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When Will Greek Looting and Austerity End?

2015 July 15
by Ian Welsh

Back in 2010 a friend predicted it would end when Greeks stormed parliament and beat or hung members of parliament.

It seems that, while that may or may not be literally the case, in general terms it is one of three possible end states. Since there are always enough MPs willing to sign any deal, no matter how bad, because they personally do not suffer the consequences of said deals, bringing the consequences home will be necessary.

The second possibility is the Schauble plan. It is odd that Schauble, though extraordinarily punitive, is willing to offer a pretty good deal for Grexit. He’s worked hard for it, and maybe he’ll be able to force it through yet. So far he has been stymied primarily by the fact that the Greeks will accept any deal, no matter how bad. You can imagine Schauble thinking:

“I want the Greeks out, so I’ll offer bad deals, surely they’ll leave.”

“Hmmm, that didn’t work, I’ll offer a worse deal!”

“No!?  A terrible deal, then?”

“Ah, ha, finally, a NO vote in the referendum.”  (Rubs hands together with glee.)

“Now, an apocalyptically catastrophic deal on one hand, countered with a reasonably generous plan for support if they leave!”

“No? No!?”

So, Schauble, having realized that Greece will not leave no matter how terrible the deal inflicted on them, must now convince not Greeks, but other key European decision makers.

The third possibility is that a truly radical government takes over in Greece: Likely Fascists or Communists. Someone who actually says what they mean about austerity and will do whatever it takes to end it.

Remember, Hitler did turn the German economy around. Mussolini turned around the Italian one.

One can hope it will be a slightly nicer set of people, but we are definitely in a period where the “decent” people mostly don’t have the necessary courage to stand up for anything that matters; certainly not the courage to actually face down neo-liberalism.

This isn’t a joke post, though I wish it was. I want everyone to remember the rule of prosperity and rights.

You have exactly and only the rights and prosperity which are useful to your lords and masters or those you are able to secure from them with force or the credible threat of force.

Any rights or prosperity you have beyond that will always be taken away from you.


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Syriza Wins in Greece: What It Must Do

2015 July 13

(Given the way Greek financial negotiations have played out, I think my first take is timely/relevant, and have restored it to the top. Originally published in January. -Ian)

It would have been better if they won last time, Greece is pretty fully looted now. But Greeks thought they were Europeans, and didn’t realize the contempt that French and Germans had for them, nor how willing they were to kill and impoverish large numbers of them.

There is a great deal of hand-wringing in conventional circles over the Syriza win. They are worried about the Greeks exiting the Euro (Grexit) and defaulting on their debt.

Greece should do both of these things, or something close to it. (Rolling the debt over into 100 year bonds at 1 percent, for example.) Greek debt is at a level which is effectively impossible to pay off and has been made much, much worse by all the “aid packages” and “bailouts” given by their “fellow” Europeans. (a.k.a., they should have defaulted years ago.)

As for the Euro, Greece can’t print it, and Greece will need to print money.

I worry that Syriza is serious about negotiating on the debt. There is essentially no chance the Troika (well, really, Germany) will give them acceptable terms on a write-down. Negotiations should be intended only to go on long enough to demonstrate that a good deal is not possible. While they are ongoing, the Greeks should be preparing for Grexit and repatriating all the resources they can. Since Greek debt is under foreign law, debt vultures will go to the courts to seize all foreign Greek assets once Greece does default or restructure its debt.

Greece needs to recognize that it will effectively be a financial pariah, unable to access Western money markets. It will have almost no hard currency, and no ability to buy goods which require hard currency.

This is a huge problem for Greece because it has neither oil nor the ability to feed itself. Syriza MUST have a plan to deal with both these problems. Neither is insurmountable.

For oil, Greece will simply have to make a deal with Russia, Venezuela and/or Iran. Greece will be a pariah state just like them, and they have oil. What does Greece have to offer? Well, sub voce, access to Greece. Greece will be out of the Euro, but it will still have borders with Europe. Once whatever you want into Europe is in Greece, it’s easy enough to get it into Europe. And anything those countries want from Europe, the Greeks can obtain and ship to them. Grey market, baby, and grey market finance, as well.

In terms of food, a deal must be made with a food surplus nation. I would suggest Argentina, which has plenty of food. (This is incorrect, Greece can feed itself, Greeks will just have to eat less imported foods.-Ian)

Remember that Greece has one of the largest merchant marines in the world. It has that to trade, and it has access to Europe to trade.

In addition, currency controls must be put on immediately and the borders must be secured against those trying to move goods out of the country (a.k.a., Greece’s useless rich).

Given that all this will cause Greece to be completely loathed in Washington, London, Berlin, and Paris, they may also wish to consider seizing much of whatever means of production remain in the country. If they want a reason, simply use the Lagarde list of Greek oligarchs who haven’t paid their taxes, and seize their back taxes—with plenty of interest.

The media is playing this as an anti-austerity vote, and it is. But voting anti-austerity for a country like Greece, which can’t feed itself, has no oil, and doesn’t have a lot of industry, is one thing, not being austere is another. If the Greeks want a decent life again, they will have to take on some of the most powerful nations in the world and at least fight to a draw.

Many nations are in the same boat as Greece: Russia, Iran, Venezuela, Argentina. Greece needs to make the necessary alliances with such countries and it needs to align with the rising Chinese block.

Doing this requires a psychological step that many Greeks may be unwilling to take: A recognition that their interests do not lie with Europe and an understanding that Europeans are willing to see them impoverished, homeless and dead. Greeks who are living in the past and think the EU is about prosperity for everyone in the EU need to learn otherwise.

If the Greeks are unwilling to be coldly pragmatic and give up their illusions about who they are, what their fellow Europeans are willing to do to them, and what their actual assets are, then Syriza will fail, and Greece will continue on their path of impoverishment.

I wish the Greeks all the best.

(26/01/15 – There is some dispute over whether the Greeks can leave the Euro and not the EU.  See this paper for a discussion — pp 26-29.)

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Yet Another Deal

2015 July 13
by Ian Welsh

So, Tsirpas has agreed on a deal. It includes 50 billion in collateral to be managed by a fund controlled by Juncker.

We’ll see if the Greek parliament will pass it.

I have yet to see a single indication that Syriza ever made the necessary moves to allow for an orderly Grexit, though the EU has. They went into this fight relying on the good will of, yes, their enemies. (That they did not realize they were negotiating with their enemies was their first mistake.)

This is yet another step necessary for the end of the neo-liberal era. A tragedy, cruel beyond any justification, but that’s rather the point. Westerners, not just the rest of the world, need to understand who they are ruled by, and that no one is immune to their cruelty.

The EU’s leaders, however, have most likely done what is in their personal self-interest. They are either the people who inflicted austerity, or the politicians who accepted it. Under no circumstances could it be shown that there was another choice with better outcomes. If so, they would be fools or criminals, having inflicted unnecessary pain.

I am particularly amused by the Finnish government’s ferocity towards Greece, since Finland, now that Nokia is dying and lumber prices are down, needs to devalue its currency. Being in the Euro, it cannot, and must instead suffer.

In time, everything the Finns value about their country’s social network will be sacrificed to stay in the Euro.

I don’t believe in people getting what they “deserve,” because we’d all be fools to want that. So let’s just say that the Gods enjoy using our most fervent desires to destroy us.

I’ll keep covering Greece as necessary, but the topic is beginning to become tedious. Horrible people doing horrible things to incompetent fools who refuse to resist, but simply lie there taking kick after kick to the nads while saying, “But we love you, we want to be one of you, do anything to us, so we can prove our devotion.”

I no longer have much preference for how this turns out. It is clear that, while Grexit would be preferable in principle, Tsipras and Syriza could not so much as manage a lemonade stand, let alone handle something as difficult as leaving the Euro under hostile fire and then rebuilding prosperity with Europe opposing them every step.

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Greek Talks Continue

2015 July 12
by Ian Welsh

Basically the Greeks offered the EU everything they had asked for before and then some, but the EU won’t take it, they want their pound of flesh for being embarrassed by the referendum.

I get that Syriza and some Greeks don’t want Grexit, and will do virtually anything to avoid it, but I’m hoping (probably vainly) that there might be some depths to which they will not sink, some abasement they will not endure, some calamity they will not inflict upon the weakest and poorest in their own society.

Probably not. Not quite sure why I still have faith in humanity to ever do the right thing when any other option exists.

“OK, now that you’re crawling, down on your belly!”


Feel free to use this thread for talk about Greece.

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Greek Bailout Offer Passes

2015 July 11
by Ian Welsh


the Greek bailout offer passed 250 Yes, 32 No. But from 162 govt MPs, 8 abstentions, 7 absent, 2 no.

I’ve said my piece on this. To be crude, Tsipras and his party have been: stupid through all this, not understanding what they were up against; cowards, in not standing  up, and; fools, in not making any contingency plans.

This is emotive, judgmental language, but this is a big mistake, with wide reaching consequences.

There are still some possibilities of this turning out well (unlikely for Greece), but for Spain, Italy, and so on, if their left-wingers learn the correct lessons from this and figure out how to gird their loins. There will be no meaningful negotiation. If they get into power, they must be prepared to take unilateral action.

If the left continues to blink, the people who don’t blink will be the far right.

We are in a pre-war, pre-revolutionary world, and we are coming up on a century which will see far more death and suffering than did the 20th century. Far, far more. Continued gutlessness by those who would claim to be trying to stop such things is making the baselines scenario worse and worse and worse.

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What Does Syriza Have a Mandate to Do?

2015 July 10
by Ian Welsh

Syriza’s mandate, given twice, is as follows:

End austerity without leaving the Euro.

This mandate cannot be executed. Without leaving the Euro they can cannot reduce their debt sufficiently, nor avoid imposed austerity from their creditors.

Does that mean they must accept any deal?

If they do, they have violated their mandate as well. They have not left the Euro, sure, but they also haven’t ended austerity.

So, they are forced to choose between two parts of a mandate. They may end austerity. Or they may leave the Euro.

I will suggest that since the austerity is what is killing and impoverishing Greeks that, given a choice between these two opposed goals, they should leave the Euro.

The counter-argument is that leaving the Euro will make things even worse.

This is true. But there is a very strong argument that it will do so only for two to three years and that after that Greece would be better off than it would be still in the Euro, and therefore, still in austerity.

It is insane to say, “This mandate has two parts, we cannot do both, and therefore we must choose the one which will lead to suffering for which we can see no end-date, rather than taking a chance will likely end the suffering sooner, and in the forseeable future.”

Greece did have its own currency, you know. And the economy was better then. It is not like no one still alive remembers a Greek economy outside of the Euro. Acting as if the world will end if it goes back to the Drachma is deranged.

That is all.

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Meanwhile, Some Music!

2015 July 10
by Ian Welsh

I have been listening to what are now oldies, but were the track of my teen years. Lovely as a counterpoint to Greek disaster news.

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New Greek Proposal—Essentially the Same

2015 July 10

So, this is basically the same deal as they refused last time, just a little worse. There is some talk that American pressure has made Merkel decide to consider a debt writedown, which they will do by extending the duration of some of the bonds. It is unclear if this will really happen.

If this deal, or some form of it even with mild debt reduction, is accepted, Greece will remain under austerity and in depression.

Syriza will say they had no mandate to leave the Euro, and it’s true they never asked for one. But they did have a mandate to not accept this bad a deal, I believe.

More to the point, they did have a mandate to end austerity, and they will have failed.

I think part of this is due to clearly delusional thinking: They really did believe that Europe would let them cut a deal which wasn’t harsh austerity.

Much is incompetence: They did not make the necessary preparations for Grexit. They had no BATNA–best alternative to a negotiated agreement. As such, they basically had to accept whatever Europe offered. If it wasn’t for American intervention, I’m not sure they’d have been able to get even what they’ll get after the referendum. (Americans intervened because a Grexit could have been the first move in Greece spiraling towards the Russian orbit.)

The rest is simple spinelessness. Cowardice. Yeah, I’m just going to say it.  This is a cave.

This is a mistake politically as well. Having failed to end austerity, Syriza will not be the next government of Greece. If they had gone to Grexit and the economy had recovered by the next election, they’d be golden and probably a majority party for a generation.

I wrote what I think the consequences of Syriza blinking (I consider this them blinking) yesterday.

Please read that post. It is an important one. This failure will have huge consequences for the future of Greece, Europe, and, indeed, the world.

Enjoy your weekend, and listen to some 80s ballads.

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If Syriza Blinks

2015 July 9

So, the EU wants Greece to sign an even worse deal than the “no” referendum already rejected.

If Syriza accepts such a deal, Greece will stay in depression and, likely, that depression will get worse.

Let me be explicit: This sort of thing will not stand. If the moderate left-wing (not center-left, moderate-left) won’t do the job, then someone else will.

That will mean either the hard-right, or the hard-left. People who can credibly say: “When we say we will end austerity, we mean we will do anything it takes. Anything.”

You have all been warned, repeatedly. French Economy Minister Emmanuel Macron said it, so it’s been said by a “real person”:

“Let’s not re-enact the Treaty of Versailles.”

The hard-right is salivating over what is being done to Greece. LePen in France, the hard-right in Britain, and so on. They know that rage, anger, and hate is building as people are smashed in the face over and over again by neoliberal politics. They are thrilled by Cameron’s smash-mouth budget in England. They love the way the refugee crisis is being bungled.

They know how to use the fear, desperation, and rage. And they will use it. People will become so fed-up with having lousy lives and no hope for the future that they will turn to anyone who looks hard-assed enough to fix it and to break with current power structures, who will get (and deserve) the blame.

This is not a game; this is not consequence free. We are fulfilling all the necessary conditions for an age of war, famine, and revolt. Greece is only one domino, but be clear, it is both a crime and a mistake. No matter what happens, the consequences of all these stupid and cruel decisions will be harsh. They will be harsher if the hard-right are the ones who make the break.

Europe has a chance here to negotiate with people who still believe in the European project and who are essentially moderates (Syriza is hardly left-wing at all in historical context, sorry).

There will come a day when they will meet people, from either the Left or the Right, who have no interest in negotiating. Given an electorate willing to follow me, I can tell you that, even in 2010, I would have had only very brief negotiations with the EU if I ran Greece.

Today, people like me who are willing to break things to make a new world are in the minority.

Today is passing.

Be afraid. Be very afraid.

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Chinese Stock Market Woes and the Pre-War World

2015 July 9


China is bolstering efforts to arrest a selloff that has rippled through risk assets globally, banning major stockholders from selling stakes as more than half the country’s listed companies are suspended from trading.

Expect some ripple effects, given that a LOT of people can’t sell formerly liquid assets—if they need money they will need to sell offshore assets.

As of this writing, the stock market is slightly up–but yeah, that’s with over half the companies frozen and with vast efforts by the government to funnel money into those that aren’t frozen. A ton of investors are still selling what they can.

Let’s talk China for a bit. I’ve long said that China is the place to watch: It is now a larger real economy than America’s, with a larger population, and it is the largest industrial country in the world. Making stuff, real material stuff, still matters. Americans trumpet innovation, but Britain was still producing more patents than America for years after America was the biggest economy in the world; the stuff just wasn’t made in Britain.

Commodity prices have been dropping in virtually every commodity, not just oil. This is driven by, yes, China, and it affects every commodity exporting country in the world.

(Insert ritual cursing out of Canadian Prime Minister Harper for his policy of doubling down on oil and abandoning manufacturing, thus critically damaging a mixed economy policy well over 100 years old.)

China has been vastly overbuilding infrastructure and real-estate for some time. The media is replete with stories of vast tracts of uninhabited high-rises and so on. Much of what has been built is of dubious quality (not necessarily entirely bad, if it has to be rebuilt, from an economic viewpoint, but disastrous from an environmental one). Peasants in China love their lives; workers hate theirs, even though workers have much more money. This is a direct analogue of Western industrialization, by the way, people had to be forced off the land. Early industrialization makes life much worse for most people directly involved.

I can’t speak directly to Chinese leadership, but I’d guess that we’re now reaching the point where the last competent people are near the end of their careers.  Soon the Communist party will be run largely by princelings: entitled, greedy, and short-sighted.

China is a violent nation. Huge industrial protests happen all the time, entire villages fight (and sometimes win) against army units, etc. The violence is often savage—hand-to-hand melee with iron rods and so on.

One wonders why the Communist party keeps cracking down, installing more surveillance, etc, etc. If they lose control, or if they don’t make it to the airport before the mob, they and their entire families will die, and die messily, or worse.

If things go really pear-shaped in China, the Communist party WILL blame foreigners. You can bet every cent you have on it. War is possible. China is making the necessary preparations and pre-war blocs are forming.

Now, this stock market crash isn’t necessarily the precipitating event. I doubt it is, and even if we look back in 20 years, in the midst of the sweet nuclear glow, and conclude it was, we won’t know for some time that it is.

But we are in a world which is a ton more dangerous than most people, many of whom buy into this “the world is getting less violent” stuff, are willing to believe. Yeah, the world is less violent than it was for most of the post-WWII period, but such periods, well, they end, when the conditions which made them possible end.

The Chinese can still print a ton of money. The lesson the elites took from the Financial Crisis has been “just print money if people who matter are hurting.” The Chinese and Westerners put different groups of people into their “who matters” categories, but both are willing to run the virtual printing presses.

What This Means: It’s likely that the situation won’t go really pear-shaped until such time as running the printing presses stops working as a preventative to staving off disaster. Unless until someone gets stupid and doesn’t run the presses when they should because they think the people suffering don’t matter enough to bother with.

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