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This is a letter From Greek PM Alexis Tsipras in today’s Le Monde. I have little to add, his eloquence needs few comments at this moment. One thing is certain: the negotiations will never be the same. And neither will Europe.

Straight from the Prime Minister’s offical website: :

Alexis Tsipras: On 25th of last January, the Greek people made a courageous decision. They dared to challenge the one-way street of the Memorandum’s tough austerity, and to seek a new agreement. A new agreement that will keep the country in the Euro, with a viable economic program, without the mistakes of the past. The Greek people paid a high price for these mistakes; over the past five years the unemployment rate climbed to 28% (60% for young people), average income decreased by 40%, while according to Eurostat’s data, Greece became the EU country with the highest index of social inequality.

And the worst result: Despite badly damaging the social fabric, this Program failed to invigorate the competitiveness of the Greek economy. Public debt soared from 124% to 180% of GDP, and despite the heavy sacrifices of the people, the Greek economy remains trapped in continuous uncertainty caused by unattainable fiscal balance targets that further the vicious cycle of austerity and recession. The new Greek government’s main goal during these last four months has been to put an end to this vicious cycle, an end to this uncertainty. Doing so requires a mutually beneficial agreement that will set realistic goals regarding surpluses, while also reinstating an agenda of growth and investment. A final solution to the Greek problem is now more mature and more necessary than ever.

…click on the above link to read the rest of the article…

Russian Pivot: Greece Will “Probably” Join BRICS Bank, Official Says

May 30, 2015

Russian Pivot: Greece Will “Probably” Join BRICS Bank, Official Says

Greece has very little in the way of bargaining power with European creditors. Outside of gimmicks like tapping its SDR reserves, Athens has no cash to make payments to the IMF in June and, perhaps more importantly, there’s very little in the way of wiggle room when one looks at revenues versus spending (see below), meaning Greece will also struggle to pay public sector employees which, in combination with Greeks’ consternation about the safety of their deposits, could contribute to social unrest and put unwelcome political pressure on PM Alexis Tsipras and his Syriza party that swept to power just five months ago on a defiant (and apparently naive) anti-austerity platform.

The troika (and Germany) knows this of course and they are also acutely aware that Spain’s Podemos and Portugal’s Socialists are watching the Greek drama closely for the slightest indication of concessions from the IMF or from the EU. In other words, the standoff is now just as much about politics as it is about economics, and the ‘institutions’ do not want any Syriza sympathizers to be able to say that Greece made anyone blink by threatening an exit from the currency bloc. What all of the above means is that for better or worse, Greece has essentially no leverage because for many European officials, trading austerity concessions for the right to maintain the idea of euro indissolubility is no longer a desirable outcome as it could embolden anti-austerity governments in larger, more influential countries. All of that said, Greece still has one card to play: the so-called ‘Russian pivot’.

…click on the above link to read the rest of the article…

Greece – Stumbling Toward Default

May 30, 2015

Greece – Stumbling Toward Default

Good Cop Under Fire

On June 5, Greece has to pay €240 million to the IMF. A week later another €270 million are coming due. All in all, Greece has to pay back €1.5 billion in IMF loans over the month of June. All indications are that the Greek government doesn’t even have the €240 m. that are coming due next week. In light of this, its intransigence in the negotiations with the euro-group may be slightly bewildering, but as we have pointed out already when it became clear that Syriza would likely win the Greek parliamentary elections, the situation always was akin to a Mexican standoff.

modern greece

Image credit: António Jorge Gonçalves

Some in the group leading the negotiations are now accusing the EU Commission and its president Juncker of giving the Greeks “false hope” by making it appear as though they will be bailed out no matter what:

“Some euro zone countries are accusing the European Commission of giving Greece false hope of new loans for less reform effort, but they still want Brussels to find a way to keep a defiant Athens in the euro.

After four months of talks with scant progress, hawkish governments privately blame Commission President Jean-Claude Juncker and Economics Commissioner Pierre Moscovici for muddying their message by playing “good cop”.

Greece is now close to default and still resisting unpopular labor and pension reforms that are conditions for more aid. Some governments believe the creditors would get faster results if the institutions representing them — the Commission, the European Central Bank and the International Monetary Fund — presented a more united tough front.

…click on the above link to read the rest of the article…

The Pressure Just Shifted from Greece to the US and EU

May 30, 2015

The Pressure Just Shifted from Greece to the US and EU

With the 3rd US Q1 GDP print coming in at -0.7% (-3% if not for inventories), perhaps the media spotlights – and lively imagination – can move away from Greece for a few weeks. The US has enough problems of its own, it would seem. For one thing, its Q1 GDP is now worse than Greece’s. Of course its debt is also much higher, just not to the IMF and ECB. But let’s leave that one be for the moment. Though a bit of perspective works miracles at times.

Of course it’s not a technical recession yet for the US, which only recently presented a +4% quarter with a straight face, and there’s always the ‘multiple seasonal adjustment’ tool. But still. It’s ugly.

The IMF confirmed on Thursday that Athens has the right to ask for “bundled” repayments in June. “Countries do have the option of bundling when they have a series of payments in a given month … making a single payment at the end of that month,” as per an IMF spokesman. Who added that the last country to do so was Zambia three decades ago.

That leaves Athens, in theory, with a 30-day window, not a 7-day one. This of course takes the pressure cooker away from Athens, and the media attention as well. There is no immediate risk of a default, or a Grexit, or anything like that. The negotiations with the creditors will continue, but the conversation will change with time less of an issue.

…click on the above link to read the rest of the article…

Why Europe can’t let Greek economy crumble: Don Pittis

May 29, 2015

Why Europe can’t let Greek economy crumble: Don Pittis

EU must find solution that does not propose stripping elderly of pensions

There are vultures in the financial community snapping their beaks and waiting for a Graccident.

If you haven’t heard the term before, Graccident is the latest rhetorical bastardization of the English language after Grexit, wherein you attach the first letters in Greece to something bad.

In this case, Graccident means that despite everyone’s best intentions to patch up a solution to the Mediterranean country’s economic woes, at some point things will go horribly wrong. The Greek financial house of cards will fall and the country will crash out of the eurozone, sending Greece spinning into bankruptcy and a perilous future.

While Greece’s leaders will suffer if the country accidentally collapses, the reputational damage for the European Union will be much worse.

And worst of all, the only ones who will benefit if it happens are those financial vultures betting fortunes on bond spreads and other derivatives that will make them a pile if everything goes sour.

“A precarious situation in Greece is getting worse and the probability of an accident in which governments both in Greece and the rest of Europe lose control is high,” said well-known economic commentator Mohamed El-Erian on the business TV network CNBC earlier this month.

Playing chicken

When two sides in a financial negotiation are playing chicken, there is always a possibility that both will think the other will give way at the last minute. Accidents do happen.

…click on the above link to read the rest of the article…

Austerity, Economics and Religion

May 28, 2015

Austerity, Economics and Religion

There are many things going on in the Greece vs Institutions+Germany negotiations, and many more on the fringe of the talks, with opinions being vented left and right, not least of all in the media, often driven more by a particular agenda than by facts or know-how.

What most fail to acknowledge is to what extent the position of the creditor institutions is powered by economic religion, and that is a shame, because it makes it very difficult for the average reader and viewer to understand what happens, and why.

Greek FinMin Yanis Varoufakis has often complained that he can’t get the finance ministers and others to discuss economics. As our mutual friend Steve Keen put it:

Steve Keen said the finance minister was frustrated with the progress of Greece’s talks with the euro zone, adding Varoufakis had compared the talks to dealing with “divorce lawyers”. Keen said the finance ministers of Europe refused to discuss certain euro policies, according to Varoufakis. [..] When asked what [Varoufakis and he] mainly discuss at the moment, Keen said, “Mainly his frustration, the fact that the one thing that he can’t discuss with the finance ministers of Europe is economics..”

“He goes inside, he is expected to be discussing what the economic impact of the policies of the euro are and how to get a better set of policies, living within the confines of the euro and the entire European Union system, and he said they simply won’t discuss it. He said it is like walking into a bunch of divorce lawyers, it is not anything like what you think finance ministers should be talking about..”

…click on the above link to read the rest of the article…

Greece Owes $1.2 Billion To Drugmakers As Government Can No Longer Afford Basic Medical Supplies

May 28, 2015

Greece Owes $1.2 Billion To Drugmakers As Government Can No Longer Afford Basic Medical Supplies

Talks between Greece and its creditors went full-retard on Wednesday when the following soundbite from Canada’s FinMin Joe Oliver hit the wires:

“No Greek payment to IMF would be default to IMF”

That seemed self-evident to us, but in a world governed by debt, we suppose everyone occasionally needs to remind themselves that failure to make good on one’s obligations constitutes default.

In any event, Greece apparently owes quite a bit of money to the world’s drug suppliers because, as we reported earlier this week, Athens is now running short on bed sheets and painkillers in its hospitals as the consequences of being completely beholden to the ”institutions” which control the printing of a fiat currency become increasingly clear.

Here’s what we said on Sunday:

The idea that a developed country cannot provide basic emergency medical care because it is in poor standing with the institutions that print a fiat currency is patently absurd and simply isn’t tenable meaning that one way or another, this ‘situation’ will resolve itself in the coming weeks, an event which will put Europe’s broken bond markets to a rather difficult test.

And now, we get this from Reuters:

Cash-strapped Greece has racked up mounting debts with international drugmakers and now owes the industry more than 1.1 billion euros ($1.2 billion), a leading industry official said on Wednesday.

The rising unpaid bill reflects the growing struggle by the nearly bankrupt country to muster cash, andcreates a dilemma for companies under moral pressure not to cut off supplies of life-saving medicines.

Richard Bergstrom, director general of the European Federation of Pharmaceutical Industries and Associations, told Reuters his members had not been paid by Greece since December 2014. They are owed money by both hospitals and state-run health insurer EOPYY.

…click on the above link to read the rest of the article…

Is The 505 Trillion Dollar Interest Rate Derivatives Bubble In Imminent Jeopardy?

May 26, 2015

Is The 505 Trillion Dollar Interest Rate Derivatives Bubble In Imminent Jeopardy?

All over the planet, large banks are massively overexposed to derivatives contracts. Interest rate derivatives account for the biggest chunk of these derivatives contracts. According to the Bank for International Settlements, the notional value of all interest rate derivatives contracts outstanding around the globe is a staggering 505 trillion dollars. Considering the fact that the U.S. national debt is only 18 trillion dollars, that is an amount of money that is almost incomprehensible. When this derivatives bubblefinally bursts, there won’t be enough money in the entire world to bail everyone out. The key to making sure that all of these interest rate bets do not start going bad is for interest rates to remain stable. That is why what is going on in Greece right now is so important. The Greek government has announced that it will default on a loan payment that it owes to the IMF on June 5th. If that default does indeed happen, Greek bond yields will soar into the stratosphere as panicked investors flee for the exits. But it won’t just be Greece. If Greece defaults despite years of intervention by the EU and the IMF, that will be a clear signal to the financial world that no nation in Europe is truly safe. Bond yields will start spiking in Italy, Spain, Portugal, Ireland and all over the rest of the continent. By the end of it, we could be faced with the greatest interest rate derivatives crisis that any of us have ever seen.

The number one thing that bond investors want is to get their money back. If a nation like Greece is actually allowed to default after so much time and so much effort has been expended to prop them up, that is really going to spook those that invest in bonds.

…click on the above link to read the rest of the article…

Pray For Graccident—–It Will Trigger The Demise Of The ECB And The World’s Toxic Regime Of Keynesian Central Banking

May 26, 2015

Pray For Graccident—–It Will Trigger The Demise Of The ECB And The World’s Toxic Regime Of Keynesian Central Banking

It is not surprising that in a few short months Yanis Varoufakis has proven himself to be a thoroughgoing Keynesian statist. After all, what would you expect from an economics PhD who co-authored books with Jamie Galbraith? The latter never saw an economic malady that could not be cured with bigger deficits, prodigious printing press “stimulus” and ever more intrusive state intervention and redistribution.

In what is apparently a last desperate game theory ploy, however, Varoufakis has done his countrymen, Europe and the world a favor. By informing his Brussels paymasters that they must continue to subsidize his bankrupt Greek state because it is the only way to preserve the European Project and vouchsafe the Euro, the Greek Finance minister blurted out the truth of the matter, albeit perhaps not intentionally:

“It would be a disaster for everyone involved, it would be a disaster primarily for the Greek social economy, but it would also be the beginning of the end for the common currency project in Europe,” he said.

“Whatever some analysts are saying about firewalls, these firewalls won’t last long once you put and infuse into people’s minds, into investors’ minds, that the eurozone is not indivisible,” he added.

He sure got that right. People who believe in democracy and economic liberty anywhere in the world should pray for a Graccident. During the next several weeks, when $1.8 billion in IMF loans come due that Greece cannot possibly pay, there will occur a glorious moment of irony for Syriza.

…click on the above link to read the rest of the article…

Grexit “Disaster” Looms As Greek Hospitals Run Out Of Sheets, Painkillers

May 25, 2015

Grexit “Disaster” Looms As Greek Hospitals Run Out Of Sheets, Painkillers

The default countdown is about to go under 10 days and it is becoming increasingly apparent that both Greece and its creditors have had enough.

Months of tense negotiations have gone nowhere and yielded exactly nothing and it now looks like PM Alexis Tsipras and FinMin Yanis Varoufakis may be willing to miss a June 5 payment to the IMF if it means proving they are serious about keeping their campaign promises and forcing the troika to the bargaining table. The implications of a missed payment aren’t entirely clear but Athens is keen to predict the worst as it tries to squeeze concessions from creditors.Bloomberg has more:

A day after Prime Minister Alexis Tsipras said Greek society can’t absorb any more austerity measures, Finance Minister Yanis Varoufakis said his government has met the euro area and IMF three-quarters of the way, and that it’s up to creditors to cover the remainder.

“Greece has made enormous strides reaching a deal, it is now up to the institutions to do their bit,” Varoufakis said Sunday on BBC’s Andrew Marr Show. “It is not in their interests as our creditors that the cow that produces the milk should be beaten into submission to the extent that the milk will not be enough for them to get their money back”…

German Finance Minister Wolfgang Schaeuble, meanwhile, signaled there isn’t much wiggle room after Tsipras’s government committed to policy changes in return for aid in a euro-area accord on Feb. 20.

“That is the condition for completing the current program,” Schaeuble said in a Deutschlandfunk radio interview aired Sunday. “The problems are rooted in Greece. And now Greece does have to fulfill its commitments.”

…click on the above link to read the rest of the article…

Greece Says That It Will Default On June 5th, And Moody’s Warns Of A ‘Deposit Freeze’

May 21, 2015

Greece Says That It Will Default On June 5th, And Moody’s Warns Of A ‘Deposit Freeze’

The Greek government says that a “moment of truth” is coming on June 5th. Either their lenders agree to give them more money by that date, or Greece will default on a 300 million euro loan payment to the IMF. Of course it won’t technically be a “default” according to IMF rules for another 30 days after that, but without a doubt news that Greece cannot pay will send shockwaves throughout the financial world. At that point, those holding Greek bonds will start to panic as they realize that they might not get paid as well. All over Europe, there are major banks that are holding large amounts of Greek debt and derivatives that are related to the performance of Greek debt. If something is not done to avert disaster at the last moment, a default by Greece could be the spark that sets off a major European financial crisis this summer.

As I discussed the other day, neither the EU nor the IMF have given any money to Greece since August 2014. So now the Greek government is just about out of money, and without any new loans they will not be able to pay back the old loans that are coming due. In fact, things are so bad at this point that the Greek government is openly warningthat it will default on June 5th…

Greece cannot make an upcoming payment to the International Monetary Fund on June 5 unless foreign lenders disburse more aid, a senior ruling party lawmaker said on Wednesday, the latest warning from Athens it is on the verge of default.

Prime Minister Alexis Tsipras’s leftist government says it hopes to reach a cash-for-reforms deal in days, although European Union and IMF lenders are more pessimistic and say talks are moving too slowly for that.

…click on the above link to read the rest of the article…

Obama Has A Big Fat Greek Finger

May 20, 2015

Obama Has A Big Fat Greek Finger

Will this Greek stuff ever stop? Probably, but don’t hold your breath. I was reading up on China, but that will have to wait till tomorrow. A friend just sent me a Sputnik story -they’re a Russian news channel, so they can’t be trusted, right?!- that adds more juice to the Syriza vs troika tale. And whaddaya know, the king of Greece leaks, Paul Mason at Channel 4, is involved once again.

Let’s do Mason first. He’s in Athens and, wait for it, he scored another leak. But not a direct leak to Mason; this one concerns a European Commission document leaked to Greek newspaper To Vima. There are some useful numbers here. Mason:

Greece: Europe’s Last-Ditch Effort To Keep It In Euro?

According to To Vima, the EU commission boss (Juncker, ed.) has offered Greece a deal that delays the harshest austerity for two years, and releases €5bn of bailout money to help fill the gaps in the Greek budget. To get the money Greece has to:

• Run a primary surplus of 0.75% of GDP – much lower than the previous demands from the ECB and IMF. And a surplus of 2% of GDP in 2016.

• This rises to 3.5% for both of the next years, but would have to be seen as notional – as committing to anything in 2018 barely matters when you are three weeks from default.

• Greece has to raise VAT to 18% – with 15% for card transactions. This cleverly forces tax evaders into the formal economy by setting a relatively low rate.

…click on the above link to read the rest of the article…

Are They About To Confiscate Money From Bank Accounts In Greece Just Like They Did In Cyprus?

May 20, 2015

Are They About To Confiscate Money From Bank Accounts In Greece Just Like They Did In Cyprus?

Do you remember what happened when Cyprus decided to defy the EU? In the end, the entire banking system of the nation collapsed and money was confiscated from private bank accounts. Well, the nation of Greece is now approaching a similar endgame. At this point, the Greek government has not received any money from the EU or the IMFsince August 2014. As you can imagine, that means that Greek government accounts are just about bone dry. The new Greek government continues to insist that it will never “violate its anti-austerity mandate”, but the screws are tightening. Right now the unemployment rate in Greece is over 25 percent and the banking system is on the verge of collapse. It isn’t going to take much to set off a panic, and when it does happen there are already rumors that the EU plans to confiscate money from private bank accounts just like they did in Cyprus.

Throughout this entire multi-year crisis, things have never been this dire for the Greek government. In fact, Greece came thisclose to defaulting on a loan payment to the IMF back on May 12th. And with essentially no money remaining at all, the Greek government is supposed to make several large payments in the weeks ahead…

Athens barely made its latest payment (May 12) to the International Monetary Fund (IMF), and it managed to do so only when the government discovered that it could use a reserve account it wasn’t aware of, according to the Greek media.

Kathimerini, a Greek daily newspaper, reports that Prime Minister Alexis Tsipras wrote to the IMF’s Christine Lagarde warning that Greece would not be able to make that May payment, worth €762 million ($871 million, £554.2 million).

…click on the above link to read the rest of the article…

Are They About To Confiscate Money From Bank Accounts In Greece Just Like They Did In Cyprus?

May 19, 2015

Are They About To Confiscate Money From Bank Accounts In Greece Just Like They Did In Cyprus?

Athens barely made its latest payment (May 12) to the International Monetary Fund (IMF), and it managed to do so only when the government discovered that it could use a reserve account it wasn’t aware of, according to the Greek media.

Kathimerini, a Greek daily newspaper, reports that Prime Minister Alexis Tsipras wrote to the IMF’s Christine Lagarde warning that Greece would not be able to make that May payment, worth €762 million ($871 million, £554.2 million).

…click on the above link to read the rest of the article…

Abolishing Cash – New Age of Economic Totalitarianism

May 18, 2015

Abolishing Cash – New Age of Economic Totalitarianism

Europe is moving full speed ahead to eliminate all cash. Instead of reforming and tackling the economic problems, government always seeks to maintain the same course of thinking that now leads us to the totalitarian approach coming from Brussels. To maintain the euro, they must maintain the banks. However, the bank reserves are debts of all member states. As government becomes insolvent as in Greece, the banking system is undermined. The only way to prevent the banking collapse is to prevent people from withdrawing cash. Hence, we see this trend is surfacing in all the mainstream press to get the people ready for what is coming after 2015.75 – the elimination of cash. We are even starting to see this advocated in parts of Germany. We will not be able to buy or sell anything without government approval. That is where we are going, and it may be the major event that erupts after 2015.75.

The bail-in that took place in Cyprus managed to get away without bloodshed. The people just took it. This has encouraged governments everywhere, since now they know they can safely do the same thing and the people are like sheep – dumb and stupid. Just how much will society take before they say no?

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