EUCOM Economic Analysis - Part I

[Firn]

Die Akte Griechenland is a highly interesting article about the bond debt Germany owes according to the Alexis Tsipras, among others, Greece. Some aspects discussed in it are tragicomic others of course most grim.

According to the 'Haager Landkriegsordnung von 1907' Greece had to finance it's occuption, which rapidly posed big problems. Per capita the specific cost in Reichsmark was the highest of all Europe but the exchange rate got fixed and the Greeks (had to) massively devalued their currency with the printing press which meant that the German soldiers could afford less and less. Italy and Germany tried to get the Greek state to do more but there were understandably a couple of problems:

1) The war hit (rather obviously) all the three sources of hard currency like shipping, tourism and remittances very hard.

2) Greece was already heavily in foreign debt before the war

3) The Greek public sector was large, overstaffed and not very competent.

To raise the income the tax evasion was to be curbed by following the 'German model'.

The reading becomes very grim when one discovers how the Greek currency was eventually supported - by buying it up with the looted wealth of the murdered Greek jews, especially gold. The German report comes up with 476 million RM of liabilities which however have to be balanced with Greek ones towards Germany for food from German-controlled areas, German goods and (sic) gold from the restricted German reserves. For those the documentation was not fully available, and the 'final' report was wrapped up four days before the Soviets launched their great offensive against Berlin. Interestingly the exact number has been widely accepted while the rest has not been considered.

Personally the article has reinforced my opinion that laying to rest those claims and conflicts has been incredibly important for the common European good and enabled in part the economic miracle which followed the war.

[Firn]

So they are (officially) discussing a Grexit. Seems more then groundhog day, with dwindling support within Europe's insitutions and it's people but as it is politics it is almost impossible to figure out what will come out of it. The current Greek government seems brilliant at getting political allies:

A member of the political negotiation team from Athens, according to IMF sources, criticized the attitude of the Fund noting its "unproductive attitude" that keeps the negotiations deadlocked. He added: "We do not need the IMF, you can leave, your contribution is not constructive. "

The IMF delegation asked for a break to brief their superiors in Washington.

When the meeting with the Greeks continued, the Greek team read the following statement: "Wherever in the world the IMF is engaged, its participation was by invitation and the tacit or active support of the country concerned. Syriza is the only government in the history of the IMF which calls on the Fund to leave, despite the fact that it has been invited by the country. "

On hearing this statement the IMF delegation left the room...

The basic problem is still not solved, especially after the post-Syriza crash during this terrible depression. Greek does infact need something called money, be it from the EU, the Russians or the IMF. All in all it is a tragic, suicidial farce:

This outcome is all the more tragic, given that the economic analysis underlying Syriza’s demand for an easing of austerity was broadly right. Instead of seeking a face-saving compromise on softening the troika program, Tsipras wasted six months on symbolic battles over economically irrelevant issues such as labor laws, privatizations, even the name of the troika.

This provocative behavior lost Greece all potential allies in France and Italy. Worse still, the time wasted on political grandstanding destroyed the primary budget surplus, which was Tsipras’s trump card in the early negotiations.

P.S: It is worth repeating the praise about the current crop of central bankers.

[Firn]

So a deal is in doubt, as so often, and there might be long hours and days ahead, as so often before.

Alexis Tzipras is locked in talks with Greece’s creditors that could help determine whether Athens receives the bailout funds it needs to avoid bankruptcy.

Insiders say that that outcome of today’s negotiations with Christine Lagarde, Mario Draghi and Jean-Claude Juncker are highly uncertain, with no guarantee of a breakthrough.

Hopes of a deal tonight were badly dented this morning, after it emerged that Greece’s latest proposals have not been accepted by its creditors, putting the whole deal in doubt

The creditor's take on the Greek proposals seems to have been leaked, likely if you follow cui bono by somebody in the Greek team. Lots of red ink, especially about the pensions and VAT, but also a demand for bigger cuts in military spending which is very high by not so high European standards.

I have no idea how this will end or when but it is difficult to see a soft landing for Greece in the mid run. The Greek are right that such most cuts will deepen the recession but so many years of mostly pseudo-reforms and recent snubs has likely hardened the creditors stance which understandably has also been shaped by internal politics...

As I said before it is a great tragedy that it has come so far.

[davidbfpo]

[Firn]

I'm certain quite a few creditors are feeling that way. On the other hand many Greeks see it like that:



I have to repeat myself that it is really a farce and a tragedy that it has almost come down to this.

[Firn]

So we are stumbling towards a Grexit unless somehow an agreements gets someway found and maybe for some Draghi ex machina. Great tweet by Peter Spiegel:

Pretty much everything you need to know about Greece today in one footnote

Withdraw who can at many Greek ATMs, a sight we saw in Cyprus earlier and not a pretty one...

[davidbfpo]

Whilst a Greek exit from the Euro is a possibility, nay a certainity for many, coming up fast - for mainly political reasons - is a British exit from the EU. The UK is not in the Euro.

So this article's three charts put a different angle to the usual reporting that the EU is the UK biggest market:http://www.telegraph.co.uk/finance/e...e-charts.html?

This is the third chart: