It looks like Greece will be kicked out of the eurozone – perhaps as early as this week. Indeed, it is more likely, for the sake of optics, that the Greeks will choose to leave at some stage. If it doesn’t happen this week because there is a deal stitched together, it is likely to happen when the next funding crisis emerges.
Ultimately, the world knows that austerity isn’t working in Greece and is clearly making things worse.
Half of Greek men under the age of 30 are unemployed. The budget deficit is still 10 per cent of GDP, as is the current account deficit. This means that Greece has to borrow 10 per cent of its total income just to pay for imports. The banking system is bust and there is no prospect of recovery. And yet the EU advocates ‘more of the same’ in terms of austerity policy.
As someone clever – either Albert Einstein or Roy Keane – once said, the definition of insanity was doing the same thing over and over again and expecting different results.
This is insanity.
However, it is not just the EU’s economic strategy that has hit a brick wall. Up to now, there was the perception that Greece would at least be treated sensitively.
But beginning with the deposing of former prime minister George Papandreou for the ‘crime’ of suggesting that the Greek people be asked about their own future, there has been very little from the EU bar threats and insults.
It is hard not to conclude that the EU has given up on Greece. We should be careful not to join this cacophony, not least because, if the Europeans can give up on the country that gave Europe democracy – the country that, more than any other, is the cradle of European civilisation – they can give up on anyone.
The EU has to be about more than money, fiscal policy and bond yields. Imagine if the EU had reacted to the fall of the Berlin Wall through the same narrow prism of how much it would cost.
There are bigger things than economics but, for anyone who doesn’t get it, the problem with the current plan is not that Greece will default – the problem is that Greece won’t have defaulted enough. The ‘voluntary’ writedown under discussion with Greece’s lenders will not be anything like enough.
When all this is over, Greece will default on everything by as much 90 per cent. The IMF will then lend it new money and it will start again. That’s what happens – and that is what the IMF is for.
The Greeks are like a big Irish developer that has €800 million of loans on a property portfolio worth €100 million – they can’t pay, so they won’t pay. The money is gone; move on.
The new reality is that the assets are worth €100 million and that’s it. And, in the Greek case, the new reality is that it is totally bankrupt.
Bankrupt economies remain nations, and nations are bound together by more than money.
They are bound together by communal experience – and the Greeks now have no choice but to stand together.
This sense of national solidarity has clearly been heightened by the latest EU ultimatum, which gives the Greeks till Wednesday to sort themselves out.
If the Greeks leave the euro, then what will happen? We will see a massive bank run in all of peripheral Europe because, if this can happen in Greece, it can happen anywhere.
That is the nature of a crisis. It is never controlled. The world moves quickly and the paradigm shifts. Remember the soft landing spoofers in Ireland? When property started falling first, their story was, initially, that ‘this is a buying opportunity’.
Then the falls continued and the story was ‘it will only fall in Roscommon and Leitrim’. As prices fell, the story changed to ‘prime property will hold its value’ and then, when prime property collapsed, it changed again. That’s what happens – once a crisis starts, all bets are off.
Remember, this crisis was caused by over-lending as well as over-borrowing.
It is clear that the Greeks are not innocent, but that is not the point any more. Clearly, the Greeks might not be fond of paying tax, but they weren’t fond of paying tax a few years ago either, when European banks lent to them hand over fist.
So the banks – and the rest of the EU people who monitor – can’t have it both ways.
How can they ignore the Greeks’ errant behaviour when there is money to be made, and then seize on the same characteristics when money starts being lost? Now let’s analyse what has happened in the past few weeks, which has led to a change in the German and EU attitude. The shift in the EU attitude towards Greece – if they don’t ‘shape up’, then Europe will not pay up again – is 100 per cent related to the shift at the ECB.
The ECB is operating a massive operation of injecting liquidity into the banking system, and this could be a central factor in the Greek euro exit. Up to now, the big fear was that, if Greece went, it would prompt yet another credit crisis in Europe. This would cause bank failures and these bank failures would beget yet more economic chaos. This has all changed now.
The ECB will, by the end of the month, have injected €1 trillion of cheap money into Europe’s banks by this new operation, whereby it lends to banks for three years. I can’t stress enough how important this is. It is a giant, monumental ‘cash for trash’ scheme, which is giving banks real cash for brutal collateral at 1 per cent.
This is Europe’s answer to quantitative easing, and it means that, whatever the European banks need, they will get.
There are many ramifications of this which we will come back to in later articles. However, for this week, let us satisfy ourselves that this operation makes the Germans feel that a Greek euro exit could be managed. Why else do you think the Dutch EU Commissioner stated last Tuesday that the eurozone could handle a Greek exit from the currency?
Make no mistake, the elite in Europe are preparing for a Greek exit. They feel they have now enough liquidity in the banking system to handle the shock because, if the Greek exit causes losses in the banks holding Greek bonds, the ECB will at least give them the liquidity to handle the short-term crisis.
Obviously they will take a capital hit, but – as far as the politicians are concerned – this is tomorrow’s worry. We could be in for a huge week.
‘When all this is over, Greece will default on everything by as much 90 per cent. The IMF will then lend it new money and it will start again. That’s what happens — and that is what the IMF is for.’ – great, start the debt cycle again. Makes sense. Why cant the greek state print their own debt free money?? Why give unelected bankers power over our money supply? Madness
Greetings, David. There is no mechanism whereby a State can be kicked out of the Eurosystem. In a time of fear and distress it is irresponsible to suggest otherwise. If you are aware of such a mechanism I would be glad to hear of it but you do not refer to it in this article. For sure, if the ECB were to choose to stop refinancing Greece’s banks then there would be bank failures and possibly/probably wider European knock-on effects including some other bank failures. But none of those stop the Euro being a valid functioning currency and your Argentinian… Read more »
Actally 1 trillion isn’t enough to feed the leaky banks,especially the insolvent core of inter-alpha leeches who alone are about 5 trillion in the hole. Printing another 4 trillion Euro to try a plug that gap will blow the system out through hyperinflation.I know David likes a bit of inflation but I don’t think to the extent of destroying a currency. The other concern is that the ECB cannot print Euros with impunity as it is not the worlds reserve currency. It needs to borrow from the Federal Reserve who can print with impunity as it is the worlds reserve… Read more »
I read reports of children ravaging in rubbish bins for food in Athens…..this is going beyond economics and finance and even politics. If John Paul II were still around he would have shamed the powers into a solution reminding them that this is not the Europe of Adenauer, De Gasperi or Robert Schuman. Anyway, the default is assured and but so is the €140 billion handout against my forecast of three weeks ago I have to admit. It looks like €120 billion will be used to refloat the Dracmha post-default. Being really cynical, the situation in Greece is probably being… Read more »
I agree David, it is patently obvious that the ECB is shoring up the defences, and I agree that it may well be the Greeks who decide enough is enough therefore the arguement that Europe has them where they want them in order to garner more stringent agreement down the road will be proven wrong, as I have said before, take everything away from a man and guaranteed he will come out fighting ‘cos he has nothing left to lose. And you are right, this is not just about Euro’s and Cent’s it goes a lot deeper, I wouldn’t be… Read more »
This whole issue is about the exercise of raw power.
The perceived interests of the larger and more powerful economies/countries will dictate what decisions are taken. Afterwards the lawyers will work their magical jiggery-pokery to tidy it all up and make it look perfectly acceptable.
No matter what happens here, Greek society has undergone a massive trauma that will haunt it for decades to come.
Emmission a la Casino
Under the table hand shakes with a nod and a wink to the croupier and the issuance goes undetected in the underwear of the bankers while the punters smoke hash .
i was at a recent speech you gave in Landsdowne Rugby Club which was very enjoyable and thought provoking. however , one of your themes was that Ireland should stand up to the EZ/EU/ECB more and demand improved terms , debt write-off etc. as i understood it , the thinking was that eventually they would just pay up for us to keep the whole EZ going. does the above thinking about the EU being prepared to let greece go change your view on “ireland should stand up”? because it would be a bluff on our part and it now looks… Read more »
Saturday Night Fever.
“Enough is enough!” said 89-year-old Manolis Glezos, one of Greece’s most famous leftists and a national hero. “They have no idea what an uprising by the Greek people means. And the Greek people, regardless of ideology, have risen.” Mr Glezos is a national hero for sneaking up the Acropolis at night in 1941 and tearing down a Nazi flag from under the noses of the German occupiers, raising the morale of Athens residents. Many Greeks believe their living standards are collapsing already and the new measures will deepen their misery. http://en.wikipedia.org/wiki/Manolis_Glezos “The London Agreement on German External Debts, also known… Read more »
‘Prepare for Greece Lightening’ .
Is that Lightning (as in big spark) or Lightening as in movement of the uterus during pregnancy ? Is Greece about to give birth to an ‘enfant terrible’. enlighten us.
I am surprised Greece has lasted this long the so called greek puppet government agreed to suit Europe ,but at what cost I believe they want to get the funds now and soon after leave,I believe the pressure from inside Greece from the badly treated people will rise up against the savage cuts and show Europe and the rest of the world that they should take Most of there pain and rightly so.
So what’s coming next will be civil unrest and civil war.
This is utter insanity and yet it is still spoken of as some type of book-keeping malfunction? It’s no longer even a question of economics! It’s nothing less than a seismic social cancer on at least an equivalent scale to the 1930’s. Two questions; Whose owed all this debt and who dies if it doesn’t get paid? How many people are dying or going to die in the social upheaval required to pay back this debt and how many people will actually be saved by the time the last instalment is paid? It’s complete madness – It will be remembered… Read more »
Israel blames Iran for two bomb attacks on Israeli diplomatic staff in India and Georgia Today………………..
Iran Blames Israel and the U.S for the murder of two Nuclear scientists several weeks ago.
Of course this has nothing to do with the present financial crisis , just the resources…………..
Yeh here we go again …Greece and its all carrot suggestions instead of what they really need ….stick and plenty of it.
They only voted on 3.3 billion of cuts , we did 3.8 billion in the budget .
Its AUSTERITY they need not molly coddling .
EU / Germany now says funds will not be ready or available to Greece till early March……………..what a fcuking scam.
Athens Burns……….
David as usual banging on about the demise of Europe and the Euro. I do wonder what his agenda is. I don’t think his assement of the big picture is at all on the pulse. Indeed I would question whether he sees the big picture at all. It seems to me none of the successful mainstream economics hacks can.
Is it a case of not being able to see the forest for the trees…or is there more to it?
Very nice analogy, DMcW. Lightning occurs when there is a huge tension buildup, and a cosmic ray bores a conducting channel starting the discharge. This can go from ground to cloud, between clouds (nations), but most of all above clouds outward (sprites, elves – all documented by Shuttle and plane observations). Sooner or later strikes a “cosmic intervention”, entirely natural, but totally outside the ken of the oligarchical technocrats who think they have everything “under control”. They are being zapped! Everyone talks about the “origin of democracy” being Greece. True, but the origin of how nations (Greece had only the… Read more »
David,
I would say that as the article references the Greek / EU solutions as insanity I reckon it is surely sane as far as Insiders are concerned.
The insiders are making a mint out of all of this disaster capitalism.
As they are clearly bulldozing through the real economy because it is kerchinging them more lolly than doing an honest days work for an honest days pay.
David poses a queston, ‘How can they ignore the Greeks’ errant behaviour when there is money to be made, and then seize on the same characteristics when money starts being lost?’ If I may, I will offer an answer. The banking system overall has morphed into a financial ponzi scam. So, the reason Greek Insiders spoofed themselves into Euro with Goldman Sachs expertise is precisely because their banking system wanted in on the Euro portal to an internationally run derivatives ponzi scam. The ponzi scam collapsed. And its adherents are now pushing forward with austerity to make money on the… Read more »
Did You See That ? WOW That includes ALL Irish Banks
‘We will see a massive bank run in all of peripheral Europe because, if this can happen in Greece, it can happen anywhere’.
Greece neer changes.
St Paul’s First Epistle to the Thessalonians 4:10
10 And in fact, you do love all of God’s family throughout Macedonia. Yet we urge you, brothers and sisters, to do so more and more, 11 and to make it your ambition to lead a quiet life: You should mind your own business and work with your hands, just as we told you, 12 so that your daily life may win the respect of outsiders and so that you will not be dependent on anybody.
Welcome back to today’s lunatic asylum news; Per head of population debt break down (Source BBC Euro Web Breakdown – Nov 2011): USA: €35,156 France: €66,508 Spain: €41,366 Portugal: €38,081 Italy: €32,875 Ireland: €390,969 Greece: €38,073 Japan: €15,934 Germany: €50,659 UK: €117,580 I would like to apologise for owing that €390,969! As for my wife’s €390,969 – I’m also terribly sorry! Oh then there’s my 14 yr old daughter – €390,969 – How stupid of me not to notice? But worst of all’s my 10 yr old son – €390,969 – totally wreckless of me. Had I had the decency… Read more »
Irish Sperm Count is directly proportionate to the total of the family debt due to the world
Good evening,
I’d like to point to yet another economist – There are way too many around, don’t you think? ;) – Yanis Varoufakis, who then points to another economist of a site that I read regularly myself where Bill Black is a contributor as well.
http://yanisvaroufakis.eu/2012/02/11/greece-and-the-rape-by-the-rentiers-by-marshall-auerback/
Government says it has a target of 100,000 jobs created by 2016, 25,000 jobs per year for 4 years while 50,000 emigrate per year and 440,000 and rising on the Live Register.
Anyone see a problem with any of that?
Excellent article. The current debacle is proving that Europe, run by puppets of vested interests, and idiots, cannot any longer consider itself a civilization – in regard to how it is handling this crisis. But, the arrogance of those who have blindly, and persistently, told us lies to the effect that Brussels is the nadir, the peak of European Civilization. The EU, it’s Ponzi schemes, it’s encouragement of corruption, it’s pliability to big finance, has proven that it is the antithesis of European Civilization. I hope that the Greeks get away without having to pay the Troika a cent. Then… Read more »
When i see fat men arriving at EU ministers meetings in chauffeur driven cars to preach austerity i want to throw something at the tv and smug Noonan was one of them.
nice clip here for lyndon jones and all the immolation gang (aka the austerisy brigade). this time its the belgians having a good laugh – forward to 2 mins 40 seconds, it might just lift your day
http://www.deredactie.be/cm/vrtnieuws/mediatheek/programmas/dezevendedag/2.19816/2.19817/1.1218193
I really really liked that!
Bankrupt economies remain nations, and nations are bound together by more than money.
Maybe this is the answer.
http://www.facebook.com/freeworldcharter
+1, just who’s paying the water bill? LoL
Morning All Just wanted to congratulate Super duper Junior Minister for Housing , Jan O Sullivan on her Pay rise last Week of €17,000,00 per year ,not a bad pay rise considering the crisis we are in , this comes in the week when Moody’s rating agency reported we are sitting on a mortgage debt problem of €35 billion euro and NOT €9 billion as was allowed for in the Bank Stress tests carried out recently. Well done ,Jan I am sure the St Vincent de Paul could do with €328.00 per week. Sincerely RR6 unemployed ( “we are in… Read more »
Moodys rating agencies downgrades France , U.K and Austria to a “Negative”position
This means these Countries can expect a downgrade in their credit rating in the next 9–14 months.
This is the first time the U.K has been downgraded since this financial War started.
Glad to see everything is working so well………………..
last night the ratings agency, Moodys downgraded several EU members : http://www.marketwatch.com/story/moodys-cuts-ratings-on-italy-portugal-spain-2012-02-13-184280 Markets this morning are in fear mode again. US unemployment statistics are a joke. But the establishment is trying to make sure that the biggest billionaire in contention for the US Republican Party Pres nomination gets the nomination. That way there will be two different parties, and one GSucks-supportive winner, regardless. And a leading political commentator on the US Media got sacked for essentially saying as much. Britain’s Triple AAA rating is under threat. This has implications for that much heralded “export led growth” theory that the establishment… Read more »
Even AEP of DT notes “Would Konrad Adenauer ever have made such a blunder?”
I certainly hope this is in Merkel’s briefing.
Revolt in Greece’s Parties, Early Election Called The European financial oligarchy won only a Pyrrhic victory when the Greek Parliament passed the new austerity agreement 199-78. Nonetheless with 43 members of the two coalition parties either voting against or abstaining, both parties were devastated by these mass defections. Now the government has been forced to come out declaring that an early election will be held in April, putting to rest talk about extending the term of the unelected Prime Minister Lucas Papademos through to 2013. The third coalition party, Laos, had already left the government before the vote. The leader… Read more »
Chomsky’s Maryland Lecture January 27th 2012. – Crisis and Hope, Theirs and Ours
Highly recommended
http://www.youtube.com/watch?v=QMjgRgPKxxE
Greece: The Rebellion Has Begun “Is it possible to impose these measures by using tear gas … These measures don’t have the vote of the Greek people,” the 90-year-old Second World War Resistance hero Manolis Glezos declared in a statement from Syntagma. Glezos was wearing a surgical mask as the police fired pepper spray all around the square “The rebellion has begun,” he told TV reporters according to Britain’s {Guardian}. “These measures will never pass. They are a breach of our democracy.” Standing next to Glezos was his comrade in the Resistance Movement they both founded only a few days… Read more »
What weak sort of democracy does Greece have when its people aren’t even allow the right to have a referendum. As it is obvious what they would choose, perhaps they only have a right to vote when its pointless, or rather, makes no meaningful difference whatever the result. What sort of democracy do we have – for it seem that we too have a ‘democracy’ where the people not deserving the right to have a referendum. Just how much real democracy do we all have. Do the citizens any member country within the EU want this treatment for themselves. Is… Read more »
Massive Protests in Spain and Portugal, as “Labor Reforms” Create New Feudalism, Destroy Wages In Spain, yesterday, the text of the state decree on labor market “reforms” was published. Apparently, the full extent has been kept under wraps so far, and thus Spanish trade unions have called for nationwide protest actions this next Sunday, Feb. 19. These so called reforms enable firms to lower wages, if the firms considers it necessary. They can also cut the working hours and change shifts, according to “necessities” and in order to “stay competitive”! The trade unions have already warned of the “most massive… Read more »
“No matter the legalistic interpretation, the Fed is, working through the ECB, bailing out European banks and, indirectly, spendthrift European governments. It is difficult to count the number of things wrong with this arrangement.” (The Federal Reserve’s Covert Bailout of Europe)
Read more: http://articles.businessinsider.com/2011-12-30/wall_street/30571340_1_new-euros-euro-zone-foreign-banks#ixzz1mLvQ59xq
the best website for what is owed…read it and weep.
http://demonocracy.info/
I have seen enough to realise we are heading into the end of an era. Maybe it follows a well know path trodden many a time down thro’ the ages of human existance. What is different this time is that we are one planet and irrefutably interdependant and interconnected like never before and our very existance relies on getting along and a profound mutual respect. I find it curious that to be a successful “somebody” in business / politics/ showbiz etc you need the characteristics of a psychopath and be egotistical and meglomanic. That is what keeps your pensions topped… Read more »
Is this the way?
http://www.freeworldcharter.org/
Good writing David. You are right. It is insanity. I thought it was just me that was insane but it comforts me to know that my superiors and betters are just as barking if not more so. You should inject more humour into your articles and give them a more ‘punky’ attitude. Think of it as ecomonics Brewdog style. There is a sense of sympathy and respect for the Greek people in both the words of the article and in some of the posts. Some posts smack of jingoism however and would have us believe that all Greek people do… Read more »
http://online.wsj.com/article/BT-CO-20120214-707773.html
French PM Favors Referendum On Budget Balance Rule-Party Official
I think this is quite important. Are the French preparinig themselves for life after Sarkozy?
Over to you Inda…..
Here is another short vid that should waken up even the most conservative of (middle class) Irishmen.
The Story Of Your Own Enslavement
http://www.youtube.com/watch?v=Xbp6umQT58A&feature=player_embedded
How many people who ran or still run small companies are sick of the banks the government the red tape,this current government say they are going to set up loads of jobs over the next 4years.wake up wake up unless you export out of this country you have a small chance and all the focus is on new jobs what about all the long running ones already set up in the services sector,plumbers,electricians ,carpenters,ect ect eke the list goes on on on the domestic home Market has died rest in peace because the people who use these services are broke… Read more »
From Joe Higgins These are the policies of the madhouse. Not surprising because they were concocted by the owners and managers of the madhouse that is the financial markets system and blessed by a subservient political establishment. Like a severely delusional patients, government ministers believe the same managers when they are patted on the head and told they are doing great work. Those who patronise the Irish people with praise about how stoic and accepting they are of austerity have a heavy vested interest in a continuation of the bailout of the capitalist financial system in Europe and Ireland. One… Read more »