Greece part II

[Hullygully]

I would be very grateful if we could keep this about Greece, and those (two) who want to dance up and down jibing at Claig and calling her a fool and a kremlinbot and an anti-semite, start their own thread for that purpose.

Cheers

The German people have a say on Merkel in just over 2-years time, and to try to say politicians have no domestic electoral recourse to their EU decisions, especially for a U-Kipper having spent YEARS telling us they do - really adds nothing here.

claig .. re your last link, are you now disproving your previous statement that Merkel (in playing Greek hard ball) was doing it for the EU, not the German citizens?

Come on, sharpen up, get your story right.

As the Greek creditors ARE NOT BANKS

Are the ECB and IMF not banks?

'claig .. re your last link, are you now disproving your previous statement that Merkel (in playing Greek hard ball) was doing it for the EU, not the German citizens?'

No, I am saying that most Germans now want Grexit and Merkel doesn't, she wants to save the EU political class's union by keeping Greece in the Euro i.e. she doesn't do what German voters want, she can't because she does what the European elites want. As Seumas Milne said

"Europe’s elites want regime change in Greece"

but it hasn't worked out that way just yet.

DoctorTwo .... re your "Are the ECB and IMF not banks?"

Nope, one is the European Central Bank with very different functions to an Investment or High Street Bank and the International Monetary Fund is a ..... well 'Fund', it sez it on the can, a supranational organisation funded by governments.

Are you trying to tell us in all honesty that post after post after post saying 'the banks' were to blame, you meant the CENTRAL banks?

Well that might have washed (ish) if you hadn't listed some earlier, starting with Goldman Sachs.

The entire European elite is reeling because of Syriza's referendum victory and the crisis still has a long way to play out. This is from the Wall Street Journal

"Europe’s Populists Hail Syriza Win in Greek Elections From Left and Right

Antiestablishment Parties See Greek Upstarts Blazing New Trail for Populism Across Europe"
...
From left-wing groups such as Spain’s Podemos and Ireland’s Sinn Féin to right-wing movements such as France’s National Front and Britain’s U.K. Independence Party, populist parties sought to present Syriza’s win as payback for what they see as out-of-touch mainstream parties and EU institutions.

“I am delighted by the enormous, democratic slap in the face that the Greek people have delivered to the European Union,” Marine Le Pen, leader of the far-right Front National, said on French radio station RTL. France’s far left was just as enthused. “The end has begun for the era of the all-powerful arrogance of the neoliberals in Europe,” said the Left Party’s Jean-Luc Mélenchon, who won 11% of the vote in France’s 2011 presidential elections."

www.wsj.com/articles/europes-populists-hail-syriza-win-from-left-and-right-1422320824

Claig ... if 85% of Germans didn't want more money pumped into Greece a while back, they don't only NOW want a GREXIT and Merkel as explained time and time again, no doubt with voter views in the back of her mind, appeared to come to a conclusion that the EU project, the Euro as a currency, her nerves in general - would all benefit from the weakest economy of the 19 Eurozone members leaving - as opposed to gifting Greece a low pain bailout, stoking internal/external political problems with other Eurozone States that needed help and currently working through it.

On the one hand you write pages saying Merkel wanted Greece OUT and on others, saying she wanted them in to save the project, which would have been more of a problem if conceded to Greek Syriza demands.

If you stick to the facts, rather than post 100 other opinions, it might help you to retain clarity on any issue. IMO.

'On the one hand you write pages saying Merkel wanted Greece OUT'

No, I said the EU political class could not afford to have Greece out as it would cause contagion and the end of the Eurozone. France and Italy panicked and Merkel did what she did to hold the Project together for now.

I wouldn't put it past Syriza to spring another surprise in the coming weeks or months, where they go for Grexit. Then the crisis will continue.

Claig .... why the hell have you just posted a European elite reeling link (sort of) from a January 2010 WSJ?????

Concentrate on the facts, not the Syriza propaganda, and you'll stop confusing YOURSELF, trust me I'm a doctor (holds up hands for rubber gloves).

Errr ... Jan 2015, not 2010....more tea vicar.

claig ... the statement that a Greek exit 'would cause contagion and the end of the Eurozone' is based on WHAT?

The EU banking system can't suffer from 'contagion' when they have limited Greek exposure (for the numpty fifth time).

Greek STAYING IN was the problem, based on the Jan 2015 link I guess you erroneously posted "Europe’s Populists Hail Syriza Win in Greek Elections From Left and Right"

Syriza has JUST had its arse handed to it on a platter, do you think these populist left and right party and their supporters thinking that they can buck austerity, don't currently SEE that?

Claig was pouring cold water over my WSJ link before, because it was from the WSJ. miffed

Alyosha ...its a question of t-t-t-t-t-timing, you need claig to have her silver foil protective hat, OFF, as she sees far fewer American and other plots on her shopping lists then.

I made a mistake on the link to th Wall Street Journal. I didn't realise it was 2010. These things happen.

'the statement that a Greek exit 'would cause contagion and the end of the Eurozone' is based on WHAT?'

Gut feel.

No, it was Jan 2015 WSJ article, not 2010

Are you trying to tell us in all honesty that post after post after post saying 'the banks' were to blame, you meant the CENTRAL banks?

No. I haven't said the banks are to blame. What I said was Greece borrowed from private banks who were paid in full by the IMF and ECB who took on the risk, something vital to capitalism. Though nowadays when banks make shit investments they go crying to governments and get bailed out. When they crash, and they will do, it will fuck over the entire economy. Then there will be bail ins, they had a trial run in Cyprus and changed the law to enable them to do the same all over Europe.

I've been reading a lot about Greece in recent weeks but would like to know more about the origins of the current global recession. Could anyone recommend some books?

Sorry if I'm going slightly off-topic.

DoctorTwo .... re your "No. I haven't said the banks are to blame. What I said was Greece borrowed from private banks who were paid in full by the IMF and ECB who took on the risk, something vital to capitalism."

You make this 'stuff' up as you go along to fit your anger, WHICH banks, and how and why would this have happened????

It is neither the job of the ECB or IMF to compensate Investment Banks for bad lending decisions.

Even when western banks were being fed cash DIRECTLY by their central banks from early 2008 onwards, to compensate for the closure of the interbank market (the global artery of liquidity), the CB's always demanded collateral of a high quality in exchange i.e. domestic mortgages and government bonds, and generally over and above the amount of cash liquidity granted.

So I can't see any mechanism or reason what you think has happened, took place.

The Greek parliament passed the Greek Bail Out plan.

Now it will take weeks to flesh out all of the details.

I named some of the banks on Tuesday. You only have to scroll back to check you ridiculing that post too. Also, you only have to scroll back a few days to confirm, with a link, that Jean Claude Trichet, former head of the ECB demanded that the private banks be paid what Greece had borrowed by the ECB and IMF.

DoctorTwo ..... I took time off my life I'll never get back to scroll back 10 pages to prove YOUR POINT that private banks will be paid back by the ECB and IMF and didn't find anything.

I should have stopped when I read your posts disagreeing that inflation doesn't erode debt, but I'm a trooper, I carried on.

So I will repeat, whether looking at the functions of the ECB and IMF, or why on earth they would care if investment banks made bad internal credit/trading decisions at all, never mind compensate them - so I will stick my neck out and guarantee that you are WRONG.

This would not be the first time (this week) you have got something financial bottom-about-face, but thinking about it, I should have had a clue, when it was "former head of the ECB Mr Trichet" as again the time-line could be a clue, as if the demanding is NOW, as ex top knob of the ECB, WHO CARES what he says, he's demands will be as influential as MINE.

Domestic mortgages were hardly collateral of a high quality in 2008.

The ECB and the operations of national central banks are not separate from or impervious to the operations of commercial banks. Private sector bondholders have a stake in private and public debt. The ECB issues short term repurchase agreements/ contracts to successful bidding banks (about 1500 Europe-wide) and those banks repay that debt. Eligibility to bid depends on banks having collateral -- public debt or private banking securities. Property boom and bust in Spain and Ireland had an impact in many interrelated areas, including inability to repay. Weakening of the private banking system forces the central banks to step in to bail out or otherwise support private banks (except in Iceland). The SSM now allows the ECB to supervise banks in the Eurozone to a greater extent than before 2014, in hopes of preventing the spectacle of bank failure and the need for bailouts. But more and more, the ECB has to rely on Moodys and S&P for accurate assessment of creditworthiness because the crisis showed how easy it was to mask problems.

Greece got shafted in 2010 but private (mainly German, French and Dutch) banks were saved, using the bailout to dump their worthless debt into Greek pension funds and reduce their exposure in Greece from 122 to 66 bn dollars in Greek sovereign debt between 2010 and 2012 -- bad enough in itself but this also fueled the crisis as it developed. Plenty of Cassandras in evidence in the minutes of the IMF, esp India, Argentina..

mathsanxiety .....

Domestic mortgages would be and were decent collateral in most countries, when the central banks demanded say 110% of the liquidity received by a central bank AND charge the banks an interest rate - in the UK homes dipped, what 20% in price DUE to the lending logjam, but bounced soon after - and the BoE actually made £billions in that operation.

Other EU countries like Spain and Ireland, did not have their home prices crash over night, it took a few years, mainly because their banks were trying to prop up prices.

Next, I'm confused with that EU big picture 'stuff', are you saying that the investment banks WERE directly compensated by the ECB and IMF for Greek losses - if so, please qualify it directly, without the smoke screen.

Finally, I don't see the direct link of non Greek banks reassessing their Greek loans/bond risk (as everything else post Lehman Bros) as it was clear the Greek economy was neither functional or sustainable and SELLING Greek bonds, and getting into Greek Pension Funds.

Greek banks and pension funds would have held Greek government bonds as they clearly knew the credit, they might have bought non Euro Greek bonds as a hedge against a falling Euro, for commercial bank reserves reasons - and last but not least, the yield/returns on sell offs, buying on dips possibly to average the price down by adding to 'good time' holdings.

Well if we are talking about the SSM let's remember that it only went live in late 2014 - there is no sense in which it was "sort of" supervising anything before then.

But I'm quite surprised that the SSM is relying "more and more" on the credit rating agencies for information. What is your source? The SSM is supposed to be able to go into the banks, go through the books and have full access to whatever information it needs as a supervisor - this is much more access than any of the credit ratings have so ought to yield a much better picture. I'm sure the SSM will look at the ratings agencies closely - again it's another perspective and also a useful insight into market reactions. But rely on the agencies rather than their own analysis? That would worry the living daylights out of me - and would be ironic given that the rating agencies received so much flack for their role in the global financial crisis.

On mortgages, debt and banking through - Greece and Ireland are often differentiated in the sense that in Ireland the banks almost blew up the government through reckless, unsupportable property lending because the hole in the balance sheets when the loans went bad was much more than the government could afford to bail out and keep the banks going. In Greece the dynamic was different as banks loaded up on government debt -normally seen as a super safe asset - but the Government had gone wild on its spending having been able to issue debt at rates it could only have dreamed of in the past before it joined the Euro. Not totally sure this adds to the discussion other than to say that the Irish and Greek cases - in terms of fragility of the banking system - had a different cause and it's not obvious the same solution therefore works.

I think you could go further and argue that, especially in 2010, there was a lot of concern that if Greek government bond holders were expected to take a cut in the value of the debt they held that contagion would spread like wildfire and all kinds of markets would be affected, many banks brought down and - unfairly because they had no choice in the matter - the person in the street all over the EU would end up potentially losing - whether their direct savings held as deposits, or the value of the assets that were supposed to contribute to pensions. And this is one of the reasons why the single supervisory mechansim and resolution mechanisms were put forward - to attempt to protect against contagion. From this perspective, I think you can perfectly well argue that the banks were de facto protected from losses as a result of investment in Greek bonds - but if so I think the motivation was much more about what would happen to the end user if everything went horribly wrong.

In theory we are much better placed to handle disruption and as many have said on this thread, Greek default has been priced into the market - though I've heard that as much as 30% of Greek government debt is still in the private sector and not the public institutions (IMF, ECB). I saw one chart (BBC I think) that suggested UK banks are still on the hook for 10bn.

But in terms of how the banks got there, I do think there was one naievty in particular that caused problems in the Eurozone - and that was that it was a real currency (and real currencies don't let sub regions leave or dip in and out) and that the risk of lending (by buying Government debt) to all members of the Eurozone was the same. The regulatory rules not only permitted but frankly encouraged this pleasant daydream. But prior to the Euro noone would have lent as freely to Greece as they did to Germany - but somehow the magical glow of the newly minted Euro and the single interest rate changed all that. And I've had arguments with people who insisted to me that "it's all in the EU, it's the same currency, it has to be the same risk." Really? How well did that work out?

The single currency is one of the biggest projects the EU has ever taken on and in 2010 the tenor of the discussion was absolutely "no-one leaves". And it was such a lauded success story of the EU, I understand them hanging onto the concept like grim death and in the face of all logic. So with this background I find it extraordinary that Germany has been prepared to even consider much less talk out loud about either full Grexit or temporary exit (which is an admission that the Euro isn't a real currency in quite the way that the Dollar or Sterling is - I don't see Wyoming ever being allowed to exit the dollar and I don't think Birmingham would be given a holiday from the pound). So whatever the EU and Eurozone were before the Greek referendum I think it is different now, but I'm very unsure of what that actually is any longer.

Hawthorn - I thought Germany was preparing for Grexit?

www.ft.com/cms/s/0/4bb34e4e-2bcf-11e5-8613-e7aedbb7bdb7.html

Perhaps it was a negotiation tactic to scare the Greeks into realising the real alternative to austerity - even more austerity and no more borrowing.

I agree that the Eurozone is shaky due to lack of national unity. Many lefties on this thread & claig seem to feel much more affinity for Greece than those responsible for paying for Greece's largesse.

The only real long term for the Eurozone is closer political & fiscal union - and they need to be up front with voters on this.