Greece must bow to austerity or go bust, says EU

[Stephen Retired]

Source: The Telegraph (UK)

Eurozone finance ministers will on Monday threaten an end to negotiations on debt relief for Greece unless its new radical Left government promises to honour all existing austerity agreements.

Eurozone officials are convinced that the EU holds all the trump cards in the coming clash with Greece's leader-in-waiting, Alexis Tsipras, including the nuclear option of letting Greek banks collapse. They believe Mr Tsipras knows his weakness.

The hardline approach will be sugared with offers of flexibility on the detail of austerity measures, and a move to allow Greece more time to meet an end of February deadline for renewal of key EU loans that are keeping the country’s economy afloat.

Jeroen Dijsselbloem, the Dutch finance minister who chairs meetings of the Eurogroup, will set out a strategy aimed at playing for time by drawing Syriza into months of talks in the expectation that Mr Tsipras will back down.

“There’s certain wriggle room to negotiate, to talk about the form of the adjustment programme,” he told Germany’s Der Spiegel magazine at the weekend. “But just to ask for a credit without having to meet conditions - that won’t work.”

Read more: http://www.telegraph.co.uk/news/worldnews/europe/greece/11368634/Greece-must-bow-to-austerity-or-go-bust-says-EU.html

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Good night!

[PoliticAverse]

1. So we'll see who blinks first. n/t

[TexasTowelie]

2. Of course they believe that they hold all of the cards.

Have you ever known a banker that wasn't an arrogant prick?

SYRIZA and Left must now justify the hopes placed in it by the working class and social movements, not only in Greece, but across Europe and far beyond. It now has a historic mandate based on these hopes.

However, there should be no illusion: This political victory in the elections--as great and important as it is--is only the first step. It is a new starting point along a difficult path that will be marked by tough and decisive battles against the system.

The owners of the mass media, the Bankers and industrialists, the Schäubles and Draghis {referring to conservative German Finance Minister Wolfgang Schäuble and European Central Bank President Mario Draghi} will try to extinguish the fire of Greece's rebellion against austerity. They will use the carrot and the stick--threatening and blackmailing on the one hand, but also proposing compromises whose effect would be to prolong the Memorandum framework.

The reversal of austerity has begun, but the decisive path lies ahead. We must remain unwavering in our fundamental objectives of abolishing the Memorandum and removing austerity in order to be in a position to win the great battles that will come--to have a chance of completing process, we must stay strong in the political commitments put forward for a government of the left. We must confront both the "stick" of blackmail and threats, and the "carrot" of the "fair compromises" that maintain the priorities of the Memorandums.

More at http://socialistworker.org/2015/01/26/taking-the-first-step-in-greece .

[PoliticAverse]

4. They hold the "if you want more money you have to do what we say" card. n/t

[Yo_Mama]

29. Syriza holds a higher card - without the interest payments, they think Greece wouldn't need money

Greece is projected by the last government to be running a primary budget surplus this year, which means that if they weren't making interest payments on the debt, they wouldn't need to borrow money to keep the country running.

http://www.wsj.com/articles/greece-on-track-to-achieve-primary-budget-surplus-for-second-year-1415882052

And that is why this is happening now. Because if Greece repudiates its debt, the EU is left holding worthless paper.

[candelista]

43. And no one will invest in Greece.

And the drachma will sink like a stone.

[JackRiddler]

61. Feeling good about that?

I think the next time capitalism crashes they should put you on a reduced Greek pension.

[candelista]

67. What is your problem?

I have no idea what got you to say that. What an evil, fallacious, presumptive, vicious thing to say!
Making a comment about how capitalists will act is not an endorsement of capitalism.

[Yupster]

44. Same with the US

The US debt is about $ 18 trillion. At 3 % interest that's 540 billion a year in annual interest payments.

Without the interest, we'd have a balanced budget too.

[Yo_Mama]

47. Yes, but we aren't running the massive budget deficits as a percent of GDP

that Greece is. Greece is bankrupt, and its debts have to be written down or restructured for very low interest payments (which is another way of writing off debt).

Our day of reckoning is still in the future. Greece's is now.

[truebluegreen]

52. Don't disagree with you about Greece,

but the US, with its own currency, can't go bankrupt.

[freshwest]

56. Then the solution, is not to ask for anymore money from people you regard as crooks, I guess.

Let Greece decide. If they don't want to pay a debt to those who financed them in the past, if they want to make a fresh start, it's their right.

I doubt there is going to be a war over any of this. The people of Greece have been backed into a corner and can't take any more. So their solution must be internal, take stock of what they have to run their country, make up their mind to file bankruptcy on the world stage, and let the chips fall where they may.

The story now is that their poor, elderly and public workers are suffering and dying because of the bankers. Reality would seem to press the Greecian peoples into some other solution to meet their own needs. Is there anything that they have needed from the rest of Europe except money?

Then let them have their own path. BTW - This is not a rant regarding your comment, just used it as springboard to work out some of my own thoughts. Those closer to Greece may have solutions that we don't know about. JMHO...

[delrem]

3. "Radical Left" was the headline at washingtonpost.com, as well.

They sure do like to go with mindless negative memes.
Perhaps that's all they have to do? Perhaps they're that secure?

[muriel_volestrangler]

13. Do you see 'radical' as negative?

If you do, then Syriza is probably not the party for you, since that's what the 'riz' stands for:

The Coalition of the Radical Left[11] (Greek: ?????????ό? ???????????ή? ???????ά?, Synaspismós Rizospastikís Aristerás), known colloquially by its acronym SYRIZA (Greek: ??????, pronounced [ˈsiɾiza]), is a left-wing political party in Greece, originally founded as a coalition of left-wing and radical left parties.

https://en.wikipedia.org/wiki/Coalition_of_the_Radical_Left

[delrem]

15. context is everything.

[muriel_volestrangler]

16. Unfortunately, I need some context for that gnomic utterance

I don't know what the headline that included the words 'radical left' said, but since 'radical left' is the translation of the party's name, and there is a less radical left wing party - the socialists, who have often been in power - it seems reasonable to call the party 'radical left'.

[Helen Borg]

5. Iceland did ok...

By telling the banks to f off...

[hack89]

8. As well as implementing austerity and borrowing billions from the IMF

they also decided to join the EU.

Let's not forget their problem was not a debt problem- they had little dept.

[DCBob]

23. Actually Iceland still has a mountain of debt.

They have just isolated it somehow so it doesnt affect their economy much. Eventually they will have to deal with it.

[FLPanhandle]

24. The EU is demanding it be paid before they are allowed to join

It's not gone.

I don't know why Iceland would want to join the EU though.

[roamer65]

35. Iceland recently withdrew its EU application.

They've basically told the Eurocrats to go bugger themselves.

[whatthehey]

53. And at the time had a debt of 50% of GDP not Greece's 177%

Why can so few on this site understand the difference between defaulting on sovereign debt and letting privately held banks fail?

[joshcryer]

6. EU can't allow Greece to set a precedent.

Eastern EU might follow suit.

There will probably be a compromise here or there and it'll be sold as non-austerity.

[amandabeech]

54. Or Italy, Spain or Portugal. n/t

[PosterChild]

7. Like Venezuela . ..

....without the oil.

As the public’s desperation has risen, so has Syriza’s popularity, with middle-class voters abandoning the centrist parties that have dominated Greek politics for decades and casting their lot with a group dominated by Marxist university professors and Communist activists.

Greeks emphatically reject austerity, elect Syriza in historic vote
http://wapo.st/1yYP8Ub

[blackspade]

9. Greece to EU: fuck off.

[Adrahil]

12. They can certainly do that, but they must be prepared for the consequences.

If they tell the EU to GTFO, they will need to be ready for a massive shift in their economy. Their banks will collapse, and that will cause a lot of national pain. IF, and I say IF they have a plan for what to do next that is REALISTIC, and EXECUTABLE, they stand a chance at a meaningful reform of the their economy to something sustainable. But if Greeks think that just means free money from the government, they are in for a very rude awakening.

[Helen Borg]

14. Yes, they need to rethink their way of life and all.

It would be nice if it was done in a rational and gradual manner, with people realizing that living minimalistic lives can be very fulfilling and overall a better way of life for everybody. But done this way, it will cause massive problems in the area.

[truebluegreen]

55. It has already caused massive problems

trying to comply with the EU's asinine austerity program. Supposedly their prescription to solve the problem caused by the corrupt elites would have resulted in a little pain at first, followed by a vigorous recovery. Four years later, the pain has been massive and the recovery hasn't come. IMO, the Greeks are fully justified in telling the EU and the IMF to go Cheney themselves.

http://www.salon.com/2015/01/26/paul_krugman_the_nightmare_conditions_that_led_greece_to_elect_a_leftist_government/

[Helen Borg]

58. Well, duh...

Austerity in these cases does not work. That is why rebelling against it makes sense. Creditors should get through their thick skulls that they need to invest to have a recovery, not make everyone poor to the point where nobody can buy anything.

[truebluegreen]

63. Nice talking to you. nt

[Helen Borg]

64. The "duh" was not directed at you, FYI. nt

[sendero]

65. The way the IMF goes about....

.... (IMF and hence the Troika) is akin to putting a man in jail for not paying child support. He might have well been behind but now he will be paying nothing.

This "plan" is not about a sane way to get back to economic health, it is about ASSET STRIPPING and CONTROL.

Folks should familiarize themselves with "confessions of an economic hit man" before going all judgmental on Greece.

[FLPanhandle]

10. Greece has no real option

They are bankrupt and still want to borrow money to cover a massive deficit.

Last time they went to the well to cover their costs, the EU balked unless they at least made some effort to balance their budget.

Now, the Greeks want to toss that agreement and are asking to borrow even more.

The Greeks can default and try to make it on their own revenue (ouch) or work a deal to borrow even more (ouch).

Somewhere along the way Greece needs to increase revenue (close all those tax loopholes) and decrease spending.

Getting off the Euro is also imperative but will also result in a forced balanced budget.

There is no leverage the Greeks have as they are basically the beggars here.

[Jack Rabbit]

17. There is always an option

Greece is moving in the right direction. Tell the EU to fuck off, as should all the other underperforming economies.

It won't really hurt Greece to let their banks go under and more that it would hurt America to let its crooked Wall Street banks go under. Banks don't produce wealth. They just move it around, and for the last 35 years, the era of Raganomics, they've done a terrible job of that.

The EU is merely a facilitator of these fake job creators. It's worthless, if that's not paying it too high a compliment.

What is the city but the people? If the economy isn't putting wealth in the pockets of the people, it's because somebody who shouldn't be is expropriating the wages on their labor. The Greeks are not beggars; they are the victims of a grand heist (see my signature line) and Angela Merkel is the bankster's moll and the EU is the getaway car.

Austerity is bullshit. The answer is to close tax loopholes, impose regulations on financial institutions, jail the banksters and create a jobs program. It doesn't matter if the financial institutions are the old ones or the new ones that rise from the ashes once the corrupt old are allowed to fail.

They should be allowed to fail. Banking is too important to be left to the bankers.

[FLPanhandle]

18. That is an option

But it will be painful in the short term.

Can any government survive the transition period?

I agree with you getting off the Euro is the best long term plan, but that plans still involves short term pain and austerity measures.

[Jack Rabbit]

22. There will be some short term pain involved, but the Greeks owe it to themselve to shorten the term

They also owe it to themselves to make certain that the Greek people come out of this prosperous; if their creditors do, too, so much the better, but that isn't really important.

The key is to put some money in people's pockets and make sure that there is something for them to buy with it. Functioning banks would be helpful, but if Greece's creditors insist on collecting on odious debt, then that will be taken as an indicator that they don't want to cooperate in the rebuilding of the Greek economy. The government can constitute its own banking system to replace the corrupt private bankers who did more than just a little to create this problem. Let them cry socialism. It doesn't matter what it is, as long as it isn't predatory capitalism, which is something quite distinct from a well functioning economy. We have all sen enough of that.

[Cosmic Kitten]

30. They can get money from China or the BRIC

[Dyedinthewoolliberal]

28. To whom do they owe the money?

Is each individual Greek citizen going to die if they new government stands fast?

[FLPanhandle]

31. It's not just the old debt, it's getting loans to cover their current spend

If the government stands fast, then no new loans.

No new loans, the Greeks have to live with a balanced budget.

A balanced budget means both new taxes for revenue and less spending (i.e. austerity).

Greece is continuously borrowing to cover their shortfall and thus the conditions the banks set in the first place to keep lending them money.

[Dyedinthewoolliberal]

36. But what I mean is

how does this affect the average person living there? Does it mean the garbage doesn't get picked up? The water stops running? The lights don't work? Or does it mean the banks can't extract huge amounts of money form the government in the form of interest for loans that probably were used for what? To buy tanks and airplanes and bombs?

[FLPanhandle]

42. Depends on how the government cuts their spending

It will ripple through to the average person there in some manner though.

[DeSwiss]

51. Greece may not.

- But Grecians have plenty.


Hey EU, what's less than a fucking zero???

[warrant46]

11. This is fresh ----wait until the food supply is affected

Its going to get very Ugly

[hobbit709]

19. That's like being given the choice of smallpox or typhoid.

either way the people are going to get screwed.

[Bragi]

20. Go Tsipras!

Better to control your own destiny than to do whatever the German bankers may demand.

[lovuian]

21. Severe Austerity against Germany

caused WWII and the worker will rise up

[elias49]

25. There's some austerity going on right here at home

in the US. Who's going to scold us about OUR debt??
I think we should call the IMF!

[JustABozoOnThisBus]

27. Who will scold us?

That would be China, probably.

We owe them a nice sum.

[ND-Dem]

37. According to Paul Krugman,

"It’s true that foreigners now hold large claims on the United States, including a fair amount of government debt. But every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors. If your image is of a nation that’s already deep in hock to the Chinese, you’ve been misinformed. Nor are we heading rapidly in that direction."[52]

http://en.wikipedia.org/wiki/National_debt_of_the_United_States

[freshwest]

57. Thanks, no idea of those stats. Could you link the Krugman piece, too?

Or the title, so I can google it?

[ND-Dem]

59. link:

http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html?_r=2&ref=paulkrugman&

[freshwest]

60. Thanks! He always breaks it down. I wish he was in the government sometimes...

[madville]

62. They have 9% of our debt

And the Social Security trust fund owns 2x that, or about 17% of the US debt. It's interesting to think what will happen now that Social Security is projected to run deficits from this point forward and will have to call all that debt in over the next 15 years to cover payouts. And then what?

[Erich Bloodaxe BSN]

26. If they're threatening Greece with 'going bust', Greece should return the favour

and tell them they'll simply void all debts owed to foreign creditors if Europe wants to play hardball.

[Yo_Mama]

34. That is exactly the platform Syriza campaigned on.

They don't expect to have to leave the Euro and they do expect to get concessions, and in effect EU leaders had already conceded that they would before the election.

It's now about how much rather than if.

[Recursion]

39. That's the Argentina strategy, which has some advantages

To the first order it's what Iceland did. Empirical history shows that greed does not have much memory (people lend to Argentina right now, God knows why), so it's probably better in practice than it looks on paper.

Still, it will be very interesting to see what happens in Greece in the next 2 years or so.

[Erich Bloodaxe BSN]

46. My gut feeling, which might be ignorant of important less than obvious factors

would be that the degree of success of such a strategy would depend upon how self-sufficient a country could be, since obviously, you're going to kill future foreign investment for quite some time in the future, and trading partners are likely going to demand payment up front.

[Fearless]

32. How about instead of the poor picking up the tab the wealthy actually pay taxes??

[Dawson Leery]

33. The Euro was a massive mistake.

Southern Europe cannot survive with the imbalance in political power that disfavors them.

[Recursion]

40. The euro is the real culprit here, I agree. Divorcing monetary and fiscal policy was a stupid idea

This is probably the one thing that economists on the left and right pretty much agree on.

[Dawson Leery]

66. Greece may have to take another short term hit in order to recover.

This means Greece leaves the Euro (which I consider a junk currency) and I cannot feel sorrow for Germany and France for the effects it will have on their national economies.

[TooPragmatic]

38. Syriza will get something but not enough

The EU will most likely give some more time, but they wont cut much if any of the debts. The question is will it be enough for the new government in Greece.

If Greece leaves the euro zone the consequences will be though and I doubt that Syriza will be able to hold the country together, since they wont be able to keep their promises on jobs assistance and subsidies without excessive printing of the currency and Greece is too reliant on foreign goods that it wont be able to afford any.

Because Greece has a primary budget surplus and some holes where to get money(tax evasion, corruption etc.) Syriza should attack those issues first and use the new revenue to further their domestic programs that assist the poor and create jobs. Reforms plus extension on the loans could create an budget surplus that could ease the markets and in the future allow Greece to borrow money from the markets and thereby reduce their interest payments. Btw. Greece in 2014 paid 4.3% of GDP on interest payments. That is less than Italy or Portugal

http://www.ft.com/cms/s/0/6e5532c0-a310-11e4-ac1c-00144feab7de.html#axzz3Q1KMiBPu

[Recursion]

41. Plenty of "marginal" European countries aren't on the Euro

The Czech Republic, Denmark, UK, Switzerland, etc. show that it's perfectly feasible to be integrated into the European economy without forming part of the currency union.

[TooPragmatic]

45. But Greece does not have a currency

Firstly Switzerland is not in the EU. Secondly, Denmark even though it has the Krone, it is pegged to the Euro so it operates as if it had the Euro without actually having the Euro.

Then we have to look at these countries and how do they get by without the Euro. the UK and Switzerland both have large banking institutions and have a currency that is and has been well valued for a long time. Czech Republic and Denmark have strong export economies. All of the countries you have mentioned have relatively stable economies with low deficits and a public debt that is well constructed.

But one has to think of the consequence of Greece leaving the Euro and reintroducing the Drachma could be a hellish experience to Greeks who have already gone through though times.

What would it mean. First there would be capital controls and bank holidays so people wouldn't be able to get their money. then as restrictions would would come off the Drachma would dive and inflation would go way up. That would mean that people who have debts in foreign currencies would see their debts go way up and also all foreign goods would be a lot more expensive. A somewhat ok comparison would be Argentina, but Argentina has an economy that is more tied to the country and more self reliant economy. Early 2000's were rough for Argentina and it still hasn't gotten through the consequences. It would be a lot worse for Greece.

[seveneyes]

48. Austerity of a singularity

We are all austere to ourselves. To come together and expand as one will require dependance.

[Sparhawk60]

49. Time to Bit the Bullet

Greece should bit the bullet and default on the loans. Yes, it would hurt in the short term, but it is the only way out of the situation. The alternative is to bleed the people dry to feed money to the 1%.

[DeSwiss]

50. K&R