Wednesday, March 2, 2011

Greece

In a sort of throw away comment in FLG's rambling rant about unions, he wrote this:
FLG reads Jean Quatremer. Quatremer's analysis of the financial troubles with Greece and other Eurozone countries almost always blamed one of two things -- banks, who were using their economic muscle to unfairly contradict the democratically chosen political policies of various countries, and thus infringing on their sovereignty OR the newspaper stories of UK financial press who have a serious hate on for the political and economic policies on the continent. FLG can't ever remember Quatremer acknowledging that perhaps the Eurozone countries had unsustainable fiscal arrangements.

Well, Quatremer wrote about Greece again the other day:
Officiellement, rien n’a changé : la Grèce remboursera son énorme dette publique, comme elle s’y est engagée et comme s’y sont engagés ses partenaires de la zone euro afin de rassurer les investisseurs. Mais, dans les coulisses, on commence à admettre que la tâche est impossible : il y a des limites à ce que les peuples peuvent endurer. «Nous n’en pouvons plus», clamait ainsi mercredi à Athènes une banderole lors de la manifestation qui a accompagné la première grève générale de l’année 2011. «Nous sommes en train de mourir», avertissait une autre. Cette journée, marquée par un regain de mobilisation contre la cure de rigueur sans précédent que les Grecs subissent depuis un an, a fait ressurgir les craintes d’une déstabilisation politique. Du coup une question revient en force au sein de l’Union : pour redonner de l’air à la Grèce, ne vaudrait-il pas mieux «restructurer» cette dette qui ne cesse de gonfler, c’est-à-dire l’alléger en présentant l’addition à ceux qui lui ont prêté inconsidérément de l’argent ?

Rough translation:
Officially, nothing's changed. Greece will payback its enormous public debt, like it and its eurozone partners agreed so as to reassure investors. But behind the scenes people have begun to admit that the task is impossible : there is a limit to what the people can endure. "We can take no more," claimed a sign at a Monday's general strike, the first of 2011. "We are dying," another read. This day, marked by a renewal of protests against the unprecedented austerity that the Greeks have undergone for a year, reignited fears of political destabilization. The question to the Union : to resuscitate Greece, wouldn't it be better to restructure this debt which doesn't stop growing, that is to say reduce it by presenting the sum to those who lent the money inconsiderately in the first place?

He also says:
La quasi-totalité des économistes estime désormais que la Grèce n’a plus seulement un problème de liquidités, c’est-à-dire d’accès aux marchés, mais un problème de solvabilité. Autrement dit, elle ne pourra pas rembourser.

Again, rough translation:
A near totality of economists estimates that from now on Greece doesn't only have a liquidity problem, which means access to markets, but a solvency problem. Or put another way, Greece wouldn't be able to payback its debt.

Listen, when it comes these type of macro, international finance problems, FLG really looks at it from a cost-benefit perspective. If Greece defaults then it will not have to worry about paying off all its debt. Things will get easier in the short-term. But also it will probably have to wait for a long while before it can go back to the bond market again and it will probably have to pay a pretty high rate, if we assume something similar to Argentina. They have to balance that cost against the current cost of austerity which comes with the benefit of maintaining what's left of their credit standing.

All things considered, if FLG were in charge of Greece, then he'd probably pull out of the euro, devalue, and restructure debt like a motherfucker.

But that would set off a domino of problems for the rest of the eurozone. And so Germany and France, well really Germany, would have to decide whether the euro as economic and political tool is worth it.

So, as far as conclusions go, FLG is with Quatremer. Mostly from a rule of holes type of analysis -- if you're in one, then stop digging. Not sure Greece has any other way to stop digging then to just declare the hole filled and go on with their life. But what bugs FLG is that Quatremer seemingly places all the responsibility, as per usual, everywhere but with Greece and the Greek people. It's almost like he thinks Greece was some old grandma who got duped into taking out a interest-only arm on the house her husband built by hand and was entirely paid off and then she got foreclosed on by evil, shifty bankers. When Greece was more like Charlie Sheen on a bender in Vegas who found out the credit card is maxed out and then blames AmEx for his having to pay for the Motel 6 with the cash in his pocket. A long string of irresponsible fiscal decisions were made.

Does Quatremer have a point? Sure. Creditors were stupid to give Greece the same interest rate as Germany because it was in the eurozone. FLG isn't going to weep if they have to take a haircut. But it takes some sick, twisted, idiotic logic to get to the Greece is an innocent victim in all this.

2 comments:

The Ancient said...

You're right, but under any circumstances it's going to be difficult to explain to an entire nation that its income must decline by as much as 40% for a decade, after which they will be even worse off than they are today.

A long time ago, I lived in Athens. I love the Greek people. But they are fantasists to their core. Charming, slothful, and certain that no matter what they do, the sun will come up tomorrow, just as it did today. (What they don't understand, because they are fundamentally unadult, is that the rising sun doesn't guarantee any sort of continuity.)

arethusa said...

A long time ago, I lived in Athens. I love the Greek people. But they are fantasists to their core. Charming, slothful, and certain that no matter what they do, the sun will come up tomorrow, just as it did today. (What they don't understand, because they are fundamentally unadult, is that the rising sun doesn't guarantee any sort of continuity.)

I second that. The Greeks are often children - generally charming children, true, but sometimes the only annoying thing about living in Greece was the Greeks.

 
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