Monetising the… ECB: The latest insult to be added to Greece’s multiplying injuries

Last week another installment of the cruel theatre of the absurd, also known as the ‘Greek Rescue’ (and more recently re-released as ‘Greece’s success story’), was delivered silently: Not for the first time, the bankrupt Greek state borrowed from one arm of the Eurozone to give to another, with massive interest to boot. To be precise, the Greek government borrowed €4.2 billion from the European Stability Mechanism (ESM) in order to repay the… European Central Bank (ECB) €5.6 billion, leaving the ECB with a profit of €2 billion plus from this hideous transaction. Re-pay what exactly?

You may recall that between Greece’s first bailout (in May 2010) and Portugal’s collapse almost a year later (June 2011), the ECB tried, in the clumsiest of manners, to stop the contagion by buying Greek, Irish, Portuguese, Spanish and Italian bonds in secondary markets. As was expected, that ‘program’ (known as SMP) failed for the simple reason that the then President of the ECB, the hapless Mr Trichet, had pre-announced that the ECB would not spend more than €200 billion in that effort: an open invitation to speculators to short these bonds until the ECB’s €200 billion was exhausted, cashing in massively once the ECB withdrew with its tail between its legs (which is precisely what happened).

Still, during that yearlong folly, the ECB accumulated a large number of peripheral government bonds, which it purchased at so-called ‘distressed’ prices; i.e. at a large discount. In the case of the Greek bonds that were thus purchased (and which matured last week), even though the ECB does not tell us how much it paid for them, my information is that it paid less than 64 cents to the euro. In other words, the Greek government bonds that matured last week, owned by the ECB, had a face value of €5.6 billion but cost the ECB only €3.6 billion. Which means that, last week, the Greek government handed over to the ECB €2 billion, which amounts to an effective 55.6% interest for two years, in addition to the monies that the ECB spent in order to purchase these bonds. If this is not usury, I know not what is.

ECB defenders may say that these ‘profits’ will eventually be returned to Greece, assuming that the Central Banks of the surplus states agree. Perhaps they will. What they forget, however, is that had the ECB not purchased these Greek bonds, they would have been haircut last year, with the so-called PSI of early 2012, and then again last December with the so-called ‘debt buyback’. In short, the bonds until recently held by the ECB of €5.6 billion face value would have shrunk to less than €1 billion (the rest constituting the haircut). Noting that the ECB’s purchase of these bonds did nothing whatsoever to help Greece, the end effect of the ECB’s action was to put the Athens government in the situation it found itself last week: of having to borrow €4.2 billion from the ESM and to add to this pure blood money (i.e. the savings it made by cutting savagely on health, education, pensions, disabled people’s benefits etc.) equal to €1.4 billion in order to redeem the ECB owned Greek government bonds to the full, thus creating the aforementioned €2 billion profit for the ECB. In total, the cost to the Greek state of the ECB’s intervention (taking into consideration the extent to which this debt would have been haircut without the ECB’s intervention) comes to a staggering €4.6 billion. Money that is now being taken out of the Greek economy in ways that crush Greece’s society.

In short, had the ECB not tried to ‘help’ Greece during 2010/11 (by buying these bonds secondhand), the Greek government would now be able either to avoid borrowing the last tranche of €4.2 billion from the ESM or to borrow it in order to invest in our suffering people and/or economy.

Many lament that the Eurozone is a perverse economy in that it has a Central Bank without a state to direct it and states without a Central Bank to back them up. In fact, the situation is worse, as the above tale demonstrates: The Eurozone has a Central Bank that, even when it tries to help its weakest members in the midst of a vicious crisis, it ends up weakening them further; operating unwittingly as a giant squid on the face of their societies.

42 thoughts on “Monetising the… ECB: The latest insult to be added to Greece’s multiplying injuries

  1. The risk of «taking losses» is neither the principal nor the only pretext for the ECB’s vehement refusal to restructure, roll over, freeze or write off its holdings of sovereign bonds purchased in the secondary market under the short-lived SMP programme.
    Any of these monetization options would cost nothing to the ECB or the Holy German Taxpayer, anymore than it cost the «eurosystem» to buy these bonds in the first place. This was done by simultaneously augmenting both sides of the ECB balance sheet, with the newly acquired «assets» equal to «liabilities» on the currency issuer’s seigniorage, i.e. the power of its printing presses.
    The official explanation for withholding these bonds against the slightest PSI haircut – reiterated by senior ECB officials and Mario Draghi himself ad nauseam – is that any debt relief on ECB- or ESCB-held sovereign bonds is strictly prohibited under ECB Charter. And this is because it would constitute a form of «monetary financing of fiscal deficits», which compromises the ECB’s supposed «independence» from eurozone member states «and other EU public bodies».
    This independence, which bars the ECB from its function as «lender of last resort», does not stop it from acting as «Enforcer of first and last resort» for all sorts of harsh austerity «conditionalities» that accompany direct or indirect «bailout» programmes imposed on virtually all the countries of the European South.
    Indeed, the gnomes of Frankfurt are prone to advertise their blackmailing exploits by issuing ultimatums and threats of financial strangulation through «confidential» letters to uncooperative prime ministers. They then «leak» those letters to the media in quick succession, making sure that progressive future governments in Greece, Spain or Italy have been duly warned about the consequences of their disobedience to the Troika of Berlin, Brussels and Frankfurt that rules Europe.
    This glaring conflict of interest between the ECB as guarantor of monetary stability and bank liquidity on one hand, and the ECB as Enforcer of Compliance to Austerity (at the expense of bank liquidity «if needed»), is a far more ominous contradiction than the one Yanis dissects between ECB Profitability and Quantitative Easing. And this is not least because it also entails a double-standard treatment of Greece by excluding its bonds from Quantitative Easing after 5 years of «fiscal [and monetary] waterboarding».
    In fact, the ECJ Advocate General’s recommendations stress for the first time that this contradiction must be lifted if OMT or Q.E. are to spread their benefits more evenly across the eurozone.
    “The ECB must…refrain from any direct involvement in the financial assistance programme that applies to the State concerned”, advocates Mr Pedro Cruz Villalón.
    But a withdrawal of the ECB (as Enforcer) from the Troika, to allow the same ECB room for OMT or QE without prejudice against particular beneficiaries, implies that the Enforcer’s usurious ransom (the SMP bonds) must also be taken out of the equation.
    In the case of Greece, the amount of SMP bonds that remains to be repaid over the next three years is €28bn. A “withdrawal” – one way or the other – of this sum alone from the Greek debt overhang will give the new government a 3-year “breather” it needs to negotiate a truly sustainable economic recovery.

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  4. A quite interesting non economic article about the current geopolitical situation:

    What is Merkels role here? Just the muppet of the Americans?

    There was lately a very interesting article in the German Handelsblatt where the author questioned the deeper interests of the Troika (or more precisly the IMF) in the “rescue” programes of Greece and expecially that of Cyprus!!!

    Often our German friends are not clever enough to understand that there are also mightier “dark” forces involved which have their own agendas!


    του Δημήτρη Κωνσταντακόπουλου

    Το ΝΑΤΟ ολοκληρώνει την τεχνική προετοιμασία στρατιωτικής επέμβασης στη Συρία, ενώ, αν πιστέψουμε την ισραηλινή ιστοσελίδα Debka, που φημολογείται ότι συνδέεται με μυστικές υπηρεσίες, ο Πούτιν προειδοποίησε με έντονο τρόπο ΗΠΑ και Ισραήλ εναντίον τέτοιας προοπτικής, διατάσσοντας επιτάχυνση παραδόσεων ρωσικών όπλων στη Δαμασκό. Οι Αμερικανοί πιέζουν ταυτόχρονα τον Ερντογάν να δεχθεί στάθμευση ισραηλινών αεροσκαφών στη χώρα του. Η συριακή πολιτική της Τουρκίας δημιουργεί όμως έντονα πολιτικά προβλήματα στους ισλαμιστές, ιδίως μετά την ισραηλινή αεροπορική επιδρομή στη Δαμασκό. Θυμίζουμε ότι κλιμάκωση της συριακής σύρραξης ενέχει τον κίνδυνο καταστροφής του συριακού χριστιανισμού. Η κοινότητα των Σύρων χριστιανών, όπως και η αποδεκατισθείσα/μεταναστεύσασα κοινότητα των χριστιανών του Ιράκ, ήταν οι δύο αρχαιότερες στην περιοχή της Μέσης Ανατολής και η παρουσία τους παράγων «ειρήνης των πολιτισμών». Απορεί κανείς και με την ελληνική στάση, ιδίως στο θέμα της απαγωγής. Ελληνικές οργανώσεις που δραστηριοποιούνται στη Συρία και κουρδικές πηγές διερωτώνται γιατί το ΥΠΕΞ δεν συνεργάζεται μαζί τους.

    Η προετοιμασία της επέμβασης περιλαμβάνει την Ελλάδα, από την οποία ζητείται η συνδρομή σε υποδοχή πολύ μεγάλου αριθμού προσφύγων, η χρησιμοποίηση Ελλήνων πιλότων της Πολεμικής Αεροπορίας, χωρίς ελληνικά σήματα, στους βομβαρδισμούς, και η αναβάθμιση της Σούδας μεταξύ άλλων. Σύμφωνα με πληροφορίες, έχουν βγει επίσης στην «πιάτσα» προς άγραν συνταξιούχων πιλότων, που εξαθλιώνονται εξαιτίας των συντάξεων πείνας. Οι ‘Ελληνες πιλότοι θεωρούνται οι καλύτεροι στο ΝΑΤΟ. Πληροφορίες αξιόπιστων πηγών, που χρήζουν όμως περαιτέρω επιβεβαίωσης, κάνουν λόγο εξάλλου για συμφωνία χρήσης από το Ισραήλ των αεροδρομίων Πάφου και δυτικής Ελλάδας για σκοπούς διασποράς, σε περίπτωση πολύ μεγάλου πολέμου κατά του Ιράν, με ότι αυτό συνεπάγεται για Ελλάδα-Κύπρο.

    Τα συμβαίνοντα στη Συρία, μετά τη Λιβύη και την Αφρική, επιβεβαιώνουν ότι αυτό που παρακολουθούμε δεν είναι τόσο παροξυσμός εσωτερικών προβλημάτων χωρών και καθεστώτων, που ασφαλώς υπάρχουν, αλλά η χρήση τους στα πλαίσια της μεγαλύτερης νεοαποικιακής επιχείρησης της νεώτερης εποχής, της δημιουργίας και του ελέγχου(μέσω αιματηρού χάους) της «ευρείας Μέσης Ανατολής», εγχείρημα που άρχισε με τους πολέμους σε Αφγανιστάν-Ιράκ.

    Η κατάσταση είναι δυνητικά τόσο εκρηκτική, που ο Μπρεζίνσκι, εκφραστής των «περιστεριών» στη Μέση Ανατολή, εχθρικός προς την επιρροή Νετανιάχου στην αμερικανική πολιτική, ζήτησε δημόσια αυτοσυγκράτηση από τον Ομπάμα, «χαμογελαστό Πρόεδρο που βομβαρδίζει». Τόνισε επίσης την ανάγκη αποφυγής κλιμάκωσης «κυβερνοπολέμων», όπως αυτός που διεξήχθη με αποστολή ιών στις πυρηνικές εγκαταστάσεις του Ιράν.

    Οι εξελίξεις θέτουν εκ νέου επί τάπητος το ερώτημα κατά πόσον, πίσω από τους «οικονομικούς πολέμους» κατά Ελλάδας και Κύπρου υπάρχει (και ποια) κρυμμένη«γεωπολιτική ατζέντα», που μπορεί να σχετίζεται τόσο με το εγχείρημα στη Μέση Ανατολή, όσο και με πιθανή επιδίωξη δημιουργίας μηχανισμών διάλυσης της ΕΕ (σε αντιδραστική κατεύθυνση) ή πάντως ελέγχου τυχόν τέτοιας διάλυσης. Και ατζέντα άλλωστε να μην υπάρχει, υπάρχουν γεωπολιτικές συνέπειες και πολύ μεγάλες. Δεν μπορούμε να καταλάβουμε πολλά πράγματα για τη Συρία, περιοριζόμενοι στις σχέσεις των κοινοτήτων της, για την Κύπρο επικεντρωνόμενοι αποκλειστικά στις σχέσεις Ελληνοκυπρίων/Τουρκοκυπρίων ή την Ελλάδα, ξεχνώντας την ιστορία και γεωγραφία της.

    Η ιστορική εμπειρία είναι εξόχως διαφωτιστική επ’ αυτού. Από την εποχή των Σταυροφόρων, ο έλεγχος του ελληνικού χώρου θεωρήθηκε απαραίτητη προϋπόθεση υποψήφιων κατακτητών είτε της ισλαμικής, είτε της ρωσικής Ανατολής. Ο Χίτλερ έχασε πολύτιμο χρόνο και δυνάμεις στον σκοπό αυτό, προτού στραφεί κατά της Ρωσίας (1941). Ο Τσώρτσιλ το1944 τάδωσε όλα στον Στάλιν για να πάρει τον έλεγχο της Ελλάδας, προτού η Δύση εξαπολύσει τον Ψυχρό Πόλεμο. Ολόκληρη η μεταπολεμική πολιτική μας ιστορία,ιδίως το ελληνικό (1967) και το κυπριακό πραξικόπημα (1974), ερμηνεύονται επαρκώς από την προσπάθεια ελέγχου της Κύπρου.

    Όχι μόνο η ρωσική παρουσία είναι παγίως και εντελώς ανεπιθύμητη από τους Δυτικούς σε Ελλάδα-Κύπρο, αλλά και οι Ευρωπαίοι γίνονται δεκτοί μόνο ως οικονομική, όχι ως στρατηγική παρουσία από τις ΗΠΑ, που μας θεωρούν αποκλειστικό στρατηγικό τους χώρο. Βασικός λόγος εχθρότητας προς τον πρεσβύτερο Καραμανλή ήταν τα ανοίγματα στον Ντε Γκωλ (1962). Τα ‘Ιμια (1996) πιθανώς σχεδιάστηκαν όχι μόνο για να συρθεί η Αθήνα σε διαπραγμάτευση για Αιγαίο-Κύπρο, αλλά και να δοθεί κατάλληλο μήνυμα προς Σημίτη-Γερμανία, για το ποιος κάνει εν τέλει κουμάντο εδώ – κάτι που σχεδόν διατύπωσε ανοιχτά στις Βρυξέλλες τότε ο Χόλμπρουκ.

    Με δεδομένο το βάθος της ελληνικής κρίσης, χωρίς προηγούμενο για ειρηνική περίοδο στη δυτική οικονομική ιστορία, και το ακόμα μεγαλύτερο της επερχόμενης κυπριακής, χωρίς σύγκριση με οτιδήποτε συμβαίνει οπουδήποτε αλλού, εγείρεται το ερώτημα κατά πόσον υπάρχουν στρατηγικές που επιδιώκουν να πλήξουν, μέσω Ελλάδας-Κύπρου, το όλο εγχείρημα της ευρωπαϊκής ενοποίησης. Ο συγκεκριμένος τύπος ενοποίησης είναι απαράδεκτος και αντιδραστικός, το πραγματικό πολιτικό ζήτημα είναι όμως που και πως θα πάμε φεύγοντας από εδώ, πως θα πάμε σε καλύτερη, όχι σε χειρότερη κατάσταση.

    Δεν είναι δυνατόν επομένως το ζήτημα του νομίσματος να εξετάζεται μόνο ως τεχνικό θέμα συναλλαγματικής ισοτιμίας, χωρίς επίγνωση του μεγέθους των στρατηγικών συνεπειών, ούτε η παγκόσμια κρίση και η παγκοσμιοποίηση να ανάγονται/περιορίζονται σε ζήτημα αρχιτεκτονικής του ευρώ. Κάνοντάς το, κινδυνεύουμε να λειτουργήσουμε ως «χρήσιμοι ηλίθιοι». Θα επιστρέψουμε όμως στο θέμα λόγω της τεράστιας σημασίας του.

  5. Hi. This is a purely technical (and potentially stupid) question but where do you get the “55.6% interest rate figure”? You write that “the Greek government bonds that matured last week, owned by the ECB, had a face value of €5.6 billion but cost the ECB only €3.6 billion. Which means that, last week, the Greek government handed over to the ECB €2 billion plus 55.6% interest for two years in addition to the monies that the ECB spent in order to purchase these bonds”. €3.6 billion (the amount paid by the ECB) plus €2 billion (the difference paid by the Greek govt) equals €5.6 billion (the final amount handed over to the ECB); so where’s the *additional* 55.6 interest rate? Thanks.

    • The ECB, two years ago, paid 3.6 billion for a few pieces of paper. Last week, the Greek govenrment transferred 5.6 billion into the ECB’s account for this same paper. Thus, an ‘investment’ of 3.6 yielded a ‘profit’ of 2. That is, a 55.56% ‘profit’. Since no production ever took place, to justify this surplus, we are not really talking about profit but, rather, of a sort of ‘rent’ or ‘interest’. By virtue of the fact that the ECB is some sort of bank, it is most appropriate to think of its ‘profit’ as interest received on a financial transaction. Ergo, the ECB received interest from the purchase of Greek debt to the tune of 55.56% over two years. QED.

    • “Ergo, the ECB received interest from the purchase of Greek debt to the tune of 55.56% over two years”

      Yes. But this is not at all identical to what you wrote 1st

      “the Greek government handed over to the ECB €2 billion plus 55.6% interest for two years[…]”

      The 2billion ARE the 55.6%. Not ‘in addition’.

    • Ok, so there was a mistake there (as noted by Very Serious Sam). Thanks for the clarification!

  6. “ECB defenders may say that these ‘profits’ will eventually be returned to Greece, assuming that the Central Banks of the surplus states agree”

    I’m sorry but I don’t see how is that a valid defense for ECB’s actions. The return of these ‘profits’ to Greece seem to be at the discretion of some NCBs and not an automatic procedure. Thus the ECB knows in advance that demanding a repayment at face value for bonds it purchased on secondary markets is not necessarily a ‘neutral’ action but has all the possibilities to constitute a negative action (i.e. burdening a member country’s budget).

    Yanis, can you please elaborate some more on the mechanism behind distributing these ECB ‘profits’? Specifically, how is decided which NCB get’s what and when? And are there any legal obligations on what the NCBs can/must do with their share on those ‘profits’?

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  8. Why did the ClubMed enter the Euro? The indenpendent central bank with price stability as a primary mandate was clear befre they entered.

    I suggest that all who do not like the current rules, pay back what they owe, create a new currency union with whatever rules they like and stop complaining about the others.

    • Does this include Germany? Will it pay back the oodles of savings it made during the last few years from yields that were ridiculously low courtesy of the Periphery’s capital flight into its bankrupt banks? Will Germany return Siemens’ profits from the lucrative contracts that it procured by actively bribing Greek officials? It is clear to me Sir that during the past few years of following this blog, you have made no effort whatsoever to engage in reasoned debate. Since this blog has failed to contribute anything to your primitive thinking, and you simply use it in order to parade your stereotypical nonsense, I am now going to release you from it. As of now, your comments are blocked. Good luck spreading your inanities elsewhere.

    • There is no way to fix the current system, be it Euro or Drachme or Franc.

      The only remaining solution is to permit market forces and competition to influence currency decision making. The euro needs an exit strategy and exclusive rights. At the same time the legal barriers to the printing of money in response to market economy pressures must be removed. Tinkering around the edges will no longer suffice. We need an improved currency.

  9. One should not forget that the from the beginning obviously idiotic SMP was forcibly pushed trough by the French soldier Trichet as orderred by Sarkozy, and supported by the representatives of the GIPSIFs.

    And one should not forrget that it was strictly opposed by the then head of the Bundesbank, Axel Weber, and the then ECB Chief Economist Jürgen Stark.

    Both resigned from their positions due to the irresponsible acting of the ECB (and the lack of support they got from the German government).

  10. o.k. Yani; let me give you my 2 cents.

    It’s very important for Greece that we get the big picture right. So, here is what I think is going on.

    Greece has a lot of sovereign debt (approaching 350 Bil. euros) but at an artificially low rate of about 1.8%(not all debt at the low rate but a good part of it).

    So when you say, why did Greece borrow another 5.5 Bil. at 1.8% vs. leaving it in private hands to be subjected to a PSI haircut that would have reduced the same debt to 1 Bil. euros? The answer is for 2 reasons. First, Greece will get the same effect through an OSI but the haircut would be much larger in nominal terms, say a 50 Bil. euro haircut all at once but sometime later (say sometime towards the end of 2013 or middle 2014). The second reason is that if you had left the bonds in private hands the bank recapitalization would have been bigger in scope and thus would have defeated the purpose. Therefore it does not matter that Greece is increasing its total debt for the moment knowing that some drastic OSI in the future (or increments of it) would have the same effect of bringing the total debt down. It’s all political and has to do with Merkel. When she is ready post German election we will have the OSI. The reason we can’t subject the debt to a haircut now is because she won’t have it.

    The artificially low rate of 1.8% that Greece is paying today is a much bigger problem for your proposal to negotiate tough with Troika as we are reaching first stages of primary surplus.

    What I think Stournaras is trying to do is to convert as much of the outstanding Greek debt into the 1.8% debt cost category. So, there is a conversion process going on as old debt matures and gets rolled over into new debt at 1.8%. Once Greece (hopefully with a good Greek summer tourist season) shows signs of primary surplus and no latter than October of this year Stournaras will kickstart the engines of debt reduction through OSI. (it’s part of the agreement Greece signed last November with the 2nd PSI to the Greek banks).

    And the reason I say that the artificial 1.8% cost of debt is a hard nut to crack is that once withdrawn Greece will have new budgetary deficits to cover which force the vicious cycle of new austerity measures, weaker economy and new austerity upon old austerity ( a total madness).

    In this conversation we must realize the following: The 250 Bil. euro debt coversion for Greece is almost over. (I call the EU aid of 250 Bil. to be a debt conversion package). Therefore Troika would leave the scene regardless. If at that point Greece needs to cover new deficts then Greece would have to return to markets at say roughly 5% cost of new debt.(if everything goes smoothly)

    Therefore, this “optimism show” by the government et al is EU lender driven because they don’t want to advance further aid to Greece. The real question for Greece is why is she supposed to be looking forward to market access debt at 5% when currently her debt is at 1.8% and standing a good chance of debt principal reduction through an OSI. The answer of course is that she does not have a choice. Wolfie Amadeus Schauble would tell you just that i.e. get on with the program.

    • Dean, I did not ask: “…why did Greece borrow another 5.5 Bil. at 1.8% vs. leaving it in private hands to be subjected to a PSI haircut that would have reduced the same debt to 1 Bil. euros?” All I pointed out is that these 5.6 billions would have been haircut to less than 1 billion had the ECB kept itself to itself. In its bid to ‘help’ the Periphery, by the SMP program, it added to Greece’s burden substantially by ringfencing almost 50 billions from the two haircuts we already had. The only people to have benefitted from that where the private investors and banks that sold these 50 billions to the ECB. My conclusion is that the ECB, even when it tried to help (through the SMP), functioned like a giant squid on the face of our social economies. What happens in the future (OSI and the like) is neither here nor there. If the SMP purchases had not taken place, the OSI necessary would have been far, far, far less.

    • Yani:

      True. But what you call a “ring fenced 50 Bil. euros” you are gonna get it later as a haircut through the OSI. It’s all 100% political. First they pile up Greece’s debt as high as possible at a serviceable 1.8% and then they would declare that a 190% debt to GDP ratio is not sustainable and will give you a the 50 Bil. euro (for now ring fenced) haircut anyway. It’s a matter of appearances really designed to protect the officialdom from losing face.

      Sooner or later we are going to get a Greek sovereign debt reduction. It’s like running up a debt on a credit card knowing that you are filing for bankruptcy protection.

      I am not saying it is moral, but that it is the way they chose to do it. In their mind it’s the same thing because it leads to the same end result. They don’t want to argue the details for now that doing it their way it hurts people more. They don’t care about that part; they think it’s Samaras’ job to sell the program using the logic of benefit to the official state (not the ordinary people).

    • Maybe. But what matters is that last week Greek taxpayers borrowed massively and Greek cancer patients went without medicines so that the Central Bank could be paid. Of course they will haircut Greece’s debt again in the future. But the firms which are not receiving their VAT rebates this week and the patients who are dying do not give a damn about that.

    • As far as the timing issue is concerned (i.e. OSI a lot less without the ring fencing), my view is that time was more valuable to Germany than the amounts involved.(in other words delay was far more valuable than final cost).

      Obviously the SMP was part of the learning curve. They thought that 200 Bil. would be enough; it wasn’t and at the time internal debates prevented a larger amount or better execution. Even if they thought that 200 Bil. was inadequate, what really counts is that this is as far they were willing to go at the time.

      What we have here is a strong element of “learning on the job”. I don’t think Germany and others at the time had a clue what they were doing. They were simply doing the minimum hoping that more time would be a more potent factor of curing the problem.

      And on that I think the Germans were proven right re: their own exposure. And as far as Greece, no one really cares about us. If we can’t protect our own interest why would someone do it for us? They (EU#)did what they thought was adequate. They never said that they would do the maximum or the most beneficial for Greece. In fact the exact opposite is true. They did what was best for them and what was worst for us.

      So, it is hard to take a revisionist approach on this. They did what they did and they didn’t care about the effect on us; they only cared about problem containment. And the more they were able to contain the problem with half measures the more emboldened they became about the righteousness of their approach.

    • “Obviously the SMP was part of the learning curve. They thought that 200 Bil. would be enough…” You are being too kind to them. Far too kind. A high school kid can understand that you never announce the volume of your ammunition before entering a battle. For the enemy will bring along more. Especially this particular kind of enemy.

    • O.k. You are making good points. I can’t disagree.

      But I think we are having a problem defining a constant enemy. You can attribute parts of the problem to various entities but who is to blame for most of it?

      If we can’t call a spade, a spade how could we ever resolve this issue?

      In order to get the next tranche of 9.2 Bil. Greece will have to go through further misery. But who is the true enemy? ourselves? Troika? Germany? who? (please don’t tell me the banksters because I am looking for somebody other than the catch-all category killer)

    • The enemy is impersonal. It takes the form of the conventional mindset which refuses to grasp the political nature of this crisis and insists on serving narrowly local interests (i.e. the class of people and institutions to whom each politician feels he or she owes his or her position) in a manner that jeopardises shared prosperity.

    • You just managed to wrap my mind around a Gordian knot. By such broad and amorphous definition, no politician would ever be able to fulfill the criteria for the job. If we assume that in general the political right (conservatism) serves institutions and the political left (liberalism)classes of people, then both would be unfit to rule given the constraint. And the absence of self-interest in politicians as a pre-requisite introduces de facto the concept of the philosopher king back into the conversation. But from what I understand, the Left rejects Plato’s Republic as a fascist document. How else could we get politicians who are the most intelligent and best trained for the job(i.e. neither beholden to special interests nor to particular classes of citizens)?

    • Yes, Yani, the enemy is indeed impersonal. But it does have a name. And the scenario you outlined earlier, whereby human beings go without medical treatment to facilitate the appearance of numbers on a screen in London or Frankfurt, may compel a new generation to question the nature of the ubiquitous system that cocoons and suffocates us – with all its promises of ‘shared prosperity’.

      The debate is now political, philosophical. It is no longer all about ‘the economy, stupid’.

      Zizek, Badiou, Negri, Eagleton etc. etc, are battling it out, and have not abandoned the hypothesis, despite all its failures. Because it simply remains the correct hypothesis.

      And after all, what is failure if not “nothing more than the history of the proof of the hypothesis, provided that the hypothesis is not abandoned.” (Badiou, 2010)

      Its been invigorating to read your thoughts of late.

    • O.k. George.

      Let’s assume that you are correct. That the real enemy is our biases and the wrong framing of issues be them political or philosophical.

      But is virtue enough to settle this issue?

      Wasn’t Socrates a virtuous man and he was executed because of his virtue? Wasn’t Christ a virtuous healer and teacher and died on the cross for opposing the arrogance of Rome?

      Is this debate really of who will be right in retrospect? or is this more of what one can do to better people’s lives today?

      Say after 100 years from today you win the philosophical argument that yours was the correct point of view and that your political and philosophical framing was on target.

      Is this what the whole debate is all about? of whose was the better team? Isn’t this a fan’s argument?

      And how about the argument that virtue alone is not enough for the survival of the state? Where do we place competence and political intelligence in this debate?

      Show me the practical and beneficial application of your theory and many would convert to your point of view.

      The most common mistake I see in debates of this sort is the assumption that disproving your opponent’s position elevates yours to the winning spot. What if both positions are wrong?

      Humans are fallible, therefore their ideologies are fallible too. Are we talking here about degree of fallibility? That your theory is better than mine because it is less harmful? or are we talking about achieving excellence?

  11. I am not sure if my understanding is correct, so feel free to step in and correct me if wrong.

    Any profits the ECB makes on Greek bonds are distributed to the member states which in turn are supposed to return such profits to Greece subject to a certain procedure of foreign parliaments voting. Therefore I am not sure the ECB is profiting here.

    When you have maturing debt at say 4.5% and you replace it with new ECB debt costing Greece 1.8% (this is what Greece pays for such funds today) then Greece lowers its debt service in the process(but not the total amount of debt).

    Therefore Greece continues to lower its debt service but the amount of debt is now approaching 350 Bil. euros which sets up the case for the OSI. But that’s a different story.

    The issue Stournaras is focusing on is the 10-YR Greek Bond rate which is currently circa 8.17% with a historic high of 35% or so. Once such yield drops below 4.5% (pre-crisis level) then Greece could return to market funding. The real question is what is the incentive Greece has to replace current debt service of 1.8% with new market debt at 4.5%.

    Hint: Click on the 5-Yr tab to see how the rates have progressed since Greece entered crisis mode.

    • Hello Dean,

      you write “once such yield drops below 4.5% (pre-crisis level) then Greece could return to market funding”.

      Yes she could. Please don’t forget she was there already for quite some time, between 2001 and 2009. The cheap money was used to heap up a huge load of debt, as you know.

      What makes you believe that next time Greek officials can put their hands on cheap money they use it more responsibly?

  12. It is usury, definitely. The art of the times in all its glamor. It is a corrupt system the European peoples representatives do not care for the improvement of the welfare of Europeans they represent.

    Without regaining Greek Independence nothing will change in Greece. The road to misery is getting longer. It is not an issue of Economic Policy. Excellent ideas and ways of getting out of the crisis exist. It is an issue of National sovereignty for the Greeks and the rest of the Europeans. The British got it and gave the message voting UKIP (27%) in the last local elections.

    The Greeks need first to get rid of the “Κοπρος του Αυγειου” (One of the labors of Hercules) to use the parallel from the Greek Mythology which Yannis particularly likes.

    Stathis Papanicolaou,
    Seattle, WA

  13. Giannis, you have not taken the leed in Greece, in the proposal of a new debt-free monetary system. Why aren’t you taking the leed for a movement as the british ” Positive Money UK”-movement.
    You know that debt free money is the righteous path, that will bleed the ruling centralbankers like Rotshield, Rockefeller etc. to death, which will make the peoples of the world to prosper.
    You are in a key position, being a professor in Economy in Greece.
    Either you don’t understand your influence and possible impact, or you don’t understand debt free money, or you are corrupt. Obama, a puppet of Goldman-Sachs told the greek people not to leave the Euro, and the people got duped by the Nobel-prize war-monger.
    If you don’t take the lead, you are indeed a prodotis of your people. Maybe the greek people is not your people? Maybe you belong to “the tribe”….

    • If by “maybe you belong to the tribe” is an insinuation that I am trapped in, or part of, a Jewish conspiracy, my only answer to you Madam is YES I AM A JEW!!! Something that I would like to think I would prove courageous enough to shout from the rooftops during the Nazi occupation of Europe when the Jews had to wear the Star of David. Not because I am a Jew but because when the Jews are prosecuted it is our moral imperative to be Jewish. So, good riddance to you and your Nazi friends Madam. Zero tolerance to serpents like you is the only reasonable policy for sensible humanists.

    • If by “maybe you belong to the tribe” is an insinuation that I am trapped in, or part of, a Jewish conspiracy…

      The “Tribe” is also a common nickname for the Cleveland Indians baseball team. (Sorry … not trying to make light of the matter … just that I am a big baseball fan :-))

      But seriously …

      …my only answer to you Madam is YES I AM A JEW!!! Something that I would like to think I would prove courageous enough to shout from the rooftops during the Nazi occupation of Europe when the Jews had to wear the Star of David.

      Yes, I sincerely believe that you would. You are a good man. Of course, I don’t know you personally, but I have been reading your blog for about two years so I have a pretty good idea of the kind of man you are.

      Would a guy like Tony Blair? That opportunist?! Most likely not.

      George Soros? Definitely not! If anything, he’d lead the way for the Nazis … and then chalk it up as a learning experience! (If anyone cares, google “Soros, Steve Kroft, 60 Minutes interview “‘)

      Now if I may …

      Antisemitism is racism. Always!

      Zionism is racism. Always!

    • Agree!
      I’m always amazed that the King of Denmark isn’t better known or honoured. He immediately sewed a yellow star on all his clothes.

  14. So, Yanis, do we read here speculators did cash in some billions as anticipated. In your answer to Dimitros I conclude this to be true.

    Do you have something to back all this?

    Perhaps you have some links to those unnamed hacks, the ones “aiding and abetting” the PM?

    • My point is twofold: First, that the ECB’s intervention under the SMP cost Greece dearly and confirms that the Eurozone member states have a central bank that is detrimental to their well being, rather than one that offers a helping hand during tough times (as the Fed or the BoE do). Secondly, that because of QE exercised by the Fed and BoE, for the purposes of lending a helping hand to their respective governments, hedge funds and other speculators are going all out in a fools’ gold fever investing in junk bonds worldwide – including in Greece. To keep that bubble going, various media outlets, heavily influenced by financial institutions with a vested interest in keeping the bubble going, are aiding and abetting the moronic claims of our PM regarding a ‘Greek Success Story’. This is all self evident to anyone with a genuine interest to read, listen and interpret the multitude of signals from the world over.

  15. Who coined “Greece’s Success Story” anyway? As for your description of the situation, it only adds to our frustration as Grreks.

    • I believe it was our Prime Minister, aided and abetted by various hedge fund-friendly hacks in London and New York.

  16. Hard to argue with the logic of this article. I think far too little attention has been paid to the foreign sources & uses of funds for the Greeks state. I am afraid this story would not be the only rather bizarre story in this theater!

  17. Very interesting all these, but I think the problem is on how many greeks and europeans know and BELIEVE these!!!

    • “ECB defenders may say that these ‘profits’ will eventually be returned to Greece (…). Perhaps they will”.

      As costly new loans and with draconian neocolonialist measures associated only. In the EU of the banksters nothing is gratis.

      The question is where do the profits made by the ECB with this usurary practices go to? And the answer is obvious: to the private banksters who are the only ones being lent (at nearly 0% interest!!!) to by this public bank that, in theory, belong to us all, European citizens.

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