Wednesday, June 29, 2011

Greece votes to delay default until 2012

If the new austerity measures and privatization had been voted down, the Greek default would occur almost instantly - not later than in mid July 2011. PASOK needed 150 Yes votes in the 300-strong Parliament. They got 155 Yes votes - which is the same as the number of PASOK deputies.

Only one opposition deputy supported the bill; he or she compensated for one PASOK deputy who opposed it and was immediately fired from PASOK.

There exists exactly one group of Greek government employees who are doing a rather hard work these days. Here they are:

I think that the New Democracy, Greek's main nominally "center-right" opposition, is just completely insane. They are not hiding that they would try to be even more fiscally irresponsible than the socialists. Right now, their politics is even more throroughly built on socialist populism than the politics of PASOK. I can't believe it.

80% of the citizens oppose the austerity measures. It looks like a huge majority but it depends how you count it. You should really remove the people who are directly corrupt by the decision because they're pure recipients of the money - the government sector plus pensioners. Among the remaining people who could be viewed at least a bit uncorrupt, the opinions are pretty much split.

It is likely that Greece will get its EUR 12 billion now and it will be followed by another EUR 100 billion gift from the EU, ECB, IMF. What will it do?

Well, Greece still needs to pay interests from its huge EUR 0.35 trillion debt - plus some installment. It's comparable to EUR 50 billion per year. Moreover, there will still be a huge budget deficit. The expenses will drop but so will the revenues. The overall impact won't be large.

Don't get me wrong: the austerity is the step in the right direction but it's not a miraculous cure and they need to go much further to stabilize their nation's economic life. Moreover, it's clear that there will be a huge amount of tax evasion. If 80% of your population disagrees with the austerity, be sure that they will find tricks to steal the money from the government.

Count it in any way, 2012 is more likely than 2013 to be the year when those new EUR 110 billion will be depleted. I hope that by that time, Greece, Europe, and the world's financial markets will already be ready for a default - psychologically and when it comes to the financial planning - and the superstitious debates will be avoided.

While there are great many things in which I agree with President Klaus and UKIP folks etc., I actually do disagree about some of the most fundamental issues in this mess. If Greece had its own currency, its devaluation could have saved the country from the mess. I agree with that. But I don't think that this removes the responsibility from the Greek politicians and citizens.

The euro is just a unit! It can't be the ultimate culprit of someone's impossible management or overconsumption. The debt would exist even if it were expressed in other units.

After all, the exchange rates between the euro and other currencies - such as the Czech one - were fluctuating by less than 10% from a mean value during the last 3 years. So it can't possibly matter for the "qualitative outcomes" whether we're using the same currency or not. For Greece, it would make a bigger difference - but you must simply adjust your behavior to your currency if this extra degree of freedom disappears.

For the same reason, it's absurd to expect all member countries of the eurozone - including Slovakia - to pay billions of euros just because they're members of the eurozone. It's just a club using the same currency; it is not a club using the same wallet. Even two nations that hate each other and plan to exterminate each other (and who surely don't want to help each other financially) may use the same currency; in the case of gold, it's been the case throughout the history. It's kind of shocking why some people misunderstand it. Moreover, many Slovak politicians who wanted their country to avoid the aid to Greece altogether are actually the only ones who respect the laws underlying the eurozone. Balanced budgets etc. are among the conditions that the eurozone members should guarantee.

This "detail" has become so controversial that when ECB board member Jürgen Stark reminded the world today that a proposed bailout for Greece would violate a no-bailout clause in article 125 of the EU treaty, he almost shocked everyone else. "Haven't we sh*tted upon all the laws already? Why the f*ck are you annoying us with something as obsolete as the laws and treaties, Herr Stark?" the European politicians and financiers almost uniformly screamed at the German chap. "We love to break all the laws, especially if parasitic millionaire communists pretending to be victims are the recipients of the money - that what makes us politically correct."

These developments only help to underscore the fact that if some laws and rules can't be effectively enforced, they're just irrelevant. Most of the laws underlying the European institutions are piles of dirty toilet paper. The same thing holds for many documents produced by the United Nations. To enforce laws, a country really needs a well-defined police - or even army - obeying orders from the courts etc. according to well-defined and respected rules and the EU simply doesn't have any of those things, so it shouldn't pretend that it may afford to have its own laws and rules. It is just an international club that allows politicians to meet and that allows their bilateral treaties to be easily copied by other countries as well.

Lots of people and journalists recently wrote about the decaying European Union. These developments are, of course, not surprising to me: I've been saying that the EU acting as a superstate was a badly and unethically engineered project from the beginning. Obviously, it is showing its tendency to collapse during the first thunderstorm.

On the other hand, I am no Europe hater. I think that there are obviously many things that are meaningfully organized at the European level - such as the free-trade zone and others. It would be nice if the recent developments helped the people to rationally discuss what kind of activities the EU can and and what kind it cannot do and shouldn't do. However, it doesn't seem to me that this is happening. People either deny that anything is happening that shows lethal flaws in the European unification concepts; or they're already talk about a funeral and the end of time.

There won't be any end of time. There won't even be a Big Crunch because our Universe has a positive cosmological constant: it will approach de Sitter space even more closely. There will be some future and people should rationally evaluate the experience from the past and try to optimize the future. It's damn obvious that the idea that the desire to "unify" everything - while paying no attention to the evidence that it could be a very bad idea in many contexts - is something that we shouldn't repeat again.

1 comment:

  1. If I were a Greek, I would protest for default. Why are banks so important, that they can't be privatised? If you run a business with a big loss, you should go bankrupt, even if you run a bank.