Varoufakis: pourquoi l’Allemagne refuse d’alléger la dette de la Grèce

 

12 juillet 2015

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Behind Germany’s refusal to grant Greece debt relief – Op-Ed in The Guardian

Tomorrow’s EU Summit will seal Greece’s fate in the Eurozone. As these lines are being written, Euclid Tsakalotos, my great friend, comrade and successor as Greece’s Finance Ministry is heading for a Eurogroup meeting that will determine whether a last ditch agreement between Greece and our creditors is reached and whether this agreement contains the degree of debt relief that could render the Greek economy viable within the Euro Area. Euclid is taking with him a moderate, well-thought out debt restructuring plan that is undoubtedly in the interests both of Greece and its creditors. (Details of it I intend to publish here on Monday, once the dust has settled.) If these modest debt restructuring proposals are turned down, as the German finance minister has foreshadowed, Sunday’s EU Summit will be deciding between kicking Greece out of the Eurozone now or keeping it in for a little while longer, in a state of deepening destitution, until it leaves some time in the future. The question is: Why is the German finance Minister, Dr Wolfgang Schäuble, resisting a sensible, mild, mutually beneficial debt restructure? The following op-ed just published in today’s The Guardian offers my answer. [Please note that the Guardian’s title was not of my choosing. Mine read, as above: Behind Germany’s refusal to grant Greece debt relief ). Click here for the op-ed or…

Greece’s financial drama has dominated the headlines for five years for one reason: the stubborn refusal of our creditors to offer essential debt relief. Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure? The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics.

In 2010, the Greek state became insolvent. Two options consistent with continuing membership of the eurozone presented themselves: the sensible one, that any decent banker would recommend – restructuring the debt and reforming the economy; and the toxic option – extending new loans to a bankrupt entity while pretending that it remains solvent.

Official Europe chose the second option, putting the bailing out of French and German banks exposed to Greek public debt above Greece’s socioeconomic viability. A debt restructure would have implied losses for the bankers on their Greek debt holdings.Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.

To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well.

Once the sordid operation was complete, Europe had automatically acquired another reason for refusing to discuss debt restructuring: it would now hit the pockets of European citizens! And so increasing doses of austerity were administered while the debt grew larger, forcing creditors to extend more loans in exchange for even more austerity.

Our government was elected on a mandate to end this doom loop; to demand debt restructuring and an end to crippling austerity. Negotiations have reached their much publicised impasse for a simple reason: our creditors continue to rule out any tangible debt restructuring while insisting that our unpayable debt be repaid “parametrically” by the weakest of Greeks, their children and their grandchildren.

In my first week as minister for finance I was visited by Jeroen Dijsselbloem, president of the Eurogroup (the eurozone finance ministers), who put a stark choice to me: accept the bailout’s “logic” and drop any demands for debt restructuring or your loan agreement will “crash” – the unsaid repercussion being that Greece’s banks would be boarded up.

Five months of negotiations ensued under conditions of monetary asphyxiation and an induced bank-run supervised and administered by the European Central Bank. The writing was on the wall: unless we capitulated, we would soon be facing capital controls, quasi-functioning cash machines, a prolonged bank holiday and, ultimately, Grexit.

The threat of Grexit has had a brief rollercoaster of a history. In 2010 it put the fear of God in financiers’ hearts and minds as their banks were replete with Greek debt. Even in 2012, when Germany’s finance minister, Wolfgang Schäuble, decided that Grexit’s costs were a worthwhile “investment” as a way of disciplining France et al, the prospect continued to scare the living daylights out of almost everyone else

By the time Syriza won power last January, and as if to confirm our claim that the “bailouts” had nothing to do with rescuing Greece (and everything to do with ringfencing northern Europe), a large majority within the Eurogroup – under the tutelage of Schäuble – had adopted Grexit either as their preferred outcome or weapon of choice against our government.

Greeks, rightly, shiver at the thought of amputation from monetary union. Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.

To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilisation of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available.

With Grexit reinforcing the ECB-induced bank run, our attempts to put debt restructuring back on the negotiating table fell on deaf ears. Time and again we were told that this was a matter for an unspecified future that would follow the “programme’s successful completion” – a stupendous Catch-22 since the “programme” could never succeed without a debt restructure.

This weekend brings the climax of the talks as Euclid Tsakalotos, my successor, strives, again, to put the horse before the cart – to convince a hostile Eurogroup that debt restructuring is a prerequisite of success for reforming Greece, not an ex-post reward for it. Why is this so hard to get across? I see three reasons.

One is that institutional inertia is hard to beat. A second, that unsustainable debt gives creditors immense power over debtors – and power, as we know, corrupts even the finest. But it is the third which seems to me more pertinent and, indeed, more interesting.

The euro is a hybrid of a fixed exchange-rate regime, like the 1980s ERM, or the 1930s gold standard, and a state currency. The former relies on the fear of expulsion to hold together, while state money involves mechanisms for recycling surpluses between member states (for instance, a federal budget, common bonds). The eurozone falls between these stools – it is more than an exchange-rate regime and less than a state.

And there’s the rub. After the crisis of 2008/9, Europe didn’t know how to respond. Should it prepare the ground for at least one expulsion (that is, Grexit) to strengthen discipline? Or move to a federation? So far it has done neither, its existentialist angst forever rising. Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.

What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.

Greece Might Have To Sell Ancient Ruins, Islands Under Bailout Deal

 

Region:

 

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dette-Grèce

It’s a horrifying prospect:  Greece may have to sell it’s ancient ruins and sights in Athens and elsewhere, as well as nature preserves, and islands as part of it’s deal under the new bailout agreement.  People are very rattled at the part of the seven-page agreement where the Greek government has agreed to sell off 50 Billion Euro’s worth of “valuable Greek assets”.

According to Time.com [1]:

“It’s an affront,” says Georgios Daremas, a strategist and adviser to the Greek Ministry of Labor, Social Security and Social Solidarity. “It’s basically saying sell the memory of your ancestors, sell your history just so we can get something commercial for it,” he tells TIME on Monday. “This is an idea to humiliate Greeks.”

The idea of locking up Greek assets in a special fund emerged on Saturday from Germany, the biggest and one of the least forgiving of the creditor-nations involved in the talks. In order to guarantee repayment on loans to Greece, the German Finance Ministry even suggested moving the titles to Greek assets to an “external fund” [2] in Luxembourg so that Athens could not renege on their sale. On this point, Greek Prime Minister Alexis Tsipras managed to fight off the Germans on Sunday, though it was one of the very few concessions he managed to get during the marathon talks.

Greece

“The deal is difficult, but we averted the pursuit to move state assets abroad,” [3] Tsipras said in trying to put a positive spin on the bailout, which would see Greece take more than 80 billion euros in additional loans in order to stave off bankruptcy over the next three years.

Greek payments on its two previous bailouts were also meant come in part from the sale of state assets. Under the terms of its first bailout in 2010, Greece agreed to privatize around 50 billion euros in property and infrastructure as a way of raising money for its creditors. But only 3.2 billion euros have come from these sales to date. So Germany and other creditors have good reason to doubt the Greek commitment to privatization.

Going forward, Greece will have to stash its assets in a specially created fund and prepare them for sale “under the supervision of the relevant European Institutions,” according to the text of the bailout agreement published on Monday [4]. Asked what kinds of assets the fund would include, Dutch Finance Minister Jeroen Dijsselbloem, one of the key European negotiators in the bailout talks, said “experts” would be brought in to settle this question. “I won’t give you any examples, because it’s not my specialty,” he told reporters in Brussels on Monday [5].

Most of the examples would have to come from the government’s land and real estate holdings, says Daremas, the government official in Athens. “That may include buildings, possible areas of land, and even islands,” he says. To protect the natural, historical and archaeological value of such real estate, Greece would need to pass laws and empower oversight bodies to make sure that “the new owner does not abuse or damage the property,” says Daremas.

Since Greek islands and plots of land often house ruins from ancient civilizations, some of these may also have to be sold, he added. “Maybe some archeological sites that are not developed,” Daremas says. “But if you have this as a private investment you also have to assume responsibility for developing the site, of course being monitored by [Greek] authorities.”

There are, of course, limits to the privatization of ancient artifacts. The treasures of Greek antiquity, such as the Acropolis in Athens, would never be sold, Daremas says. “That’s impossible. Their value is immeasurable.”

The idea of selling the Acropolis came up early in Greece’s debt crisis. In 2010, two conservative German lawmakers caused a furor [6] in Greece by suggesting that ancient ruins should not be off limits to privatization. “Those in insolvency have to sell everything they have to pay their creditors,” Josef Schlarmann, a member of Chancellor Angela Merkel’s political party, said at the time. Since publishing those remarks, the Bildnewspaper, Germany’s most popular tabloid, has continued to irritate Greeks by asking why the Acropolis cannot be sold to repay debts to Germany [7].

This is black humor,” says Natalia Kosmidou, a tour guide at the Acropolis in Athens. “The Germans must have had too much beer.” Although the last five years of economic turmoil have forced Greece to rely on private donors and foreign foundations to help pay for the maintenance and restoration of the Acropolis, Kosmidou says, “the Greek state will always own these monuments, even as the poorest pauper, even penniless.

Greece has at least been willing to discuss the sale of its islands, however, as many of them are uninhabited and underdeveloped. Joseph Stiglitz, the Nobel-prize winning economist who has spoken out in favor of debt relief for Greece [8], says the sale of islands could be an important part of the broader privatization campaign. “You could sell them,” he says. “But not a fire sale, because that would be like giving away your patrimony for nothing.”

That would mean waiting until the property market in Greece recovers. “Of course real estate prices are depressed right now,” says Daremas. “It’s very important to have time, and to wait for change in the economic climate to be able to sell them at a fair price.” The Greek promise to sell state assets came with no time limit in the text of the agreement published Monday. But in their hunger for guarantees on this latest package of loans to Greece, creditors in Germany will not be happy to wait much longer.

 

Disclaimer: The contents of this article are the sole responsibility of the author(s).  Unruly Hearts will not be responsible for any inaccurate or incorrect statement in this article.

Greece’s Referendum: The Price of Five Years of Cowardice – BY SPIEGEL

 

 

Much of Europe is outraged by Alexis Tsipras’ decision to hold a referendum on reforms in Greece. But how did the euro zone allow an economically irrelevant country of 11 million to bring the common currency to the brink? Through cowardice.

You had it coming, Europe. And how!

 

The decision over the weekend by the Greek government to hold a referendum on Sunday on the reform measures being demanded by its creditors threatens — within just a few days — to destroy the illusions of five years of policies aimed at saving the euro. The easy way out is to cast blame on Greek Prime Minister Alexis Tsipras and his government.

After months of negotiations and just before the expiration of the deadline in question, the Greek government has now decided that it is unable to take responsibility for a clear “yes” or “no” to the results of negotiations on its own. Why didn’t the Greeks says weeks ago that they wanted to put the negotiations up for a vote? That would have been the democratic way to go about it. In the very best case scenario, Tsipras’ about-face on the referendum is a populist move (assuming the decision was taken with any political calculation). In the worst case scenario, it is a cowardly one (if the head of government got cold feet about making such a difficult decision).

But “constant cowardice” is also the answer to another question — namely how the rest of the euro-zone members, Germany above all, could have allowed a situation to develop in which the erratic leaders of an economically insignificant country with a population of just 11 million people could bring the currency union to the verge of collapse?

Protracting the Problems

For the past five years, politicians within the euro zone, under German Chancellor Angela Merkel’s unofficial leadership, have shirked painful decisions that might have helped to solve the debt crisis in Greece. The consequence has been that the problems have been protracted rather than solved.

This trend began with the first Greek bailout program in 2010. In order to prevent a Greek default, the euro-zone states provided their first credit guarantees to Athens at the time. To do so, they used tricks to circumvent clauses in European law that prohibited precisely this kind of shared liability within the currency union. Even then, the more courageous act would have been to force Greece’s private creditors to absorb their losses. Under that scenario, even if banks had fallen into financial difficulties, one could have still used tax money to either partly nationalize these banks or to refinance them with fresh capital. During the financial crisis, Great Britain showed precisely how that could be done.

The cowardice continued with the 2012 debt haircut for Greece. At the time, euro-zone officials lacked the courage to force Greece’s private creditors to accept the total loss of their capital. They only had to accept losses of half. And it was already clear back then that Greece’s debt load would remain unsustainable despite the 50 percent cuts. But the politicians ignored the uncomfortable figures and instead prescribed unrealistic savings and reform targets for Athens. They also entertained the comfortable illusion that a handful of troika officials could somehow rid Greece of its inefficiencies.

With these harsh policies, the creditor states contributed significantly to the fact that the Greeks voted at the beginning of 2015 for a new left-wing government. The way in which this new government was treated was demonstrative of the third case of cowardice. European politicians have refused to even negotiate a debt hair cut that Athens has continued to insist upon. The reason is clear: They are afraid of their own voters, to whom they would have to admit that the billions that have flowed into Greece have now vanished.

In all likelihood, that is exactly what has happened. Most voters will have suspected as much for some time now.

Christian Rickens is the head of SPIEGEL ONLINE’s business and economics desk.

Conclusion:
A real question for many economists, however, is why Europe is forcing Greece to do any more austerity at all. It’s already done so much that, before this latest showdown, it actually had a budget surplus before interest payments. And, in this view, that’s all it should shoot for, really: the point at which it doesn’t need any more bailouts from Europe. Anything more than that, though, could just inflict unnecessary harm to the economy. When interest rates are zero, like they are now, budget cuts of 3 percent of gross domestic product would, by Paul Krugman’s calculation, make the economy shrink something like 7.5 percent. So even though you have less debt, your debt burden isn’t much better since you have less money to pay it back.