The Crisis In Europe Has Only Just Begun

[marmar]

By Mathew D. Rose, a freelance journalist in Berlin


Five months ago I attempted to explain why the conflict between Germany and Greece was destined culminate as it has:

Following the recent elections in Greece, Germany and its EU compradors are making it clear who is in charge. The Germans are currently not offering any compromise, but iterate the same blunt demand: Greece has to accept what is being dictated; in other words, capitulate or be annihilated. This time it will not be the Wehrmacht und Luftwaffe that are to force the Greek nation into submission, but a weapon just as lethal: national bankruptcy.

This conflict has nothing to do with Greek debt or finances. Syriza’s strategy was based upon the rational assumption that the nation’s debt and recovery are being stifled by austerity. As we know from most any respected economist, Greece’s debt can never and will never be repaid. On the continent that prides itself as the cradle of the enlightenment, there should have been an amicable, lasting solution to Greece’s untenable financial situation. Greece has had to learn the hard way, that the EU is no longer a European project for peace, democracy and prosperity, but a German tool for hegemony.

This has been a conflict between a small European nation, led by a leftist government, attempting to reassert its autonomy under crushing German predominance. That may sound simplistic, but there is not much more to it.

In past postings I have also attempted to explain the German mindset leading to this – and there is no other word for it – disaster. The negotiations have been surprisingly linear. Syriza’s main goal was debt relief. They always saw Chancellor Merkel as the lone decision maker in the negotiations. Ms Merkel on the other hand has unremittingly demanded unconditional capitulation. The rest has been spectacle. There is a saying: “Clowns entertain in the intervals between the acts. The circus director runs the show”. Dijsselbloem, Juncker and the rest may have had a lot to say to the media, but little to say in negotiations. Finland, Slovakia and Slovenia are irrelevant. The only other player of any importance besides Merkel was ECB president Mario Draghi, who assisted Germany’s financial blitzkrieg by questionably terminating the ECB’s support of Greek banks. Schäuble was Merkel’s executioner.

The intervention of France’s President Francois Hollande was uncannily reminiscent of Neville Chamberlain. The only thing lacking was his arrival at Charles de Gaulle Airport brandishing a letter from Chancellor Merkel. The conclusion of “negotiations” was reminiscent of the Munich Dictate. Greece has been “saved”, much as Czechoslovakia 77 years ago. ..................(more)

http://www.nakedcapitalism.com/2015/07/mathew-d-rose-the-crisis-in-europe-has-only-just-begun.html

[DetlefK]

1. Greece has lied to EU about its finances since the year 2000.

And the EU is now supposed to believe what Greece tells them?
The EU is now supposed to believe the financial numbers coming out of Greece?
The EU is now supposed to take Greece's word that anything but a debt haircut will be catastrophic?

Negotiating in good faith with a broke con-man is now the moral thing to do, because he's broke after all.

Imagine a friend of 10 years saying "That money you lent me to build my business? I lost it in shady investment deals. Sooo... we're good, right?"

[randome]

2. Those poor, lying Greeks. Have you no sense of compassion??

[hr][font color="blue"][center]"There is a crack in everything. That's how the light gets in."
Leonard Cohen, Anthem (1992)[/center][/font][hr]

[ljm2002]

3. Oh here we go again...

...funny how you always fail to mention Lloyd Blankfein, whose division at Goldman Sachs engineered the deception in the first place. And how you fail to mention that it was a conservative Greek government who engineered Greek's deception to gain entry to the EU.

You do not seem to grasp a basic tenet of finance, to wit: Any debt that CANNOT be paid, WILL NOT be paid. The IMF has already determined that Greek's debt CANNOT be paid. The austerity measures so far have decreased Greece's economy by 25% and have INCREASED the already unpayable debt, with untold suffering for the population, the vast majority of whom had nothing whatsoever to do with the original deception, but who are shouldering the burden nevertheless. So the current "solution" is to grant Greece another loan, all of which goes right into the coffers of the banks, NOT into programs to assist Greece and its people in any way; and which comes with strings attached, namely: more austerity measures guaranteed to decrease their economy even more, and selling off Greece's priceless heritage. This will result in more suffering by the Greek population, and the end result will be MORE debt, not less.

Yeah, that's the ticket.

[DetlefK]

6. 1. I have no idea why they chose austerity as a strategy.

2. Greece has cooked the books for at least 10 years before the shit hit the fan. Do you think they are above cooking the books to prevent more shit from hitting the fan?

I am not saying that Greece is falsifying numbers right now, but the point is that there's a non-neglectable probability that it is. Greece has a severe lack of credibility and this impacted the whole process.

I think it was Varoufakis who complained that Schäuble insisted on a big, comprehensive deal that tackled all problems and all reforms at once instead of solving Greece's problems step by step and as fast as possible.
Is this a negotiation-tactic you employ if you trust somebody?

[ljm2002]

7. Again: Any debt that CANNOT be paid...

...WILL NOT be paid.

The IMF recognizes that as it stands now, the Greek debt CANNOT be paid.

Furthermore, as usual, those who caused the situation (cough Blankfein cough) are rewarded while those who did not are feeling the boots on their collective throat.

Sorry your screeds about credibility are simply a convenient way to avoid seeing this situation clearly.

Yes, no one denies there was deception. That deception was engineered by Goldman Sachs. Yet no one anywhere seeks to punish them, or seeks restitution from them -- and they profited mightily from it.

Meanwhile Greece's economy tanks and the transfer of wealth continues upwards -- and the nation itself is to sell its patrimony to the private sector.

It is a textbook case of disaster capitalism. Yes the deception was bad, and Greece's (conservative) government was complicit. Big time. But now we need to look for different answers than collectively punishing the Greek population for something they did not do but rather, had done to them.

[DetlefK]

9. It was Greece that asked Goldman Sachs for help!

Greece wanted to hide its debt from the ECB and that's why they contacted Goldman Sachs in the first place. Goldman Sachs pulled the deception off, but it was the greek government that came up with the idea.

Okay, so we need a plan that makes sure that greek politicians will never again pull off this shit AND that spares the greek citizens. Any ideas?

[ljm2002]

10. First idea:

Don't try and squeeze blood from a stone.

ANY DEBT THAT CANNOT BE PAID WILL NOT BE PAID. Do you not understand this bedrock principle of finance? Unless you can acknowledge this simple fact, our exchange is pointless.

[mythology]

13. The exchange is pointless because you aren't willing to admit that the Greek people caused this

Instead you point to a bank as if the bank came in and was operating completely without the knowledge of the Greek government. Even if other countries forgave Greek's existing debt owed to them, Greece would still be in the same position as they haven't made the structural changes that would prevent this problem in the future.

You also ignore that Germany has in fact forgiven a great deal of Greek debt.

http://www.pbs.org/newshour/making-sense/truth-greek-debt-german-generosity/

[PassingFair]

16. I don't believe for an INSTANT that the "Greek people" caused this... anymore than "I" caused OUR

... market collapse.

"I" didn't borrow to buy a house beyond my means. "I" didn't invest money I didn't
have in risky stocks. I'm sure that the "Greek people" didn't either.

The chiselers chiseled, and now the "Greek people" are being bent over the chair to pay the price.

Bullshit!

They should clamp down like Iceland.

I keep going back to this Edwin LeFevre quote from 1932:

"Reckless fools lost first because they deserved to lose, and careful, wise men lost later because a world-wide earthquake doesn't ask for personal references..."

[ctsnowman]

19. .

[mythology]

27. Because saying something was widespread means literally all?

The housing crisis here was caused because enough people bought houses they couldn't afford.

That doesn't mean everybody who purchased a house bought more than they could afford.

[ljm2002]

17. You must have missed this part of my post:

"Yes the deception was bad, and Greece's (conservative) government was complicit. Big time."

Also, Greece's leftist Syriza government has made structural changes. It has not done enough, but they have made real changes. But the real question is why all the benefits accrue to the monied elites while the punishments must be on the shoulders of the peons.

And the answer is, disaster capitalism. The deceptive deal was engineered by Goldman Sachs whether you would like to admit that or not. Why is there no hue and cry to go after them to recover their ill-gotten gains? The ONLY issue that seems to be important to some people, is that the banks must be made whole. Just like in our own 2007-2008 crash.

Do people really think that the banks making loans to Greece had no idea of the risk they were taking? Was there no one in the EU and the IMF who was able to ascertain what was going on there before Greece was admitted? Did they really take a critical look at Greece's books, or were they also overeager?

Regardless of what came before, the fact is they CANNOT pay the debt. The IMF has acknowledged this. How would you suggest the EU squeeze blood from this particular turnip? The new loan goes DIRECTLY to the banks, NOT to the people of Greece. Therefore, their economy will see NO benefit and will continue to spiral downward, making them LESS able to pay back a LARGER loan. How is that going to work out again?

[DetlefK]

15. Second idea: Don't give Greece any f**king money.

We have seen what happens if you give Greece consequence-free money.

ANY CONTRACT THAT WAS BROKEN WILL BE BROKEN AGAIN. Do you not understand this bedrock principle of finance? Unless you can acknowledge this simple fact, our exchange is pointless.

[ljm2002]

18. And yet...

...they have already proposed to loan Greece more money, with more austerity measures that simply ensure Greece will be LESS able to pay back and ever LARGER loan.

So what is your position on this again? Your solution seems to be a Greek exit from the Eurozone. If so, I agree. I think all of the current plans are simply prolonging the agony and that having a single currency among nations with such disparate economies is a recipe for disaster.

In the States, we routinely give some states more money from the Federal level, than they contribute. But we are within a single country. In the EU, that is not going to happen, and yet they still attempt to impose a common currency.

Looks to me like the smart way to handle the EU is a political alliance but countries maintaining their own currency. I know the UK kept their currency and a couple of other EU countries did too IIRC.

[KamaAina]

24. So, which German bank do you work for?

[DetlefK]

28. The big shadowy one with an island lair shaped like a skull.

We use Heckler&Koch MP5s and wear black tactlenecks, except on casual Fridays. Once we have pillaged Greece, we can finally afford to order that big laser which will be aimed at a table with shackles.

[randome]

30. Oh, that's just too good!

[hr][font color="blue"][center]"The whole world is a circus if you know how to look at it."
Tony Randall, 7 Faces of Dr. Lao (1964)[/center][/font][hr]

[KamaAina]

32. That doesn't narrow it down a whole lot.

[cemaphonic]

22. Another principle of finance:

Don't lend new money to debtors that can't or won't pay. All these op-eds about how Germans are mean always seem to leave out that Greece is not only asking for debt restructuring, (when they have already had a couple rounds of it) but to borrow more money as well.

[mythology]

12. Apparently we're supposed to either forget that part or assume that

Goldman Sachs broke into the Greek government, forged some documents and Greece had no idea until it was too late. Because pointing out that a bank was involved in financial mismanagement, means we can ignore Greek's decades of financial mismanagement.

The Greek people wanted a lifestyle that they couldn't or wouldn't finance and eventually the financial house of cards came crumbling down and they want other people to continue to throw good money after bad.

[ljm2002]

20. You mean, "The Greek elites wanted a lifestyle...

...they couldn't or wouldn't finance".

Greek pensions are in line with other European countries. The Greek population is older than most populations in the EU, so there are more people receiving pensions. The wealthy Greeks are used to not paying taxes, that is true. Syriza has made inroads there but not enough.

But you and many others think that the sins of the elites should be visited on the Greek people en masse. And you hold Goldman Sachs simply not responsible. Their finagling is A-Okay apparently.

Since they are on the Euro, Greece has no ability to change their currency exchange rates as they could if they had their own currency. Regardless of what has come before, their hands are tied in an economic sense.

Disaster capitalism wins again. Sad to see so many DUers cheering it on though.

[mythology]

26. Greek pensions started earlier than other countries

And tax evasion wasn't limited to just the elite.

I get it. You want to shift all of the blame onto a few Snidely Whiplash characters, but the problems were and are more widespread than you acknowledge.

[ljm2002]

29. I get it.

You want to continue to punish the Greek people until their economy is 100% wrecked and they are forced to sell all of their valuable assets, the things that could actually bring money into the country.

The real question is, what to do with the situation now. And the answer that you and others come up with seems to be, punish those who had the least to do with it, while allowing the movers and shakers and the well-to-do to continue with their own lavish lifestyles and suffer ZERO consequences. Have you heard about anyone going after the architects of Greece's initial deception? No? Me either.

Please spell out your answer to how Greece will be able to pay back the new loan. If they already CANNOT pay the current debt (as the IMF has stated), then how is going further into debt going to help? Continuing austerity measures only weakens their economy, further eroding their ability to generate money to repay the loans; and the loans do nothing, nada, zero, zilch for the Greek economy. They go directly to the banks so they can continue to pretend they are 100% covered -- i.e., to falsify their real standing.

Disaster capitalism, coming soon to a country near you.

[Taitertots]

4. Comparing nations to your friends is a great indication that you should be ignored

Because the comparison is irrelevant. Greece isn't a person.

Also, derivatives exist and you arn't "Lying" when you do use fairly standard accounting practices.

[DetlefK]

5. But the EU still has to work with the numbers Greece provides to them.

And those numbers were falsified during every single report Greece filed from joining the Euro until the Recession.

The problem is a lack of trust: The trust that Greece is willing to do its part to rectify this. But from the very beginning Greece wasn't trying to rectify this. Did the greek government before Tsipras fight tax-evasion? Did it fight waste? Did it fight corruption? Did it try to install a progressive tax-system?
Example: When the greek government was presented by a foreign agent with a list of greek tax-evaders, what did they do? They blacked out some names before passing it on.

This greek government signed deals with the EU how to handle this and then the Tsipras-government came in.

Tsipras asked for a new deal but Schäuble rebuffed him: No post-negotiations, no changes, a deal is a deal. Because there was no trust that Tsipras would be any better.

[Taitertots]

8. "Trust"? The pseudo-moralist position has no basis in reality.

All the little pieces the pseudo-moralists love it cite don't add up to enough to have done anything but delay the inevitable.

You're suggesting more austerity and tax hikes would have solved their economic problems.

You'll get further trying to understand the situation using conventional macro economics than worrying about the "trust"/confidence fairy.

[DetlefK]

14. Why help Greece in any way if you can't trust it?

Greece falsified documents.
Greece lied to its closest allies for a full decade.
Greece's actions are endangering a currency held by 19 countries.
Those are undisputable facts.

(What outcome does conventional macro-economics predict when one business-partner falsifies documents?)




Greece's debt can be forgiven without major problems (except bad press).

If Greece's debt is forgiven, what happens 10 years from now?
Will Greece stop falsifying documents?
Will Greece stop the lying?
Will Greece stop shady Wall Street dealings that threaten the Euro?
Why would Greece? The problem is solved!!! The system works!!! Let's return to the good old days of tax-evasion, corruption and cheap loans!!!



Here is my prediction:
- It's not about austerity. Austerity is used by the EU (and Schäuble) to force Greece with maximum brutality into abso-fucking-lutely reforming their country and not backing out of it: Greece must never again be allowed to fuck up the Euro.
- The suffering of the greek people is a negotiation-tactic and intentional: If Greece got off too easy on the side of monetary help, they would have no incentive for reforms. Greece would possibly quit halfway through. Greece's suffering is intended to keep it weakened and in line until the process is finished.
- The very second that all reforms have been implemented in Greece, EU-politicians will suddenly start pondering that a debt-haircut for Greece is not THAT outlandish.

[ljm2002]

21. Were the numbers falsified?

Or did they correctly report the complex derivatives that Goldman Sachs helped them to devise?

When negotiating a contract, both sides are expected to be diligent and to protect their own interests. Why is there no hue and cry against the EU and IMF negotiators? If deception is the issue, then where are the indictments against Goldman Sachs? Why do we hear NO complaints from the Germans about them? And if that deceptive accounting was legal, then where is the call to change the financial regulatory systems in order to prevent these kinds of shenanigans in the future?

What I see is that the idea of a shared currency between such disparate nations doesn't work, the end. The rest is sound and fury and at the moment, a wish to punish someone -- namely, the Greek people.

By the way: that deal that Tsipras accepted? It won't work either. It tightens the austerity screws, ensuring Greece's economy will continue to tank and will therefore have less tax revenue with which to repay its ever-larger debt.

[DetlefK]

23. Oh, they were falsified before Goldman Sachs ever entered the stage.

The EU had complicated negotiations what kind of country would be allowed to join the Euro. German Chancellor Kohl insisted on very strict baselines for economic stability, but they got weakened more and more. In the end he had the choice to accept a weaker Euro or no Euro at all.

There are 5 criteria: deficit, debt, inflation, interest-rates and a currency exchange-rate with little fluctuations.
Violate these criteria and you can't join the Euro.
Violate these criteria after joining the Euro and you must pay a fine.
https://en.wikipedia.org/wiki/Euro_convergence_criteria

The limit for deficit was and is 3%. At the time when Greece applied for the Euro, their deficit was more like 6%.
The limit for debt was and is 60% of yearly GDP. At the time when Greece applied for the Euro, their deficit was more like 105%.
Greece cooked its books to meet the criteria. (Some numbers were totally made up because the greek finance ministry itself didn't have numbers.)

Nobody at the EU believed them, but also nobody had the authority to double-check them and demand insight into files of the greek state. And thus Greece joined the Eurozone.

Once inside, there was the problem of keeping up the deception. And that's when Greece hired Goldman Sachs.





Was it Tsipras or Varoufakis? One of them said in an interview that it's too late for Greece to leave the Euro and that Greece never should have entered it in the first place.

[kelliekat44]

11. The Greeks upheld austerity when they refuse to reign in corruption and their tax evaders.

All over the world, capitalism does not seek to work for the common good but for individual gain and power. It is the root cause of all the conflicts. It uses religion, the opiate of the masses, and racism, the opiate of the ignorant to keep control of militaries, banks, news media, land, food and all natural resources. All western capitalist nations are falling prey to their own greed and corruption. Their unbalanced, selfish desires are not sustainable for much longer as people tire of their evil.

[randome]

25. Unbalanced? Selfish?

Sounds like you're describing the Greek tax cheaters. Face it, they are just as greedy as the corporations. And no, the tax cheaters were not confined to the rich and powerful. It cut across all income levels.
[hr][font color="blue"][center]"The whole world is a circus if you know how to look at it."
Tony Randall, 7 Faces of Dr. Lao (1964)[/center][/font][hr]

[Eleanors38]

31. I'll throw in some naive questions/observations...

If these banks in all their financial wisdom, acumen, and knowledge of risk made these loans to Greece, why should they not take responsibility for what seems to be some international loan-sharking? Many everyday investors are aware of penny stocks, C-rated and junk bonds. You buy them and you take a chance on WhizzKid Anti-splash Urinal selling OTC. The company knows this as well, and is as likely to fail in its capitalization as the stock-buyer.

But here you have a sovereign nation, cooked books or no, selling bonds at big interest rates, and the bank is Not likely to fail; after all, the banks loaned at rates comparable to Speedy's Cash/Pawn and knew it had the coercive power of government to back 'em up. Doesn't seem the banks took much of a "chance." Like in the bundled derivatives bubbling in our own cesspool.

Maybe they should share the financial burden, at last.