It is regularly pointed out that Greece is only 2 per cent of eurozone GDP, but maybe we should consider that the plughole is also only 2 per cent of the bath. Greece matters not just politically and financially, but morally too and this is why the behaviour of Brussels – and by extension our own finance ministry – in this sorry tale has been appalling.
Ghandi once observed that the weak can never forgive. Forgiveness is the attribute of the strong.
Greece is weak. And efforts now to humiliate its people further in the name of Europe risks not just a bank run in the next few days, but undermines the entire thrust of the EU which claims to be a community of countries.
Greece is a battered economy, a fractured society and one where incomes have fallen by a quarter in recent years. It is destroyed.
And it wasn’t destroyed by Syriza, its present government, but by a series of centre right and centre left kleptocrats who governed Greece with Europe’s blessing for decades.
The radical Syriza is the consequence not the cause of Greece’s problems. This is the simple truth.
Greece doesn’t have a debt to GDP ratio of 180 per cent because some radical bunch of Marxists seized power. It has a massive debt ratio because the centre pro-EU, middle ground destroyed it, borrowing from European banks and blew the cash.
These are the guys who hang out together in Davos, high-fiving each other in the corridor of power. I know this because I have seen it.
Last Friday, Greece said it wouldn’t pay the IMF this week and it would roll up its debts to the IMF with those to the EU and pay them all at the end of the month.
Syriza leaders say they are unwilling to burn any more of the country’s dwindling cash reserves to pay creditors until there is a credible offer on the table. They have, not surprisingly, insisted on paying pensions and salaries. If they have to default on creditors so as not to default on their own people, so be it.
Can you blame them?
The idea that Greece might be either forced to (1) leave the euro or (2) raid the savings of its own people to pay part of the creditors’ bills, has prompted ordinary Greeks to take their euros out of the banks.
Deposit flight was already running at €400 million a day. Once this starts, you are in full bank run territory. A country I visited two weeks ago, Argentina, experienced this in 2002. The Argentinians introduced limits on the amount of money people could take out of the banks every day as well as capital controls which sought to stem cash leaving the country.
This was called the Corralito – which is Spanish for a type of playpen. So the idea was that your savings are corralled into a playpen, just like a baby, and you can’t get out without the permission of an adult.
They did this to stop a massive bank run. It is not inconceivable that Greece might have to do something similar over this weekend. Otherwise, it will simply watch Greek deposits flee. Why would you keep your money there now?
At the moment, the ECB is just about keeping Greek banks open, however, if there is no deal on Greece restructuring its debts, there is every reason to worry about the banking system.
In its most basic form, the EU wants more austerity in return for a Greek deal. Up until last Thursday, this give and take was understood by both sides and it seemed that there was a good chance of a deal with the Greeks giving just enough and the EU accepting a victory.
But on Thursday, the EU upped the ante in terms of how much austerity the Greeks had to stomach and this seems to have been a final straw for the Greeks, prompting them to miss their IMF payment.
What we now have is the prospect of a Carthagenian peace. This is what Keynes perceptively termed the Versailles Treaty, warning that destroying Germany with reparations would lead to disaster.
The expression comes from ancient history which also won’t be lost on the Greeks. In the final Punic War between Rome and its great enemy Carthage (Hannibal and all that), the Romans won and destroyed the city, knocking down every building and selling the citizens into slavery.
Such total devastation of the enemy is what the Romans called peace.
The EU seems to be on a similar path. The Greek economy simply can’t recover under these terms because it will raise taxes to pay off debts and this money will just flow out of the country, making it weaker still.
One of the other Greek concerns is that the IMF – supposed to be an even broker – is singing from the creditors’ hymn sheet.
Ashoka Mody, the IMF lad who was knocking around here a few years ago, observed last Friday: “Everything that we have learned over the past five years is that it is stunningly bad economics to enforce austerity on a country in a deflationary cycle. Trauma patients have to heal their wounds before they can train for the 10K.”
The position of Ireland in all this is egregious. There was a time when we used to have a moral side to foreign policy, when the Department of Foreign Affairs stood up for the weak. It may have only been ceremonial as with the Palestinians, but it is an expression of a national position.
The EU is about to turn the Greek economy into the financial equivalent of the Gaza Strip, devoid of capital, hope and the potential for growth, left to fester in the south-east of the Balkans.
And then the EU expects these same Greeks to man their borders to turn back desperate refugees who want to live in the EU? If I were a Greek minister, I know which way I would look. I would, like the Department of Foreign affairs, look the other way.
David McWilliams hosts dalkeybookfestival.org next weekend
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The Good Room may be an apropos analogy here. Or, you like to use school yard stuff too, like the guys who would hang with the truly strong and become majestic by association. We knew without the aid of the big guy, these other little turds would be nothing, this is Mick Noonan, an utter gas bag piece of tripe. And smegma breath Enda, a weak vicious bully. They want to be in the good room, at the top table, and will sacrifice all of their collective moral compass to lie, cheat, degrade ohters, and steal their way to the… Read more »
The Good Room may be an apropos analogy here. Or, you like to use school yard stuff too, like the guys who would hang with the truly strong and become majestic by association. We knew without the aid of the big guy, these other little turds would be nothing, this is Mick Noonan, an utter gas bag piece of tripe. And smegma breath Enda, a weak vicious bully. They want to be in the good room, at the top table, and will sacrifice all of their collective moral compass to lie, cheat, degrade ohters, and steal their way to the… Read more »
Just why is the EU doing this to Greece?
Every sensible economist that I have read in the past few weeks has rationally pointed out that it’s not going to work, it’s going to make things worse and as David points out – it’s not just technically the wrong approach – it’s also morally repugnant.
So why are they doing it? What is wrong with these people?
The Greeks still want to retire at 50. Changing that is not “Austerity” & they should get no bailout until they stop freeloading.
All that the Greeks have to do is, Get on the phone to MR Putin, and just ask him if his help is still available, and stuff NATO, it wont be long till, the EU and the good old Island of saints and scholars , will be swamped with African Refugees, as a direct result of NATO’S actions in Africa. EU the greatest disaster that the people of Ireland had ever gotten themselves into.
Yes, Mr Noonan, and Mr Kenny, vote for more sanctions on Russia, thats the way to go.
“There was a time when we used to have a moral side to foreign policy…”
When, exactly? You seriously think that if Britain had been staunchly pro-Israel, that a pro-Palestinian stance would have been countenanced? Just as we took that position, planes flew through Shannon with kidnap victims en route to Guantanamo bay. Did our foreign policy show some morality then?
Give me a break. Irish foreign policy – like the foreign policy of every country in the world – is entirely and absolutely based on self-interest. Anything else would be a derogation of its mandate.
Greco Roman Baths
Greece is only 2% of the Eurozone so is the plughole 2% of a bath .We need to understand that we do not know how many taps the bath has .It may be endless .
IMF has betrayed its mission in Greece, captive to EMU creditors
http://www.telegraph.co.uk/finance/economics/11654639/IMF-has-betrayed-its-mission-in-Greece-captive-to-EMU-creditors.html
Only I don’t believe there is a Bilderberger group with a specific plan behind all this!
Of course I think those who want a Federalised Europe (your bilderbergers!) will try to capitalise on this crisis as will those with a more nationalist bent.
Good article David. The way Greece is being treated is appalling; and our own lot are a disgrace. Many argue that austerity policies have failed and are only making things worse. The implication is that the policies of austerity are an error made in good faith. This is similar to the manner in which the crimes of the Washington Regime are usually treated in the Western corporate media cartel. For instance the indirect murder of 500,000 children in Iraq by means of sanctions is viewed as a foreign policy error made in good faith. The Washington Regime itself regarded it… Read more »
Irish Foreign policy is a farce.
Long gone are the days of Frank Aiken, when Ireland was the balcony of Europe aloof from the imperialism, militarism, exploitation, and power centralization running amock elsewhere.
Since the 1980s Ireland has become another proxy for bigger more powerful neighbours. In other words the DOFA does whatever pleases the thinktanks in Washington (who are not even suggesting policies that advance American interests, but rather looking after their sponsors).
Irish Foreign policy is a series of PR stunts.
It’s only “achievement” is keeping Uganda sweet for an Irish hydrocarbon extractor.
Hi Adam,
If I buy a bitcoin today at $203 and hold it for 3 months. Then I decide to buy something with the bitcoin but bitcoins are then $150 do I lose $53 us per coin?
yours sincerely,
Michael.
st week there was a chat about gold and silver primiums. Seems as if things are tighter in Europe compared to Canada.
http://www.peakprosperity.com/forum/wherehow-buy-gold-europe/7754
http://jessescrossroadscafe.blogspot.ca/2015/06/the-global-monetary-phenomenon-that.html
Despite proclaiming gold a barbarous relic the central banks of the world have turn net buyers over the last five years and in ever increasing volumes. Why could this be?
Bear in mind I know nothing about economics. Now just suppose for a moment that the following assumption of the IMF method is accurate. After the acquisition of enormous debt by whomever –the bill gets passed on to the population. Next the population are told to pay off their debts to ECB, IMF etc. Then privatize, so that they can then pick up national assets on the cheap. Slow down or destroy the economy and force the population to suffer, call it austerity. At the same time run down more public services to the point that calls for further privatization… Read more »
Greece is ground zero in the battle for societal control, for the continued benefit for the extremely rich, and the hereditary political machines that serve their agendas. At this point in time, the most unstable societies are those where the political and media are most obedient to the demands of the richest in society. These are also the societies where there will be the highest level of surveillance of the citizenry. It is also becoming apparent that large super-state entities like the EU, are functioning as a means of the monopolization of policy. And this favours the rich, more than… Read more »
[…] Blog David McWilliams – Irland. Dass die griechische Regierung die Vorschläge der EU-Gläubigerländer zur Lösung der Schuldenkrise bisher abgelehnt hat, ist nicht verwunderlich, meint Ökonom David McWilliams in seinem Blog: “Die Spitze von Syriza sagt, sie weigere sich, noch mehr Finanzreserven ihres Landes für die Rückzahlung der Kredite zu verbrennen, bis ein glaubwürdiges Angebot auf dem Tisch liegt. Sie haben wenig überraschend darauf bestanden, Renten und Löhne auszuzahlen. Wenn sie ihre Schulden nicht tilgen, damit sie wenigstens den Verpflichtungen gegenüber der eigenen Bevölkerung nachkommen können, dann sei’s drum. Wer kann ihnen das vorwerfen? … Die EU ist drauf und… Read more »
http://www.rte.ie/news/business/2015/0609/706871-greece-talks/
Today’s Headline: EU officials swiftly dismiss Greek reform offer
“It would be the beginning of the end of the euro zone,” Tsipras said. “If Greece fails, the markets will immediately go to look for the next one. If negotiations fail, the cost for European taxpayers would be enormous.”
“My best advice for anyone who wants to protect themselves financially is to get as much money OUT of the system as you can. It’s up to you whether or not you convert your cash into physical gold and silver, but I think at this point only an idiot would leave his money in the system and denominated in paper dollars.” Dave Kransler
A Derivatives Bomb Exploded Within The Last Two Weeks
Dave Kranzler
http://www.gata.org/node/15438
Texas Senate Passes Bill to Establish Bullion Depository for Gold and Silver Transactions. A bill to make gold and silver legal tender in Texas passed in the state Senate by an overwhelming 29-2 vote. The bill essentially creates a way to transact in precious metals. It will allow citizens to deposit precious metals in the state depository and then use the electronic system to make payments to any other business or person who also holds an account.
The Greeks just have a great way of “winding it up”. I love the Greeks, come onn people what’s not to like…. Take it away Jakub Zajaczkowski and Goodnight Ireland.Sleep Well.
https://www.youtube.com/watch?v=AlNtTMJAQpg
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