes things a lot more difficult for us.

Many large European banks like Commerzbank are getting ready for a pre-Basle III rights issue (which the markets don't seem mad keen on). If their capital takes a hit on the debt crisis then the rights issues could go the way of HBOS in the UK. The German government would have to recapitalize their own banks before they recapitalize the ECB.

Where we are right now could seem like a walk in the park, because right now we believe that our European colleagues could do more to help us, they are choosing not to do so. How much worse would it be if we knew they were no longer in that position?

later12 · 24-05-2011 11:28pm

Sand wrote: »

whose going to recapitalise the ECB? Germany? Doubt it.

I do not see that this problem could be impossible to overcome. If it can be possible to kick Greece out on its lying tail, and lets be honest, probably Ireland in such a case, I do not see why a change cannot eventually be brought about whereby a man sitting at a desk clicks print x 150 billion, or whatever it is. The ECB is mainly an internal engine, it does not need to worry about external ramifications of such an act, in theory it could have endless resources without ever needing a recapitalisation.

Scofflaw · 25-05-2011 12:43am

What on earth does an archaic and repealed regulation on bananas have to do with Greece leaving the euro or otherwise?

I believe Tora Bora is countering the argument made by one of pro EU posters that the EU has neither the time or resources to examine the accounts of countries applying for membership of Euro or anything else.

According to that ever so cordial poster, the EU is a small bureaucracy that has to take countries on trust.

But yet we can point out they have had time to tie themselves in knots making decision on vegetables, fruit and don't forget chocolate.
And I am not even going to go on about their extremily daft fishing quota laws.

And one would then point out that those are their assigned tasks - to decide what can and cannot be described a particular way for the purposes of trade. That's largely what the EU regulates, and the reason it does so is so that what is described as "Grade 1 bananas" fits a certain set of criteria common to all the member states in order to smooth out trade between the member states. In terms of trade, that means that France and Ireland do both have the same criteria for the item in question. What's on sale in the shops, on the other hand, differs depending on what customers expect.

Note that the EU's bureaucrats do not then spend time intrusively checking whether what is put on sale in a member state fits that description, because that's not something they have the resources to do - again, because they haven't been given those resources by the member states.

Which takes us to the point again that the EU could only have known whether the Greek government was or is lying about the state of its finances by applying legal powers and resources it simply doesn't have. The same goes for the ECB - it only has the right to the national information supplied to it by the national central banks, nothing more. It's not "head office" - and so, to some extent, it's operating in the dark. The ECB and the EU can have an internal opinion on the reliability of the national information, but have no rights or resources to do the hostile auditing required to verify that opinion.

As far as the question of 'burning' Greece goes, there is no specified exit mechanism from the euro, and there is a commitment on the part of all EU member states to join the euro. The member states not in the euro have temporary 'derogations' from joining the euro, a situation regularised in the Treaties.

What strikes me as eminently possible here is for Greece to be given a derogation on the use of the euro. There is no specified procedure for obtaining such a derogation, there are simply two legally recognised possible situations for member states in respect of the euro - with derogation, without derogation. Nothing forbids Greece from obtaining such a derogation except its Treaty commitment to adopting the euro in the first place - but a member state can obtain a derogation from any aspect of the single market if required (with the proviso that "they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market"), so there is an implicit acceptance within the Treaties that backsliding can occur, even in respect of something as fundamental as the single market - and, even more to the point, the Treaties clearly accept that using the euro isn't a defining characteristic of membership.

cordially,
Scofflaw

beeftotheheels · 25-05-2011 1:12am

Scofflaw wrote: »

As far as the question of 'burning' Greece goes, there is no specified exit mechanism from the euro, and there is a commitment on the part of all EU member states to join the euro. The member states not in the euro have temporary 'derogations' from joining the euro, a situation regularised in the Treaties.

What strikes me as eminently possible here is for Greece to be given a derogation on the use of the euro. There is no specified procedure for obtaining such a derogation, there are simply two legally recognised possible situations for member states in respect of the euro - with derogation, without derogation. Nothing forbids Greece from obtaining such a derogation except its Treaty commitment to adopting the euro in the first place - but a member state can obtain a derogation from any aspect of the single market if required (with the proviso that "they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market"), so there is an implicit acceptance within the Treaties that backsliding can occur, even in respect of something as fundamental as the single market - and, even more to the point, the Treaties clearly accept that using the euro isn't a defining characteristic of membership.

cordially,
Scofflaw

This I have to disagree with (which adds to my fear at the moment). Some treaty articles permit derogation, some do not. Freedom of establishment does, free movement of capital does not (or rather does not in an intra-community context, it does in a third country context). So we don't really know where EU law stands on this.

The UK had, for very many years, the notion that parliament was supreme and that parliament could not bind its successors. But along came the Merchant Shipping Act 1988, and a gaggle of Spanish fishermen (and a very sympathetic Irish fisherman with a Scottish wife and Scottish kids) and suddenly what the UK knew was no longer true.

We know that EU law is greater than International Law in its scope and application. We don't yet know how great it is. Like so many laws it is developing, it is changing our expectations. Like so many laws it is dependent on the judiciary which enforce it.

If you take, for example, the Eurofoods case, you could reach the conclusion that the Irish courts are more than happy to interpret EU law for themselves and only make references to the Court of Justice to underline their position.

The UK courts tend to refer any ambiguity to the CJEC to try and avoid making the decisions themselves, and have become much more savvy about interpreting CJEC judgments in a manner which does the least possible damage to their domestic rules. If Factortame was to be heard in the Supreme Court today I doubt that the Supreme Court would suspend the application of an entire Act of Parliament. Yet having done it once, they cannot refuse to do it again. And I have no idea how the Greek courts view the CJEC - like the Irish or like the British? A purely historical analysis would suggest that they've got it wrong a hell of a lot (like the Brits) but have they yet learned their lesson?

I don't want to believe that we are facing financial armageddon, but I do find myself questioning it today.

Scofflaw · 25-05-2011 1:41am

This I have to disagree with (which adds to my fear at the moment). Some treaty articles permit derogation, some do not. Freedom of establishment does, free movement of capital does not (or rather does not in an intra-community context, it does in a third country context). So we don't really know where EU law stands on this.

I would argue that the fact that there are member states with a derogation, and that such a status is explicitly recognised in the Treaties covers that concern - clearly a derogation from using the euro is something that can happen. That there's no recognised pathway for it to happen once you've adopted the euro - because it wasn't contemplated - can, in extremis, I would say, be taken to mean that there is similarly no explicit prohibition on it. I admit that the ECJ might well not take that view - independent courts are such a pest, really - and Greece might of course decline to accept such an interpretation.

On the whole, I can see what you're saying with respect to Greece, but I'd probably agree with later10's view that the markets would see it as something that could be done subsequently to other problem countries, even though Greece's problems are very much deeper and more structural.

Today’s declines are “partly down to concern that policy makers will be unable to come up with any concrete solution to the debt crisis,” said John Davies, a fixed-income strategist at WestLB AG in London. “There’s a growing realization that a pain-free solution for Greece may not be there.” Today’s manufacturing and services data “suggest that we might be seeing a sharper slowing in growth than people were expecting,” he said.

I can see what has you concerned there - the upward march of Irish bonds is pretty inexorable, and comparison with German bonds suggests the market currently estimates us as having a 75% chance of a 50% default in the 10-year span, and an 83% chance in the next two years. Greece, 90.5% and 98% respectively. The ECB, as you say, may blow the whole show by insisting on holding the line on burden-sharing - that's bankers for you, too loose in the good times, too rigid in the (ensuing) crisis.

cordially,
Scofflaw

later12 · 25-05-2011 2:21am

Well interestingly the Euro is up right now and rising, suggesting that this Greek story may be losing its momentum for the time being. Presumably down to these comments by Noyer of the ECB today
http://www.bloomberg.com/news/2011-05-24/ecb-s-noyer-rejects-greek-restructuring-as-horror-transcript.html

Funny to think that such gloomy warnings could leave the forex crowd swooning after the euro, but they are a macabre lot.

Apparently some ECB executive board members are due to give a press conference later today (Tuesday), which should bolster the euro further and act to dampen fears for the moment.

That is, unless some German politician opens their mouth in the next 24 hours, and sends everything back into a tailspin.

Scofflaw · 25-05-2011 2:26am

later10 wrote: »

Well interestingly the Euro is up right now and rising, suggesting that this Greek story may be losing its momentum for the time being. Presumably down to these comments by Noyer of the ECB today
http://www.bloomberg.com/news/2011-05-24/ecb-s-noyer-rejects-greek-restructuring-as-horror-transcript.html

Funny to think that such gloomy warnings could leave the forex crowd swooning after the euro, but they are a macabre lot.

Apparently some ECB executive board members are due to give a press conference later today (Tuesday), which should bolster the euro further and act to dampen fears for the moment.

That is, unless some German politician opens their mouth in the next 24 hours, and sends everything back into a tailspin.

Interesting - that suggests that what the markets are betting on is an EU-arranged default, rather than a unilateral Greek default.

cordially,
Scofflaw

meditraitor · 25-05-2011 9:51am

beeftotheheels wrote: »

Huh??? Where on earth did that come from?

Goldman Sachs are a reputable Wall Street bank who produce their accounts under US GAAP. There have been suggestions of manipulation thrown at many of the finance houses due in no small part to the complexity of the accounting standards dealing with financial transactions.

Greece, as a sovereign state produces cash accounts which are black and white unlike the grey area of trying to comply with accounting standards and they misstated them.

Dont be so naive, Goldman Sachs had a very significant part to play in the greek crisis.......

http://www.spiegel.de/international/europe/0,1518,676634,00.html

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

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Greeks aren't very welcome in the Rue Alphones Weicker in Luxembourg. It's home to Eurostat, the European Union's statistical office. The number crunchers there are deeply annoyed with Athens. Investigative reports state that important data "cannot be confirmed" or has been requested but "not received."

Creative accounting took priority when it came to totting up government debt.Since 1999, the Maastricht rules threaten to slap hefty fines on euro member countries that exceed the budget deficit limit of three percent of gross domestic product. Total government debt mustn't exceed 60 percent.

The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.

Fictional Exchange Rates

Such transactions are part of normal government refinancing. Europe's governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.

In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent.

At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.

The bank declined to comment on the controversial deal. The Greek Finance Ministry did not respond to a written request for comment.

beeftotheheels · 25-05-2011 10:07am

meditraitor wrote: »

Dont be so naive, Goldman Sachs had a very significant part to play in the greek crisis.......

http://www.spiegel.de/international/europe/0,1518,676634,00.html

So a transaction which Greece entered into in 2009 (eight years after they joined the euro) allowed them to keep some debt off their balance sheet. As Goldman's were the counter-party to this transaction we can accuse them of exporting accounting fraud to Greece???

Alright so.

meditraitor · 25-05-2011 10:35am

beeftotheheels wrote: »

So a transaction which Greece entered into in 2009 (eight years after they joined the euro) allowed them to keep some debt off their balance sheet. As Goldman's were the counter-party to this transaction we can accuse them of exporting accounting fraud to Greece???

Alright so.

2009 was not the first transaction? ?

It was a blatant attempt to conceal important data from the rest of europe facilitated by Goldman Sachs...... This data had it been available earlier could (maybe) have given the eurozone early warning of the greek crisis which like every crisis is essential when dealing with crisis
This is not the way a

you wrote:

reputable Wall Street bank

does business.

I was only pointing out the fact that Goldman Sach are not some shining light banking organisation.

beeftotheheels · 25-05-2011 10:43am

meditraitor wrote: »

I was only pointing out the fact that Goldman Sach are not some shining light banking organisation.

Of course they are not a shining light - they are a commercial business and answerable to their shareholders. However, the original post which I took issue with accused them of exporting accounting fraud to Greece which is defamatory. They were a counter-party to a transaction which the Greeks kept off balance sheet according to your link.

That they were a counter-party does not mean that they forced the Greek state to account for the transaction in any particular manner, how the Greeks accounted for it was down to the Greeks.

wiseguy · 25-05-2011 12:06pm

beeftotheheels wrote: »

Huh??? Where on earth did that come from?

How Goldman Sachs Helped Greece to Mask its True Debt

paddy0090 · 25-05-2011 7:32pm

There seems to be a standoff between the EU (incl. govt.s) and the ECB over what to do next. From what I've read there was no ECB rep at the secret summit in Luxembourg(though I could be wrong). The Germans aren't happy with the current policy because they don't see it working, but Trichet is insisting on staying the course. I read in the economist that privately ECB officials are evening threating the destruction of the greek financial system.

If you destroy the greek banks i.e cut off the money it's practically the same as throwing them out of the Euro though not legally. They'd have no option but to start their own currency. It might even be argued that it's a human right. Subject to legal challenges of course but so is a default. So it might not be as far fetched as it seems.

This would be a terrible outcome for us I think. You might well argue that we're different because it's our banks that are the problem and we lied about our ability to guarantee the bank debt, so we should be thrown out next. Portugal is different too because this it's 3rd time dealing with the IMF. So in a way it should be thrown out too. And so forth!

On the other hand it could drop the curtain on this saga if the EU project as a whole comes into question(that it could be destroyed). Despite the bile here as much (or more so) as abroad I don't think anyone wants to see this happen.

Trichet will be replaced soon so the new guy can change direction without the suggestion that he is clueless. Like Lenihan he is in a way bound by his previous actions. Not simply in the legal sense (he has guaranteed billions) but also in the need to demonstrate competence to the markets.

The calm surrounding Spain is strange. They merged a few Cajas and apparently all is well. My suspicion is that the Chinese are standing over there bond price to keep it down. It's not in their long term interest to have countries big and small defaulting left right and centre. The small fry matter far less so let them hang.

Prakari · 25-05-2011 8:23pm

Greeks now risking 100 tons of gold for digital money. Aristotle must be spinning in his grave.

later12 · 25-05-2011 8:28pm

Some startling words from the Greek commissioner this evening

http://www.google.com/hostednews/afp/article/ALeqM5gFXM2pOcTbmhMUFgmtW8iS-m_zbA?docId=CNG.81374c16cfc013e475cf3f610e431f1a.251

"The greatest achievement of post-war Greece, [joining] the euro and the European course of the country, is at risk," Ms Damanaki said. "The scenario of Greece's exit from the euro is now on the table, as are ways to do this. Either we agree with our creditors on a programme of tough sacrifices and results ...... or we return to the drachma. Everything else is of secondary importance.

The euro has hit a record low against the Swiss Franc, a crisis haven currency.

steve9859 · 25-05-2011 9:03pm

later10 wrote: »

Some startling words from the Greek commissioner this evening

http://www.google.com/hostednews/afp/article/ALeqM5gFXM2pOcTbmhMUFgmtW8iS-m_zbA?docId=CNG.81374c16cfc013e475cf3f610e431f1a.251

The euro has hit a record low against the Swiss Franc, a crisis haven currency.

It is all coming to a head I think. Over the summer we will find out what the end game will be. Germany will be forced to make the big decision they have been avoiding until now: either the support of a central european bond (a big move toward european federalism) or else letting go of peripheral countries (probably a step toward the ending of the Euro project). That quote misses one other issue, that being the ability of the Greek authorities to implement the agreed austerity without the country descending into chaos.

Scofflaw · 26-05-2011 12:01am

steve9859 wrote: »

It is all coming to a head I think. Over the summer we will find out what the end game will be. Germany will be forced to make the big decision they have been avoiding until now: either the support of a central european bond (a big move toward european federalism) or else letting go of peripheral countries (probably a step toward the ending of the Euro project). That quote misses one other issue, that being the ability of the Greek authorities to implement the agreed austerity without the country descending into chaos.

I agree that a lot of the tension building up here seems to be based on the unwillingness of Germany in particular to accept either an federalist solution like eurobonds, where the peripheral countries essentially get to trade on Germany's solid economy, or a more nationalist solution like cutting out some of the gangrene.

To be fair, German voters were promised that nothing like the former would happen when they accepted the creation of the euro, while the latter does go against the principles of the EU. Still, as beeftotheheels says, the Greeks do have the unenviable distinction of having lied their way into the euro in the first place.

cordially,
Scofflaw

thebman · 26-05-2011 3:58pm

Well the Greeks area also unwilling to sell state assets I fear which is pushing this movement in the country.

The problem with this is obviously how will they fund themselves if they leave the Euro.

Don't they have one of the highest military expenditures in the Euro zone?

They don't seem to have thought this through TBH. Neither has Germany though IMO. Germany still seems to be in denial though I imagine Merkyl is hoping to struggle through to election time.

Sand · 26-05-2011 10:16pm

Theres three points to consider here when you evaluate the possibility of Germany suddenly deciding to jump in and save the day by flashing the cash.

1 - Is there any support in Germany for Germany saving the day by flashing the cash?

No.

2 - Even if the Germans could be persuaded to pay, could the rest of the EU countries be persuaded to accept the level of control over budgets, spending and ultimately political sovereignty that the Germans would demand? Would Irish, Greeks, Portugeuse accept a deal whereby they could elect politicians to maintain the pretence of sovereignty but all major spending decisions would have to be approved by the German parliment where the Irish, Greek and Portuguese would have no representation?

No.

3 - Even if the Germans could be persuaded to pay, and the Irish persuaded to accept permament loss of sovereignty, would the Germans accept being in the position where they were made scapegoats and demonised for opposing stupidly unaffordable spending plans by various peripheral states?

No.

@Beeftoheels

So a transaction which Greece entered into in 2009 (eight years after they joined the euro) allowed them to keep some debt off their balance sheet. As Goldman's were the counter-party to this transaction we can accuse them of exporting accounting fraud to Greece???

I wonder what they would make of NAMA which was setup as a SPV with the exact same objective of hiding government debt off balance sheet. Apparently the NTMA came up with that wheeze by themselves, though theyve been spitting mad ever since as everyone still counts NAMA debt as government debt.

View · 27-05-2011 12:24am

Sand wrote: »

2 - Even if the Germans could be persuaded to pay, could the rest of the EU countries be persuaded to accept the level of control over budgets, spending and ultimately political sovereignty that the Germans would demand? Would Irish, Greeks, Portugeuse accept a deal whereby they could elect politicians to maintain the pretence of sovereignty but all major spending decisions would have to be approved by the German parliment where the Irish, Greek and Portuguese would have no representation?

Nobody is proposing this, so I have no idea where you are getting it from. Germany is a Federal Republic. The idea you are suggesting goes against every tenet of Federalism - there is zero chance of the Bundesverfassungsgericht approving any EU Treaty that contains even the suggestion of what you are talking about.

clear thinking · 27-05-2011 1:30am

Sand wrote: »

I wonder what they would make of NAMA which was setup as a SPV with the exact same objective of hiding government debt off balance sheet. Apparently the NTMA came up with that wheeze by themselves, though theyve been spitting mad ever since as everyone still counts NAMA debt as government debt.

Dont forget the extra €50.0bn liquidity from the Irish central bank into our banking sector, basically unsecured 2 week money that is effectively off balance sheet & has not yet been copped on to by the mob.

Stheno · 28-05-2011 12:22am

Greek Austerity Talks fail

The Greek Pm looks to be struggling, looking for "any proposal and cooperation"

Greek prime minister George Papandreou failed today to get opposition party leaders to back austerity measures and vowed to do whatever it takes to exit a debt crisis even without their consent.

The EU warned Greece was running out of time but Mr Papandreou said not all hope was lost in getting political backing for debt-cutting measures, the kind of consensus achieved in Portugal and required by Euro zone policymakers before handing Athens more cash to stay afloat.

"I am open to any proposal and cooperation," Mr Papandreou said in a televised address to the nation after political leaders turned down his call for unity. "We must end all talk and disastrous scenarios about our country leaving the euro zone."

Today's 5-hour meeting, chaired by the Greek president, was the latest effort by Mr Papandreou to get his opponents on board after inconclusive one-on-one talks earlier this week. After leaders from across the political spectrum rejected his call, it was not yet clear whether fresh meetings would be sought.

The European Commission's top economics official said time was running out for Greece to back a €110-billion bailout deal that rescued it from bankruptcy last year.

"We expect that the efforts towards a cross-party agreement to support the EU-IMF programme will continue. An agreement has to be found soon. Time is running out," EU Economic and Monetary Affairs Commissioner Olli Rehn said in an emailed statement.

Jean-Claude Juncker, head of the euro zone finance ministers' group, alarmed investors yesterday by saying the International Monetary Fund may withhold its next slice of aid to Greece if conditions are not met.

The European Union is trying to reconcile conflicting demands and hopes the IMF can show "pragmatic flexibility" in disbursing the June tranche of emergency loans, a senior euro zone official said today.

Opposition parties reject Mr Papandreou's latest austerity package on the grounds that the belt-tightening agreed is choking the life out of the economy.

"We don't agree with a policy that kills the economy and destroys society," conservative opposition leader Antonis Samaras said after the party leaders' emergency meeting.

The Athens stock exchange reversed gains on the failure to get a deal, closing 1.7 per cent lower on the day, with banks down 2.3 per cent.

Athens kick-started a stalled privatisation programme on Monday and promised tougher austerity measures and tax hikes to meet EU/IMF conditions for the next loan tranche.

Analysts said early elections could be on the cards after the attempt to reach consensus on the measures failed.

"After failing to secure consensus, Papandreou will go ahead and implement reforms on his own as rapidly as required. But if there are violent reactions, if we get burning cars on the streets, then he will call elections the next day," said Dimitris Mavros, head of pollsters MRB Hellas.

Mr Papandreou, who has a comfortable majority in parliament but has seen his party's popularity decline, said he was determined to tackle the task without wider support if he had to and ruled out snap elections before they are due in 2013.

Thousands of protesters gathered in central Athens for the third day today, prompted by a Facebook campaign and chanting before parliament "Thieves! Thieves!", mirroring anti-austerity rallies in Spain.

Mr Samaras, whose party voted against the bailout deal struck last year, said he asked for tax cuts but Mr Papandreou, whose government has increased VAT from 19 to 23 per cent last year and hiked income taxes, rejected his proposal.

Mr Papandreou said he had suggested to other parties that they jointly negotiate tax policy with creditors, signalling some flexibility on the issue.

Mr Samaras' conservatives have 86 seats in the 300-seat parliament, where the ruling socialists have 156 MPs.

Also participating in the meeting were the leaders of the communist KKE party, which often boycotts such events, the far-right LAOS party and the Coalition of the Left. Their leaders said they would not be "blackmailed" into accepting the government's austerity measures.

In Athens, EU and IMF inspectors are examining new Greek measures before granting the next €12 billion tranche of the bailout.

Without it, Greece will be unable to cover pressing funding needs of €13.4 billion and will go bust.

Greek government officials have said that Athens has enough cash to cover its needs until mid-July.

Cannibal Ox · 30-05-2011 1:55pm

CNN by way of FT wrote:

European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatization of state assets, in exchange for new bail-out loans for Athens.

Full piece

Based on rumours. Would love to know more about international involvement in tax collection. I also presume any settlement reached would have knock on effects, in terms of setting a precedent, for Ireland if we do go looking for another deal?

Either way, even if they get the opposition involved, I think the Greek people will still have a very loud say in what happens. I can't see them sitting by quietly if these rumours are true and they've proved over the last two years that they're more then willing to get out and make their opinions known.

Sleepy · 30-05-2011 2:09pm

How?

Surely Greece's first response to being kicked out of the Euro would be a default on all debt it owes to Europe. Since that's a *HEFTY* amount of euros, wouldn't we just be giving them a strong platform for the New Drachma?

later12 · 30-05-2011 2:33pm

There would be a default, but certainly not a repudiation a la Cuba. The debt would still stand, in the event of a hard restructuring it would be more akin to Argentine, Mexican and Russian debt in the past 30 years.

People seem to think default means debt wipeout, it cannot realistically be taken to mean that,

Owldshtok · 30-05-2011 3:38pm

later10 wrote: »

I haven't read the Lex yet but the first question I would ask is who this plan would really help. It is, on the face of it, a fine idea. A fine idea, that is, if one's aim is to bring about a strong and stable Europe impenetrable to, and safe from, the scallywags... but what if we are one of the scallywags? And are we not?

The question arises whether the markets would look on Ireland, Portugal, Spain, and maybe Italy, as a risk of being the next out in their tails, and stay firmly away, creating yet another self fulfilling prophecy cycle with negative feedback loops to sovereigns funding themselves. It could end up in a progressive cleaning up and clearing out of the periphery, leaving only the healthy core, which doesn't need saving to begin with.

I think this would be an option if contagion were to start to infiltrate the financial health of the core, but as yet there is no real question of that happening, and I don't think this would be a particularly helpful move to us in the periphery.

Of course, that doesn't mean that it wouldn't be wise or clever, from an objective market standpoint it sounds like it might be both.

Even tho they're not without financial problems and have raked up huge debt I doubt Italy are as vunerable as the other peripherals going on the fact that they are the fourth largest economy in Europe after Germany France & UK,and a member of the G8.At the moment they are tipping along somewhere in the middle,not booming and not technically in recession.

beeftotheheels · 30-05-2011 3:46pm

Cannibal Ox wrote: »

Full piece

Based on rumours. Would love to know more about international involvement in tax collection. I also presume any settlement reached would have knock on effects, in terms of setting a precedent, for Ireland if we do go looking for another deal?

Either way, even if they get the opposition involved, I think the Greek people will still have a very loud say in what happens. I can't see them sitting by quietly if these rumours are true and they've proved over the last two years that they're more then willing to get out and make their opinions known.

The Greek people are a lot of the problem here. Tax evasion is endemic (hence the suggestion of taking tax collection out of the control of the Greeks) and civil unrest/ political instability is a big part of the issue.

The Greek people, like the Irish to some extent, think that there is an easy solution so are reacting badly to austerity when the reality is that there is no easy solution. If Greece were to default and chaos were to ensue it would at least make the point to the peoples of the other States that there is no easy solution here, and austerity is not the worst case scenario - default is.

ei.sdraob · 30-05-2011 4:01pm

Colm McCarthy has yet another excellent piece exposing the ECB for the fudge that it is.

Some might go and blame the Greek people like the guy above (Or Irish people etc) but the real elephant in the room is the unprofessional and disorganised organisation that the ECB is. They are the ones ran/run the monetary union like a bunch of school kids, and they are the ones who continue to constantly put the euro and the EU at risk

Btw I am disgusted by the rhetoric above from @beefoftheheel to reduce a whole nation to a bunch of stereotypes is lazy,
then again the Germans from whom most of this commentary is coming from, do also have a history of painting whole sections of people to be somehow "flawed" before doing away with them :rolleyes:

I am rather sick of this whole nationalist mumbo jumbo that is being played out, and threatens to reduce europe to a bunch of bickering nations that the continent once was, or to quote Colm

It is Ireland's misfortune to have left itself reliant on political leadership from a Franco-German European 'engine' which is running on empty

Owldshtok · 30-05-2011 4:14pm

'It is Ireland's misfortune to have left itself reliant on political leadership from a Franco-German European 'engine' which is running on empty'

There hasn't been great leadership from within Ireland in the first place.

ei.sdraob · 30-05-2011 4:17pm

Owldshtok wrote: »

'It is Ireland's misfortune to have left itself reliant on political leadership from a Franco-German European 'engine' which is running on empty'

There hasn't been great leadership from within Ireland in the first place.

No there has not, but the leadership from Europe is even more lacking and less accountable (not the local lot can be held to much account either).

Instead of getting together and coming up with a solution once and for all to this crisis, europe continues to limp month to month as the problem is kicked down the road for someone else to deal, all while things get worse.

Cannibal Ox · 30-05-2011 4:18pm

beeftotheheels wrote:

The Greek people, like the Irish to some extent, think that there is an easy solution so are reacting badly to austerity when the reality is that there is no easy solution. If Greece were to default and chaos were to ensue it would at least make the point to the peoples of the other States that there is no easy solution here, and austerity is not the worst case scenario - default is.

I don't really see the incentive for the Greek people in this. It's all stick and no carrot, so why would they consent to it? They don't have to, and they've shown in the past that they'll make their dissent very public if they want to.

You're saying that austerity is better then default. The scenario being presented to the Greek people is one where they loose control over tax and policy, they'll have their assets stripped from them to pay foreign creditors, and they'll be left with a program of austerity that, arguably, won't improve employment rates or the life prospects of young people in the short or long term.

So where's the incentive? Why accept it? Default is worse then austerity, sure, but when austerity looks like your country being stripped, chained and led around the EU as an example of what not to do, why go for austerity?

thebman · 30-05-2011 4:19pm

beeftotheheels wrote: »

The Greek people are a lot of the problem here. Tax evasion is endemic (hence the suggestion of taking tax collection out of the control of the Greeks) and civil unrest/ political instability is a big part of the issue.

The Greek people, like the Irish to some extent, think that there is an easy solution so are reacting badly to austerity when the reality is that there is no easy solution. If Greece were to default and chaos were to ensue it would at least make the point to the peoples of the other States that there is no easy solution here, and austerity is not the worst case scenario - default is.

The Irish don't think there is an easy alternative to austerity. On this board and elsewhere everyone accepts there needs to be massive cut backs. Even the most hardcore anti-cuts politicians admit we need cutbacks and tax increases unlike Greece. Where our politicians and people differ is where proportion of cuts to tax increases we need.

People are angry, there is a difference. People are angry because politicians have yet to reform the system that allowed us to get into this mess and want it resolved in such a way that it doesn't happen again and politicians seem to not want to resolve their system since that could mean them not getting elected again under a new system.

People saying default have given up on the government and the EU forming a solution to the problem and know we can't pay back our debts without something happening so this seems like the most likely option to them and they just want to move on from this mess as soon as possible IMO. Either that or they are a political party that lacks a policy and has admitted they are an opposition party and will not have to make the decisions so can spout whatever populace nonsense they like.

beeftotheheels · 30-05-2011 4:23pm

ei.sdraob wrote: »

Colm McCarthy has yet another excellent piece exposing the ECB for the fudge that it is.

If Colm cannot tell the difference between the ECB and other EU institutions then he should just stop talking about it. The ECB has been entirely consistent on restructuring and I challenge you to find one public utterance from an ECB (as distinct from say Juncker who does not speak for that institution) official on this which has done other than toe the party line. Even former ECB board members have toed the party line.

We heard from Papademos

http://online.wsj.com/article/BT-CO-20110528-701521.html

Noyer

http://www.bloomberg.com/news/2011-05-24/ecb-s-noyer-rejects-greek-restructuring-as-horror-transcript.html

Stark

http://www.reuters.com/article/2011/05/19/us-ecb-stark-collateral-idUSTRE74I1RQ20110519

Bini Smaghi

http://www.ft.com/cms/s/0/8e4a75d2-8a18-11e0-beff-00144feab49a.html?ftcamp=rss

...and of course Trichet

http://uk.reuters.com/article/2011/05/05/uk-ecb-bailouts-idUKTRE7443V120110505

I cannot see the inconsistency that Colm has noted and indeed I have trawled through google looking for ECB and Greek restructuring and all I find are the above, or more of the above, nothing suggesting that the ECB is conflicted on this.

beeftotheheels · 30-05-2011 4:30pm

Cannibal Ox wrote: »

Why not cut off your nose to spite your face?

I don't know. When you put it like that it sounds like a brilliant idea.

There are worse options i.e. default, and there are no better options.

Greece does not have a birthday, nor will it make its communion or confirmation so a card in the post with a few bills from Great Uncle Germany is not going to happen.

By refusing austerity they increase their chances of default, which is cutting off their nose to spite their face.

There is not always a carrot, sometimes there is just a stick and a bigger stick.

thebman · 30-05-2011 4:49pm

beeftotheheels wrote: »

I don't know. When you put it like that it sounds like a brilliant idea.

There are worse options i.e. default, and there are no better options.

Greece does not have a birthday, nor will it make its communion or confirmation so a card in the post with a few bills from Great Uncle Germany is not going to happen.

By refusing austerity they increase their chances of default, which is cutting off their nose to spite their face.

There is not always a carrot, sometimes there is just a stick and a bigger stick.

To be fair though, the opposition is refusing tax increases, they want to reduce the size of the public sector.

But Antonis Samaras, head of the main opposition conservative party who earlier this month called for a renegotiation of the bailout deal, argued the government’s overall direction was wrong — although he said he did back certain aspects, such as privatisations.

http://businessetc.thejournal.ie/greek-opposition-party-rejects-new-austerity-plan-142802-May2011/

So they aren't against austerity really, just tax increases as they fear it will prevent an economic recovery when you read through the rest of the world crying, Greeks worst country in world, garbage journalism.

The party in government is socialist and wants to increase taxes and not sell off state assets so they are in a conflicting position while the government looks for cross party support which they probably knew they weren't going to get anyway.

It is, to be fair, a very similar position to where we were before our election. FG promised cuts not taxes and FF weren't making cuts and were increasing taxes and looking for FG's support on it but FG smelt blood/power and denied them that to force an election to get power.

So it looks like Greece is where Ireland was 2-3 months ago which is itself a bad sign.

Time to burn Greece?

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