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The Roller Coaster Continues

roller coaster

Composite image by Alex Brogan. CC License 3.0

Our friends Marilyn Carter and Mark Emamian are watching the news of the Iran nuclear talks as closely as we’re watching news of the Greek economy.  There has been a weird kind of parallelism in the two sets of negotiations.  Marilyn’s latest Facebook post quotes a Washington Post article: “According to some reports from Tehran, virtually all business has halted as people wait anxiously to learn whether they will get sanctions relief in exchange for accepting restrictions and monitoring of the country’s nuclear program…”  Greece is in a similar state; everyone is holding their breath as they wait and watch the news.  Relatives sound subdued when we talk on the phone.

Late Friday, the Greek Parliament overwhelmingly approved the Syriza austerity plan (vote was 251-32).  That’s really surprising, given that the plan so closely resembles the one rejected in the referendum 5 days before.  This gave me the sense that Greece really didn’t want to exit the euro, and that the representatives could pull together and make a difficult, unpopular decision.   So, a strong turn by Greece back towards the euro; ball in EU court. And today the EU ministers met.  I had wondered if they’d be willing to give enough debt relief to make it possible for Greece to begin an emergence from the crisis.  But they didn’t even get to that question.  The leadership (German, Dutch, and Finnish) found Greece’s proposal inadequate and called for more details.  They focused on “problems of trust,” meaning they don’t believe the government will actually implement its own plan.  They will supposedly meet again tomorrow (Sunday), and in the evening the heads of government will meet. This feels like the end of the story to me.  Syriza more or less capitulated, and the finance ministers refused to take yes for an answer.  It’s not totally unreasonable to wonder if Greece will really implement its promises, but anyone who wanted an agreement, who wanted to defuse the crisis, would see that as an issue for another day.

It’s hard to see how the proposal could be amended and approved by the Greek parliament before the Sunday evening/Monday morning deadline.  And it’s hard to imagine Syriza being able to cede any more territory.  The EU may demand the transfer of properties for privatization to a fund based in Luxemburg; it may demand “monitors” inside the Greek treasury.  Pakis points out that they’ve had the latter for several years; has it helped?  One gets the feeling the Germans will demand the dismantling of the country as the price of inclusion.  None of this is definite for now, but here’s an account of Saturday’s unfolding events. Interestingly, today’s news includes a new possibility that Greece could sue Goldman Sachs for the estimated $500 million it made on shady transactions that enabled Greece to enter the euro in 2001:

“Under Ms Loudiadis’s guidance, Goldman swapped debt issued by Greece in dollars and yen for euros which were priced at a historical exchange rate that made the debt look smaller than it actually was. The swaps reportedly made about 2 per cent of Greece’s debt disappear from its national accounts.

“The size and structure of the deal enabled the bank to charge a far bigger fee than is usual in swap transactions…”

It has been widely reported that, for a good part of the last decade, Goldman was lending money to Greece and then betting that the loans would fail.  It kept selling drinks to the alcoholic, in other words, and laughed all the way to the bank.  I don’t know that Greece could net enough money from a lawsuit to make a difference.  Perhaps it would regain a few shreds of dignity; perhaps it would just call attention to its own failings.  There are ample reminders, though, that Greece didn’t get into this crisis on its own.

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Categories: Greece

Ah, Greece…

Greek flagWe’re following the news intently, of course.  Pakis follows it in Greek and English, and every few days he talks to his brothers or cousins in Greece.  Everyone has been on tenterhooks for so long they can hardly remember when they used to be able to look ahead and do something like plan a summer vacation.

Members of the family had intense feelings on both sides of the referendum.  Like most in the country, those with something to lose voted “yes”; they want to stay in Europe above all.  Those with nothing much to lose voted “no.”  So if you think about the 60-40 split in the national results, you get a sense of how far so many people’s fortunes have fallen.

As I write this, Greece has submitted its “final” proposal for economic reform and debt restructuring.  According to the Wall Street Journal, it includes tax increases and pension cuts that are closer to the EU demands.  The package will go before the Greek parliament tomorrow; who knows if it can pass?  We know people who have done hard, agricultural work their whole lives and are being hit by austerity measures that seem like punishment for wrongs they never committed.  And we know people who have been milking the system and cheating wherever they could.  It’s hard to think that anyone “deserves” harsher austerity measures, though.

Greece is in a crisis equal to the deepest, darkest moments of the Great Depression, and it’s going to get worse.  Europe, led by Germany, seems intent on continuing to strangle its economy by continuing a grossly unsuccessful austerity policy.   Even the IMF now acknowledges that the debt cannot be repaid.  Greece can accept continued strangulation, perhaps–if a deal is reached on Sunday–or it can try to launch a new currency in the midst of a crisis.  Both options look dismal, but on different trajectories.  The EU offers a continued downward spiral; the drachma will result in a precipitous decline followed by who-knows-what.

Seth Godin’s blog post this morning was about a new book called Debt by David Graeber.  It puts this whole situation in a much broader perspective–and reinforces the sense that this crisis was totally avoidable.  The Europeans (and many Greeks) like to blame Tsipras for refusing to work with them, but there were no solutions generated by the two previous governments, either.  They just capitulated to sham “bailouts” that sent money from German and French governments through the Greek treasury and back to their own banks.  So now they’re “insulated” from a Greek meltdown.

As Paul Krugman points out, bad loans reflect irresponsibility on the part of both lenders and borrowers.  Germany, though, sees fault only on the Greek side.  It has seemingly forgotten the large scale, postwar debt forgiveness of which it was the beneficiary.  Ironically, Europe is making plans for humanitarian aid to Greece.  When starvation sets in, I suppose, they’ll rush in with aid and congratulate themselves.

Our friend Apostolos Dollas has read the Syriza proposal and sees some valuable reforms in it.  If the EU responds dramatically with debt forgiveness and a repayment plan calibrated to Greece’s ability to pay (making the debt sustainable), there could be some hope.  It’s hard to think that outcome is likely right now, but there’s always hope, right?

Categories: Greece

Understanding the Greek Debt Crisis

February 23, 2012 Leave a comment

Since all of my husband’s family lives in Greece, people occasionally ask me how they’re doing and what’s really going on there.  Our relatives are struggling to various degrees; some family units retain as much as 75% of their former income, while in others, both adults are unemployed.  A close friend is expecting his taxi to be impounded any day because his partner hasn’t been paying his share of taxes.  There’s very little work for the taxi anyway.  That same friend is fortunate to own his Athens apartment, but he can’t afford to heat it.  Lots of people are parking their cars and turning in the license plates, which makes it harder than ever to find a parking place if you’re still driving around. Read more…

Categories: Greece