originally posted at yanisvaroufakis.eu
So, Greece defaulted. In the beginning, May 2010 to be precise, Europe and the IMF put up the largest loan in history supposedly to avert any kind of debt restructuring. Then, when by the summer of 2011 it had become clear that debt restructuring was unavoidable, Europe embarked on ten months of navel gazing and a series of odd negotiations in order to effect the type of debt restructuring that would not, we were told, trigger CDS contracts. This week the default occurred and the CDS contracts were triggered. In terms of the troika’s own criteria, this was a spectacular failure to meet both targets.
But was there a silver lining, as the powers-that-be say there is? Did Greece’s debt enter a sustainable path, even if belatedly? Again the answer is a definite No! Exhibit A is, of course, the fact that the new English Law bonds issued by the Greek state (to be swapped for the distressed older Greek Law government bonds) are trading at prices which shriek: “Fresh default coming soon!” Could this be another instant when markets are wrong? So, let’s look more closely under the bonnet of the new Bailout-PSI combination.
Why a Fresh Default/Haircut is inevitable
The success or failure of a haircut depends not on its extent but on the viability of the debt that remains. When Greek and European politicians celebrate the fact that almost €100 billion have been shaved off Greece’s public debt, they state a useful fact but use it as a smokescreen that veils the numbers that count the most.
Suppose I owe a bank €100 thousand and the following agreement is struck: The bank will write off €53 thousand and will receive from me, in return, €15 thousand up front plus, say, 32 interest bearing IOUs of €1000 face value each and long maturity (assume also that the interest rate on these IOSs is around 4%). Has my debt been rendered serviceable? It depends. First, it matters that, since I do not have it, I must borrow the €15 thousand cash that I have promised my bankers. Who from? My metaphor is strained here. One could say, from ‘family’ (although families come in different guises, not excluding the Sicilian type). Secondly, as part of this deal, I must borrow immediately (or find it in the not distant future through liquidating whatever assets I have) another €30 thousand to put in a trust fund that will be used as collateral in case my IOUs bounce in the future (or in case I fail to meet my interest rate payments). Thirdly, for this deal to go through, I must bind myself to a behavioural code (also known as austerity) that most analysts believe will further shrink my already diminishing income flow over the next few years. Read the rest of this entry »
By Yani Varoufakis, originally published at http://yanisvaroufakis.eu
According to the official narrative, the euro was saved (again) by preventing a ‘disorderly’ Greek default and against the background of Mario Draghi’s Central Bank ‘activism’. So much for the official narrative. For in my estimation, the sight of our leaders proclaiming such victory against the Crisis has a strong whiff of the moment Neville Chamberlain returned from Munich, to tell a relieved British public that agreement had been struck and to promise them ‘Peace in Our Time’. All he had, of course, achieved, was to buy time for War to become stronger, more menacing, lethal beyond comprehension. Similarly, our European leaders only indulged in a form of Appeasement. Not of Germany (since our leaders are, for better or for worse, Germany) but of the Crisis. A Crisis that is, under the cover of inane celebrations of ‘resolution’ and ‘bailouts’, growing ever stronger, more divisive, efficient in the manner in which it eats into the very foundations of the eurozone. Read the rest of this entry »
“Greece will pay amount corresponding to coming quarter’s debt service directly to a segregated account. Within 2 months Greece will pass law ensuring priority is granted to debt servicing payments and include in Greek constitution ASAP”
Posted at http://storify.com/asteris/greece-eurogroup-imposes-terms-of-debt-servitude?awesm=sfy.co_aZW&utm_campaign=&utm_medium=sfy.co-twitter&utm_source=facebook.com&utm_content=storify-pingback
Press Release: Statement by IMF Managing Director Christine Lagarde on the Meeting of the Euro Group Press Release No. 11/53 February 20, 2012 Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the f…Imf
ΓΡΑΦΕΙΟ ΤΥΠΟΥ ΠΡΩΘΥΠΟΥΡΓΟΥ Αθήνα, 21 Φεβρουαρίου 2012 Π. ΚΑΨΗΣ: Κυρίες και κύριοι καλημέρα σας. Μετά από μια δύσκολη βραδιά ολοκληρώθηκε …
Exclusive: Greek debt may remain at 160 percent in ’20: IMF/ECB BRUSSELS | Mon Feb 20, 2012 4:21pm EST BRUSSELS (Reuters) – Greece will need additional relief if it is to cut its debts to 120 percent o…Reuters
Eurozone finance ministers asked Greek political parties to underscore their commitment to economic reforms in order to secure a new €130…Euractiv
Prime Minister Lucas Papademos hailed as “historic” an agreement struck after 13 hours of talks in Brussels that will lead to Greece rece…
Finance Minister Evangelos Venizelos says the deal struck between Greece and its eurozone partners in Brussels early on Tuesday was bette…
On BBC tv, hours after Greece’s Bailout Mk2, commenting on the deal
posted by Yani Varoufakis http://yanisvaroufakis.eu/
by Yani Varoufakis originally posted at http://yanisvaroufakis.eu 18/2/2012
Perhaps the greatest enemy of the eurozone, at this particular juncture, is an erroneous assumption: that a Greek default is inextricably linked to a Greek exit from the eurozone. The problem with this assumption is twofold: First, it prevents Europe from escaping a trap of its own making. Secondly, it is false. Read the rest of this entry »
By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Also Published at http://www.nakedcapitalism.com/ 12/2/12
As you have probably heard, the Greek parliament, if you can still call it that, has passed the austerity bill. Overnight Athens has erupted in protest with a reported 80,000 people on the streets and up to 30 buildings on fire.
All of KKE, Syriza and Democratic Left members voted no, as well as 21 New Democracy members and 13 Pasok members. Laos members also voted No with their leader absent. All but one Democratic Alliance members voted Yes.
The political fallout is in full swing as I type, with Antonis Samaras expelling 21 members from his party and George Papandreou doing the same. 43 members in total have been removed.
What a complete mess.
What makes the situation completely surreal are the numbers.