Home | About | Donate

Germany Digs in Heels on Austerity as Greece Demands End to 'Business As Usual'


#1

Germany Digs in Heels on Austerity as Greece Demands End to 'Business As Usual'

As a leaked document on Wednesday suggested the German government is determined to take a hard stance against the new Syriza government, Greek's newly appointed financial minister Yanis Varoufakis declared "business as usual" is no longer an option when it comes to his nation's relationship with troika creditors.

Representing the new anti-austerity Syriza government, Varoufakis said he is optimistic that he will be able to strike a deal after a series of high-level meetings this week.


#2

Used to be that the lender was AT LEAST as responsible for due diligence in ensuring the loan could be repaid as the borrower. This has been turned on it's head where the borrower is now solely responsible, particularly where politicians and bureaucrats make decisions taxpayers foot the bill for.

Added to this mess is the fact that the money, (especially of the Quantitative Easing variety, whether Euros, Dollars or Yen) loaned is essentially created out of thin air. In the olden days this was called a Ponzi Scheme, where the "new" money is used to pay off the interest/dividends due on the "old" money. But I guess when countries, central banks and corporations do it, it's not fraud.

Nice scam. If the money-go-round never stops. Who's going to be left standing holding the bag when the FED/Bretton Woods/IMF/WTO/World Bank music stops? The taxpayer/consumer, of course. Definitely not the 0.01% and their 1% enabler class.


#3

What we're seeing here is the beginning of the breakup of the European Union, which is dominated by the Eternal War Axis in Washington/New York/London that extends its tentacles around the globe and promotes war and economic chaos everywhere. This axis now dominates the U.S. government and is preparing to embroil all of Ukraine in a major war-for-profit, with billions of U.S. tax dollars to flow to the usual war-mongers in the U.S, Europe and the Mideast. . Amazingly, most of the gullible American and European taxpayers put up with all this, but the Greek Rebellion finally is the first strong indication that change is coming. Fortunately, Europeans are not so easily conned as Americans and soon will begin to detach themselves from the Eternal War Axis. Let us hope, anyway.


#4

Things are just starting to get interesting. Victoria Nuland, the FPI/PNAC operative in the US State Dept, who oversaw the overthrow of Ukraine's democratically elected government, is on her way to Greece this week.


#5

Greece could make a deal with China or BRICS+ for much better terms. All of the victimized EU countries should band together and break the troika's stranglehold. And on another actually related note, It's time for US citizens to re-ignite antiwar fever.


#6

Stiglitz (from a previous article) - "When companies go bankrupt, a debt-equity swap is a fair and efficient solution. The analogous approach for Greece is to convert its current bonds into GDP-linked bonds. If Greece does well, its creditors will receive more of their money; if it does not, they will get less. Both sides would then have a powerful incentive to pursue pro-growth policies."

Oops - bad idea - no one needs "powerful incentives to pursue pro-growth policies" - especially when measured by "GDP". In fact, for the sake of our life support systems we need just the opposite - we cannot have a system that requires infinite growth operating in a system, our planet, that has finite resources ... Herman Daly (on the CASSE site, as well as elsewhere for over 30 years now) has made that case quite persuasively -

How ironic that if Greece, or any other economy, "succeeds" in pursuing this policy, its life support system and, ultimately, its economy will suffer ...

What we need is a system where successful "development" is measured not by GDP, but by the degree to which it satisfies the needs of its people in a manner that sustains its environment ...

Too bad they seem to be backing down on debt forgiveness, because, it seems to me, that is the only way that could give them the breathing room to develop, as Varoufakis says, "in a way that has never been tried before and with a determination that was always absent," - tying repayment to GDP will, instead, prove "a powerful incentive to pursue pro-growth policies." - in other words "business as usual" ...


#7

Good points. I suspect that the Eternal War Axis' scramble to embroil us in as many wars as possible reflects their concern that the fake-money gravy train -- deficit spending, quantitative easing, imperialism-through-IMF-loans -- might finally be coming to an end. The alternative banking and trade structures being set up by Russia and China should eventually make that happen.


#8

I fail to see the point in Mr Stiglitz's proposal. In a normal debt-equity swap he/she who accept to swap debt for equity normally wants to have his/her say (i.e. appoint management and/or BoD members) in how the company is run, which is exactly what the Trojka wants (and what Greece's new political leadership doesn't).
The comparison between a state and a corporation is not proper, in my opinion. In fact this idea that states can or should be run like corporations is what I find most objectable of the EU/ECB/IMF economic policy.


#10

In the old nursery rhyme the smart pig builds his house out of bricks to stay safe from the wolf.

It's still valid with a bitta tweaking. Now its the PIGS [Portugal, Italy, Greece and Spain] who should build their home's using BRICS to keep them safe from the wolves of Wall St.


#11

"On Wednesday, Varoufakis met with the head of the European Commission, Jean-Claude Juncker, and Mario Draghi, head of the ECB , as well as his German counterpart Wolfgang Schaueble, to discuss a proposal to link Greece's debt repayments with the country's economic growth."

Well it appears that Stiglitz approach is what Greece is pursuing at this point ...


#12

Economist Richard Wolff has pointed out that there is a rather galling irony in Germany's refusal to work out a debt reduction with Greece. In 1953, Germany, its economy suffocating under the weight of debt from the two world wars, asked for, and got, a 50% reduction in external debt payable from the allies, through an instrument known as the London Debt Agreement. A 2012 article from BloombergView notes:

Greece also contributed to the postwar German debt relief. Signatories to the London agreement, including Greece, agreed to defer settlement of war reparations and debts incurred after 1933 until a conference to be held after Germany’s reunification. Although Germany paid compensation to individuals in the 1960s, the conference never took place and many Greeks think that more was due.

("History Shows Why Germany Should Help Greece," BloombergView, Dec. 2, 2012)


#13

So true, great comment!


#14

Hopefully the Greeks will hand Nuland that wonderful article Joseph Stiglitz posted here yesterday, titled something like "A Greek Morality Tale."


#15

If you failed to see the point to Stiglitz's article, then perhaps you want to read it again.

It is clearly written and briliant. It is not complex, or too nuanced for Republicans, either.


#16

Agree with everything you wrote, sir, including most of Dr. Wolff's quote. "Galling irony?" Just plain galling suffices... The sheer nerve of those volks! An amnesty on their entire, post-1933, including WW2, bill meant the victors subsidized the Nazi war machine, including the German banking establishment and munitions merchants. Soooo, the collective amnesia suffered by post-WW2 "Good Germans" extends to the victors' largesse. Who knew?
Be well.


#17

It surprises me when Americans go into a panic, urging our government to reject the austerity agenda when, in fact, our middle class fully embraced it -- at least, for our poor. We know that not everyone can work (health, etc.), and that there aren't jobs for all who urgently need one. The US shipped out a huge share of our jobs since the 1980s, then ended actual welfare in the 1990s (TANF is a short-term job program, exclusively for those with minor children). We imposed deep austerity on our surplus population -- the jobless poor, and many of the unemployable.


#18

What I was trying to say is that if one follows the logic of Stiglitz's proposal then the trojka is right in asking to have control of Greece's economic policies. In real life a debtor can not ask a creditor to swap debt for equity and then tell him/her that he/she will not have any power to decide how the company should be managed in order to come back to profitability.
In fact Greece is not asking to swap debt for equity, they are only proposing to repay debt in proportion of how the economy grows (i.e. no equity for the creditors). To me this seems an entirely different thing from what Stiglitz proposes.


#19

My interpretation is very different from yours. As I wrote in another post Greece is proposing something quite different.


#20

To hell with the world-wrecking banksters---The EU needs Greece a lot more than Greece needs the EU. What's next, an invasion to take down the "terrorist" Greek gov't?


#21

Well, it would indeed be a good suggestion to "follow the logic of Mr. Stiglitz's proposal." And those who grasp that logic have no difficulty doing so. And there is not evidence in anything you have written to indicate you have as yet found that logic, or even any significant part of that proposal.

I wish you the very best revisiting Mr. Stiglitz's proposal.