Greece’s debt problem is eminently solvable. How about imminently?

The speed with which the eurozone’s key players reacted to Greece’s coalition government narrowly winning a vote on the latest austerity and reform package was impressive. If they could show the same haste and purpose in addressing the economic capitulation threatening to undermine Greek society and politics, we might be in for better days.

Even before 153 out of 300 Greek MPs had voted in favor of the legislation last Wednesday, which foresees more than 18 billion euros of cuts and tax hikes over the next four years, European Economic and Monetary Affairs Commissioner Olli Rehn admitted that Greek debt was not sustainable but that the most obvious method for tackling this problem, restructuring, was not an option.

A few hours after the vote, having seen the three-party coalition in Athens stagger over the finishing line, German Finance Minister Wolfgang Schaeuble said Greece would not immediately receive the 31.5-billion-euro loan tranche, which it had been expecting since the summer to recapitalize its wheezing banks and moisten the lips of its liquidity-parched market. The eurozone, it seems, has developed a dangerous penchant for self-harm.

There is also more than a dose of irony in the fact that the Eurogroup was not in a position to confirm the disbursal of Greece’s next loan tranche on Monday partly because longstanding issues such as the extra financing of up to 30 billion euros needed for a two-year extension and the sustainability of Greek debt had not been settled. They spent the last two-and-a-half years harrying Greece over the slow pace of reforms (justifiably) and its apparent inability to meet fiscal targets (Monday’s preliminary budget data for the first 10 months of 2012 showing deficit targets being beaten is confirmation that this criticism should now be dropped). But over the last few months, Greece’s lenders have shown they are prone to procrastination themselves.

The frosty exchange between International Monetary Fund Managing Director Christine Lagarde and Eurogroup chief Jean-Claude Juncker after Monday’s meeting in Brussels emphasized that in this crisis, Greece is not just battling its own demons, it is also threatened by others’ fears.

Pinballing between the institutional reservations and individual hang-ups of the ECB, IMF and eurozone partners, the coalition government finds itself battered and bruised, although just five months old. Its 179 seats have dwindled to 167. It has staked its survival on the success of the measures it approved last week but for these to take root, its lenders will have to rise above the short-termism that has pervaded their crisis management strategy.

“While disbursement is likely and Greece will be put on a more stable footing in the near term, eurozone member states and the troika have once again been myopic in their dealing with Greece,” wrote Wolfango Piccoli, the head of the European division at the Eurasia Group, in a note to clients on Monday. “By leaning so hard on this government now, coalition fragility has increased.”

A longer-term strategy, despite what Rehn argues, will surely have to involve some kind of debt restructuring. There is now growing consensus that a large chunk of what Greece owes will have to be written off so it can wriggle out from under the debt mountain that is flattening hopes of an economic recovery. The latest to add his voice to those calling for a multi-pronged strategy to deal with Greek debt and remove the uncertainty seeping through the eurozone is Zsolt Darvas of the Bruegel think-tank in Brussels in a paper titled “The Greek debt trap: an escape plan.”

It should be noted that Bruegel and Darvas recommended a restructuring of privately held Greek debt a full year before the Private Sector Involvement took place. Darvas’s comment in February 2011 is as valid today as it was then.

“If something is not sustainable and you try to muddle through then the outcome could be worse for everyone involved, including the Greek government, the Greek people, Greek banks and creditors,” he told Kathimerini English Edition at the time.

Twenty-one months later, we have come full circle, only now there is a need to write down official sector debt, not just bonds held by private investors.

Darvas starts his paper by pointing out the obvious, which in this crisis can never be repeated enough: If it remains on its current course, Greece is heading for disaster. Debt will be pass 190 percent of GDP over the next few years, the economy will have contracted by almost a quarter compared to pre-crisis levels and, as the Bruegel economist points out, the number of employed Greeks will be lower next year than at any point since 1980.

“The high public debt ratio and the deep economic contraction feed off each other, especially when there are widespread expectations of a Greek euro exit scenario,” writes Darvas. “With an increasing debt ratio, more fiscal consolidation is needed, which in the short term has a negative impact on output. But more importantly, when several consolidation packages follow each other, the government and the parliament may be unable or unwilling to pass new measures, perhaps due to social pressure and unrest. This can lead to a collapse of the government, domestic political paralysis and a stop in the external financial assistance.”

Greece finds itself staring at a debt mountain it had supposedly dynamited with the Private Sector Involvement (PSI) initiative earlier this year. A few months later, it has proved to be a damp squib – as many predicted it would be.

While Greece restructured almost 200 billion euros of debt held by private investors, it also had to borrow substantially to provide cash incentives for investors and cover the domestic impact of the haircut, while some 60 billion euros of new Greek bonds were issued. As a result, Greece’s public debt only fell by about 12 billion euros in 2012 and its ratio in relation to GDP actually increased by 5.5 percent, according to the figures presented in Darvas’s paper.

Along with the worsening recession and the impact of the further austerity measures, this means that piecemeal solutions will no longer do for Greece.

Juncker’s suggestion during Monday’s late-night news conference, much to Lagarde’s chagrin, that official sector involvement (OSI) will not be considered was very worrying. This leaves a limited number of tools for reducing Greek debt on the table. These include lending Greece about 50 billion euros to buy back the remaining privately held debt, reducing the interest on its bilateral loans and Athens being given the profits from the Greek government bonds held by the ECB.

Darvas says this is unlikely to be enough. After crunching the numbers, he found that all these measures, plus the front-loading of privatization measures, would reduce Greek debt from 343.8 billion euros in 2012 to 299.6 billion in 2013. This would not put Greek debt on a sustainable path. Darvas sees the debt-to-GDP ratio falling to 162.4 percent of GDP in 2013 and reaching 127 percent in 2020, rather than the 120 percent demanded by IMF.

Instead, the Bruegel economist proposes a much wider array of measures to tackle Greek debt. These include maturity extensions for bilateral and IMF loans, a zero interest rate on all forms of loans until 2020 and indexing official loans to Greek GDP. Darvas also makes the point that despite the eurozone’s reluctance to provide more funding, Greece will need an extra 30 billion euros on top of the 15 billion needed to carry out the bond buyback that has been proposed.

This combination of measures would help bring Greek public debt down to about 100 percent of GDP by 2010, Darvas argues.

He sees the option of providing zero-interest loans to Greece as a much more palatable one than accepting a write-off on what Greece owes its partners. Darvas writes: “While the two ways of restructuring official lending can have the same outcome, from a public relations perspective the message that ‘Greece won’t pay any interest for eight years but will pay interest later and will pay back the principle in full,’ could be preferable to the message: ‘We write down one quarter of Greek debt, yet Greece will continue to pay interest and will pay back the rest of the principal later.’”

While the proposals in the policy paper mean the ECB does not have to become involved in assisting Greece, and therefore won’t be accused of direct monetary financing of a eurozone member state, they do mean that a number of other taboos have to be broken: Greece will need more funding and the official sector will have to be involved somehow in the effort to restructure Greek debt.

Darvas’s suggestions are the latest in a series of ideas put forward by economists and commentators that would allow Greek debt to be tackled decisively, Greece to be able see on the horizon an exit from the crisis, and the eurozone to rebuild credibility, trust and a sense of unity.

The Lagarde-Juncker tiff, however, suggested there is no overriding acceptance within the eurozone of the need to break the bailout mold in the next few days. When eurozone finance ministers meet again on Tuesday, the onus will be on them to take, or at least put in motion, historic decisions. If they let shortsightedness rule, economic reality is likely to be unforgiving and Greece will be the first to feel its destructive impact.

Nick Malkoutzis

50 responses to “Greece’s debt problem is eminently solvable. How about imminently?

  1. The OSI is a must. In fact the OSI haircut – in order to be fair – has to equal the PSI which in nominal terms was 53% but in real Net Present Value terms was 84%. Therefore an OSI haircut of 84% magnitude is the equivalent remedy the official (public) sector should provide to equal that of the private sector (PSI).

    Nick calls the troika myopic in this article, yet the truth is that only the European component is myopic (in other words the European Commission and the ECB – European Central Bank). This is another way of saying that the defective parts of the Troika are both German controlled (and Germany – as we all know – is the only constant factor of idiocy in this protracted European drama).

    For once the IMF (aka Lagarde) is taking the right position by requiring an immediate, once and for all trimming of the Greek unsustainable debt. Every sound and reasonable Greek government in the world would have thrown its full weight behind the IMF position and undertake an activist role in this debate.

    Yet this present Greek fractured coalition government has only shown some pathetic reactionary reflexes, playing an unpopular “obedience” game, lead around by the nose and becoming a spectacle of ineffectiveness both domestically and abroad. The depths of Greek amateurism are truly appalling. Not only this so called “government” does not know what it is doing but it proceeds further to undermine its own economy as the recent “bank recapitalization” proposal indicates(in effect the Greek banks were ordered to self-recapitalize before allowing their plunder 8 months earlier). Hypocrites of both ND and PASOK simply owe too much money in party loans and are attempting to win debt forgiveness while destroying the domestic banking sector.(PASOK alone owes 200 Mil. euro of bank loans unable to repay and ND something quite close to it).

    Instead of mounting an effective European charge to win the day for Greece, this miserable coalition is trying to take positions of how to maximize advantage from the day after. A “day after” decided by Germany that is, because Greece is 100% absent in shaping its future. There is no other way to say it: The Greek politicos have let us down big time.

    • Dean, fair point on the troika. It can no longer be described as one entity, especially after such a public falling out this week. The IMF has taken its time in getting there, though.

      As I have mentioned on this blog before and as I tweeted yesterday, I am left utterly perplexed by the Greek government’s decision to take such a passive role on the issue of debt sustainability. This is the game changer and we are sitting on the bench.

      ________________________________

  2. BTW, in case you have not figured out the disgusting German game yet, here it is. Using Greece as a pretext, Germany borrows with negative rates (can you spell “free money” and then some?), while Greece which needs zero rates is forced to pay money to Germany which already profits from Greece’s “accident” in multiple and through other channels.

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_14/11/2012_469969

  3. Darvas hits the nail on the head when he argues that, for ‘public relations reasons’, an OSI would be wrong at this time. And he correctly points to the instruments which would achieve the debt relief which Greece needs without an OSI (interest-free loans, significant maturity extension, indexed debt service).

    Just like the Greek government has to be mindful of popular backlashes against its policies, the governments of the ‘paying countries’ have to be, too. Bear in mind that foolish politicians in the paying countries have told their electorates for over 2 years now that the rescue loans are ‘good loans’ and that they are making a profit on them. I fear that an OSI at this time – particularly when shortly after that OSI even more loans have to be made (which is unavoidable) – would change the public mood in the paying countries dramatically. It is above all in the interest of Greece to choose a ‘public-relations-friendly’ route where governments of the paying countries can tell their electorates (rather: lie to them) that they “have not forgiven a single cent of debt”.

    The IMF’s message (“a real fix, not a quick fix for Greece”) is convincing but I doubt that this is achievable at this time. There are just far too many variables which no one can predict. And we have seen in the last 2-1/2 years how much damage is done when something which is sold as a real fix turns out to have been a quick fix.

    ‘Debt sustainability’ is a totally abstract term from the IMF’s Charter and no one, the IMF included, can say with accuracy where debt becomes sustainable again. If debt is interest-free and maturities don’t fall due, the sky is the limit. If interest rates go back to the level of the 1990s, even 120% becomes totally unsustainable. And when, in a confidence crisis, many maturities fall due at once and are called, one goes out of business even with low debt. I fail to understand why all the attention seems to focus on a totally abstract term.

    If Greece’s interest expense were indexed (I recommend indexing it at 6% of primary expenditures), the private creditors could be serviced. Most of the official debt would end up being interest-free (interest could be capitalized). And a grace period of 10 years should be put on principal maturities of official debt. Actually, a large chunk of official debt should already now be rescheduled way out into the future (30 years at minimum; ideally a 99-year bond) because it is clear that it cannot be serviced properly in our lifetimes. And whether the ECB holds a bond with a 5-year maturity or a 99-year maturity is a moot point.

    So Greece would get, for the next 10 years, the debt relief it needs and the electorates in the paying countries can be kept at bay. What happens in 10 years when a lot of principal and capitalized interest fall due? That will be the time when one can negotiate a ‘real fix’ because by that time a lot of today’s unknowns will have been cleared out. Creditors can commit today that this will be done on a best-efforts basis (implying that there will be an OSI then). And when, in 10 years from now, Greece has turned-around its economy and the emotional dust has settled, a ‘real fix’ will become a lot easier.

    Incidentally, it was not the debt and certainly not the foreign debt service which has crippled the Greek economy. All of Greece’s foreign debt has so far been serviced by foreigners. What crippled the Greek economy was an austerity triggered by Greece’s demand for Fresh Money in excess of 100 BEUR in the last 2-3 years (and the foolish way how austerity was applied).

    http://klauskastner.blogspot.gr/2012/11/a-quick-and-clean-solution-the-greek.html

    • Klaus:

      It’s very simple math. According to Der Spiegel an OSI haircut would cost Germany roughly 17 Billion euros. Compare this to the profit of roughly 100 Bil. euros Germany has made from the Greek crisis and it’s quite obvious that Germany is getting cheap(a well known German virtue) off the hook.

      • I did not argue whether the cost of an OSI would be fair or not. I argued what the better strategy might be. The loss for Germany et.al. is already there. The only question is what the best timing is for its recognition.

      • > profit of roughly 100 Bil. euros Germany has made from the Greek crisis
        How do you come to that number?

      • Klaus:

        I think it’s kind of ridiculous to say to a dying person: “Please postpone your deaths until it’s politically possible to announce it”. Obviously the best timing is now.

      • BTW, Roger:

        I hope your research is thorough and complete (aka German) in every way. Because Germany has benefited from the euro crisis itself: an estimated €80 billion in reduced interest rates on its bonds alone.(and that’s a July 2012 figure)

        To that you have to add all the export benefits from the artificially low value of the euro (it is estimated that the true and unsubsidized euro value is about $1.80 versus $1.27 today which represents a 30% discount) and other financial benefits for Germany’s financial sector in increased profits from windfall European flight capital seeking rescue in Germany.

        After doing all your homework, you may find that the German benefit from the crisis is upwards of 120 Billion euros. In fact a lot higher than 120 Bil., but let’s see if you are willing to face the truth on your own.

      • Dean, I think the readers of this blog – as well as the other blogs where you post – benefit when they can read different opinions instead of having opinions declared as ridiculous. Your opinion is that the timing for an OSI is good now and I opine differently. That’s all.

      • Klaus:

        If you want better treatment in this blog you need to abandon being an apologist and unashamed propagandist for the German position. Greece does not deserve this deceit from self declared neutrals that are nothing more than defenders of German nonsense.

        Just type these exact words “German benefit of 80 Billion euros from
        reduced bond interest alone”. This figure is much higher today. We then have to add other figures as I explained to Roger.

        So, if you want to have a serious discussion on the subject let’s first find the answer to this 1st component. What is the German benefit as of November 15, 2012 from reduced interest rates? Go and find out and get it here subject to my inspection.

        And start doing some work also. I hate lazy readers who do nothing but be obstructionists and skeptics. So get yourself to work and produce figures.

      • Dean, help me out with math. You suggested that I type “German benefit of 80 Billion euros from reduced bond interest alone”. I did that.

        In the 2 years in question, Germany’s new borrowings (most of them for refinancing maturing debt) were a little over 400 BEUR. An interest benefit of 80 BEUR would represent an interest rate benefit of approxiamtely 20% p.a. Germany today borrows at close to zero. So your opinion is that Germany, without Greece’s problems, would have borrowed at around 20% p. a. I respect your opinion. My own opinion is that Germany would have borrowed at less than 20% p.a. without the Greek problem.

        Now, let me ask you to do some typing. Type into Google “flight to quality”. Wikipedia will inform you that that is “a financial market phenomenon occurring when investors sell what they perceive to be higher-risk investments and purchase safer investments”, Switzerland’s borrowing rates have tanked because of this phenomenon and, actually, so have those of the US. Coming to think of it, the US, too, may owe it to Greece that it can borrow at such low rates despite their down-grading!

      • This is an except from a report that appeared on German TV(state channel?) as of March 2012. Obviously the figures ar emuch higher now:

        “German Institute for Macroeconomics, where prof. Gustav Horn gives us the actual gain, from the euro devaluation, for German exports: 50 million euros, or 2% of the German GDP!!!
        Then Mr Folker Heimailer, from the Trading offices in Bern, provides the reporter with the calculation of profits of the last two years, due to the cheap borrowing interest of the German state. He says that money flows into Germany, due to the weakness of the other countries: Total profit , the last two years is 65 millions. ( Greeks are given 4 and 5% interest loans from their “partners”, while they themselves, borrow that money with 1% interest from the ECB!)
        The German economic committee is once again interviewed and proven clueless..
        At the end the reporter makes the calculation: In 100 billions of German profit, Out 15.2 of German guarantees!!! She also mentions that a ‘Marshal plan ” type of support for Greece is needed for the euro to survive and also reminds the viewers that it was the Marshal plan, that allowed Germany to recover after WWII. ( It also deprived Greece of the well-deserved war compensations, that it never, since, received, even though there was a clause deciding that Germany would have to pay war compensations, after the reunification with East Germany. German officials and media pretend this never happened… Surprisingly so does the Greek gov. …). /////”

        My own calculations show a german profit so far from the Greek crisis at 150 Bil. euro and rising.

      • BTW all numbers on the above quote in the German TV state channel are in the billions. The quote in paranthesis was taken from an actual translation which made the mistake of translating billions to millions.

      • Dean:

        My specific response was to your specific statement that “Germany benefited 80 BEUR from reduced bond interest rates alone” and I am glad that we could get that settled. Perhaps that allows us now to discuss essentials.

        Regarding the overall benefit to the German economy due to Greece, I have seen most sophisticated analyses arguing that the benefit was huge. I have also seen most sophisticated analyses arguing that the benefit was small. And some even argue that there was (or rather will be, when all is said and done) a significant loss. To me, these arguments are futile because no one will ever be able to prove them.

        One irrefutable (mathematic, and not economic) fact is that current account surplusser must be capital exporters and when they export capital, they put their money at risk. This is one reason why Germany, as Michael Lewis once wrote, was involved in just about every international bubble of late (except for Bernie Madoff…). Germany can only employ its people because it exports so many products. Greece could only employ its people in the last decades because it imported so much capital. That commercial imbalance is at the root of the debt problem and that is what needs to get fixed. Everything else is working on the ‘derivative’ instead of the ‘underlying’.

        Returning to the haircut. If a substantial OSI would definitely get Greece off the ‘problem list’, I guess everyone would go for it. My point is that it wouldn’t change a thing. Sorry, it would change one thing: the abstract ‘debt sustainability’ could be shown for 2020 and the IMF would be happy. But as long as ‘economic sustainablity’ is not achieved, an OSI would only lead to what Darvas calls the ‘negative public relations impact’: electorates in the paying countries would assume that, now that they have forgiven debt, no more bad news would be coming from Greece (in fact, foolish politicans would lie to them that way). And within a year, the Greek problem would be on the table again (everything else remaining equal).

        Remember that, so far, every single cent of Greek debt service has been paid by foreign creditors. They have basically paid out of their left pockets what they collected with their right pockets. Every profit they took on lending margins and guarantee fees, they have paid to themselves. By definition, this means that nothiing would be different today (except the level of debt) if Greece had not had to pay interest in the last 2-1/2 years. Particulary when considering how much effort went into dealing with this farce (at the expense of constructive things that the effort could have been applied to), one really has to wonder!

        Now consider the other extreme. Suppose Greece’s creditors had said 2-1/2 years ago something like the following: ‘we will put all debt service on hold for 10 years and we will lend Fresh Money in agree-upon limits; in the meantime, all resources will be devoted to achieving ‘economic sustainability’ for Greece; and at the end of the 10 years, we will make a final reckoning and restructure Greek debt so that it becomes sustainable’. I think what was valid 2-1/2 years ago is even more valid today.

        Perhpas it strengthens my argument when I say that, yesterday, Jens Weidmann (whose dictionary so far seemed to have included few other words than ‘njet’) has made more or less the same proposal.

        To make sure: I am not claiming to be right. I am just explaining my arguments. Please consider them just like I consider yours (always!).

      • Klaus:

        Here is a German parliamentarian (of Greek descent) that says that the German profit is at least 80 Bil. He is wrong of course since (Greeks tend to be approximate but not precise) it is at least twice as much:

        http://www.protothema.gr/politics/article/?aid=237112

        Then here is a video for you (minus a few Greek at the beginning) showing how clueless Germans are re: Greek situation.

        Finally my point was for you to Google the exact words “80 Bil. euros German profit from bond interest alone”. If you did you might have come across an article like this which specifically makes this point (you will find the number in bold towards the end of the 7th paragraph under the heading “Germany as euro victim”). The article’s name is :”Reinventing Europe: Germany debates political union By Ulrike Guérot “). I can’t list it here because the last time I did, the program Nick uses withheld my entire reply to you. Something about the hyperlink I guess which makes my reply subject to “moderation”.

        Going back to our conversation. You seem to suggest an export model as a good thing. Whereas I consider it a very bad thing. The last thing the world needs is consumerism fueled by a German or other nations’ appetite to make things for sale to others. The consumption model is already dead. It’s the consumption model which lead us where we are today globally: at a complete impasse.

        The new economy is that of ideas and knowledge. Not export products, not industrial goods, not the selling of any habit forming products. Your Germany/Austria is acting as a drug dealer pushing drugs to junkies around the world. We don’t need such nations among us in the new order of things. This model is finished, done, dead.

        In a few weeks from now and according to the Mayan prophecy, the world is about to experience a tectonic shift. Perhaps not a physical one but a perceptive one. Gone are the old ways of doing things. Welcome the new era where humanity will triumph over consumerism. It’s about time to let Germany and her antiquated ways go the way of the dinosaur. Just say goodbye and let it go. And please also let go this unhealthy fixation, you and a few other here, seem to have with Greece.

  4. Roger:

    Feel free (by using the internet) to research it on your own. I am done with baby sitting. If you can’t find it then I will give it to you, but first present your own figures.

    Here is an appetizer (however not indicative to the total amount):

    http://www.ocnus.net/artman2/publish/International_3/How-Germany-s-Super-Rich-Benefit-From-The-Economic-Crisis_printer.shtml

    • Why do you discredit yourself so much when you oftentimes have very good arguments? First you state a totally unsubstantiated figure and when asked about it, you explain that explaining your figure would be baby-sitting. I, for one, would have loved to read how you arrived at the 100 BEUR. That shouldn’t be so difficult to explain in a sentence or two.

      • Klaus:

        Please. You are hardly a person to pass judgement of whether I “discredit” or “credit” myself.

        You are treating me as your equal and without a doubt I am not.

  5. And now that the class has been disciplined, let me give you some clues.

    Germany is but a minor player in all of this. The decisions are all made on the west side of the Atlantic and now that the Merkel clone (aka Romney) has been prevented from taking power, game is over for Germany.

    http://www.forexcrunch.com/to-prevent-a-grexit-germany-would-need-to-take-a-loss-on-greek-loans/

  6. BTW, noticing a general weakness in the responses here. I wish to remind you that the problem has been framed for you before but you do not seem to have paid any attention.

    So, here it is properly framed again. The objective of truly enlightened politics is justice. Not economics, wealth or well being. These objectives are for less developed individuals.

    Pay attention to the graph and notice that we Greeks have known this for at least 2500 years. And since then neither German philosophy nor others German endeavors have been able to progress the debate one iota.

    Therefore, it kind of looks ridiculous to us that Germans (i.e. less intellectually advanced people) are showing up at our door step claiming that they have the solution for what ails us. We think that such is laughable by itself. It’s like students knocking at the door of the teacher with the intent of educating the teacher. (It’s very rare, but usually such attempts end up in failure).

    The issue we have with Germany is not money. It’s justice. And because less developed people tend to get hurt at their wallet, we aim at a substantial fine to teach you a lesson of not even attempting to do the same nonsense to other people/nations. It seems that it’s the only way for you to learn. Get burned financially by being over your head with Greece and then learn.

    http://fmmh.ycdsb.ca/teachers/F00027452/F00027453/platoste.html

  7. “eminently solvable”? Really!!! Is all of Greece’s debt going to be wiped out by lenders? If yes, then it is truly eminently solvable! Otherwise, it’s just a strategy to prolong the curent “status quo”, which will lead to more poverty.

  8. “They have lent money, at a theoretical profit. They have issued a fistful of guarantees to Europe’s twin bail-out funds, covering Greece, Ireland, Portugal, Spain, and soon Cyprus. They have taken on opaque and potentially huge liabilities through the European Central Bank.

    Yet little has disturbed the illusion that the euro is a free lunch for the surplus powers. An assumption persists that the creditors will – and should – be spared the consequences of flooding Southern Europe with excess capital.

    All the losses in Greece until now have been concentrated on those pension funds, insurers, and banks that stayed to the bitter end, rewarded with 75pc haircuts for their loyalty.

    We are at last nearing the awful moment when the curtain is ripped away. Greece’s economy has contracted 7pc over the last year. Public debt will spiral to 190pc of GDP in 2013. Leaving aside the Gothic horror of youth unemployment at 58pc, Greece’s debt trajectory is simply out of control.”

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9686251/Merkels-day-of-reckoning-as-taxpayer-haircut-on-Greece-looms.html

  9. The Greek debt issue cannot be solved by hoping for charity. A second restructuring will only leed to a third, then a fourth and so on. The Greek debt will never become sustainable unless Greece truly reforms its economy to achieve competitiveness. Only Greece can do this! The Europeans cannot force it on Greece by threatening or delaying loans. Greece needs competent leadership that can articulate and implement a realistic economic plan for growth and hope. The international community will help if Greece demonstrates a geniun effort to help itself. Greece, still has not done this.

    I would like to start hearing more talk about Greece’s economic plan for growth and job creation and less about loans and debt. The debt can be dealt as part of a realistic economic plan.

  10. If you quote an english anti-european newspaper: Have you ever asked yourself, why the Telegraph never ever proposed that UK should help Greece by subsidizing money or offering credits? They are really good in offering good proposals others have to pay.

    By the way: “We are at last nearing the awful moment when the curtain is ripped away. “:
    Which curtain?
    And how many more curtains still have to follow?
    Which one might be the last one?
    I suppose there will be another haircut if the trust is growing that this will be the LAST curtain, that there are no more skeletons in the greece toilet, that will require a next and next plus one subsidicing program.

    “Haircut” has also the meaning of “Final solution”.
    No more subsidices for greece, because the public in Germany and Northern Europe would not accept it after a haircut.

    That is the solution for the time all skeletons have been found, the reforms have been executed and the results are showing successes. Its the solution for the time Greece can refinance itself at free markets that are willing again to bear the risks of another greek default. Today they are not.

    • Roger:

      Some observations to what you said.

      1. Ambrose Evans Pritchard is a well respected journalist regardless of the print medium.

      2. The Telegraph represents the conservative right in Britain which is the ideological equivalent of Merkel’s party. If nothing else this is a conservative newspaper opining about the actions of another conservative government in Germany.

      3. That the British are euroskeptics in general has little to do with the thesis of the article. The fact that they are euroskeptics is supported by the subject of the article dealing with another European mess. The point here is that if you want the British to change their mind about the euro structure, then stop giving them loud examples of European failure. When something is ugly, and can be demonstrated that indeed is ugly, you can’t accuse people of bias for stating the obvious.

  11. @Dean Plasseras:

    >”Therefore, it kind of looks ridiculous to us that Germans (i.e. less intellectually advanced people) are showing up at our door step claiming that they have the solution for what ails us.”

    This is pure racism and overestimation of one’s own capabilities. Do you think that Greeks are the most intellectually advanced people? This may have been true in very ancient times, but today it is fatuous and it fortifies my impression that you live on another planet in a different epoch.

    >”We think that such is laughable by itself. It’s like students knocking at the door of the teacher with the intent of educating the teacher.”

    With that post you made a fool of yourself and you better realize now that your land of milk and honey financed by foreign debts has ended!

    • HT:

      Why is it racism? It’s factual. Greece has the highest per capita PHD ratio in the whole of Europe.

      You can call us a lot of things, but uneducated or intellectually inferior you can’t.

      It’s not supported by the facts.

      Maybe the reason you are so eager to pull the “racism label” trigger is that you are racist yourself. And if you are, I can’t help you. But at least use the “racism” label intelligently because you are exactly proving my point. It seems that is you people that you have an inferiority complex rather than us having a superiority one.

      • If it is not racism then it is simply sillyness because highest rate of PHD does not prove at all your point. And please read carefully, I did not say it is inverse!

        I’m not at all eager at that label and your guess that I might suffer from a inferiority complex are just ridiculous. That’s not the kind of discussion I will continue. Good luck anyhow, you pretty soon will need it!

      • What are all Greek PhD:s doing then? There are no Greek Nobel laureates in sciences? And very few Greek high-tech companies. And why do Greek universities perform so badly in international rankings?

        Unfortunately, the truth is Greece is no star in science and technology and hasn’t been since the ancient Greek mathematicians. In fact, today the only country around the Mediterranean that is actually known for its innovation is Israel. And maybe to some extent northern Italy, but that’s it.

      • Peter:

        I hate to burst your bubble, but the overwhelming majority of Greek PHDs are from schools abroad. And by that I mean universities far better than German universities.

        We are talking about top 50 global universities here, and I don’t think you can find many( try any) German ones on such list. The Greek universities are at a Bachelor’s level with a small dose of Master’s graduate work. Greeks go abroad for PHD specialization. Most end up in UK/Australian and US/Canada schools.

      • Dean:

        So who are the modern Greek equivalents to Carl Friedrich Gauss, David Hilbert and Albert Einstein?

        I am neither German nor Greek, and in fact I have much closer ties to Greece than to Germany, but I think your idea that Greeks are intellectually superior to Germans is just ludicrous. I don’t think Germans necessarily are more intelligent than Greeks, but Germany is and has been for a long time a much more developed country. And it’s unquestionable that modern Germany has made much bigger contributions to science than modern Greece (1821 – today).

        http://www.sciencenews.org/view/generic/id/63944/title/Swedish_academy_awards

      • Peter:

        The stereotype for Germans is that they follow orders and are neither creative nor imaginative. The equivalent of a human robot.

        Therefore, when we have a problem of the magnitude Greece is facing we can’t accept German leadership (which is an oxymoron of sorts). How can the less imaginative, less intelligent, less creative, less grand thinkers lead the parade here?

        Being well provisioned, having a cellar full of supplies to last the winter is not something that excites us as the image of our leaders. This is the image of scared men in their retirement age, trying to avoid losses by inflicting pain upon others.

        To lead people, you first have to earn their respect. I think it naive to think that Greeks well ever uphold any German model. I think you are confusing the cooperation of an impotent and failed class of Greek politicians as some sort of respect for something that does not exist in a Greek heart. I failed to see what particular German quality would ever capture the hearts and minds of the Greek people.

      • Dean:

        “I think it naive to think that Greeks will ever uphold any German model… I fail to see what particular German quality would ever capture the hearts and minds of the Greek people”.

        It seems to me that Otto Rehagel rather successfully captured the hearts of the Greek people. I could observe his successes only from the distance but my sense is that he did not have to teach Greek players how to play soccer. Instead, he ‘only’ had to convince them that 11 players playing in a coordinated team achieve more than 11 individual superstars, each on their own ego trip, each out to prove that they won’t follow orders, etc. etc.

        I know only Northern Greece. I have never been to a village where not at least some people still spoke German because they had worked there. A few weeks ago, I had a conversation with an elderly and retired Greek whose German was near-perfect (he had successfully run his own car dealership in Germany for a few years). I told him that I worried about the extreme anti-Germanism which I observed in Greece. And I quote his answer: “You won’t find that in the North. That’s only the Greeks from South of Larissa because they have no idea about Germany and the Germans”.

        I am not saying that he is right. All I am suggesting is that you should allow for the possibility that you may not represent the views of 100% of
        Greeks.

    • Klaus:

      Rehagel was o.k. but his legacy so and so. His idea was that because the Greeks couldn’t play offensive football, he will then turn them into a defensive team looking for opportunities on counter attack. This has created a legacy of low scoring games and even today the Greek national team has tremendous difficulty in scoring. The typical Greek result is 1-0 and that’s it.

      Talking about northern Greece. Thessaloniki, where I was born, used to be occupied by the Germans in WWII for the main objective of protecting the Ploesti Romanian oil fields. In fact it seems that the only reason the Germans invaded Greece is to make sure that allied bombers were not in range for an attack in those fields. The rest of what you call “south of Larissa” Greece was occupied by Italian forces which were quite different and much friendlier.

      As it happens with occupied cities some of the population collaborated. Apart form the fact that Germans exterminated a thriving Jewish community in Thessaloniki (talk to mayor Boutaris about it – he will show you the best buildings in Thessaloniki of Jewish origin). On my mother’s side, my grandfather, send his male child to a German school, while the girls went to the Italian school. A good friend of mine, who committed suicide from a high rise facing the German high school in Thessaloniki, had her mother with an illegitimate child from a German soldier (in fact she called him Othon too). Bakoyiannis and a lot of people from ND have are graduates of the German high school. But that’s the Greek elite we both agree has to go. Therefore their philo-German preferences are irrelevant.

      The fact that Northern Greece has more German sympathizers than the rest of Greece is a direct result of the WWII German occupation of northern Greece. There were many of the “elite” families who collaborated with the enemy and have passed this legacy of shame to the following generations. Due to the civil war that ensued after the German occupation was over, such families instead of being humiliated like the collaborators in France were allowed to blend back into the “acceptable” part of society due to a much larger struggle going on at the time which divided Greece in two camps. Therefore what you call the right (conservative) part of Greece is full of such “admirers” of Germany and of the old monarchy (which by the way monarchy was very pro-German).

      Since you are married to a Greek wife, you may know some of this but I am not sure if the story has been framed correctly for you to understand it and make the right connections of how it’s supposed to flow.

  12. Dean:

    An analyst would have a field day interpreting your lines. Nobody called Greeks uneducated or intellectually inferior. Instead, you thought that they did (without any evidence for it) and you reacted accordingly. I told you before that I enjoyed reading Nikos Dimou’s little book. To some Greeks, his hypotheses really apply!

  13. HT and Klaus:

    This article below sums up my argument pretty well. Use Google translate to read it. The author studied in Germany and knows what he is talking about plus he has done his homework (see footnotes):

    http://www.foreignaffairs.gr/articles/69031/athanasios-gkotobos/pos-kai-giati-i-germania-epitethike-enantion-ton-ellinon?page=show

    • Google is not able to translate that to understandable German or English…

      But I do not care anyhow because I know that you have a lot of links which prove your standpoint because other authors also live on various planets in differnet epochs.

  14. @Dean Plassaras | November 20, 2012 at 2:55
    Thx for the nice song. But at 2:55 you should sleep??
    The lyrics reveal that you do not understand at all my motivation😦

    There is not the slightest intentention to hurt you. It might only be that _reality_ will one day force you to aknowledge that your standpoint was on a far away planet in another epoch.

  15. I am not a Tsipras guy but he is correct in saying that Greece is absent from the negotiations shaping its future. Greece should have taken a notorious and public position siding with the IMF on the absolute necessity for an OSI haircut.

    Such opportunities don’t come every day and it’s about time that the whole world knows the true villain of the story: Germany and her compound failings.

    Moral of the story: Never trust Germany to do anything right. In fact, trust Germany always to do the wrong thing, or in the language of the markets for her always to be a negative indicator.

  16. > I am not a Tsipras guy but he is correct in saying that
    > Greece is absent from the negotiations shaping its future.
    Hi Dean,

    May I remind you to further discussions?
    I asked about the Greek proposals to get up the country and the economy again. I missed and miss that kind of creative proposals quite a long time.
    You answered once it is not up to Greece but up to Germany to present constructive proposals because Germany would have generated the crisis and so it hase to offer the solution as well. And for all reforms brought in by the greek government you told that it was made mainly due to German pressure and hence it is correct for greeks to protest against it.

    That IMHO extremely destructive position (that seemed to be representative for parts of the greek public) has several big flaws. One of them: Without constructive proposals Greece takes itself out of any negotiations shaping its future.
    You cant get everything.
    So what du you prefer?

    PS: The rest of your posting is that much filled with disgusting subtle racism (big villain Germany) its not worth reacting with something else than contemp.

    • Roger:

      The condemnation of Germany at this juncture is universal; therefore it’s neither my idea to say so nor is it subtle racism. It’s a factual statement of failure.

      What I don’t understand is why do you and other Germans seem to care so much about Greece. Do you think that you have a reasonable chance of maintaining a friendly relation with Greece? I think this part is over and no longer negotiable. There will never be any friendly relations between us. This has to be understood and you need to provide the means of your departure never to be heard again.

      Therefore this begs the question of why are you an apologist for the German failure and what do you expect to gain from Greece at this point? Are you so naive in believing that some day Greeks will appreciate the self-serving German behavior? Not one chance in a billion.

      Therefore, why don’t you quit trying to rationalize it and pretend you are helping in any way.

      As to you question of what Greece will do, that’s Greece’s prerogative. It’s not to be shared on public space with those who created the damage in the first place. Your attitude about this is compounding the insult. Not only you wrecked our economy to a large extent but you have the nerve to ask what we will do about it? On what basis do we owe you an explanation? You seem to be on another planet but most severely you underestimate how unwelcomed you are in Greece.

      There is no future for Greek-German relations. This is over and for good without any possibility of repair.

  17. Do not feed the trolls roger!

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