Europe’s Faustian Bargain: On the latest attempt to resolve the Greek debt crisis and its repercussions

The Agreement reached yesterday by Europe’s political and financial elites is meant to tackle, once and for all, the Greek debt problem. Just as in May 2010 the idea was that intra-eurozone contagion could be prevented by ringfencing Greece (recall the first Greek bailout, the creation of the European Financial Stability Facility, the EFSF, and the ‘radical’ step of having the ECB purchase peripheral bonds in the secondary markets), so too at present our great and good leaders have deemed it necessary to have a second stab at the ‘ringfencing’ problem, given the abject failure of their first attempt fourteen months ago.

Undoubtedly, there are elements in the new Agreement that have merit. For example, turning the EFSF into a TARP-like pan-European fund for recapitalising the banks (and not only those of the ‘fallen’ member states) is a good idea that I have proposed some time ago (and whose practical value will be judged, in practice, by the degree to which banks are forced to take capital from the EFSF in exchange for shares). Additionally, lending Greece at 3.5% and for thirty years seems positively civilised, in comparison to the exorbitant rates of the first bailout (and the laughable four year repayment period). Lastly, a haircut of around 20%, which is what is effectively touted now, for bonds expiring up to 2019, would have probably sufficed in early 2010.

Alas, going through the merits of this Agreement is akin to discussing a decent plan for extending the Maginot line through Belgium after Hitler had taken Paris. In short, the horses have bolted and we are debating the merits of the new barn gates. Am I exaggerating? Read Article 7 of the agreement to see that I am not. After Article 6 states that the haircut concerns Greece and Greece alone (“we would like to make it clear that Greece requires an exceptional and unique solution”), Article 7 adds: “All other euro countries solemnly reaffirm their inflexible determination to honour fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms.” In other words, the pledges that Greece was making till now, the rest (e.g. Ireland) will continue to make independently of their capacity to meet them. This is priceless gift to speculators who love nothing more than testing such unsustainable ‘solemn’ and ‘inflexible’ commitments on behalf of governments and EU bodies with a long history of such declarations that are confirmed more in the breach than in the observance.

The trouble with the new Agreement (one that is not dissimilar in spirit to the Emperor’s Newest Clothes) is that it contains all the right ideas but in precisely the wrong proportions and with woeful timing. The right ideas are: Debt restructuring and a more rational approach to debt management; a Marshall Plan for boosting investment and kick starting recovery; and a TARP-like EFSF that will recapitalise the banks. Tragically, these splendid ideas (which, by the bye, are the three planks of our Modest Proposal for Overcoming the Euro Crisis) are put forward only to the extent that they do not apply to the eurozone as a whole, limiting their scope only to puny, inconsequential Greece. Let’s take them one by one.

      I.        Greek debt restructuring and management: Who will pay the piper? The EFSF is the answer. And it will have to come up with the bulk of the new bailout loans for Greece while Greece’s creditors suffer a tiny, in the greater scheme of things, haircut (of 21%). Put differently, Germany and France will have to guarantee most of the new loans that will be used to repay, or buy back, Greece’s older debts.

    II.        Recapitalising Europe’s banks: Who will provide the capital? The EFSF of course. Again.

   III.        The Marshall Plan for Greece: Who will finance it? The Agreement says nothing on this but, in the absence of any specifics, it is inevitable that the funding must come from the EU’s existing budget. Which means that monies currently earmarked for investments in Ireland and the rest of the periphery will be re-channelled to Greece. Hardly a recipe for overcoming the Europe-wide investment dearth…

Now, if these three steps were enough to ringfence Greece, their implementation cost would be manageable and their outcome desirable. Unfortunately, this type of ringfencing is at least a year too late. Back then, prior to May 2010, the cost of these measures would have fallen below the EFSF’s €450 billion funding base. Today, the cost has skyrocketed to around €2 trillion. For it is impossible to imagine that Greece will be borrowing at 3,5% while Spain is struggling to roll over its huge debts in the money markets at more than 6%. And it is preposterous to imagine that any sensible person will be convinced by our leaders’ oath that the Irish debt will not be restructured when the Greek debt is subjected to a menu of alternative haircuts. Additionally, it is mindnumbingly perverse to think that sluggish Italy can be left to the appetite of the credit rating agencies and at the mercy of the wolves of the money markets who have already scented blood coming from Rome, Madrid even Brussels itself.

All in all, the cost of carrying out policies I, II&III above is prohibitive for the AAA-rated countries that have to bear it; in effect Germany and France. What makes this prospect even less likely is that speculators have just been given, courtesy of yesterday’s agreement, two separate playing fields in which to practise their well honed skills: (a) Attacking peripheral bonds and banks, and (b) testing the water to see if France’s AAA-rating is safe. The moment they make ground with regard to (a), their bets will be strengthened vis-à-vis (b). And once France’s AAA-rating is shrouded in a small cloud of doubt, the question will become: Will Germany ever  countenance putting up guarantees for the EFSF amounting to almost half the nation’s GDP? (For this is what Germany will have to do properly to implement I,II&III above once France’s AAA-rating is questioned.) The answer is an unequivocal ‘NO’. And once this answer starts doing the rounds in the hearts and minds of policy makers and money market players, the Crisis will be back with an unprecedented vengeance.

Which brings me to my (predictable) point: If Europe is truly keen to implement I,II &II above it can only do this by adopting our modest Proposal; by transferring, that is, a large swathe of the eurozone’s aggregate debt to the centre (the ECB is my preferred destination), which will service it by means of eurobonds which can then also be used to co-finance the European Investment Bank’s investment-led pan-European recovery program. Until we hear our leaders speak the word eurobond; until the new Marshall Plan spreads its wings over the whole of the eurozone; until the banks are forced to take sufficient capital from the EFSF (and not just the minimum amount that will keep them in a 1990’s Japan-like zombie state), the Crisis will go from strength to strength.

Conclusion

The general response to this Agreement is one of cautionary approval. Most commentators’ verdict is that it is in the right direction but requires larger, more courageous steps. It is not my verdict.

What might have been a decent response a year and a half ago may be the wrong medicine today, well after the disease has progressed to hitherto unaffected organic parts of the common currency area. It may, of course, turn out that, politically, Europe is trying out on Greece policies I,II&III for size before extending them to the rest of the eurozone, once the evidence is in that the Crisis is stubbornly refusing to recoil. But there is another interpretation which, unfortunately, may be more pertinent.

My alternative interpretation is that Mrs Merkel has gone too far down the road of the fiscal transfers that she, supposedly, admonishes. As I argued above, this new package for Greece is hugely expensive on the German taxpayer and, worse still, it creates a fresh chain reaction (in the realm of speculation) that can only inflate that cost exponentially in the coming months. Rather than bringing about greater political union, and a new resolve to homogenise debt and investment, the escalating cost to the German taxpayer will undermine Berlin’s political resolve to stick to the euro.

If I am right, rather than a move toward the logic of our Modest Proposal, yesterday’s Agreement may be a Faustian bargain that pushes Europe a few steps further down the ladder to the hellish prospect of European disintegration. So as to delay further the move to a degree of debt commonality and surplus recycling (in the form of productive investments in the deficit regions), Europe’s leaders seem to have struck a deal with some postmoderm Mephistopheles that will, eventually, lead us to a hideous moment of reckoning. The question then is whether the story’s ending will resemble more that of the pre-modern Marlow or the happier resolution of Germany’s own Goethe.

39 thoughts on “Europe’s Faustian Bargain: On the latest attempt to resolve the Greek debt crisis and its repercussions

  1. Pingback: Protesilaos Stavrou on EU affairs » Blog Archive » Can a bigger EFSF contain the crisis? It can certainly worsen it

  2. Pingback: Protesilaos Stavrou on current issues » Blog Archive » Can a bigger EFSF contain the crisis? It can certainly worsen it

  3. Pingback: Europe’s Faustian Bargain: On the latest attempt to resolve the Greek debt crisis and its repercussions | Constantino's Free Zone

  4. Pingback: Why Italy? Why Spain? And why the EFSF’s size does not matte « ArmonyaX

  5. 2 questions to whoever is reading and holds a finance degree.
    Referring to IIF’s offer: “All instruments will be priced to produce a 21% Net Present Value (NPV) loss based on an assumed discount rate of 9%”

    – Why 9%? This is not inflation, it’s not the global yardstick for investments (low risk Govt bond), it’s not the opportunity cost for a bank and it certainly doesnt represent the Greek bond’s market value loss. So why discount at this rate?

    – Has anyone tried to reconcile the 21% haircut that the banks are supposed to take? I tried discounting the first couple of options (30 year – increasing coupon) at 9% and the NPV does not resemble anything near 21% of any Greek bond or Greek bond discounted at 9%. Anyone tried it?

    Cheers
    Spyro

    • Scratch the 2nd question, this could be the 20yr Greek bond yield. Last time I checked (3 months ago) it was 9.7% so maybe this is it. Still, the yield is calclulated as the coupon return on market value (not par value), so I dont think how this is relevant to someone holding a bond and likely to have purchased it from the market at a much higher value.

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  7. @Xeno: You should check out what is going on at Facebook. A bew site “I want the DM back” got >5000 likes on the first day. More than “Merkel is not my chancellor” also is a nice one.

  8. True, true. But I remain hopeful. For they know not what they are doing. And, in the end, knowledge comes even to the ignorant (if only the hard way)…

  9. I copied something from wikipedia (http://en.wikipedia.org/wiki/Heinrich_Br%C3%BCning)

    It shows what happens when a coutnry has to roll back salaries & prices around 20%. The figure for Greece if it stays in the Euro is 20%-30%:

    —————
    Brüning was appointed chancellor on 29 March 1930. The government was confronted with the economic crisis caused by the Great Depression. Brüning disclosed to his associates in the German Labour Federation that his chief aim as chancellor would be to liberate the German economy from the burden of continuing to pay war reparations. This would require an unpopular policy of tight credit and a rollback of all wage and salary increases.

    Brüning’s measures were implemented in the summer by presidential decree and made him extremely unpopular among the lower and middle classes. As unemployment continued to rise, his cuts in welfare and reductions of wages combined with rising prices and taxes, increased misery among workers and the unemployed. This gave rise to the quote: “Brüning verordnet Not!” (Brüning decrees need), alluding to his measures being implemented by “Notverordnung”.
    ————

    Ok, we all know what happened then. If I would be Greek, I would get rid of the Euro before I would go the route described above.

    • This is the problem of internal devaluation compared to external devaluation.

      Internal devaluation cannot be timed equally and cannot be adjusted equally. (i.e different groups get their pay cut at a different time and at different rates). Furthermore, it causes serious social problems.

      External devaluation hits everybody at the same time , at the same amount and is generally a much smoother process

  10. Pingback: Europe’s Faustian Bargain: On the latest attempt to resolve the Greek debt crisis and its repercussions | Constantino's Free Zone

  11. Apart from the really strange impression I have that 90% of the Greeks believe that their problems need to be solved by someone else, the “Wunderwaffe” (wonder weapon) of Angela & Nicolas is really a “barrel burst”:

    1. Is Greece now less insolvent than 48 hours ago?
    I think – NO

    2. Are the AT, NL, FI, DE people as well off (in the immediate future) than they were 2 days ago?
    I think – NO

    3. Will this add to the financial well-being of the peoples of the European Union?
    I think – NO

    4. Will the EU decision make the European Union a better place to live and work?
    I think – NO

    5. Will the people living in the countries signed up to the Lisbon Treaty / Maastricht Treaty have any say in the decisions of yesterday, as the treaties will need amending to recognise these changes?
    I think – NO

    Is this the new and (not) improved version of the USSR?
    At last – a YES!

    • Dear Knut (please let the non-Germans know how to pronounce your name, otherwise you won’t be pleased by the outcome…),

      my strange impression is, that 90% of my fellow citizens in Germany are of the same opinion as you, that 90% of the Greeks believe what you wrote above. So, who is right?

      Let me remind you of the fact, that one year ago, after the greek government had raised the taxes and lowered its deficit by a rate that even Germans cannot dream of, only almost nobody protested (except of course of the usual suspects). Instead, a change of thought began to evolve. This great change began one year ago. Under this government and of course, under the pressure of the financial crisis, long overdue processes of change, not only in economy, but also in the society, were activated.

      Now, jokes aside, I don’t think that 90% of the Germans think that the Greeks are lazy. But a sad fact is, that the intellectuals in Germany still remain all too silent, while th intellectuals in Greece are now engaged actively in the public discussion, like Prof. Varoufakis. I am proud of the public discussion in Greece, in different areas, history, politics, economy, etc. We (now as a German) should be worried and ashamed of the low level discussion in Germany, which is disgracefully feeded by Ms.Merkel and several politicians of our government. This is a risky game and will surely not remain without cost for Germany. I now there are exceptions in Germany too, but way too low in number. Our time needs a broad discussion on all levels of the society. Germany has to wake up and participate in this discussion. It is a disgrace for Germany of the poets and thinkers that they only come up with popular wisdom like the one of the “swabian hausfrau” in the midst of this unprecedented deep crisis.

    • @Xeno: I do not care how “Knut” is pronounced. i tis not my real name. It was just the most silly one I could think of.

      If you look in the German press today, you will see that the resistance against the bailout packages is rising. Even Handelsblatt features articles that say that socialising debt of other countries is (a) irressponsible and (b) against the constitution.

      In the last months Prof. Hankel had to go to Austria to find an audiance that would let him speak. Yesterday he was featured in a major German newspaper. Pretty much every German agaed 60 and above will support his ideas. The younger ones are mostly to ignorant, and were tought in school that everyone who works in his self interest is a Nazi. OK there are exceptions: You can call me Nazi anytime, as long as I can keep my money.

  12. My reactions to the agreement:

    1. they’re going to use the EIB to tweak the labour market? If you look at the language related to the EIB and the rerouting of structural funds, they talk about things that fall under the postmodern concept of “active employment policies” – “competitiveness and growth, job creation and training”. This has nothing to do with repairing the dearth of underinvestment in Greece, let alone the whole periphery.

    2. The EFSF is given a broader mandate and more flexibility to implementation. However, nothing is said of increasing its financial resources. At present, the €750 billion consist mostly (about 60%) of EU member state guarantees for EFSF bond issues. In other words, the EFSF is supposed to raise the capital to keep the market at bay from the market itself.

    3. Everything is still based on “conditionalities” and there is a veiled threat that support may be withdrawn from Portugal and Ireland: “continue to provide support to countries under programmes until they have regained market access, provided they successfully implement those programmes”

    4. The EU as a whole commits to deflationary austerity.

    Just wait until “the markets” start attacking France. After Italy, it’s just a matter of time. Belgium is now safe, as it has already been bypassed in favour of bigger prey.

    The agreemtn may be enough to get the Euro through the current crisis but at the price of either a lost decade in much of the EU or another private debt bubble in the periphery if new business cycle manages to get started, ending with another crisis. Because none of the structural causes of the imbalances is addressed.

  13. Hi there.

    I would like to continue and add to my previous post.

    I wrote that i expect the USe(a)rians to intervene.
    Ofcourse now they have domestic economic problems ,but that is of no importance considering potential global agendas.

    Here is what i am thinking.

    China is expected to be the new Empire.
    It would be unreasonable to assume that the US would accept that easily.
    So maybe the problems US is facing are actually another stalling mechanism ,waiting first to intervene to Europe. The Tsunami in Japan and the Earthquake in New Zealand sure helped delaying China.

    The US will not default. They keep themselves on “life support” (not that they need to) ,by/for China’s purchased US bonds.

    When the time is right the “good guy” ,US , will intervene to what is a playing field for both China and US ,trying to gain the upper hand. To Europe. Especially Greece.

    And then the fundamentals will change.
    The US will have an economic boost through maybe exploitation of the Mediterranean. Gas and Oil.
    Asian currencies will not move higher ,not so much as the usd. And the recovery will be stable ,because Gold will not fall like a stone ,since Gold and other metals will be allowed to grow like magic trees in Greece ,but in a very controlled fashion.

    The US will secure the Empire state for more years ,by building two new Empire State buildings. One in Europe and one in Japan. Thus circling China.

    The Two Towers.

    Vivid Imagination? Well ,it is just a scenario.

  14. Last Ride on the MINOTAUR?

    Eurozone leaders decided to implement a short version of the Modest Proposal exclusively
    on Greece.All logic now points to a sudden awareness of this Proposal among the Euro leaders.The Bad Market of Speculators same story.If pressure heaten up as suggested with
    rating downgrade France with new turmoil of crisis with a Germany facing political pressure never seen and possible end of Euro or 1/ FULL IMPLEMENTATION Modest
    Proposal.2/Alternative defence can be a FEARED huge BANK TAX in all EU area as a proper vengeance on Market Speculators.
    Unfolding a WAR of FEAR&GREED!
    A no WINNER WAR!!
    OR Greece SAVED with a little Political Extortion?
    Time to take POWER BACK from GREEDY MARKETS.
    NEW GLOBAL PLAN takes form and lessoned learned.
    History will tell! EURO Prevails! Austerity is the GOLDEN COIN short term also for US economy.Wall Street based RATINGS DEATH vs Live European RATINGS
    A much Brighter FUTURE evolves without US dominion.
    Trader

  15. You are right of course, Yani, but the new bailout is just a lifeline to a drowning economy. It will help Greece’s cash flow undoubtedly, but whilst it writes off a relatively trivial portion of Greece’s debt, it does nothing to put Greece into primary surplus, nor does it speak to the profound changes that are required in Greece to put the economy onto a stable basis. One can only hope that now that everyone is breathing an unwarranted sigh of relief, Greek politicians do not take this as an opportunity the slacken their already feeble efforts at reform, having decided that now that the money commitment has been made, the EU has lost its leverage.

  16. You are a “devil” John, since you make us read Faust to be able to follow you..So let’s go for “the happier resolution of Germany’s own Goethe.”
    “He who strives on and lives to strive/ Can earn redemption still” (V, 11936–7).

  17. Dr. Varoufakis,

    You articulate your position well, and if one agrees ideologically with the implications of further integration (the good, as well as the bad), then the only issue that remains unresolved is whether or not it will prove politically feasible to implement a massive fiscal overhaul of Europe and the supplementation of national debt for supranational debt.

    It is possible that a precipitous collapse of the euro, or some other frightening monetary event in Europe that touches the Germans will create the political will necessary to integrate the periphery.

    However, it is far more possible, in my view, that the German citizens ultimately become so disaffected with the actions of their politicians (like Mrs. Merkel) in Europe, that they simply make it politically impossible for any elected official to push for something like the Eurobond and a larger SGP.

    What then?

    • What do mean with “then”? 80% of the Germans want to get rid of the Euro or have lost fauth in it? But this is only the political issue.

      The other issue will be that all the surplus money that Germany produced and that is held by people and companies flowed out of Germany and a lot of it to GR, PT, IE, ES, IT, etc.

      NOW: As a cautious investor you need to think about the possible scenarios:

      (A) Euro break up & (B) Transfer union

      Having money invested in GR, PT, IE, ES and IT (and also soon France), is mainy a risk in (A). So a lot of money will flow out of these countries back to Germany. This way you avoid currency devaluation risk. Another option is gold.

      For (B) the assumption is that there must be huge inflation at the end, so gold is an answer again.

      If a lot of money flows out of the productive economy into gold it will be the end of the transfer union. Tax revenues plunge & how do you tax gold?

    • Those are all good points regarding both reasons for holding gold, as well as understanding the risks of capital flight and how that can become a self-fulfilling prophesy.

      My question though is not for individual investment advice, or how to protect one’s wealth going forward. My question is a policy one. In other words, if we are to contemplate the possibility of an exit from the Euro, how would people in the Greek government and at the Greek Central Bank react? How can we make the best of an exit from EMU.

      I think that a bi-currency system, where the government returns to the drachma for public expenditure (including paying all government salaries in drachmas) but keeps the euro for domestic transactions is the best option. Obviously, getting rid of any regulation that creates needless barriers to entry for entrepreneurs in Greece is a must.

      Is anyone talking about this scenario seriously and preparing for it?

    • The bi-currency system has been discussed as a possible solution to be implemented within the eurozone. The idea is, basically, to create a system which effects automatically, and in real time, internal devaluations. Implemented in this manner, it would mean that while there is only one physical currency (the euro), all public salaries, debts and transactions are calculated in a local shadow currency, e.g. the drachma, whose exchange rate with the euro reflects local ‘competitiveness’. Thus, a loss of Greek competitiveness immediately results in a reduction in the euros that a public servant takes home that week. Your suggestion, on the other hand, is that a similar system is enacted where the only physical currency is the local currency (i.e. the drachma) and the shadow currency, the unit of public accounts, is the ‘foreign’ euro. The difference here is that, in this scheme, the shadow currency is a really existing one and, thus, it will be the (hard) currency of choice. In effect, people will prefer to deal in the euro and the economy will resemble Turkey prior to its reforms (when Turks preferred to be paid in euros or dollars). In short, the bi-currency solution would infuse huge deflationary forces in Europe’s economy if implemented within the currency union and/or create a Third World experience for citizens of member states that exit the eurozone.

    • The bad money always replaces the good money in circulation (Gresham´s law). As long as you do not prohibit exchanging the bad money into other currency, there is nothing you do about it. You can see this also with the EUR & USD at the moment. People prefer to use CHF or gold over USD or EUR to transfer money from today into the future..

  18. Αγαπητέ Δρ Βαρουφακη,

    Δεν έχω βρει το μεηλ σας πουθενα στη σελιδα γι αυτο σας γραφω εδω.
    Γραφω την πτυχιακη μου εργασία σχετικα με την κριση στη χωρα μας και θα ειναι τυπου
    descriptive economics σας παρακολουθω και σας διαβαζω συχνα.
    Αναρωτιομουν αν θα μπορουσατε να μου υποδειξετε βιβλιογραφία σχετικά με ήδη υπάρχουσες εργασίες στο συγκεκριμένο θεμα απο ελληνες ή ξενους συγγραφεις.

    Ευχαριστώ ειλικρινά,
    Γερμενής Παναγής
    Master In Political Sciences Yeditepe Universitesi
    Istanbul
    Turkey

    • This is what I have saying all the time. Noone accepts their government to write debt guarantees totaling 3-6 months gross salary for everyone.

      Especially when the results of the 30 year experiment shows that pooring money into certain countries does not enable them to catch up. It is OK to make mistakes, but to make the same mistake over and over again normally gets people fired.

  19. Hope you had a peaceful vacation Yanis.

    from where I am standing, the ‘medicine’ forced upon Greece is not dealing with the illness, it is a rather a small dose of morphine administered until mid 2014 to a patient with a tumor that urgently needs to be removed to better his condition. Instead of dealing with the illness, the patient will be kept in a state of‘stasis’

    Banksters and vested interest groups are forcing ‘career civil servants’ hands, politicians they are not, in Brussels and Frankfurt.

    The lack of solidarity amongst the citizens of our countries under direct attack attack, occupied by banksters, is making it very easy for the forces at play to follow through, the Muasher doctrine applies.

    This is something they are very aware about, divide and conquer at work. We are entering a postmodern version of the dark ages in deed. Without a united front of european citizens standing up for their own, their neighbors and their children’s Rights, they will continue to push back entire nations into poverty and serfdom.

    Can I just add something else here please, to allow for a different perspective?

    There are approximately 10 million people currently affected by starvation, thirst and the threat of immediate death. On the Irish Television, the ex President Mary Robinson dropped a few tears at a photo shooting and interview in Somalia. No one is talking about the EU CAP, the insane subsidies to the agriculture producing sector, of course not, it is inconvenient to educate citizens on the reality of this situation.

    It is beyond my comprehension….

    We arrived in the year 2011, space ship voyager 1 and 2 that were launched in 1977, are about to enter interstellar space in a few months time, this is not science fiction, it is science, and one of the outstanding achievements we should celebrate.

    The total cost of the Voyager mission from May 1972 through the Neptune encounter was 865 million dollars. On a per capita basis for each US citizens, this was roughly the cost of half one candy bar each year since project inception.

    The return on Investment was a total of five trillion bits of scientific data returned to Earth by both Voyager spacecraft at the completion of the Neptune encounter. This represents enough bits to fill more than seven thousand music CDs. 11,000 people worked on this project, and soon they will enter interstellar space.

    http://voyager.jpl.nasa.gov/where/index.html

    You might ask, what the Heck does this have to do with Somalia or the global financial heist. Is it not obvious?

    It is beyond my comprehension that we allow this to happen, apologetic civil servants try to convince us that all this is too complicated for our little brains, be it the financial heist or the suffering and starvation, but this is adding only insult to injury. As my example above gives evidence on our capabilities once we put our brains to something.

    Our very nature as humans can be described as being choosers, we have choices to make, and it is the choices we make today that creates the future of tomorrow. Without a strong european public united and stating responsible and ethical demands that benefit all of us, well, this public and each of it’s individual has made a significant choice, for our all future I am afraid.

    Best wishes
    Georg

  20. Welcome back.

    When i saw the reporters’ descriptions of the “solution” yesterday evening ,i thought “Hey ,they copy Varoufakis and in a most limited way. I can’t wait to read his reaction.”

    Well ,it is sad and it is fun. How meaningless all this have become.

    To use my favourite perspective of human behaviour ,what i see is the German people choosing to hate the Greeks more and demand more blood ,while many of the people of other nations ,including Greece ,will actually be convinced that slowly everything is getting better.

    But now i see a difference. Instead of authoritative figures to do what ever they want by trying to “calm the troubled seas” the last moment as usual and by the usual ways of police ,pseudo -anarchists ,”solutions” etc. ,they may use to a bigger extend the negative propaganda and hatred of an entire nation. Germany maybe? And then the good guy will intervene. Who’s the good guy?

    Oh ,how they all love authority.

    I knew that the USerians (well, who didn’t) ,would try to grasp a handle for the future ,but i wasn’t expecting for them to be so obvious so soon.

    US – Germany. Good cop – bad cop. How nice.

  21. we need to be cautious for the next few days.

    Such statements of purpose, once tested usually fall short of expectations.

  22. Don´t worry about Merkel. She and her party is dead. Her great performance might lead to a situation where we have a Marshall plan BEFORE tte war…

  23. Well, it might not be the perfect solution, but it is the best and most complete effort so far.
    It was the first time that Europe took the problem seriously and tried to come up with a solution.

    Also, do not underestimate the importance of moral hazard that Germany often insists on. The Greek government needs a carrot and and a stick, otherwise they will keep the crony state they’ve built all these years.

    • Moral hazards abound. In Greece, in Germany, everywhere. There are lessons to be learned. In the banks. In the corporate world. But, no one takes responsibility. The question, if we’re going to bring morals into play at all, is really one of original sin. What sets the imbalances into motion?

  24. I have only one hope which could present a positive perspective in the plans announced yesterday: I hope that they “buy” Europe enough time to negotiate and re-organize the Union in terms of political governance and re-distribution of resources and production.

    On the other hand, looking at the forthcoming elections in France and Germany (Italy as well), I am not very optimistic, since it is stupid to expect from the same mix of politicians to come up with a different plan!

    The future will unfold quite fast in next few months. And it does not look very good!

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