Giving Greece a chance, not just a tranche

It is a sad indictment of the manner in which the Greek crisis has been handled by all sides that for probably the first time since the economic unravelling began about three years ago, moderates in Athens as well as other eurozone capitals looked at each other in the wake of another inconclusive Eurogroup meeting on Wednesday and wondered: “Why did we ever get involved with these guys?”

The rest of the eurozone’s grievances with Greece – many justified, some the product of stereotyping – have been well documented but the inconclusive 11 hours of discussions between eurozone finance ministers in Brussels this week tipped the balance the other way. It was the turn of level-headed Greeks, fully aware of their own country’s shortcomings, to fume about their euro partners’ footdragging and failings.

Yet, just as it has been unfair for Europeans to have undue expectations of Greece, so it is excessive for Greeks to expect 16 eurozone countries to each easily overcome their national concerns and promptly agree a strategy that would make Greek debt sustainable.

However, after months of backchannel discussions and two marathon Eurogroup sessions to discuss what has been obvious since the restructuring of Greece’s private sector debt in March, the reasons for Athens, its eurozone partners and the International Monetary Fund failing to agree on a formula to move forward are wearing extremely thin.

In fact, apart from the technical issues mentioned in Eurogroup chief Jean-Claude Juncker’s statement early on Wednesday, it is difficult to justify the latest round of indecisiveness. The procrastination comes as Greece is almost out of cash reserves and its government is about to be hung out and dried by a sanctimonious opposition that can hardly believe its depiction of euro leaders as austerity-thirsty, self-serving political pigmies intent only on punishing Greece rather than tackling an urgent European – and not exclusively Greek – economic problem is about to come true.

The delay in agreeing a strategy for debt restructuring, which would pave the way for the release of the bailout funding Athens has been expecting since June, is rubbing salt into the wounds of the coalition. Prime Minister Antonis Samaras and his partners have gone out on a limb over the latest austerity package, shrugging off the opposition brickbats to vote it through Parliament. Emerging battered and bruised on the other side, the release of funds to complete the recapitalization of Greek banks and the payment of state arrears, as well as a solution for the country’s impossible debt are the only spoils Samaras has to show in order to appease an increasingly bitter electorate and fend off an advancing opposition. Every day that goes by without a deal, his government’s credibility is eroded a little more.

Part of the argument about why it is so difficult for some countries to agree to a debt restructuring is that, regardless of whether Samaras government has met its commitments and is showing willingness to pick up the pace of essential structural reforms, there is still resentment towards Greece for its past sins, and the idea of giving it this kind of break is anathema to some electorates and parliaments.

This dismal state of affairs is the result of mistakes, including woeful communication, by past Greek governments but also the pusillanimity of European leaders who have lacked the guts to explain to their voters what this crisis is about. It should be absolutely clear by now to people in the eurozone that making Greece’s debt sustainable is not – as some would still have it – about helping slackers but about recognizing economic reality. It should be about accepting that an economy which was driven to the edge by feckless politicians and a largely compromised population has now been driven into the ground by the mistaken policy of imposing towering austerity at a time of deepest recession. It should be about acknowledging that some of the key weaknesses that were so publicly aired at the start of the crisis: public spending, wage costs and a current account imbalance have now largely been corrected. It should also be about recognizing that this, possibly the world’s most dramatic fiscal adjustment, has come at a huge cost, one that cannot be borne indefinitely.

Even if one had been oblivious to what has being going on in Greece until now, just a cursory glance at the economic data published this week would confirm that a tremendous fiscal effort has been made but that this has not prevented the economy disintegrating. The Bank of Greece, for instance, said the country’s current account produced a surplus for the third month in a row in September. Considering Greece’s current account deficit stretched to more than 20 billion euros before the crisis struck, September’s 775 million surplus is a giant stride in the correct direction. After all, one of the aims of the internal devaluation in Greece was to correct this trade imbalance. Yet, if one looks closer at the figures, this correction has come almost exclusively as a result of the collapse in demand created by the crisis. The rapid drop in imports, rather than any great increase in exports is acting as a levelling factor. The structural problems affecting the current account have not been rectified yet.

Also this week, the Finance Ministry confirmed another primary surplus, of 930 million euros, in October. The primary deficit of 1.1 billion euros for the first 10 months of the year is well ahead of the 2012 target and is further proof the effort being made on the fiscal side. But the adjustment has been aided by a building up of state arrears and the extra revenues from increased taxes. An overshoot by social security funds could still have a negative impact on the final figures. Again, this points to the high cost being paid by citizens who carry the weight for helping public finances survive the onslaught of the recession.

A stark indication of just how high a price Greeks are paying came with the release of data by the Hellenic Statistical Authority (ELSTAT) that between Q2 in 2012 and Q2 in 2011, there was a 13.6 percent reduction in disposable income, a 15.1 percent drop in compensation, a 9.5 percent reduction in welfare benefits and a 37.3 percent increase in taxes. This is all in keeping with the strategy that will see Greece unwind by the end of this year the rise in unit labor costs between 2001 and 2009. Yet, the ELSTAT data also shows a 20.6 fall in investments. And, when one considers that despite their drastic salary reductions, Greeks are still forking out about 30 percent more than the EU average for basic goods such as milk and eggs, the signs for the economy are ominous.

So, as eurozone finance ministers gather again in the next few days, it would be worth them considering which of their governments would survive, which of their electorates would tolerate and which of their countries would be able to absorb the impact of such an abrupt adjustment. Greece has paid and is continuing to pay for its grave mistakes but we have reached the point where its partners must realize that they hold the key to the country being able to make a fresh start. The fiscal consolidation and the structural reforms (those already carried out and many more still to come) will count for nothing if there is no convincing deal on Greek sustainability. Greece’s political system, its society and economy will not survive without such an agreement.

There are some within the Eurogroup who are concerned that a reduction of interest rates on bilateral loans and reimbursing Athens with the European Central Bank’s profits from Greek bond purchases constitute fiscal transfers, which are currently illegal. They should consider that up to now, their countries have made a profit from lending to bankrupt Greece, initially at interest rates of between 3.4 to 4.5 percent. The eurozone is happy not to consider Germany, for instance, making gains of 380 million euros on its 15-billion-euro contribution to the first bailout package, a fiscal transfer. It has also been content until now to accept that the central bank of the euro area should be allowed to act as a private institution and pocket the profit from investing in bonds of a member that is on its knees economically. Furthermore, it has accepted the European Investment Bank, another institutional tool, abiding to private sector criteria, such as demanding excessive guarantees, before releasing any capital funding to boost Greek SMEs and help stoke some growth and job creation.

If a deal on Greek debt is to emerge by Monday evening, all sides need to accept that they’ve been guilty of serious misinterpretations and mistakes in dealing with this crisis. Now with something tangible to point to, Greece can argue that it is atoning for its faults. It can look across the table and ask what concessions the others are willing to make in order to make up for the failures of the last few years. Hopefully, this will be the moment that all sides realize it is in their common good to move on together rather than regret ever embarking on this journey in each other’s company.

Nick Malkoutzis

47 responses to “Giving Greece a chance, not just a tranche

  1. Good column. The media coverage in germany iover the failed negotiations is a bit shame-faced, in fact. The pretence that “all the money will be paid back” was always threadbare, It’s become quite frankly ridiculous. (Of course, Mr. Samaras played along, with his “personal guarantee” to this effect, when he was in Berlin. Fortunately, nobody believed him, even at the time).

    I can’t see that line holding, and suspect there will be a deal on either Saturday, or Monday.

    Parliamentary majorities, delivered by coalitions, are fragile things. In Greece, or anywhere else. I assume Schäuble blocked, because he knew he needed to get the votes together in the Bundestag. The Netherlands and Finland, similarly.

    Oh and by the way. Congragulations on the Primary Surplus. A great, and extremely necessary, achievement.

    • You got a good point Richard. I forgot about the Samaras’ guarantee that Germany will get her money back. That was an incredibly stupid thing to say.

      I used to support him but he is loosing credibility with me very fast. I don’t think he can hack it.

      As to ELSTAT (the Greek statistical authority) they are beyond unreliable. Frankly speaking, they have no clue what they are talking about. If one has to get figures on Greek exports, he/she has to look at the statistical authorities of other countries.

      Here is an example from the US statistics which show Greece for the first time having a trade surplus with the US:

      http://www.census.gov/foreign-trade/balance/c4840.html

      Elstat can’t verify any of that. They simply have their own set of figures which they constantly manipulate for political purposes.

  2. Pingback: Giving Greece a chance, not just a tranche » Mad about Messinia

  3. Nick,

    I would like to point out that your statement of loan rates in the range of 3.4%-4.5% and German profits of 380 Mil. euros on 15 Bil. loan are inconsistent.

    380 Mil./ 15,000 Mil = 2.533%

    If the statement of interest rates in the 3.4%-4.5% range holds then Germany should have made:

    @ 3.4 % = 450 Mil. euros worth of interest on 15 Bil. principal, or

    @ 4.5% = 675 Mil. euros worth of interest on 15 Bil. euro principal.

    • And the numbers above are assuming one year holding period.

      Because if the holding period is greater than a year then the 380 Mil. profit translates to a much lower interest than 2.53% and my interest calculations on the range limits are much higher (multiply by a factor of 2-3 depending on when the initial contribution was made).

      • sebastian_schroeder

        To release you from your obviously big tension on thinking that Germany may make a euro too much you should consider in your calculations that Germany didn´t get the loans provided to Greece for free. So most likely this 340 million Euros are the difference between what Germany has to pay for the loan itself and what it gets from Greece. Thats probably the reason why this payments where considered also falsely as profits.
        All other countries that provided loans to Greece got the same amount on interest payments. Germany got the biggest payment because it provided the biggest loan. Being critisized for having provided the biggest loan while the others that make the same amout of money according to the size of the loan they provided is kind of strange.

    • Dean, those were the figures given by the German Finance Ministry earlier this year.

    • Sebastian:

      When Greece become locked out of financial markets and therefore Europe had to come to the rescue – not for Greece, but for its own self-interest in keeping the European banking system alive and functioning – I don’t call this a loan.

      I call it (and 99.9999999999999999999999% of the world is with me on this one) unjust profiteering and enrichment.

      • sebastian_schroeder

        Actually you have called it a loan by yourself. Anyway, the point in my comment was that you forgot the simple fact that Germany has to pay money for the loans it gave to Greece. So Germany paid 1,5-2% and gave them to Greece for 3-4%. Thats the whole magic. For some countries like Netherlands, Germany, Austria, Finland etc that had acces to cheap loans, it would have been a good deal if Greece would have been able to pay back its loans (which obviously only polticians believes in). For countries like Italy it was a bad deal from the start. Why do you see it as unjust profiteering? 3-4% isn´t a bad rate and its much better than everything that Greece had to pay before its entry to the EZ. The rate Greece would have to pay on the free market would have been 20% or something. Why do you expect that countries that have to pay money for loans by themself will give them for free to Greece?
        If the whole strategy was correct is another question, but thats how it was agreed by Greece and the Troika. We can discuss for hours now why the hell the Alps are in the middle of Europe we will not shift them a single mm. We better start to build roads to pass them.

      • Sebastian:

        Germany’s borrowing cost in next to zero, in fact in real terms (adjusted for inflation) below zero.

        So, let’s say for argument purposes Germany gets ECB supplied funds at 1% cost and lends to Greece at 4.5%. (therfore pocketing a full 350 basis points as profit – which BTW is what really happened).

        Have you ever heard of the term “carry trade”. Borrowing at some currency in low rates and re-lending to others in different currencies at much higher rates? This is precisely what caused the collapse of the financial world circa 2008. Of this lending and relending in the pursuit of higher profit.

        And you have the nerve to call it o.k. ? or “what’s wrong with it”?

        The whole concept is wrong.

        When one of your partners is bleeding you don’t make profits on misery.

      • sebastian_schroeder

        I thought we were talking for the first bail out terms/loan here? You jump from A to Z and thats confusing the things.
        Germany has NOW something like close to 0 (actually 0,4 mean value). The first bail out was decided 2 years ago and there the interest rates Germany had to pay for the loans it handed over to Greece were close to 2%.
        If someone has the reason to be anrgy than its the Italians as they actually pay on top for every Euro the give to Greece. The interest rates for them to get the loans are higher than what they get from Greece. Those burdens should be shared among the lenders, and the plus that Germany makes should equal the losses that Italy makes.
        What you obviously ask for is that the lender countries should pay the interest rates for Greece? Except from complaining I don´t really get your concept.

      • sebastian_schroeder

        Forgot. What I mention in the last two sentences is actually happening as Germany is going to waive its interest profits.

      • sebastian_schroeder

        Its pretty pointless and bit arrogant to write something like “you don´t get it.” because it implies that you think about yourself that you get everything. Anyway, everybody as he likes…
        You complained and made a calculation wondering about the sum. I explained you the reason.
        You complained that Germany makes profits ond loans, I explained that Germany is actually not making profits at all (on the specific loans we speak about) but is even returning the interest profits by now.

        Eveyrything else, concepts, strategy whatever is a different topic from the terms and conditions of the bail out loans. There is no point to complain about the bail out loans so you start complaining about something else.

      • Greece needs a 150 Bil. OSI debt reduction, to approximate the private haircut.

      • Sebastian:

        I have a feeling you don’t get it. Skip to minute 29:30

      • Seba, my friend:

        All I am saying is:

        Let Greece live and germany die!

      • sebastian_schroeder

        Man, I hate Paul McCartney. I hope you don´t expect me to listen to that longer than 30 seconds.

        If Germany dies, Greece dies as well. Thats the Benediction of Globalization😉
        As far as I know German companies are the biggest private employers in Greece.

        Anyway have a nice Christmas time

      • Same to you Seby. Merry Scrooge McDuck Christmas to you too and all the hard working slaves of Germania.

        I didn’t know that you didn’t like McCartney. In such case could you please scratch the entire comment and go back to your righteous sleep of an honest executioner while your Greek victims are bleeding?🙂

      • sebastian_schroeder

        You have noticed that I am living in Greece, working in Greece, paying my taxes in Greece and am therefore bleeding as everybody else is. What about you?

      • @Sebastian Schroeder

        Now that you mention your background, I take it you are the man from Patras who has made very impressive comments in the Ekathimerini. A couple of them I reprinted in my blog with name attribution to you.

      • Seby:

        Why where you pay your taxes fits into the conversation?

        What sort of taxes are you paying? Are you paying more than 80000 euros per year in taxes?

      • sebastian_schroeder

        Dean
        Its quite easy to nderstand how the fact that I am paying taxes fits in the conversation. You accused me of having a nice Christmas while letting people in Greece bleed. I am bleeding like everybody else is. Tataaa
        I would consider myself of belonging to the so called “middle class” which is actually the group which has to share the highest financial burden in Greece right now.
        I don´t want to know if you pay your taxes and how much or whatever, I would be interested where you actually live.

      • Why don’t you Google me and find out.

      • Sebastian:

        Because contrary of what you think, I actually like you, here is a piece of advice:

        Cease speaking to this sewer element of Greek society. They are the most uneducated, practically illiterate people in the whole of Europe.

        Not only they have no idea of how contemptible they are but they also seem to believe that they have a place in public discourse pretty much as Satan has the license to spread Christianity.

        Stop wasting your time with human trash. These people couldn’t even hold a conversation, let alone engage in one.

        Here is a formula for your quick reference:

        GD = Junta supporters+ retired military conspirators+deposed king sympathizers+clergy malcontents = 100% pure human trash.= 100% Merkel austerity byproduct.

        http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_20/12/2012_475473

  4. Nick:

    Here is an excerpt from a Wall Street Journal article re: Greek debt:

    “The table shows that Greek debt would fall to 128.2% of gross domestic product by 2020 and to 115.2% by 2022 if euro-zone governments agreed to cut interest rates on their €53 billion ($67.8 billion) of bilateral loans to Greece by 0.9 percentage points, return profits on Greek bonds held by the ECB, finance a buyback of bonds owned by Greek banks and other private-sector bondholders, together with other measures.

    The rate charged on the bilateral loans now is 1.5 percentage points over the three-month Euribor reference rate, currently at 0.19%.”

    If we accept this as a true statement then the current rate on the Greek aid loans is 1.69%. Therefore it would be interesting to see how the German Finance Ministry has calculated such figures; over what time period, interest rates and principal involved(is the principal amount fixed from day 1 or increasing over time?)

  5. euro nations need to examine their own agendas more closely and be more transparent. Ordinary Greeks have had their dirty linen hung out for all to see and they’re sick of being hung out to dry at the expense of others. Great column, as always.

  6. To assess what the immediate costs to the budgets of lending countries of a Greek debt relief in the form of, say, an interest reduction to near-zero would be, one would have to look at the rescue loan agreements and check who the ‘lenders’ are. In the case of Germany, I doubt that its Treasury is the lender. More likely the KfW.

    Thus, all interest income and funding cost of Greek rescue loans go through the books of the KfW. The German budget would only be affected if the KfW had to reduce/cut dividend pay-out and/or require a capital injection. Conclusion: not necessarily an immediate impact on the German budget (and once an impact is avoidable, it can be ‘steered’).

    It’s even easier with the ECB. The ECB could take a, say, 100 BEUR hit without affecting the budget of any lending country. There is no recapitalization requirement on the part of NCBs. Even if the ECB incurred a negative net worth, it wouldn’t have any implications on its operations (actually not until doomsday).

    Incidentally, the benefit of paying lower interest rates on bonds goes right into the German budget!

    Against this background, it’s even more difficult to understand why the lending countries don’t implement the sort of debt relief which would work: interest rate reduction to near-zero for, say, 10 years and return by the ECB of (immoral) profits on trading Greek bonds. There is no limit to the acceleration clauses one could put into such an agreement, i. e.: the whole thing is rolled back if Greece does not reform its economy. And in 10 years one could meaningfully talk about restructuring Greek debt in such a manner that it is brought to a sustainable level (i. e. 60% of GDP) with the remainder being forgiven. That would be the carrot for Greece (and if Greece achieved that goal, that would be a huge benefit for the Eurozone).

    • But isn’t this the whole issue? Namely, that Germany is preventing the ECB from acting as a central bank for control issues?

      Of course ECB mechanisms could take care of the problem and should have taken care of the problem a long time ago. And who is standing in the way? You guessed it! It starts with a G and is not Greece.

    • Thanks for the interesting comments, Klaus. I believe the funding comes via the KfW.

      ________________________________

    • Klaus:

      You complain of lack of constructive ideas from the Greeks and of me in particular.

      Therefore, since you have decided to turn Greece into a new Prussia under Antonis die Minor here is an idea of a Silesia moment for him.

      1. Come up with an official 10 year plan.
      2. Convert Greece to a CH4 energy economy vs. Middle Eastern Oil dependence. Convert all Greek power plants to dual capacity cycle, able to use either coal or natural gas.
      3. Initiate a series of geothermal and bio-mass(garbage recycling)plants.
      4. Initiate an energy retrofit program for both commercial and residential buildings to improve energy efficiency and curtail high energy bills which chronically plague the Greek economy.

      The advantage of such energy program is immediate and could bring about quick economic dividends.

      • Dean, what a great response! Makes me write a reply a few hours before Christmas dinner.

        Yes, what Greece needs is a long-term economic restructuring plan which would also be a vision for Greeks. Not a plan which turns Greece into a colony of the EU but, instead, a plan which builds ‘a modern and prosperous Greece: a Greece characterised by economic opportunity and social equity, and served by an efficient administration with a strong public service ethos’ (this wording comes from the 1st EU Task Force report).

        Is this possible or only a rhetoric argument? It is possible. I have seen it happen in Chile in the late 1970s/early 1980s. Chile in 1973 was in much worse condition than Greece is in even today. The Chicago-Boys there applied a shock-therapy medicine which I, then, thought would not be possible in a democracy. Today, I would say it is possible in a democracy because the short-term cost/pain to much of the population seems greater in Greece today than it was in Chile then. And Greece is still a democracy.

        The elements of such a plan are basic economics: open up the economy for investment and know-how transfer from abroad; break up the power of the state (and cartels, monopolies, etc.) in the economy; liberalize the economy and allow reasonable competition; identify the country’s competitive advantages and go after them with full force; above all: believe in the private sector and less in the state; etc. etc.

        Mind you, Chile then reached the turn-around within 5 years and from then it became an upwards movement. Greece, after 5 years, still has no perspective at all.

        What are the obstacles? Really only one. If the country’s established political, economic and otherwise elite resists that transformation, there is only the chance of an icycle in hell to achieve that. From what I have seen about the established Greek elites, they would have to agree to self-amputation if such change were to happen. Thus, I believe some form of (very civil) civil disobedience cannot be avoided. In Chile, it was the housewives marching through the streets of Santiago pounding on their empty pots. Who could that be in Greece?

        So here is my suggestion to you. Motivate opinion-leaders like Yanis Varoufakis to re-direct their impressive brainpower from attempting to solve other people’s problems (like the problems of the Eurozone) to working on plans for Greece’s future. If someone like Yanis gathered some of his best students for a brainstorming project such as developing a long-term economic restructuring plan for Greece, they would come up with plausible proposals within weeks. That, of course, presupposes that people like Yanis really have as their primary interest to improve their country.

        You live in America, so I don’t have to tell you what the American mindset is. Let me just recap some of the more important soundbites: “don’t explain to me why things don’t work; propose to me how they could work!”; “don’t analyze things to death; do something!”; “don’t just stand there!”. Or as one of my bosses once said to me in the early years of my career: “You can criticize everything you want but if you don’t pair up every criticism with a proposal for a solution, you might as well walk out the door!”

        Again, Merry Christmas!

      • Merry Christmas to you too Klaus.

        That was a delightful response. You may care about Greece after all.🙂 We will pick up the subject after the Holidays!

        All the best to your family and loved ones!

      • Klaus:

        This is an area where Greece needs immeditae help. Apparently the state is losing roughly 1 Bil. euros per month in undeclared illegal imports. On an annual basis this would be 12 Bil. euros and for a country whose revenue so far stands at 58 Bil. euros, such lost potential revenue represents a very sizeable amount.

        Therefore your assistance/ideas/advocacy with the German/Austrian authorities is needed to remedy the situation.

        The racket works roughly as follows: Trucks from other countries enter Greece declaring a pass through to a different country. As such their merchandise is not subject to Greek tax. Instead of following the stated route/destination these foreign trucks unload their merchandise in Greece as part of the black market distribution network.

        Here is the article in Greek. Please use either the English or German translator for more details. I have tried and Googled endless combinations of possible themes (Lost tax revenue, illegal imports, Greece) but have not been able to locate anything satisfactory in English. It would be great to get hold of the actual SDOE report which gives alll the details.

        http://www.tovima.gr/finance/article/?aid=489923

        and here is the web page for the crime fighting unit against tax evasion (SDOE):

        http://www.minfin.gr/portal/en/resource/contentObject/contentTypes/announcementObject/pageNumber/1

      • Dean, I have replied by direct mail to you.

      • Thanks Klaus.

        Next on queue will the the topic of Greek exports and the mystery case of Greek exports to Turkey.

  7. The net effect on growth from the recent eurozone decision is zero. Here is the formula that best describes it:

    0+0 = 0.

    Guardian excerpt:

    “The murkier part of the deal relates to the plan to buy back billions of euros of Greek debt from investors at a discount to the face value — thus cutting Greece’s total national debt.

    Rumours of this plan have been circulating for weeks – driving up the value of Greek bonds in the market (and thus diluting the potential benefits).

    Christine Lagarde was notably reluctant to discuss the plan at the post-midnight press conference – presumably to avoid getting bond traders even more excited.

    But the bottom line is that there’s no guarantee that this debt buy back will be a big success.

    The FT has a good explanation on this issue:

    The key to a debt buyback is to purchase outstanding bonds at heavily distressed prices, allowing Greece to retire the debt far more cheaply than if they had to pay the bonds off when they reached maturity.

    But in a statement, finance ministers said the buyback price for bonds could be no higher than prices at Friday’s market close – meaning there will be little if any premium offered to private debtholders, raising questions about how many will participate.

    And if the debt buyback flops, the IMF might not hand over its share of Greece’s aid tranche – worth around €10bn.”

  8. I am amazed at some of the statements which have been made in the comments to this article.

    First, there is this allegation that someone has been making profits on new loans to and/or guarantees for Greece. No one has! Every single cent of debt service which Greece has made so far was made with funds which were lent to Greece in the first place to facilitate such debt service. All the ‘profits’ (interest margins, guarantee fees) were paid by the creditors to themselves. All it means for Greece is that the debt has been increased by that amount but given that much of that debt will have to be forgiven sooner or later, that is a moot point. If the above had been done with a private creditor in countries like Germany or Austria, it would have represented the criminal offense under bankruptcy laws (‘deferring bankruptcy’).

    The other allegation that countries like Germany profit from Greece’s crisis because its borrowing costs have come down due to it is true on the surface but quite a bit of a farce. I have commented on the ‘flight to quality’ before. Additionally, this would be like calculating how much money Greece has made (or ‘saved’) by being able to borrow at nearly German rates for almost 10 years.

    ‘Carry-trades’ have nothing, but really absolutely nothing to do with the Greek situation!

    Against this background, the argument that ‘when one of your partners is bleeding you don’t make profits on misery’, while morally absolutely correct, is totally inapplicable to Greece. As I said, no one has made money on Greece. Instead, a lot of market players have made a lot of money on other market players (actually, Greece is one of those market players who gained due to PSI and debt buy-back).

    Greece is not bleeding because someone stopped lending to Greece. Greece is bleeding because someone said we will lend you less Fresh Money than you would need in order not to bleed. This triggered the (poorly implemented) austerity measures which caused Greece to bleed. I hasten to add, however, that this has happened in just about every fIMF-steered restructuring program anywhere in the world.

    Let me city my often-stated analogy: one can’t draw water from a dried-out well unless one first dumps it into the well. The tragedy with Greece is that, so far, all the attention has focused on dumping more water into the dried-out well to drain it out again, instead of focusing on repairing the well.

    • sebastian_schroeder

      Klaus, thats pretty much my feeling on the whole thing is as well.
      I am a bit afraid that we miss a clear stragey in Greece on how we can repair the well though. My Girlfriend works as independent worker in Greece, and it looks like next year she has to pay 60cent on every Euro she makes on taxes and social security (TEVE). My tax limit will be shifted probably as well and I don´t see how we can get things back on track in Greece like this. I have plenty of things to do on my house but I will simply not do it unless we don´t know if they will again increase taxes backwards or how the whole situation will be next year and how much money will be finally left in our pockets. No one invests a single cent right now just because of the uncertainity.
      Instead of waiting for others to correct wrongs (like Dean expects) Greece should finally get down red tape, set out a clear strategy on 3-4 major fields (Energy, Agriculture, Logistics, Modernization program for houses) and get it running.

    • Excuse me citizens of the Austro-Hungarian-Teutonic empire:

      These are undisputed facts. Throughout the Greek crisis – which Germany engineered for this very purpose – Germany has made the following obscene profits:

      1. 80 Billion euros on zero interest financing
      2. 50 Billion euros on increased exports due to artificial 30% euro discount from its true value.
      3. 20 Billion of investment and similar unjust enrichment from sucking up all available European capital.

      By the way. Do you people know how to interpret graphs? Why don’t you explain this graph to us regarding sovereign debt?

      http://www.google.com/publicdata/explore?ds=ds22a34krhq5p_#!ctype=l&strail=false&bcs=d&nselm=h&met_y=gd_mio_eur&scale_y=lin&ind_y=false&rdim=country_group&idim=country_group:non-eu&idim=country:fr:de:el:it:nl:es&ifdim=country_group&hl=en_US&dl=en_US&ind=false

      • Dean, I have once before explained to you why the 80 BEUR savings on near-zero interest financing for Germany is a fairy tale but you prove time and again that listening to others (much less accepting opinions of others) is not a talent you ever demonstrate.

        Regarding all these other insinuations as to who profited from the Euro and who did not, it seems that I have seen an expert paper to disprove any point which some other expert has proved before. The point is: one can’t prove anything here and focusing on the issue all the time is nothing other than creating smoke screens about the past instead of coming up with proposals for the future. Just for the fun of it, I send you this one from ZeroHedge.

        http://www.zerohedge.com/news/tales-unexpected-who-really-benefited-euro-hint-not-germany

        Other than that, and to be perfectly honest with you, I am not sure I understand how your reaction to my comment has anything to do with my comment.

        And Merry Christmas to you, too!

      • Klaus:

        MC to you too.

        Quoting Zerohedge, an opaque and unknown blogger by the name of Tyler Durden who has consistently been on the wrong side of issues in the US dating back to 2008, sounds more like desperation on your part.

        You very well know that the number has been shown on German state TV and I would post it here, other than the fact that is already way outdated (the true number is twice as much).

      • This is an except from the video and oly talks about the 1st finacial aid package:

        “The German national channel “ARD” (“Allgemeine Rundfunkanstalten Deutschlands”), also called “Das Erste” (the first), which was the first TV channel in Germany, recently revealed how with massive fraud against a whole nation of people, with close cooperation from a certain select Greeks of course, Germany was able to profit some 45 billion euros from the euro crisis, on the back of Greeks! The show which was broadcasted on Greece’s own national NET television channel, shows the confession of the German head of EFSF, Klaus Regling, in an interview with news magazine FOCUS on this very subject. According to the German head of the Fund, Germany, has not suffered at all from the current debt crisis and instead has recorded significant gains which he notes are expected to multiply over time. This, according to Regklingk, is because Germany is not directly lending Greece, but is rather gaining on the interest rates from the loans which are greater than those by which it borrows from.

        “The majority of market participants do not believe in the end the crisis and expects more downgrades of states this year,” said Regling in an interview with news magazine FOCUS. “The markets are, in fact, more money would soothe even further. That may be right or wrong, but it is a fact. Create large numbers in the window of calm ” Policy was an extension of the bailout but difficult to enforce, said Regling. In recent months, Europe has regained confidence. Since mid-November last year, interest rates have fallen by a third. This development in just four months showed that this had happened at the right time. “The rescue operations have not cost Germans. The image that funds (to Greece) flowed into a bottomless pit was wrong. There are no gifts and no permanent financial transfers. On the contrary, Germany has profited from the crisis, because a lot of capital flowed into the country (Germany).”

        Germany has only given 15,2 billion euros (according to formal data from the German government), a sum that does not in any way compare with what it has benefited from in keeping Greece “under fire”. One economic analyst in the video also says that Germany’s profits were so great because it is able to lend money to other nations with similar debt problems because it is able to borrow at lesser interest rates. This difference allowed the German Republic to gain some 45 billion euros from the crisis, and it is expected that this sum will rise to 65 billion.

        The most amazing part of this shocking video -confession- is that Germany’s members of parliament suddenly developed Alzheimer’s when asked if they knew about this.”

      • Typos:

        This is an except from the video and only talks about the 1st financial aid package: …..

        As I said above, the real pofits today are much, much larger.

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