The Eurozone Crisis Thread

€1.1tn QE package announced. Will be interesting to track FX rate over the next few days.

German economists at Davos are reportedly seething, understandably so.

this is the same figure commonly predicted last week

someone clever tell me why I'm feeling terrified at ireland selling bonds at negative rates

The basic idea of negative rates is that banks may have been parking their money in government bonds, even at extremely low interest rates or even at no return, rather than lend it to its own customers, such as businesses or consumers who wish to spend it. If government bonds are set at negative interest rates, those banks will be forced to pay for the privilege of parking money, creating more incentive to loan money into the economy, where it will circulate.

The main reason to be terrified is that this negative rate strategy only makes sense in an economy that is already in a deflationary spiral, or is seen to be poised on the edge of deflation. Deflation is bad, bad news in general. Money slows down or stops circulating in a deflation. People in debt are especially at risk.

http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that

http://blogs.channel4.com/paul-mason-blog/greece-ireland-economics/3805

Then there’s agribusiness. Irish agriculture, from a country of 3 million people, produces enough to feed 50m worldwide and growing. If you look at the the profile of imports and exports from Ireland to Britain, it’s much the same via mix and per-capita GDP as the trade between the north and south of Britain. In other words – hugely controversial to say politically – Britain and Ireland are close to being a single economy with two currencies. - See more at: http://blogs.channel4.com/paul-mason-blog/greece-ireland-economics/3805#sthash.323jo1Ai.dpuf

this ending: "If you wanted to create such mayhem in an economically destroyed country, you would probably not want that country, simultaneously, to enjoy the most pro-Russian political culture in Europe, and be one border away from the Islamic State, with 42,000 Syrian migrants a month landing on its island outposts for good measure."

got that back to front

that's clearly a reference to this

In a shock escalation of the rhetoric surrounding bailout talks in Brussels, the Greek defence minister Panos Kammenos vowed: “If they strike us, we will strike them.”

European creditors told Athens to stop “wasting time” putting forward its proposals for economic reforms pledged by the new left-wing Syriza-led coalition government.

If an agreement cannot be reached, the International Monetary Fund has said it will discontinue payments on a £172 billion bailout, forcing Greece to go bust and crash out of the eurozone. Mr Kammenos said: “If they deal a blow to Greece, then they should know the the migrants will get papers to go to Berlin.”

“If Europe leaves us in the crisis, we will flood it with migrants, and it will be even worse for Berlin if in that wave of millions of economic migrants there will be some jihadists of the Islamic State too.

grexitan standoff

it's like game of thrones but isis are the dragons and golden dawn are the zombies

what a weird threat. xenophobestakes

fascism is coming

among greeks there's no love lost on the germans

Kammenos is from the right-wing anti-austerity party. Syriza were one seat from an overall majority.

http://www.theguardian.com/commentisfree/2015/jun/17/guardian-view-euro-crisis-greek-exit-would-be-europes-tragedy

http://www.theguardian.com/business/2015/jun/17/tsipras-to-meet-putin-over-bailout-loan-as-fears-of-greek-exit-from-eu-mount

http://www.theguardian.com/world/2015/jun/17/greece-says-bailout-deal-is-up-to-troika-amid-speculation-over-exit-from-eu

http://www.consilium.europa.eu/en/press/press-releases/2015/06/27-eurogroup-statement-greece/

better link: http://www.consilium.europa.eu/press-releases-pdf/2015/6/40802199986_en.pdf

yasssss

continuing austerity or the euro. tough choice for greece upcoming.

can't say the prospect a huge failure for the EU puts me in such a jovial mood. I wonder which one of the big boys will step in afterwards while the EU tells itself it did all it could

prospect of a huge failure

I'm a bright side kind of guy.

Game theory y'all:

Yanis Varoufakis ‏@yanisvaroufakis 9 Jun 2013
@WilhelmRoepke Quite. France is key. Grexit = Por-xit = Spa-xit = Ita-xit, which would then lead Germany to cut France off. Make no mistake

Wilhelm Röpke ‏@WilhelmRoepke 9 Jun 2013
@yanisvaroufakis I would not conclude that Italy needs to leave nor Spain. Both need to strive. But if there is a willingnes both can cope

Yanis Varoufakis ‏@yanisvaroufakis 9 Jun 2013
@WilhelmRoepke If Spain goes, Italy is a gonner. If Portugal leaves, Spain will follow. If Greece leaves, Portugal cannot stay. QED

http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that

Just skip to the last para and:

What happens if a whole country – a potential ‘region’ in a fully integrated community – suffers a structural setback? So long as it is a sovereign state, it can devalue its currency. It can then trade successfully at full employment provided its people accept the necessary cut in their real incomes. With an economic and monetary union, this recourse is obviously barred, and its prospect is grave indeed unless federal budgeting arrangements are made which fulfil a redistributive role.

'greek game theory' is normally just 'bluster' afaict

making fringe right winger panos kammenos defence minister ~stirred the pot~ a little (threats to flood germany with jihadist migrants, tho I'm not sure how the already dire situation with refugees could improve if greece leaves) but that's about all they can do until there's some better offer of outside cooperation. sometimes it feels like people are just wishing greece away

Greece would've already gone if there was zero risk the floodgates wouldn't have been opened.

Podemos (and Citizens) to come, then Marine Le Pen in France as the final act. Cameron may not need to renegotiate anything at this rate, as there might not be anything left. The centre falls and a battle between the far left and right is the result - where have we had this one before?

I think that's overstating things. The Front Nationale is against the euro, but so is the Parti de Gauche. I guess that's far right versus far left, but I can't today predict how the center will unfold to those sides, if at all.

The Euro is first and foremost a political project. Greece is not central to that project.

hope they told them that when they joined

Hmmm...

Greece leaving the EU is so 50/50 to me I wouldn't even know how to handicap it

them leaving is still odds against (5/2 - 13/5) on the betting exchanges at this point of me posting... but fuck knows.

afaics, the referendum is meant to provide the government with political cover for the upcoming grexit move and absolve them from the pain and dislocation this will cause in the greek economy. it's hard to see how they could refloat the drachma while repudiating their euro debt. they might be forced to sell their souls to putin to acquire a source of ready credit. interesting times.

theory is that with a clean debt slate Greece will have access to the markets again (primary surplus and all that jazz). but God knows what a Greek 10yr bond will yield by then...

I would guess that the longer term political implications (particularly on the rest of the Balkans) of a Greek state with rising far-right presence propped up by Putin would be scary enough that all other parties would do virtually anything to avoid it. If that became a serious possibility, would the US not have a major interest in bailing Greece out?

Could Russia even afford to keep Greece afloat for any length of time?

Russia could offer an advance on Turkish Stream gas payments but it wouldn't do a great deal to resolve the crisis - at best it could delay it by a few weeks. Russian capital reserves are lower than they would like at the moment and i don't think there's much appetite for throwing vast sums at Athens.

There's also a very limited direct economic involvement in Greece, compared to Cyprus. Russia's loan to the latter was partly due to the risk to Russian money held by Cypriot banks.

i agree there will definitely be all manner of 11th hour shenanigans if exit looks likely. so many people i speak to are furious with greece, it's all about pensions to them

http://www.theguardian.com/commentisfree/2015/jun/28/greece-europe-imf-democracy

Did I miss this one?

She was offering not a solution but a narrative: the Greeks were in this situation because they were bad people. They wanted a beneficent state, but they didn’t want to pool their resources to create one. The IMF was merely the instrument of a discipline they dearly needed. This line has broadly held – the debtors are presented as morally weaker than the creditors. To give them any concessions would be to reward their laziness and selfishness. The fact that debt is a two-way street – that the returns on debt exist because of the risk that the money might be lost, and creditors have their own moral duty to accept losses when they arise – is erased by this telling of the events.

Obviously "moral duty" and a buck fifty will get you a cup of coffee (maybe).

It's worth quoting Lagarde there too:

In 2012 the head of the IMF, Christine Lagarde, said in an interview with this newspaper, “Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax. And I think they should also help themselves collectively.” How? “By all paying their tax.” At the time, it sounded strange: how, in a country of cripplingly high unemployment, with whole families living off the depleted income of one pensioner, was the answer going to come from tax?

The answer is that the bulk of the missing tax revenue isn't going to come from the unemployed people living off the depleted income of one pensioner - it's from the middle and upper classes who have viewed income tax as optional for 30+ years. There is a moral failure there - it just doesn't apply to all Greeks. Syriza came to power campaigning for stronger tax enforcement and currently, iirc, is negotiating for tax to be a larger proportion of the financial settlement (with the Troika pushing for reduced expectations on tax and more weight given to harsh austerity measures). Lagarde isn't really wrong - though it's incorrect (and too common) for the sins of the upper strata to be allocated to the entire nation.

It's also worth asking what the IMF and EU was doing to push for a functional tax system when it was loading debt on to Greece over the years knowing the economy was fragile.

I haven't been to Greece but I have many Greek friends in Glasgow who freely admit that huge swathes of the population have avoided paying tax for a long time. not just income tax but VAT. you can walk into most shops and get a different price if you hand over cash, bargain with any tradesman based on a cash payment etc. obviously this happens in all countries but it seems in Greece that it's part of daily life for a lot of people.

sharivari otm as far as i've read

the greek people, like the rest of europe and indeed planet, could use a better elite

of course, greek gov also creatively cooked the books for years, before joining (in order to join) & long after (though to some extent this must have been open secret)
so maybe this was inevitable; eurozone cannot hold

could use a better elite
yes

http://www.bloomberg.com/news/articles/2015-07-01/greece-s-tsipras-calls-for-no-vote-in-july-5-referendum

Syriza has indicated they will hold new elections and remove themselves from government if the country votes yes as they aren't willing to implement the package on the table.

That said, it's not clear what package is on the table at the moment and there has been talk of them compromising on a number of key issues today.

anyone understand what syriza are playing at right now?

I don't think anyone truly does, including many of the participants - exciting times..

they are grasping at straws