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Greece €400 Million Short For Wage And Pension Payments, Rushes To Pass Troika-Friendly Laws
Greece €400 Million Short For Wage And Pension Payments, Rushes To Pass Troika-Friendly Laws
There was a brief bout of Greek risk-on euphoria following yesterday’s latest twist in the winding road to the Greek insolvency, in which the Greek finance minister Varoufakis became the latest sacrificial scapegoat to be “Nav Sarao-ed” to the angry gods of the Troika, and has been henceforth kicked out of any negotiations with the Greek “institution” creditors.
The core problem for Greece, however, remains: namely that it is still completely out of money, and as we learned yesterday, the local municipalities have mutinied, and told the government they would not hand over their cash to the central bank without their own conditions being met first, and certainly not before May 7 which may well be too late for Greece.
Which means that suddenly not only does Greece not have the nearly €1 billion in cash it will need to fund May payments to the IMF, but it is suddenly short by €400 million for wage and pension payments.
According to Bloomberg, the Greek government is €400 million short of the amount needed for payment of pensions and salaries this month, citing a Kathimerini report.
Surprisingly, this takes place even as Greece’s IKA, OGA pension funds have been informed by the government that amount needed for payment of pensions will be deposited today, while the Greece’s OAEE pension fund has said payment of pensions won’t be a problem.
In other words, someone is not telling the truth: either there is enough money or there isn’t. And if the latter case is valid, then either the government or the pensions are now openly lying to the population.
…click on the above link to read the rest of the article…
Is Greece About To “Lose” Its Gold Again?
Is Greece About To “Lose” Its Gold Again?
When it comes to the topic of Greece, most pundits focus on two items: i) when will Greece finally run out ofconfiscated cash, and ii) will Greece fold to the Troika (and agree to another bailout(s) with even more austerity) or to Russia (and agree to the passage of the Russian Turkish Stream pipeline, potentially exiting NATO and becoming the most important European satellite of the USSR 2.0) once that moment arrives.
And yet what everyone appears to be forgetting is a nuanced clause buried deep in the term sheet of the second Greek bailout: a bailout whose terms will be ultimately reneged upon if and when Greece defaults on its debt to the Troika (either in or out of the Eurozone). Recall that as per our report from February 2012, in addition to losing its sovereignty years ago, Greece also lost something far more important. It’s gold:
To wit:
Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.
The “new deal”referred to is the Second Greek Bailout, which either will be extended and lead to a third (and fourth, and fifth bailout, each with every more draconian terms until finally Greece does default), or will collapse at which point the Troika will indeed have the right to seize the Greek gold reserves.
What makes this case particularly curious, however, is that it won’t be the first time Greece will have “lost” its gold. In The Tower of Basel, citing the BIS archive from Febriary 9, 1931, Adam LeBor writes:
…click on the above link to read the rest of the article…
The Weak Suffer What They Must: Yanis and the End of Europe
The Weak Suffer What They Must: Yanis and the End of Europe
From southern Europe to the far north, matters are shifting, sometimes slowly, sometimes faster. There are moments when it seems all that goes on is the negotiations over the Greek dire financial situation and its bailout conditions, but even there nothing stands still. The Financial Times ran a story claiming Greece is about to default on is debt(s), and many a pundit jumped on that, but there was nothing new there. Of course they are considering such options, but they are looking at many others as well. That doesn’t prove anything, though.
Yanis Varoufakis’ publisher, Public Affairs Books, posted a promo for an upcoming book by the Greek Finance Minister, due out only in 2016, mind you, that reveals a few things that haven’t gotten much attention to date. It’s good to keep in mind that most of the book will have been written before Yanis joined the new Greek government on January 26, and not see it as a reaction to the negotiations that have played out after that date.
Varoufakis simply analyzes the structure of the EU and the eurozone, as well as the peculiar place the ECB has in both. Some may find what he writes provocative, but that’s beside the point. It’s not as if Europe is beyond analysis; indeed, such analysis is long overdue.
Indeed, it may well be the lack of it, and the idea in Brussels that it is exempt from scrutiny, even as institutions such as the ECB build billion dollar edifices as the Greek population goes hungry, that could be its downfall. It may be better to be critical and make necessary changes than to be hardheaded and precipitate your own downfall. Here’s the blurb for the book:
…click on the above link to read the rest of the article…
“The Mother of All Bubbles” in Stocks and Bonds: Bank CEO
“The Mother of All Bubbles” in Stocks and Bonds: Bank CEO
The first quarter was hot across the Eurozone. The euro has gotten purposefully crushed by the ECB’s currency war. QE, first promised then implemented, became all the rage. And stocks surged: the Stoxx Europe 600 was up 16%; Italy’s FTSE MIB index up 22%; and Germany’s DAX also up 22%, the sharpest quarterly gain since Q2 2003. Since January 2012, in a little over three years, the DAX has nearly doubled. Only Greece couldn’t get it together.
And bonds have soared to ludicrous levels, with yields turning negative on €2.2 trillion in Eurozone government debt, according to Societe Generale. German government debt is now sporting negative yields up to a 7.5-year maturity, while 10-year yield – at 0.14% as I’m writing this – is on its way to negative as well.
So on March 31, Hans-Jörg Vetter, CEO of Landesbank Baden-Württemberg in Germany, spoke at the bank’s annual press conference – and fired a warning shot across the bow of investors.
Publicly owned LBBW, a full-service and commercial bank, serves as the central bank for the savings banks in the states of Baden-Württemberg, Rhineland-Palatinate, und Saxony. With €266 billion in assets and over 11,000 employees, it is the largest suchLandesbank in Germany. And it too was dutifully bailed out by taxpayers during the financial crisis.
And so the press conference had the usual feel-good fare.
“Over the past few years LBBW has gained a very good position to operate successfully on a sustained basis amid a difficult environment,” Vetter said in the bank’s press release. “On this basis we are aiming for targeted and risk-conscious growth in our core business areas,” he said.
…click on the above link to read the rest of the article…
Greece Prepares To Leave
Greece Prepares To Leave
Speculation and expert comments are thrown around once more – or still – like candy on Halloween. Let me therefore retrace what I’ve said before. Because I think it’s really awfully simple, once you got the underlying factors in place.
But first, if one thing has become obvious after Syriza was elected to form a Greek government on January 25, it’s that the party is not ‘radical’ or ‘extremist’. Those monikers can now be swept off all editorial desks across the world, and whoever keeps using them risks looking like an awful fool.
All Syriza has done to date, when you look from an objective point of view, is to throw out feelers, trying to figure out what the rest of the eurozone would do. And to make sure that whatever responses it got are well documented.
Because of course Greece (through Syriza) is preparing to leave the eurozone. Of course the effects and consequences of such a step are being discussed, non-stop. They would be fools if they didn’t have these discussions. And of course there will be a referendum at some point.
There’s just that one big caveat: Syriza insists on needing a mandate from its voters for everything it does, whether that may be kowtowing to Greece’s EU overlords or walking away from them. At present, however, it doesn’t have a mandate for either of these actions.
…click on the above link to read the rest of the article…
Next Up: China Will Be Joining The Global Currency Wars
Next Up: China Will Be Joining The Global Currency Wars
Japan and the Eurozone have already (re-) discovered the power-button of their printing presses, but these countries might soon be joined by China. China’s prime minister has announced on Sunday he thinks it will be very difficult for China to keep its economic growth rate at the expected 7% level. That could result in some more worries on the financial market as the 7% level is already a guidance wich was revised downward from the previous expectations of an economic growth of 7.4%. Keep in mind the 7% growth rate would be the lowest economic expansion in approximately 25 years for the Asian country.
The situation might get worse before it gets better as for instance investment, consumption ànd production growth levels have fallen to multi-year lows which is obviously an extremely bad sign. A slowing growth rate of the Chinese economy will have an impact that will be felt all over the world despite the prime minister trying to shrug it off saying he’s more interested in a quality growthinstead of hard numbers and continues to make more excuses.
It’s however unlikely the Chinese government will allow the economy to grow at a much slower rate than the eyed 7% and it will definitely use all possibilities to make sure it meets its reduced target. The Chinese are already flexing their muscles and have patted themselves on the back they haven’t used their monetary bazooka since the global financial crisis.
…click on the above link to read the rest of the article…
Is Japan Zimbabwe?
Is Japan Zimbabwe?
Is Japan Zimbabwe? How preposterous: Japan is an advanced economy that cannot possibly suffer the same fate as Zimbabwe. Right? Or could Japan get hyperinflation? Below I explain why Japan, and with it investors’ portfolios, might be at risk.
The other day, when I was on a panel discussing unsustainable deficits in the U.S., Eurozone and Japan, the risk of inflation and Zimbabwe style hyperinflation came up. When asked about the difference about Japan and Zimbabwe, I quipped that there isn’t any. My co-panelists were all over me, arguing Japan is different. Notably that Japan could not possibly go broke because, unlike Zimbabwe, it’s an advanced economy. The argument being that Japan produces goods the world wants.
To be clear: Zimbabwe and Japan are not the same. But are they really that different? Zimbabwe not only had a much weaker economy, but also much weaker institutions. But the old adage that something unsustainable won’t last forever may still hold.
The difference between Zimbabwe and Japan – and Europe and the U.S. for that matter – is that advanced economies have more control over their destiny. However, all these regions have made commitments they cannot keep by continuing business as usual. A weak country may simply implode. A strong country has choices. The preferred choice these days appears to be to kick the proverbial can down the road.
…click on the above link to read the rest of the article…
Are Greek Capital Controls Now Inevitable?
Are Greek Capital Controls Now Inevitable?
While the trading algos are blissfully honing their headline-scanning skills (it should take no longer than a few nanoseconds to find whether “patient” and “international” are in the FOMC statement) ahead of tomorrow’s Fed announcement and avoiding any macro developments from around the globe, the biggest international news hit earlier today when Greece came one step closer to if not a Grexit, then a full blown bank run and capital controls when none other than the chair of the Eurogroup Jeroen Dijsselbloem became the first European Union official to suggest the possibility ofcapital controls to prevent Greece leaving the euro, which in turn drew a furious reaction from Athens, which accused him of “blackmail.”
Quoted by Bloomberg, Dijsselbloem said that “It’s been explored what should happen if a country gets into deep trouble — that doesn’t immediately have to be an exit scenario,” he said. For Cyprus, “we had to take radical measures, banks were closed for a while and capital flows within and out of the country were tied to all kinds of conditions, but you can think of all kinds of scenarios.”
In Athens, the insolvent but proud government issued an angry reply: cited by Kathimerini, spokesman Gavriil Sakellaridis said “It would be useful for everyone and for Mr Dijsselbloem to respect his institutional role in the eurozone. We cannot easily understand the reasons that pushed him to make statements that are not fitting to the role he has been entrusted with. Everything else is a fantasy scenario. We find it superfluous to remind him that Greece will not be blackmailed.”
…click on the above link to read the rest of the article…
Thomas Piketty on the Euro Zone: ‘We Have Created a Monster’
Thomas Piketty on the Euro Zone: ‘We Have Created a Monster’
SPIEGEL: You publicly rejoiced over Alexis Tsipras’ election victory in Greece. What do you think the chances are that the European Union and Athens will agree on a path to resolve the crisis?
Piketty: The way Europe behaved in the crisis was nothing short of disastrous. Five years ago, the United States and Europe had approximately the same unemployment rate and level of public debt. But now, five years later, it’s a different story: Unemployment has exploded here in Europe, while it has declined in the United States. Our economic output remains below the 2007 level. It has declined by up to 10 percent in Spain and Italy, and by 25 percent in Greece.
SPIEGEL: The new leftist government in Athens hasn’t exactly gotten off to an impressive start. Do you seriously believe that Prime Minister Tsipras can revive the Greek economy?
Piketty: Greece alone won’t be able to do anything. It has to come from France, Germany and Brussels. The International Monetary Fund (IMF) already admitted three years ago thatthe austerity policies had been taken too far. The fact that the affected countries were forced to reduce their deficit in much too short a time had a terrible impact on growth. We Europeans, poorly organized as we are, have used our impenetrable political instruments to turn the financial crisis, which began in the United States, into a debt crisis. This has tragically turned into a crisis of confidence across Europe.
SPIEGEL: European governments have tried to avert the crisis by implementing numerous reforms. What do mean when you refer to impenetrable political instruments?
…click on the above link to read the rest of the article…
Humiliated Greece eyes Byzantine pivot as crisis deepens
Humiliated Greece eyes Byzantine pivot as crisis deepens
Neither side holds the upper hand in the strategic game of chicken which could still see Greece forced out of the euro
Greece’s new currency designs are ready. The green 50 drachma note features Cornelius Castoriadis, the Marxisant philosopher and sworn enemy of privatisation.
The Nobel poet Odysseus Elytis – voice of Eastward-looking Hellenism – honours the 200 note. The bills rise to 10,000 drachma, a wise precaution lest there is a hyperinflationary shock as Greece breaks out of its debt-deflation trap at high velocity.
The amateur blueprints are a minor sensation in Greek artistic circles. They are only half in jest.
Greece’s Syriza radicals have signed a fragile ceasefire with the eurozone’s creditor powers. Few think this can last as escalating deadlines reach their kairotic moment in June.
Each side has agreed to a deception with equal cynicism, knowing that the interim deal evades the true nature of Greece’s crisis and cannot bridge the immense political divide.
They have bought time, but not much. “I am the finance minister of a bankrupt country,” says Yanis Varoufakis, the rap-artist Keynesian with a mission to correct all of Europe’s economic ills.
First he has to deal with his own liquidity crisis. Tax arrears have reached €74bn (£54bn), rising by €1.1bn a month. “This isn’t tax evasion. These are normal people who can’t pay because they are in distress,” he told the Telegraph.
…click on the above link to read the rest of the article…
What will Germany pay for not compromising with Greece?
What will Germany pay for not compromising with Greece?
You could argue that the very public nature of the disagreement between Germany and Greece, over the terms of the latest attempt by Greece to avoid financial collapse, is good for the reputation of the eurozone.
In that at least colossal sums of taxpayer’s money aren’t being committed via murky deals in the kind of hidden-away government rooms that used to be smoke-filled.
That said, confidence that the euro will endure till the end of days is hardly instilled by the conspicuous lack of trust between Germany and Greece.
The point is that Greece swallowed its pride and finally gave up its insistence that it must have a new bridging loan, only to be immediately accused by the German finance ministry of dishonesty – of merely pretending to adhere to bail out terms in requesting an extension of the existing €172bn rescue package (which is due to expire).
So much for famous European communautaire spirit.
There is a paradox in Germany’s financial Puritanism: this theological commitment that all debts must be repaid on the originally specified terms could be much more expensive for it than cutting Greece some slack.
…click on the above link to read the rest of the article…
How Germany Is Blowing Up The European Union
How Germany Is Blowing Up The European Union
As Germany is set to reject a Greek loan extension request (and no, international press, that is not the same as an extension of the bailout program), Steve Keen uses proprietary numbers issued by the OECD – which is supposed to be on Germany’s side?! – to show how dramatically austerity has failed in Europe- that is, if the recovery of the Greek and Spanish economies was ever the real target. It certainly failed the populations of the countries.
The problem is that nobody, not even the OECD can for Germany to answer to a report. But that does not make the case that is made, any less obvious, or bitter for that matter. Not many people remain ready to think that Greece will do what it has said it will, but I think they have been very consistent in their stated goals, and people get distracted too much by semantics at their own peril.
As Steve shows, and Syriza proclaims, more of the same is not on the table, for good reason. It will and can only make matters worse for Greece. Germany – and the ECB – choose to entirely ignore the consequences of their theories, in particular the humanitarian crisis they have caused in Greece. And any political union that ignores the misery it unloads upon its citizens has a short shelf life.
…click on the above link to read the rest of the article…
Game theory and the king’s new clothes
Game theory and the king’s new clothes
I’ll admit to being a bit obsessed with Syriza and the Eurozone at the moment (here and here): it is by some way the most interesting development at the moment in both politics and economics. And I’m also interested in the idea that Yanis Varoufakis’ background teaching game theory might have some bearing on the outcome of the talks with the Eurozone, especially now that he has gone out his way, in the New York Times to say that exactly the opposite is true. It’s worth spending a bit of time on this.
Selfish players
In an op-ed article in the NYT, he spelt this out.
“Game theorists analyze negotiations as if they were split-a-pie games involving selfish players. … The trouble with game theory, as I used to tell my students, is that it takes for granted the players’ motives. In poker or blackjack this assumption is unproblematic. But in the current deliberations between our European partners and Greece’s new government, the whole point is to forge new motives. To fashion a fresh mind-set that transcends national divides, dissolves the creditor-debtor distinction in favor of a pan-European perspective, and places the common European good above petty politics, dogma that proves toxic if universalized, and an us-versus-them mind-set.”
As it happens, Bill O’Grady has done a game-theoretical analysis of the Syriza-Eurozone negotiations, and it’s easy to see why the “negotiations” are not going well. This is the pay-off table from Syriza’s side of the desk.
…click on the above link to read the rest of the article…
Cheaper oil will not boost global growth, says Moody’s
Cheaper oil will not boost global growth, says Moody’s
Lower oil prices will fail to give a “significant boost” to global growth in the next two years, Moody’s has said.
The ratings agency said any boost from cheaper oil would be offset by the eurozone’s economic woes as well as slowdowns in China, Japan and Russia.
As a result, Moody’s said it would not be revising its growth forecasts for the G20 countries.
“For the G20 economies, we expect GDP growth of just under 3% each year in 2015 and 2016.”
This was unchanged from 2014 and from its previous forecast, Moody’s said.
Marie Diron, the author of the report, said: “Lower oil prices should, in principle, give a significant boost to global growth.
“However, a range of factors will offset the windfall income gains from cheaper energy.
“In the euro area, the fall in oil prices takes place in an unfavourable economic climate, with high unemployment, low or negative inflation and resurgent political uncertainty in some countries.”
…click on the above link to read the rest of the article…
