Is the end nigh for the Euro? [vol. 3]

[JensenA]

I don't believe the Greek people necessarily wanted a socialist government, they voted for a party which was saying "Enough is enough - we can't carry on like this any longer"
The irony of the whole situation is that the EU, which is based on socialist principles, is under threat from a socialist government.

[drdino]

chris watton said:

Does anyone know what was said to make him get up and leave?

Mr Varoufakis was saying what he repeated in the BBC Spotlight programme, that the greek government would not negotiate with the three troika reps (the particular troika committee-not the troika in general, or the EU/IMF/Eurogroup/etc). I am not sure whether Mr Dijsselbloem got up and left because of that, or because the press conference had come to an end. What I find particularly interesting is that it wasn't the first time he has hearing of this, it had been repeated throughout the day and has been publicly declared by Syriza all along. In essence, it makes it look more like a theatrical act than a genuine expression of displeasure or butthurt. Having said that, I think both of them could have handled the press conf better.
Of interesting note is Mr Dijsselbloem's background (his CV is easy to find in the public domain) and probably affects the willingness, or the lack of, to negotiate with him.

[Steffan]

Mermaid said:

Steffan said:

There are indeed very mixed messages coming out if Greece indeed this latest one is clearly totally opposed to a Greek exit see: http://www.bbc.com/news/world-europe-31067473.

I think actually the Greeks are seeking to exercise their own opinions whilst staying on the tightrope of not dismissing any option. Lloyd George, who was renowned for his natural ability to sleep comfortably in a corkscrew, could be very useful here. Time will tell but I do think the constant underlining by the Greek left wing government that the debt is actually way beyond what Greece can actually afford, is absolutely correct. This is becoming an EU problem, indeed has become an EU problem because in this relationship only the EU can afford such debt. Reality time for the EU I think.

What would you advocate if you were the new finance minister?

I would recommend that all the population leaves the country because I would be somewhat out of my depth mind you that is very probably true of the entire Greek cabinet. Indeed every politician within Greece. That's why they are in this mess.

I do think the latest Greek approach is probably the only way forward. Throughout my experience working in insolvency for many years, shedding debt enables recovery very effectively if the underlying business is actually viable. Operating outside the Euro seems to me to be the best way for Greece. If Merkel and Co want Greece to remain within the Euro they have to enable Greece to do that. The Greek's are right Greece cannot affor to repay this debt nor the interest on the debt. Down to the EU to either face this write off or Greece must exit.

On balance I think a controlled default may be the way. Unaffordable debts will not suddenly become affordable. Down to the EU to decide because clearly Greece cannot and now will not repay the debts. They have in effect repudiated the existing agreement. Question is what will the EU do. That is the real conundrum.

[Claudia Skies]

The idea that Greece can somehow wander off to a parallel debt-free universe is, I think, a nonsense.

"We're not going to pay back the money we owe you; so please lend us some more money."

Would you? I wouldn't.

[turbobloke]

Claudia Skies said:

The idea that Greece can somehow wander off to a parallel debt-free universe is, I think, a nonsense.

"We're not going to pay back the money we owe you; so please lend us some more money."

Would you? I wouldn't.

Nor would I, but with slippery EU politicians facing partial loss of pet project and thereby loss of face, alongside an ability to make and break their own rules, anything could happen in the next few months. The EU's breathless pursuit of ever-closer-union may still get closer via this freak show.

[drdino]

That's not really the case though, the question is not whether they are going to repay or pretend that they are debt-free and walk into the sunset.
Another interesting notion is that the new government is proposing reducing the expected 3%-5% surplus in the budget that the troika has been adamant on seeing, and using the difference elsewhere in order to help boost the failing economy. With joblessness reaching eye-watering levels and and the resulting lack of pay contributions to the budget leading to even further deficits, I am not sure it's such a horrendous idea.

[turbobloke]

drdino said:

That's not really the case though, the question is not whether they are going to repay or pretend that they are debt-free and walk into the sunset.
Another interesting notion is that the new government is proposing reducing the expected 3%-5% surplus in the budget that the troika has been adamant on seeing, and using the difference elsewhere in order to help boost the failing economy. With joblessness reaching eye-watering levels and and the resulting lack of pay contributions to the budget leading to even further deficits, I am not sure it's such a horrendous idea.

Even if it was a horrendous idea it may happen anyway - look at the EZ, that happened.

[chris watton]

drdino said:

Mr Varoufakis was saying what he repeated in the BBC Spotlight programme, that the greek government would not negotiate with the three troika reps (the particular troika committee-not the troika in general, or the EU/IMF/Eurogroup/etc). I am not sure whether Mr Dijsselbloem got up and left because of that, or because the press conference had come to an end. What I find particularly interesting is that it wasn't the first time he has hearing of this, it had been repeated throughout the day and has been publicly declared by Syriza all along. In essence, it makes it look more like a theatrical act than a genuine expression of displeasure or butthurt. Having said that, I think both of them could have handled the press conf better.
Of interesting note is Mr Dijsselbloem's background (his CV is easy to find in the public domain) and probably affects the willingness, or the lack of, to negotiate with him.

Thank you for that, much appreciated.

[Steffan]

turbobloke said:

Claudia Skies said:

The idea that Greece can somehow wander off to a parallel debt-free universe is, I think, a nonsense.

"We're not going to pay back the money we owe you; so please lend us some more money."

Would you? I wouldn't.

Nor would I, but with slippery EU politicians facing partial loss of pet project and thereby loss of face, alongside an ability to make and break their own rules, anything could happen in the next few months. The EU's breathless pursuit of ever-closer-union may still get closer via this freak show.

A distinctly perceptive comment, Turbobloke if I may say so. Entirely down to the bent EU self indulgence that this business has become. The EU can continue this if they want to. I honestly think Greece has shot its bolt. Greece cannot realistically repay these debts. The EU can. However how the EU package this rescue and prevent the Domino effect on the other failing states is the nub of the problem. As others have said the EU can easily print enough money to solve the problems of Greece financially. The downside risk is that others may seek to follow. That the EU could not easily solve.

[turbobloke]

Steffan said:

turbobloke said:

Claudia Skies said:

The idea that Greece can somehow wander off to a parallel debt-free universe is, I think, a nonsense.

"We're not going to pay back the money we owe you; so please lend us some more money."

Would you? I wouldn't.

Nor would I, but with slippery EU politicians facing partial loss of pet project and thereby loss of face, alongside an ability to make and break their own rules, anything could happen in the next few months. The EU's breathless pursuit of ever-closer-union may still get closer via this freak show.

A distinctly perceptive comment, Turbobloke if I may say so. Entirely down to the bent EU self indulgence that this business has become. The EU can continue this if they want to. I honestly think Greece has shot its bolt. Greece cannot realistically repay these debts. The EU can. However how the EU package this rescue and prevent the Domino effect on the other failing states is the nub of the problem. As others have said the EU can easily print enough money to solve the problems of Greece financially. The downside risk is that others may seek to follow. That the EU could not easily solve.

And whether it's to foot the bill for ever-closer-union with Greece in the near future, or for ever-closer-union with Portugal, Italy et al at a later date, I can't wait to see the look on CMD's face when he - we - are asked to pay for the magic beans (assuming CMD is still around and not polishing his father-in-law's turbines).

[Mermaid]

Steffan said:

I would recommend that all the population leaves the country because I would be somewhat out of my depth mind you that is very probably true of the entire Greek cabinet. Indeed every politician within Greece. That's why they are in this mess.

I do think the latest Greek approach is probably the only way forward. Throughout my experience working in insolvency for many years, shedding debt enables recovery very effectively if the underlying business is actually viable. Operating outside the Euro seems to me to be the best way for Greece. If Merkel and Co want Greece to remain within the Euro they have to enable Greece to do that. The Greek's are right Greece cannot affor to repay this debt nor the interest on the debt. Down to the EU to either face this write off or Greece must exit.

On balance I think a controlled default may be the way. Unaffordable debts will not suddenly become affordable. Down to the EU to decide because clearly Greece cannot and now will not repay the debts. They have in effect repudiated the existing agreement. Question is what will the EU do. That is the real conundrum.

I am optimistic about Greece, for the longer term. In or out.

They stay in with terms that suit then and are realistic. Or out and with one bound they are free - in a mess initially, but their own mess for them to clear up at their pace/their terms.

A bit naive perhaps

[turbobloke]

Mermaid said:

Steffan said:

I would recommend that all the population leaves the country because I would be somewhat out of my depth mind you that is very probably true of the entire Greek cabinet. Indeed every politician within Greece. That's why they are in this mess.

I do think the latest Greek approach is probably the only way forward. Throughout my experience working in insolvency for many years, shedding debt enables recovery very effectively if the underlying business is actually viable. Operating outside the Euro seems to me to be the best way for Greece. If Merkel and Co want Greece to remain within the Euro they have to enable Greece to do that. The Greek's are right Greece cannot affor to repay this debt nor the interest on the debt. Down to the EU to either face this write off or Greece must exit.

On balance I think a controlled default may be the way. Unaffordable debts will not suddenly become affordable. Down to the EU to decide because clearly Greece cannot and now will not repay the debts. They have in effect repudiated the existing agreement. Question is what will the EU do. That is the real conundrum.

I am optimistic about Greece, for the longer term. In or out.

They stay in with terms that suit then and are realistic. Or out and with one bound they are free - in a mess initially, but their own mess for them to clear up at their pace/their terms.

A bit naive perhaps

Looking at Iceland post-conflagration, the picture of default without austerity is potentially attractive.

Legatum Institute report intro said:

Iceland is a land of extremes — of glaciers, volcanoes and lunar landscapes, not to mention of level of civility and social cohesion matched in very few places on earth. It is near the top of the charts on the PI sub-indexes for everything from safety and security (1st) to entrepreneurship and opportunity (9th) to personal freedom (10th). The only reason Iceland ranks as ‘low’ as 15/124 on the Prosperity Index is the extremely bad performance of its banking system in the run-up and subsequent collapse of the global financial bubble.

Indeed, that performance—and how Iceland has managed a sprightly recovery from the consequences of financial conflagration—is the subject of Thor Gylfason’s essay. Gylfason, a professor of economics at the University of Iceland and research fellow at the Centre for Economic Policy Research at the University of Munich, links the collapse to institutional failure.
This tiny (population: 320,000) democracy had an active press, highly educated electorate and abhorrence of corruption.

Nonetheless, it succumbed to the bubble mentality that paralysed regulators and almost brought down the financial systems of Ireland, Spain and the UK. But unlike other nations caught in the web, Iceland wiggled free with panache. One reason: Iceland’s “real” economy is highly productive, and responded with alacrity to new export opportunities. Another, according to Gylfason: Iceland got considerable help from the IMF without submitting to the austerity imposed on Ireland, Spain and Greece by the eurozone.

They might think it's better to have self-direction than be blown about on the bad breath of intelligent but ideologically driven fools and if so, they might have a point.

[Claudia Skies]

turbobloke said:

They might think it's better to have self-direction than be blown about on the bad breath of intelligent but ideologically driven fools and if so, they might have a point.

That has been demonstrated not to be the case through through hundreds of years of history, where time and again it is the larger and more cohesive groups of people who achieve success, wealth and everything that goes with it.

Amongst other things, the more fragmentation there is in Western Europe the more trouble will be caused by our old friend Mr Putin.

[turbobloke]

Claudia Skies said:

turbobloke said:

They might think it's better to have self-direction than be blown about on the bad breath of intelligent but ideologically driven fools and if so, they might have a point.

That has been demonstrated not to be the case through through hundreds of years of history, where time and again it is the larger and more cohesive groups of people who achieve success, wealth and everything that goes with it.

Comparison with Iceland was mostly about austerity, or rather the lack of it.

Expecting left of centre politicians to have half a clue about running an economy is also part of the picture.

Claudia Skies said:

Amongst other things, the more fragmentation there is in Western Europe the more trouble will be caused by our old friend Mr Putin.

He'll do what he wants regardless of the EU. He may not be everyone's flavour of leader by far, but he is at least a leader, unlike the insipid saps in the EU and UK.

[911Gary]

Claudia Skies said:

The idea that Greece can somehow wander off to a parallel debt-free universe is, I think, a nonsense.

"We're not going to pay back the money we owe you; so please lend us some more money."

Would you? I wouldn't.

Well they have already twice,no one but them selves to blame,the gravy trainers doing anything to keep the wheels on the gravy train and the failed Eurozone alive,well it wasn't alive then and is not now and will not be in its future,they are going backwards end of (Greece) no economic output no chance of a surplus no chance of paying debt down the writing has been on the wall for years the rest of PIIGS are lining up for a good view,this will just be the start.
ETA the reported surplus is on the back of 1.6% deflation so is fiction too.

Edited by 911Gary on Saturday 31st January 15:46

[Steffan]

Mermaid said:

Steffan said:

I would recommend that all the population leaves the country because I would be somewhat out of my depth mind you that is very probably true of the entire Greek cabinet. Indeed every politician within Greece. That's why they are in this mess.

I do think the latest Greek approach is probably the only way forward. Throughout my experience working in insolvency for many years, shedding debt enables recovery very effectively if the underlying business is actually viable. Operating outside the Euro seems to me to be the best way for Greece. If Merkel and Co want Greece to remain within the Euro they have to enable Greece to do that. The Greek's are right Greece cannot affor to repay this debt nor the interest on the debt. Down to the EU to either face this write off or Greece must exit.

On balance I think a controlled default may be the way. Unaffordable debts will not suddenly become affordable. Down to the EU to decide because clearly Greece cannot and now will not repay the debts. They have in effect repudiated the existing agreement. Question is what will the EU do. That is the real conundrum.

I am optimistic about Greece, for the longer term. In or out.

They stay in with terms that suit then and are realistic. Or out and with one bound they are free - in a mess initially, but their own mess for them to clear up at their pace/their terms.

A bit naive perhaps

Not naive at all, Mermaid.

This has become the EU's problem because they have refused to recognise that agreeing for the impossible is not a real option for solving any oroblems including those of Greece. This nonsense was never the "Solution" to the problem of Greece actually being able to repay its unaffordable borrowings. It was a method of allowing the banks to offload unrecoverable debts to the European taxpayer and an EU Fraud from the start.

This is the fundamental problem with the EU now. The bureaucrats who are appointed by cronies to their posts without election are in a vastly better position than any of the electorate. They have personal power and massive personal gains from the EU gravy train without the slightest risk or responsibility. I hope Greece can recover. I am beginning to be highly dubious that the EU in its current form is actually a sustainable matter. Unless the taxpayers are happy to be screwed, which they are being en masse currently, which I personally do not think they will be this EU nonsense must come unravelled.

There are many aspects of the EU that I can and do support including unfettered travel, the right to work anywhere in the EU and so on. But whether the common currency can support insolvent failing states is an entirely different matter and, as the EU have now discovered, it rather looks as though it cannot. It will be interesting to see how Merkel and Co cope or rather fail to cope with the latest pronouncements from Greece. Clearly Greece is repudiating its debt. What now for the EU?

[Claudia Skies]

Steffan said:

There are many aspects of the EU that I can and do support including unfettered travel, the right to work anywhere in the EU and so on. But whether the common currency can support insolvent failing states is an entirely different matter and, as the EU have now discovered, it rather looks as though it cannot. It will be interesting to see how Merkel and Co cope or rather fail to cope with the latest pronouncements from Greece. Clearly Greece is repudiating its debt. What now for the EU?

I think it's pretty clear. The whole purpose of the EU and in particular the Euro is political union. The attitude of Greece, which has gone on throwing money around without restraint, simply says "we'd like to have the benefits of this club but don't want to pay the price of membership". That can never work.

Greece is going to find itself in a very sticky position if/when the benefits of membership of the club suddenly disappear. And presumably the people will then turn against the new government which has promised so much but will fail to deliver.

By the way, those who compare Greece with Iceland clearly don't have the first idea what is going on. Iceland had a bombed-out banking sector. Greece is a bombed-out country.

[Mermaid]

Claudia Skies said:

I think it's pretty clear. The whole purpose of the EU and in particular the Euro is political union. The attitude of Greece, which has gone on throwing money around without restraint, simply says "we'd like to have the benefits of this club but don't want to pay the price of membership". That can never work.

Greece is going to find itself in a very sticky position if/when the benefits of membership of the club suddenly disappear. And presumably the people will then turn against the new government which has promised so much but will fail to deliver.

By the way, those who compare Greece with Iceland clearly don't have the first idea what is going on. Iceland had a bombed-out banking sector. Greece is a bombed-out country.

OK, will staying in the Eurozone & its mandate help keep its sanity?

[RYH64E]

Mermaid said:

OK, will staying in the Eurozone & its mandate help keep its sanity?

What sanity?

Membership of the euro make little difference to a country's long-term prospects, it just brings their strengths and weaknesses into sharper focus. In or out, Germany will succeed, in or out, Greece won't.

[fido]

Claudia Skies said:

Greece is going to find itself in a very sticky position if/when the benefits of membership of the club suddenly disappear.

Aside from access to cheaper loans and Mercedes - what tangible benefits has Greece [or indeed the other PIGS] received whilst being in Euroland? Those who benefited from the credit boom and EU handouts e.g. students with grants have fled or parked their ill-gotten gains in another country.

Claudia Skies said:

By the way, those who compare Greece with Iceland clearly don't have the first idea what is going on. Iceland had a bombed-out banking sector. Greece is a bombed-out country.

I don't think anyone has made a direct comparison with Iceland, except to state that the current situation is unsustainable and does nothing to promote reform of their dysfunctional economy - EU cronyism least of all. If they default and are forced to borrow on the open market, they will at least have to the motivation (if not desire) to balance the books.