Euro Area

[Adrian II]

ooh, and another on the folly of trying to dodge Germany's immutable Basic Law:

http://www.telegraph.co.uk/finance/f...eferendum.html

The old Torygraph again, eh?

Well, the Bundestag yesterday voted in favour of the new Euro bail-out fund. And I wouldn't be surprised if the Constitutional Court followed the lead from Berlin - as it usually does.

AII

[Furunculus]

lol, the bundestag did exactly what the the karlsruhr did in saying; "this far and no further".

notably, all the bundestag have done is ratify the greece 2.0 bailout where the efsf was boosted to 440b, and the not the italy/spain crisis which has now created a desire to expand it to 2.0t.

always behind the curve, always dithering through lack of A mandate from A people.

[Adrian II]

Never been to Greece. Maybe what you say is inevitable for Greece, but don't expect me to be impressed by their "austerity".

I'm just back from a week in Athens and believe me, people there are totally desperate. While I was there yet another new property tax was introduced, plus a ruling that families with a yearly income of 5000 euro or above should pay additional income tax as well. Some shop owner or enterpreneur is committing suicide every week because he lost the family business. I had a restaurant owner in Thessaloniki crying at my table because he couldn't afford any staff anymore and had to cook, serve and clean his establishment of 16 tables all by himself every day of the week. Whole streets in Athens that used to be hubs of entertainment only a couple of years ago are now deserted, the shops and restaurants closed, the shutters down for good, many buildings battened down with a few planks and strokes of cardboard, angry graffiti all over the centre of town, beggars and cranks of all descriptions roaming the streets at night. Pretty soon all of Athens is going to look like Omonia. Man, what a way to run a country.

AII

[phonicsmonkey]

Man, what a way to run a country.

AII

The IMF are really good at doing this to countries.

[InsaneApache]

The IMF politicians are really good at doing this to countries.

Fixed.

[Papewaio]

When you have surplus you help the weak and bump up welfare.

When you have a debt you tighten welfare and encourage growth.

Increasin income tax is not austerity it's the wrong side of the budget.

[Beskar]

When you have surplus you help the weak and bump up welfare.

When you have a debt you tighten welfare and encourage growth.

Increasin income tax is not austerity it's the wrong side of the budget.

Exactly, but it is more confounded by the fact they don't have the money for the Welfare and so raises taxes which ends up putting more people on Welfare, which raises taxes again... Fail Economies.

Being honest, the problem with the "Bail Out" is that it isn't actually a "Bail Out". A "Bail Out" would imply we were actually giving them money. We are not. We are simply lending them money so they are still in debt anyway, just a different debtor.

[Nowake]

If you'll allow me to jump in for a moment, the issue with restructuring Greece's debt right now can be found in the rigidity of its european partners.

And while you cannot always agree with Roubini, I've to recommend his latest article: Eight drastic policy measures necessary to prevent global economic collapse

Also, there was this analysis in zerohedge two-three weeks ago on the slightly desperate report assessing the Eurozone put out by UBS (Euro Break Up - The Consequences): Bring out your dead -- you can find the whole UBS report enclosed at the end of the article.

[Adrian II]

If you'll allow me to jump in for a moment, the issue with restructuring Greece's debt right now can be found in the rigidity of its european partners.

Indeed, and this (ideological) rigidity is ensconced in the EU institutions. Take for instance Roubini's recommendation that "The European Central Bank should reverse its mistaken decision to hike interest rates". That might be a sensible thing to do, but the ECB's statutory mission is to guarantee "price stability" before everything else.

AII

[Furunculus]

The IMF are really good at doing this to countries.

IA is quite correct; politicians are responsible for dragging the countries down the p00p-hole, and if they want help afterwards it comes with the lenders conditions attached.

The lender wants their money back, with interest, so those conditions attached quite rightly include reforms that will drag the country back out of the p00p-hole.

[Adrian II]

IA is quite correct; politicians are responsible for dragging the countries down the p00p-hole, and if they want help afterwards it comes with the lenders conditions attached.

The lender wants their money back, with interest, so those conditions attached quite rightly include reforms that will drag the country back out of the p00p-hole.

Athens is not going to wait for two years until they have their next national election. Nor is the island Crete. And those two are the main political powerhouses of Greece. There is going to be blood in the streets, I fear. I was very depressed when I left, I must say. I love Greece with all my heart, I love their chaos, their pride, their hospitality, their landscape and sea, their food, their music, I love the way people wear their hearts on their sleeves and I love the fact that Greeks are such tough cookies, always have been. But this is going to end badly. And everybody knows. Taxi drivers, civil servants, shop owners, pensioners, mothers taking their kids to school - they all say the same thing: "It takes only this (they snap their finger) to happen and we burn down our whole parliament with the politicians in it."



AII

[Fragony]

They should do that really, it ain't their fault.

[gaelic cowboy]

It's the little things that tell you when things are bad now, like it takes 14hrs to fly Dublin to Greece due to a lack of any meaningful business or tourism contacts between the two.

[Adrian II]

It's the little things that tell you when things are bad now, like it takes 14hrs to fly Dublin to Greece due to a lack of any meaningful business or tourism contacts between the two.

Plus you always need a Plan B because there are massive strikes all the time. One day it's the taxi's, the next day it's all public transport, the day after that it's restaurant owners. And so on, like a relay race.

AII

[InsaneApache]

I wonder when the Army will take over? (again)

My dads making plans as we type to get the hell out of there. Paradise lost indeed.

[Adrian II]

Paradise lost indeed.

You go to the old streets around the Plaka where they used to have the good food, you know, before Athens had the Olympics and they got all fancy - those ramshackle tavernas where only Greeks used to go with huge familes and kids and colleagues from work, where they gave free meals to beggars and where knew all the old songs and tunes.

Nowadays they're half-empty, nobody is dancing - but the beggars are there alright...



AII

[Furunculus]

Athens is not going to wait for two years until they have their next national election. Nor is the island Crete. And those two are the main political powerhouses of Greece. There is going to be blood in the streets, I fear. I was very depressed when I left, I must say. I love Greece with all my heart, I love their chaos, their pride, their hospitality, their landscape and sea, their food, their music, I love the way people wear their hearts on their sleeves and I love the fact that Greeks are such tough cookies, always have been. But this is going to end badly. And everybody knows. Taxi drivers, civil servants, shop owners, pensioners, mothers taking their kids to school - they all say the same thing: "It takes only this (they snap their finger) to happen and we burn down our whole parliament with the politicians in it."



AII

nothing you have said i disagree with, and it is very sad, but none of the above seems incompatible with what i said above.

[InsaneApache]

You go to the old streets around the Plaka where they used to have the good food, you know, before Athens had the Olympics and they got all fancy - those ramshackle tavernas where only Greeks used to go with huge familes and kids and colleagues from work, where they gave free meals to beggars and where knew all the old songs and tunes.

Nowadays they're half-empty, nobody is dancing - but the beggars are there alright...



AII

Oh man those ramshackle tavernas......had few late nights in them!

Tragic for the Greek people.

[Fragony]

I wonder when the Army will take over? (again)

My dads making plans as we type to get the hell out of there. Paradise lost indeed.

You got a dad

[Nowake]

nothing you have said i disagree with, and it is very sad, but none of the above seems incompatible with what i said above.

Sorry to intrude, yet your statement is not necessarily true either

The lender wants their money back, with interest, so those conditions attached quite rightly include reforms that will drag the country back out of the p00p-hole.

First of all, Greece is a country, not merely a business. Even when a country defaults, its assets and policies are very much worth negotiating for. In order for lenders to recuperate their investments, they do not need Greece to remain solvent.

In the same way countries holding enough resources or the right resources can choose to nationalize properties of foreign investors whenever they like, indebted countries trying to maintain a credit line or simple remain in the international economic community are often forced to trade off part of their sovereignty. Property transfers, exploitative leases on assets or favourable economic policies towards private or state lenders can repay just as well, and more importantly, often much faster and reliably than should the lender wait for a country to get back on its feet. The only risk is social unrest -- and the French revolution is not guaranteed to be re-enacted; there are enough cases when social revolts were successfully nipped in the bud.

And even when they manifest scruples to imposing such measures, the commitments they will request will only ask for the country to remain solvent until debt is repaid, thus economic recovery in not guaranteed.
That is even more often occurring when a part of the lenders want and have the clout to enforce the preferential repayment of debt towards themselves first.

It's a principle very nicely put by good ol' Louis the XVth

Et après moi, le déluge

[Furunculus]

no, it is quite clear, the IMF is not obliged to lend to anyone, if you want its money you agree to its terms.

those terms are likely to include reforms that the IMF deem essential to encouraging the growth it beleives will maximise the chance of recieving back both the investment and interest.

a country doesn't have to accept those terms, it can say "no", in which case the IMF will say "no" too.

[gaelic cowboy]

no, it is quite clear, the IMF is not obliged to lend to anyone, if you want its money you agree to its terms.

Interestingly Ireland agreed totally with IMF terms but the ECB and EU rejected them and we got the bailouts we have now.

It seems like sometimes when you say YES ye still end up in the NO end

[Nowake]

no, it is quite clear, the IMF is not obliged to lend to anyone, if you want its money you agree to its terms.
those terms are likely to include reforms that the IMF deem essential to encouraging the growth it beleives will maximise the chance of recieving back both the investment and interest.
a country doesn't have to accept those terms, it can say "no", in which case the IMF will say "no" too.

That is a very simplistic view -- please, do not think I am implying you are simple in any way, I am merely stating that your opinion is perhaps uninformed, and thus limited. IMF's SAPs and their succesors, the PSRPs, are questioned even by IMF insiders; e.g. see this internal document:
The Effect of IMF and World Bank programmes on poverty which concludes that "the poor are better off without structural adjustment".

I glanced through this report I had bookmarked a while ago, wanting to extract a few cliff-notes for you, yet I find it rather difficult to do it while regaling you with the full picture it depicts, thus I will link it: Structural adjustment, a major cause of poverty. It contains a slew of links towards official documents or articles which further illuminate the issue under discussion.

Do peruse it and give me your views

And if you will allow me a cheap shot, one must never forget that both the IMF and the World Bank are institutions under the control of the G7, and while I am one of the least inclined persons to view these two institutions as mere economic instruments subservient to political pressure and I personally think part of their policies have indeed helped, it should be noted that managers in both organizations have been known to put national interests above those of their clients while in office. The cheap shot was me indulging in a bit of pitchfork-waving by quoting Larry Summers' view shared in an internal memo (then Chief Economist for the World Bank, then US Treasury Secretary in the Clinton Administration etc.):

Just between you and me, shouldn’t the World Bank be encouraging more migration of dirty industries to the LDCs [less developed countries]?… The economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable, and we should face up to that… Under-populated countries in Africa are vastly under-polluted; their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City… The concern over an agent that causes a one in a million change in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under-five mortality is 200 per thousand.

— Lawrence Summers, Let them eat pollution, The Economist, February 8, 1992.

[Adrian II]

Surprise, surprise, Greece will reportedly fail its budget targets for 2011 and 2012. The reason: the recession is turning out worse than they thought.

Well, what did they think? Or did they think at all?

AII

[Furunculus]

That is a very simplistic view -- please, do not think I am implying you are simple in any way, I am merely stating that your opinion is perhaps uninformed, and thus limited. IMF's SAPs and their succesors, the PSRPs, are questioned even by IMF insiders; e.g. see this internal document:
The Effect of IMF and World Bank programmes on poverty which concludes that "the poor are better off without structural adjustment".

And if you will allow me a cheap shot, one must never forget that both the IMF and the World Bank are institutions under the control of the G7, and while I am one of the least inclined persons to view these two institutions as mere economic instruments subservient to political pressure and I personally think part of their policies have indeed helped, it should be noted that managers in both organizations have been known to put national interests above those of their clients while in office.

My apparently simplistic view does rather stem from the fact that you have misinterpreted what i said.
At no point have a i laid a value judgement on that the IMF does, i merely noted that if you wish its money then you agree to its terms.
Your own link states as much:

Only when governments sign this “structural adjustment agreement” does the IMF agree to:

Lend enough itself to prevent default on international loans that are about to come due and otherwise would be unpayable.
Arrange a restructuring of the country’s debt among private international lenders that includes a pledge of new loans.

If you will allow me a cheap shot, one must never forget that this conversation thread started further up this page with IA refuting the notion that the IMF was responsible for Greeces woes, by correctly pointing out that Greece's politicians are responsible for the pickle.
The flawed political-union that underlies this glorious currency-union is exactly the reason the IMF was the only possible solution that could have prevented the eurozone sliding beneath the waves in 2010 rather than 2012.

[phonicsmonkey]

If you will allow me a cheap shot, one must never forget that this conversation thread started further up this page with IA refuting the notion that the IMF was responsible for Greeces woes, by correctly pointing out that Greece's politicians are responsible for the pickle.
The flawed political-union that underlies this glorious currency-union is exactly the reason the IMF was the only possible solution that could have prevented the eurozone sliding beneath the waves in 2010 rather than 2012.

Ahem...while I am responsible for my rather glib comment being misinterpreted I should probably clarify. I was not laying the blame for Greece's woes at the door of the IMF but rather attempting to point out that its policies and the terms of its intervention have taken a sick patient and made it worse.

I think it is becoming increasingly clear that killing economic growth through externally-imposed austerity is serving nobody's interests, including Greece's creditors who seem to have lost sight of the principal investment while focusing too much on keeping interest payments current. Do they want to increase their chances of getting their money back?

Interesting to compare the current situation with the IMF's failed intervention in Argentina. A quick google search will find it for you but here is a snappy one-pager where some of the parallels are drawn out.

Furunculus, I think you and I largely agree on the causes of this situation. As I said before, it's a failure of political leadership across Europe and over many years that has brought us to this point. You are more apt to frame it in terms of a lack of representation, but I think it's just a different aspect of the same issue.

[Nowake]

Oh, I'm very sorry, perhaps I misunderstood (no sarcasm). The part of your statement with which I was disagreeing was the following:

The lender wants their money back, with interest, so those conditions attached quite rightly include reforms that will drag the country back out of the p00p-hole.

Basically, my point was that IMF's set parameters more often than not do not include reforms which are necessarily beneficial even in the acception of its own insiders, but rather an arbitrary and rigid set of rules which will sink the country even further down "the p00p-hole".

I do believe your turn of phrase denoted that, in its capacity as the lender, IMF's own interest would dictate that it will aim for a policy to rehabilitate the state. Which is demonstrably wrong in practice and its own economists criticised it for decades now. Genuine economic recovery by the state and the recovery of the loan by the IMF are not linked.
Hence the reports and documents I linked above

[InsaneApache]

You got a dad

Hasn't everyone?

[Ronin]

Hasn't everyone?

if you don´t you get to start your own religion.

[Adrian II]

I do believe your turn of phrase denoted that, in its capacity as the lender, IMF's own interest would dictate that it will aim for a policy to rehabilitate the state. Which is demonstrably wrong in practice and its own economists criticised it for decades now. Genuine economic recovery by the state and the recovery of the loan by the IMF are not linked.
Hence the reports and documents I linked above

I'll leave the reports unread if you don't mind. I've known about the adverse effects of IMF and WB policies for a long time, actually since the 1980's.

And I've just seen the result in Athens:

AII