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David LaChapelle
One man’s effort to sell olive products online shows how complicated it remains to start a business in Greece.
And austerity in a slump doesn’t just inflict vast suffering. There is growing evidence that it is self-defeating even in purely fiscal terms, as the combination of falling revenues due to a depressed economy and worsened long-term prospects actually reduces market confidence and makes the future debt burden harder to handle. You have to wonder how countries that are systematically denying a future to their young people — youth unemployment in Ireland, which used to be lower than in the United States, is now almost 30 percent, while it’s near 50 percent in Greece — are supposed to achieve enough growth to service their debt.
After reading this, everyone should have a fairly good grasp of what happened not only today, but ever since the great (and quite endless) European financial crisis took center stage, and what to look forward to next...
In a nutshell---okay, a coconut shell---this seems to be where we are:
1) Greece was able to write off 100 billion euros worth of debt in exchange for a 130 billion rescue package of new debt, of which Greece itself will receive 19%, or about 25 billion, so that it can continue to operate as an ongoing concern. Somehow Greece is in a better position than before, with more debt and less sovereignty and still---by virtue of sharing a common currency---trying to compete toe-to-toe with the likes of Germany and the Netherlands, kind of like being the Yemeni National Basketball team in an Olympic bracket that includes the US, Spain and Germany. At least a "within the euro" default prevented bank runs in Portugal, Spain, Italy et al.
2) As a result of the bond haircuts, Greece has many pension plans that can no longer even pretend to be viable, at least according to the original contracted scheme, but pensionholders still working can take heart in the fact that their current wages will be cut, too.
3) CDS buyers will have to sweat bullets, jump through hoops, and be forced to endure every cliche known to man, but they might end up getting something for all their trouble, provided their counterparty is solvent and that counterparty itself is not heavily exposed to an insolvent party or a NTBTF institution, otherwise known as a Lehman Brothers. Expect the legal profession to be the prime beneficiary of this "event", as any new CDS contract will be at least a hundred pages of boilerplate longer in the future.
4) Good luck to any less than AAA rated sovereign who wants to issue debt from now on out. That contracts can now be unilaterally abrogated, as Greece' bonds were with the retro-CACs, bodes ill for attractive pricing from here on out. Peripherals in the EU will suffer most, as they face the added indignity of being subordinated to the ECB at any point the ECB chooses to exercise its divine right of seniority. The thing that used to be called the risk free rate no longer exists. Bill Sharpe take note.
5) One hundred billion euros worth of perceived wealth evaporated. That can not be a good thing for a Eurobanking system already capital short, as it raises leverage (quick back of the envelop calculation) by about 6% across the board. It also will not make the interbank market any more trusting, thus increasing the likelihood of perpetual LTRO. LTRO lll looks to arrive sooner than QE lll.
6) With the drawn-out Greek event and the LTRO, Europe might believe it has firewalled the system for at least three years and limited damage to Greece and Portugal (who will likely undergo a similar default by the 3rd quarter). LTRO-provided liquidity, it is hoped, will lower market rates enough in Spain and Italy so that those countries can meet sovereign bond obligations and both service existing debt and issue new debt. When the LTRO expires in 2015, "hopefully" something called organic growth will have taken over in countries imposing severe austerity measures on their public sectors, so that debt servicing becomes easier. Organic growth obviously is something that comes in a can, a can which has been kicked out to 2015.
7) As Europe now speaks increasingly of greater EU financial integration, Sarkozy's poll numbers will be the victim and a less EU friendly individual will likely win the upcoming election. Since France and Germany fortunately have a long and storied history of being the best of friends, and no one in either country would ever pander to nationalist sentiments, this shouldn't present a problem.
8) Given how much angst was caused by the drawn out Greek affair, the Spanish leader knows he has enormous leverage with EU leadership and he can continue to do what he has been doing with regard to ignoring the deficit targets demanded/suggested by the EU. The EU might well bark at him, but they cannot afford to bite at this time. Muchos gracias, Greece.
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As a Jew and an Israeli, I feel it is my duty and obligation to share with you Voridis’ background and political career. A former leading figure in Greece's neo-Nazi youth group, Chrysi Avgi (Golden Dawn), Voridis has a long history of Holocaust denial, anti-Semitism and xenophobia, including physical threats to Jewish families and leading groups of thugs against immigrants and leftists. Over the last couple of weeks he has smoothed over his thuggish past by describing it as "right-wing activism". As a student at the elite Athens College high school, alma mater of current Prime Minister Papadimos, former Prime Minister Papandreou, Samaras and myself, Voridis formed the fascist student group “Free Students” that painted the walls with swastikas and saluted each other with using the Nazi-era greeting "Heil Hitler."
During school elections, Voridis would violently threaten not only the Jewish students who opposed his fascist group, but also their families. After graduation, Voridis formed a fascist group in the Law School of Athens and became active in neo-Nazi youth groups. In the 1990s, following the footsteps of his mentor, Jean Marie LePen, he formed the National Front, an anti-immigrant party. His party's motto was "Red card for immigrants." A few years ago, he joined LAOS and was elected to parliament. He soon became the darling of the Greek media, due to his extensive family connections, his debating skills and his charisma in front of the cameras.
Although less charismatic, the second of the two LAOS MPS, Adonis Georgiadis, also has a long history of anti-Semitism. This includes attacking Jews through his television show and being named as a prosecution witness against the leaders of the Greek Jewish community who are on trial for the defamation of Kostas Plevris, a self-proclaimed Nazi and anti-Semite whose book was described by the Central Board of Jewish Communities in Greece as a "defamatory, anti-Semitic book in which Jews are called 'subhuman' and are directly threatened with annihilation." Plevris himself went on trial for incitement, but was acquitted, and then he sued the leaders of the Jewish community. Plevris is also the father of Thanassis Plevris, another LAOS member of the parliament.
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There are those who recall that not ten days ago, according to the IMF's Greek (un)sustainability analysis, worst case scenario no less, Greek GDP would somehow miraculously post just a 1% drop in 2013. Unfortunately this won't happen. According to the overnight PMI update out of Europe (where was saw the jobless rate at the highest since 1997), the Greek economy just imploded at a record pace. This follows the already horrendous budget revenue data from January which came in down 7% on expectations of a 9% rise. Sure enough, as expected the fact that the entire country has taken the rest of 2012 off with no incentive to actually work, will do miracles for Greece. From Reuters: "The Markit Manufacturing Purchasing Managers' Index (PMI) for Greece fell to a survey low of 37.7 points in February from 41.0 in January, staying below the 50 mark that divides growth in activity from contraction for each of the past 30 months. Production and new order volumes fell at the sharpest pace in the near 13 year history of the survey as austerity sapped demand. New export orders fell for a sixth straight month and at the steepest rate since May 2010." Translated: the situation is hopeless and getting worse. Expect the German, pardon Troika, Kommissar to be shocked, shocked, to find out that not only do banks in Greece have no deposits left, but the entire economy picked up and left.
I have been following the European sovereign debt crisis since it first developed more than two years ago. It was evident from the beginning that the conditions on the debtor nations being demanded by the “troika” of the European Central Bank, the European Union, and the International Monetary Fund were both onerous and counterproductive.
This view has been confirmed by the fact that the debtor countries have missed target after target and that growth has consistently come in far below projections. (Actually, the crises countries have been contracting for much of the last two years.) This could leave analysts guessing as to what economic reasoning lies behind the troika’s conditions.
Last week I got the answer when I had occasion to meet with a high-level EU official. There is no economic reasoning behind the troika’s positions. For practical purposes, Greece and the other debt-burdened countries are dealing with crazy people. The pain being imposed is not a route to economic health; rather it is a gruesome bleeding process that will only leave the patient worse off. The economic doctors at the troika are clueless when it comes to understanding a modern economy.
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If Greece’s €130 billion loan was going to be used for fiscal stimulus, then it might be worth the commitment. Because that kind of money could put a lot people back to work and kick-start the economy fast. But the loan isn’t going to be used for stimulus. It’s going to be used to recapitalize the banks and pay off creditors, neither of which will do anything to boost activity or create jobs. So, why bother? Why dig an even deeper hole if it achieves nothing? If that’s the case, then Greece should just default now and start rebuilding the economy ASAP. There’s no point in putting it off any longer.
The troika (the European Central Bank, the European Union, and the International Monetary Fund) is demanding another €3 billion in spending cuts even though unemployment is tipping 20 percent and the economy shrank 7 percent in the last quarter. What sense does that make? You don’t have to be a genius to figure out that Greece won’t reach its budget targets if tax revenues continue to fall because everyone’s either been laid off or taking a pay-cut. It will just make a bad situation even worse. But the troika doesn’t worry about these type of things. They don’t care that their lamebrain economic theories have failed miserably so far, or that their austerity measures have been a complete flop. They just keep plugging along making the same mistakes over and over again, impervious to the criticism of reputable economists, oblivious to the abysmal results, they remain steadfast in their commitment to belt tightening, sure that a strict diet of breadcrumbs and water is the best way to nurse an ailing economy back to health. It doesn’t bother them that the facts prove otherwise.
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When life give you lemons, make lemonade. When someone breaks into your home and steals your computer, make a collaborative photo project. That’s what Melanie Willhide did.
Willhide dedicates “To Adrian Rodriguez, with Love” to the individual who broke into her home and stole various things. Her computer was recovered by the police, but the hard drive had been wiped clean. Willhide attempted to recover the erased data but found her digital photographs corrupted. Lemons! Rather than delete the images, Willhide considered these corrupted files a collaboration with her machine. She refined them and made additional ones inspired by the mess. Lemonade!
Last night, after a long day and before a late dinner, I sat down with my wife to watch the news on CNN. Anderson Cooper was broadcasting from a studio in New York, but his tape was from Syria. He rightly demanded that we watch a two-year-old child in the besieged city of Homs die of shrapnel wounds inflicted by the regime of Bashar al-Assad. The camera stayed on the child until the last breath was out of him. His father cradled him and kept asking what his poor son had ever done to anyone to deserve it.
Then Cooper spoke with a reporter—a very great and experienced reporter—who was on the scene, Marie Colvin, of the Sunday Times of London. The image of Colvin on the screen was instantly recognizable to anyone who has spent time reporting, as she had for a generation, from the Middle East, Africa, Chechnya, the Balkans, or South Asia; after losing an eye in the civil war in Sri Lanka, in 2001, she wore an eye patch. For decades, she has been a ubiquitous presence in the war zones of the world and her reports in the Times were admired in the close-knit world of foreign correspondents for their scrupulous and straightforward eloquence.
...This is a chart of the Greek bank stock index, which has gone from an all out demented euphoria to suicidal depression in 5 days, as the rumor that Greece is "saved" has been replaced with the reality that Greece is still "completely broke" - if you bought on Monday like most momos, on the expectation that the torrid surge higher would continue, you have now lost 24%. We are awaiting the latest January deposit data from the Greek banking system eagerly, as something tells us Greek citizens, who are already congregating at Syntagma square for today's daily riot, did not follow Venizelos' advice to either "WORK, WORK, WORK" or for that matter "DEPOSIT, DEPOSIT, DEPOSIT."
Greeks expect to agree a deal with the Eurozone leaders today, Monday, that will cede much of their country’s independence. Greece will become an economic – and to a large extent a political – colony of Germany and its allies. Berlin will have a say in everything from the choice of prime minister to the types of medicines dispensed by pharmacies.
In return for €230bn, made up of €130bn in fresh loans and €100bn in write-downs on privately held Greek government bonds, Greece is relieved from its immediate debt burden. But the money does not go to the Greek government, still less to the Greek people. It simply leaves them to live off the money they earn.
For all the television pictures of rioting protesters, clouds of tear gas and burning buildings in central Athens over the last week, a striking feature of the political landscape is the lack of resistance to the German terms. The Greek political elite sound and look stunned, grudgingly surrendering to the demands of the Troika (EU, IMF and European Central Bank), but bereft of ideas about what else to do.
ΜΟRE
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