Friday, July 10, 2015

The third bailout: can Greece be trusted?

Since the January elections in Greece that were won by Syriza, a Marxist movement, and especially in recent 6 weeks, there have been about 19 deadlines – the really "last" moments before which a deal has to be signed else...

Tsipras and his comrades didn't pay any attention to these deadlines. They didn't care about the closure of the banks, need for capital controls, and the default to the IMF, either. For the first time, however, the Greek government seems to be serious about their concessions. Perhaps the elimination of Yanis Varoufakis has changed their moods and they started to believe that the 20th deadline is the last one, after all. Last night, the new finance minister Euclid Tsakalotos (who is also Marxist but a less aggressive one) presented
a 13-page plan for a bailout
that seems sensible to me. It seems to respect the laws of the Euclidean geometry and it is very similar to the proposals penned by the European Commissions. €12 billion should be saved in a year for Greece to secure the third, €53.5 billion bailout. The document promises primary budget surpluses of 1.0, 2.0, 3.0, and 3.5% for this year and the following three, a comprehensive pension reform, increases of the value-added tax, elimination of numerous tax and other loopholes and subsidies, policies to reduce tax evasion and other tricks, and so on.

And yes, there are still some typically left-wing policies targeting gambling or yachts but the document doesn't seem to be all about these insanely irrelevant details.

It is not hard to see that the document envisions deeper reforms – harsher "austerity", if I translate it to the negativist jargon of far leftists – than the proposals that the Greeks rejected in the referendum. Why did they reject these proposals? Because the reforms were not deep enough! Do you have any legally binding facts that would prevent us from interpreting the referendum in this way? ;-)

However, that doesn't mean that this deal will be accepted. In the German Parliament, for example, there is a growing opinion that any new bailout – including one based on this apparently complete surrender – may be unacceptable. It seems likely to me that most of the CDU/CSU party will actually vote against the bailout – any bailout. But CDU/CSU isn't the only party in the Bundestag, of course.

Almost all European nations tend to agree with the German attitude that another haircut is out of question. There is clearly a perfect consensus about this point among the post-socialist countries of Europe. But even most of the traditional Western Europe – including the PI[G]S – seem to agree. The PI[G]S have repaid their analogous bailouts – why shouldn't Greece be expected to do the same? The only exception is France that is vaguely pushing for a new haircut. But France is probably not strong enough to change the mind of others.

The debt has already been cut in the past. The Greeks are pretty much asked to repay just the principal; all the interests from the history have been forgiven. The debt is not extremely large (Japan has the debt of 230% of GDP and it is not thinking about a default anytime soon), it may be repaid, and it will be repaid. A new haircut would be extremely helpful for Greece in this situation, everyone agrees, but if something is helpful for XY, it doesn't mean that XY will get it! It also depends on whether or not someone else wants to pay for such a useful, but expensive, act.

New finance minister Tsakalotos' signature. The mild erection symbolizes the moderate growth he would like to oversee.

I would personally accept the proposal and give Greece the third bailout assuming that there would be extremely tough rules how to enforce these things. When Greece would violate anything it has promised, for any reason, the creditors would enter the scene with the backing of their armies and restore the order. This invasion would be used to confiscate assets to pay for the whole debt and the Greek society would be governed according to the creditors' rules. Without guarantees of this kind and depth, I am afraid that the promises by the Greek government can't be trusted and shouldn't be trusted. The previous treaties were signed by the Greek government on behalf of their nation. When the nation "votes" to ignore these commitments, it really means that the nation itself is not trustworthy, and that's the principal problem with Greece. That's the reason why much more tangible mechanisms of enforcement – and possible reduction of the Greeks' sovereignty – have to be included in a new agreement that makes any sense.

Well, at the same moment, I do realize that the European politicians will be much softer when it comes to the rules of the enforcement and guarantees. But they really cannot afford to be too soft because it's pretty much obvious what the outcome will be if everything is done almost identically to the last time.

Why did Tsipras and comrades surrender – with the first meaningful offer – now? On Sunday, there will be the whole-EU meeting that should "really" make the final decision. The ECB seems determined to withdraw the €89 billion ELA program if there's no deal by Sunday. The banking sector would completely collapse on Monday. Most of the financial flows would stop in Greece. They would even be unable to print their own new banknotes – it is very clear that they haven't started any "serious" planning of this possibly necessary move. They would be in a catastrophic situation that would be deteriorating very rapidly.

The EU meeting will be even harder for Greece than the Eurozone summits. The Eurozone has 19 members; the EU has 28 members. The 9 non-Eurozone EU members include Britain, Sweden, Denmark, and 6 post-socialist countries including my homeland. In average, these 9 countries may be expected to be much more stringent towards Greece than the average Eurozone country. The post-socialist countries' attitude is obvious: our average salary is still lower than your rather "normal" pensions. It's insane, you're still living well beyond your means and we're not going to fund it. The Scandinavian countries could take an attitude not so distant from the Finnish one – which is very tough.

Only Britain is different. Its attitude is somewhat analogous to the U.S. attitude. Maybe Greece would deserve a haircut and so on.

However, I actually think that the Britons were essential for Tsipras to realize that his desire to "defeat" Europe is really hopeless at this point. I am thinking especially about the European Parliament where Nigel Farage – and, outside the European Parliament, Marine Le Pen – who have pretty much praised Tsipras as their ally in their fight against the evils of Europe.

Now, I've been a natural UKIP and FN supporter for years but these links are absolutely insane. Farage told Tsipras that Tsipras has to be brave and leave the Eurozone and/or the EU, print the drachma, devalue it, restore competitiveness, and show Brussels how worthless the EU is. Now, Tsipras is really a funny person to be recommended such a thing. His whole career has always depended on Greece's ties with more disciplined European countries. He has been a communist apparatchik for his whole life so far and hasn't produced a penny of a value. And much of this funding was possible thanks to the financial inflows from the rest of Europe. He is šitting in his pants – and you could see it on his face when Farage was speaking – when someone mentions Grexit; or the need to introduce a new currency; or its devaluation. He has promised the Greeks to stay in the Eurozone, keep on getting huge amounts of money, and keep their high real pensions and salaries.

As a Marxist activist, I am sure that Tsipras has considered the UKIP to be his archenemies for a very long time. It's possible that the UKIP is so obsessed by its hatred against everything related to "integrated Europe" that Farage is eager to immediately befriend "allies" such as Tsipras. But Tsipras is not ready for anything of the sort. When he saw that the UKIP became his only allies in Europe, he must have seen the light. It's a shocking result for him and he doesn't want to go in this direction at all. His plan has always been to change the whole EU into a big transfer union where Greece may permanently live off the tits of others, with no strings attached. The idea that he would have to manage Greece himself, using the Greek-produced funds only and with no European guarantees, is absolutely terrifying for Tsipras. Tsipras is the guy who wants the most integrated Europe among all the EU politicians. Farage's efforts to paint Tsipras as a hero of an anti-Brussels revolt are just incredibly preposterous. And so are Farage's suggestions that the important politicians and bankers of Europe – Draghi, Merkel, Schäuble etc. – are acting as some Eurofanatics proving how insane the EU is. In reality, the bankers and politicians in the European countries displayed the behavior in this Greek debt crisis that is virtually identical to how the politicians in countries that have lent these amounts would be behaving if there existed no European Union at all! The EU just doesn't really play any important role here. It only played some role in Greece because the EU was the "guarantee" that lowered the interest rates that lenders demanded from Greece and that helped Greece to "get used" to the cheap loans and overspending. And it has "worked" for many years, indeed.

This is the picture of cosmopolitan mass killer Dr Che Guevara that should be printed on T-shirts. Alexis Tsipras named his own son after this mass killer.

Dr Petr Nečas – our center-right former prime minister – wrote an interesting letter about Greece to the Parliamentary Times, a parliament-based Internet news and discussion server.

This trained plasma physicist – and now a consultant in a Transatlantic Relationships Center think tank – argued that Tsipras is a dangerous infection that has to be eliminated. He is dangerous even outside Greece because he wants to export the communist revolution to other countries – much like Che Guevara did. Nečas defended Grexit and said that Greece should be paid for leaving the Eurozone because it will improve the life of others and it's a compensation for the difficulties that the Euro membership helped to cause to Greece.

Tsipras wants to be a Greek communist missionary but, as Nečas reminds everyone, the last two successful Greek missionaries were Saint Cyril and Methodius in 863 or so. ;-)

I agree with most of Nečas' comments – except for suggestions that the haircut etc. could be a justifiable "reward" for their leaving. Our debt is about 4 times lower than the Greek one. But I think that it's still large enough that if we would be able to make this debt evaporate by leaving the EU, I would immediately and unequivocally support the Czexit! And I am sure that other countries would be even more unambiguous about this preference. It just doesn't make any sense. You can't start to forgive huge debts with ad hoc explanations that have no basis in any laws or treaties.

We will see whether the third bailout for Greece is still possible. The positions of Greece and the rest of Europe have diverged so dramatically that such a proposal by Tsipras will face huge opposition both in Greece and in Europe. Tonight, the Greek Parliament will discuss the proposal and the dissolution of Syriza is likely. Many politicians and countries outside Greece no longer trust anyone in Syriza. They don't want to try another bailout, waste another penny, give Greece another chance that has always led to great disappointments in the past.

In Greece, millions of people have been led to believe nonsensical childish communist fairy-tales about a future "paradise without austerity and without debt". Now, they're hearing that Tsipras wants another bailout. A new package of spending reduction, increased taxes, and other things that are unpopular in Greece.

Syriza and its communist soulmates all over the world have been complaining that the bailout funds have always been mostly used to pay to the lenders – especially the "evil" banks. What a shock! But the very word "bailout" means and always meant that someone saves the bare life of the borrower and makes the repayments – in a certain important period of time – to the lenders. Of course, almost all the money has to go to the lenders. It's their money!

Now, the proposed Tsipras' third €53.5 billion bailout will do the same thing. It's also some money most of which will be either used to make the repayments; or at least prepare Greece to be able to make the repayments from its own product in a few years. The bailout isn't and can't be a gift that turns a borrower who is completely broke – and who would go bankrupt without a help – into a pig in rye (a Czech idiom describing someone who lives a luxurious life, especially when the luxury seems unjustified to the speaker). That's simply not what the bailout means – and it's not something that normally occurs in the real world. It may happen in the heaven or in a virtual world governed by some communist utopia but it's not possible in a world governed by any laws resembling the laws of Nature in our world. Homeless stinky beggars on the street rarely spontaneously turn into the Prince of Monaco and the existence of the word "bailout" doesn't make this transition any more likely.

I would obviously be happy if Greece were able to gradually transform itself into a trustworthy country which can produce what it consumes and which is respectful towards its commitments. Into another Ireland, if I use a very optimistic analogy. (A Twitter used just responded to this article by saying that Che Guevara was partly Irish: nice.) I don't believe it's too likely and a Che Guevara at the chair of the prime minister makes the odds even lower. On the other hand, this Che Guevara is not "directly" connected with the generations of politicians that led Greece to the gradually deepening cesspool. If this Bolshevik radical turns into a new pro-market enthusiast who will transform the deteriorating communist Greece into the Tiger of the Olymp ;-), I will be immensely happy, of course.

Stay tuned.

By the way, it became a nice hobby for many people to invent unflattering analogies for the Greek government. For example, the Berlin stock exchange's boss thinks that the Greek government is a financial Taliban. The boss of the Czech National Bank says that Greece is a tourist with an empty wallet in Italy.

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