Greek bailout moves forward

The pillaging of Greece moved forward overnight with progress across a range of measures. The EFSM bridging loans are falling into place:

The EU is tomorrow likely to approve the use of the European Financial Stabilisation Mechanism (EFSM) to provide a €7bn bridge loan to Greece to hold it over until its full bailout programme is agreed. Non-Eurozone countries are likely to be insured against any financial risk through the use of ECB profits from holdings of Greek bonds. UK government officials suggested Prime Minister David Cameron was “frustrated” by the move but it is unlikely the UK will be able to block it. Addressing the House of Commons yesterday Cameron supported the IMF’s calls for debt relief for Greece.

The ECB raised its ELA ceiling allowing more funding for Greek banks which are rumoured to be reopening as soon as Monday, from Reuters:

Banks have been closed since June 29 after Athens imposed capital controls. “They will open on Monday,” the banker said.

The ECB on Thursday increased the cap on emergency funding Greek lenders can draw from the domestic central bank by 900 million euros.

A ministerial decision on the bank holiday is expected to be released later on Thursday.

A government-appointed commission responsible for vetting capital outflows since controls were imposed said it had approved applications worth 819.9 million euros until July 13.

Capital controls will remain in place. Meanwhile, Germany is still taunting the Greeks with the truth, from Bloomie:

German Finance Minister Wolfgang Schaeuble told Greece the only way it’ll get a debt reduction is to leave the euro and cast doubt on the country’s ability to even complete negotiations on a third bailout.

Schaeuble, who led the charge for Greece to take time out from the single currency region, said the Greek parliament’s vote to accept the austerity that is a precondition of further aid was a “step further forward.” Yet he reiterated his view that a temporary exit from the 19-nation euro region may be “the better way” since it would allow the debt forgiveness that is necessary yet banned under euro rules.

The Greeks should take his money and then his advice. And here is why in a neat graphic from the FT:


Yes, the entire bailout goes to the creditors.

However, big problems remain. The bailout package is still not funded with the IMF on the sidelines and Finland agreed to negotiations but no debt relief and no further liabilities, backing Germany.

In Greece itself, a Syriza spill is likely soon from the Washington Post:

Tsipras will ultimately have to decide whether to try to muddle along with a fractured government, reach out to his opponents to forge a broader coalition or resign and call new elections.

In the strongest signal yet that that last option is a real prospect, Greece’s interior minister, Nikos Voutsis, predicted in a radio interview that a new vote could be held as early as September — just nine months after Syriza came to power.

Government spokesman Gabriel Sakellaridis played down expectations that new elections could come even sooner. While acknowledging a “notable breach” in party unity, he said Tsipras would not step down before he finalizes the bailout deal with creditors.

“The main priority of the prime minister and the government is to successfully conclude the agreement,” he said.

I still don’t know how this can stand with the Greek people but it would be curmudgeonly of me to not acknowledge that the bailout had a better day.

Houses and Holes
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  1. AEP (waking up) in the Telegraph: When will the Greeks learn to save themselves ? Lessons for others ?

    Greece should seize Germany’s botched offer of a velvet Grexit – Ambrose Evans Pritchard – UK Telegraph

    … extracts …

    Wolfgang Schauble is one of the very few figures who has behaved honourably in this latest chapter … But he is entirely right to argue that a velvet divorce and an orderly exit from the euro for five years would be a “better way” for Greece, as he did on Germany radio this morning. …

    … But this is not recovery. The much-touted “internal devaluations” of these countries are deformed, and mostly a mirage. The underlying misalignment remains, certain to be exposed in the next global downturn.

    Greece will continue to endure its long Calvary until somebody has the courage to tell the Greek people – and to keep telling them until the truth sinks in – that the drachma is their best hope of economic renewal.

    All they are being told now is that any discussion of the drachma amounts to “treason”. If that is the level of intellectual debate, God help Greece.

    Mr Tsipras missed his chance on Sunday. He – or his successor – will surely be given another before long. … read more via hyperlink above …

    • Quit Greece. You are already almost competitive. A couple of hard years followed by a bounce back is better than a long, slow strangulation.

      • The Eurogroup is bluffing. They don’t want the Greeks to quit, just accept the unacceptable. They’re scared the other PIIGS, who actually have strong export sectors would be tempted if in a couple of years Greece comes bouncing back. Go for it Greece, quit!

    • Ronin8317MEMBER

      Before it was removed, Al Jazerra had a picture of Tsipras laughing as the oarliament vote on the rescue package. He is selling his country out and comdemning it to ruin, anx he is LAUGHING. He is just a ‘professional politicuan’ with no conviction or loyalty to his country. Everything Is a game to him.

  2. “The rape pf Greece moved forward overnight”

    What has happened to facts around here?

      • Yes I’ve noticed!
        JMO You’re a bit one way. It’s difficult enough for rationality and common sense to get any hearing without MB careering off in emotive BS
        There’s some great hate Germany thing going on – because they are a hard working relatively disciplined nation.
        The facts of Greece’s indulgence and corruption seem to have gone missing. The facts of the EU groups subsidisation of Greece for decades doesn’t rate. There’s also the small matter that Greece themselves have chosen to be where they are.
        Yes! The EU should have enforced its own rules but that would have just meant Germany would have been labeled a nation of ‘Nazis ‘raping’ Greece economically’ long ago. Greece knew what it was doing and it didn’t care. The long term future didn’t matter.
        Isn’t it a simpole FACT that, in the real world, the only way for Greece to go is to default and take a ‘holiday’ from the single currency. It has to get away from an over-valued currency and make the necessary adjustments towards a stable economic system. It may be like Australia and it is all too late. It will be a disaster for some time – but what other choice is there? The rest of Europe just keep kicking 20 or 30 billion Euros annually in there? Then never mind the PIGS what will be the solution for France in a couple of years?
        Again a narrow myopic view of this thing reigns supreme – as usual for economic discussion these days (this is not a shot at MB It’s my usual shot at the whole economic fraternity).

      • Agree flawse. Greece is fully responsible for its predicament. The flaw was the euro, which is really the Deutschmark writ large. In Greece it was a second world country that was out and out corrupt that wasted the easy money through its corrupt and bloated public sector. In places like Ireland, Spain and the Baltic states, it was largely inappropriately easy money that pumped massive private property/consumption booms (like you say all the time, it was obvious in their CADs but nobody seemed worried!). However Germany now has grown dependent on the competitive advantage of a currency that is cheaper than what the Deutschmark or even a northern European Euro would be. So there’s dishonesty all round. Everyone is covered in shit. Time to cut this Gordian knot.

      • Agree St J, Greece is certainly responsible for it’s predicament but the Germans can’t get on their high horse and point the finger at everyone else because as Flawse says ” they are a hard working relatively disciplined nation” – they’ve benefited from an artificially low currency, they’ve benefited from artificially high demand from southern europe (which they themselves funded There should be consequences for unsustainable borrowing, but also for unsustainable lending. The Germans are trying to get paid for loans that should never have been made, that is their right as creditors but they shouldn’t pretend to have the moral high ground here.

      • “Isn’t it a simpole FACT that, in the real world,..”
        No it isn’t simple. Economics is not physics, testing theories is hard and we can’t point to any one school of economics and prove that it is right.
        A neoclassical theory with its paarticular assumptions will tell a story of a corrupt lazy Greece vs a disciplined and virtuous Germany.
        But different assumptions suggest a Greece plagued by years of corrupt government and oligarchy further destroyed by a poorly thought out technocratic common currency vs a eurogroup who mostly show less interest in actual economics than commentators on this blog but a keen sense of politics. And a Germany whose neoclassical success story comes at the expense of others.
        MacroBusiness is hardly neutral the bloggers have their own economic theories which are different from mine but much more consistent and with better assumptions than the mainstream flog.
        But the point is you CANT separate the economics and the politics until we have a final provable understanding of economics which just isn’t possible now and if its ever possible is a long way off. Even the theoretically safe facts of statistics can be unreliable if the methodology of the collection agency is suspect. Facts relying on economic theory are far less reliable and subjective.

      • Agree Flawse. There is a tendency to ignore the fact that the Greeks have considerably franchise in their own predicament. Whichever way it goes, reforms, painful reforms, are required.

      • “No it isn’t simple. Economics is not physics, testing theories is hard and we can’t point to any one school of economics and prove that it is right.”

        Exactly. What is it Satyajit Das says about economics? Something like: “At best an ideology, and at times a very dangerous one.” I don’t think he’s too far off the mark..

      • I’m going to disagree.
        Not on economic grounds, though they are what this blog is about.
        While Greece cannot lay the blame for its own ongoing problems upon Germany and the other Eurozone forces, it can justly say that the way it has been treated has been completely immoral and unjust.
        The best comparison that I can think of is that of someone with personal problems who is trapped in an abusive relationship.
        No one would deny that the person needed to work out their problems, but that cannot be done while they are trapped and don’t have the freedom to make their own decisions for the future.
        I would not accept the argument, ‘Look at their behaviour, they had it coming.’ in that circumstance, and I don’t accept it in this case either.
        The economics aspect is just the focus of this cultural clash, both internally within Greece, and externally.

      • glissom
        I think I was not talking about economics. I was talking about straight common sense and logic. If you spend more than your income you are going to have debts. Increasing your debt saves you having to cut back your expenditure. However this canot go on to infinity and eventually the consequences of that debt arrive.

      • Flawse, thanks for the reply.
        But even in this simple matter there is a lot of economics getting the situation messy.
        Apart from the revenue shortfall from the tax evasion and general corruption entry to the Eurozone changed their exchange rate and created a massive current account deficit. Normally the currency would devalue and balance this out. But not with the Euro. SO constant flow of Euro’s out of Greece no balancing mechanism. In fact the rules pretty much prohibit any mechanism which might correct the imbalance except internal devaluation (i.e. race to the bottom for worker conditions). Also the low interest rate policy is flooding Greece with a lot of cheap credit pushing up house prices and crowding out productive investment (Australian Disease).
        The government budget deficit has to be made up with borrowing as its illegal for non-banks to print, normally as the prospect of repayment went down the price would go up and Greece would be unable to borrow and would have to cut spending or raise revenue. Instead it was assumed to Greek debt was guaranteed by remainder or Euro (which turned out to be the case in practice) so risk decoupled from return creating a bargain and inflated demand.
        So 1) Oligarch captured government with a bottomless supply of cheap debt.
        2) a current account deficit that can’t be fixed or even compensated for.
        3) A common currency with no rebalancing mechanisms and overseen by technocratic inflexible institutions in turn overseen by a body with no actual legal existence (Eurogroup). Running on a narritive where creditors are immaculate and debtors always 100% to blame.
        A recipie for disaster. And a depression of horrible scale and poverty not seen since WWII.
        Even if the Greek government had been running a surplus the trade imbalance would have generated this problem with a bit more time. With no price mechanisms available to balance imports and exports how could they stop this?

      • Dee
        That’s why I advocate default by Greece. Those who lent recklessly, at ridiculously low IR’s that were artificially created, deserve to lose ALL.

      • glissom
        I agree entirely!!!! All the feedback loops and signals were cut!
        If the government had run a surplus perhaps the numbers might be a bit smaller but they are so large that the difference would have been negligible – take a billion off infinity what have you got?

    • Ronin8317MEMBER

      What is bringing Greece to their knees is not the givernment debt, but their banks runninng out of money. The ECB have stopped liquidity support for Greek banks, and IMF have estimated that it cost the Greek economy 10 billion US dollars for every week the bank remain closed. The country is being crushed.
      The rescue package means transferring even more Greece assets aboard, so when the coubtry is eventually kicked out of Euro, after which it is guaranted to become a failed state, and will probably lose Cyprus to Turkey. The German can’t believe how stupid the Greek is behaving. They are ‘acting tough’ to give the Greek government enough political cover to exit the Euro. The Greek people voted in a referendum, and yet the politicians sold their country out instead. So the title is appropriate.

  3. Suggest rape not be used
    I’d suggest it’s insensitive to actual rape/sexual assault victims

    • drsmithyMEMBER

      While I think that’s a bit overly sensitive, “the pillage of Greece” is a similar and arguably more accurate alternative.

      • respectfully disagree. I don’t have personal experience here but know many who do, and what is happening is nothing like rape. It just isn’t. That might be being sensitive (what’s wrong with being sensitive to sexual assault victims anyway), but it’s also being accurate

        Pillage much better word

        (again, respectfully disagreeing)

      • Forget the PC guys… its OK. Clearly different context here!

        Anyway, this is not a bailout offer – its a kick out clause. The Left in Europe is quiet, fearing a similar fate. The Greeks are fearful of their social largesse is coming to an end. Germany wants to kick on – and get Greece to technically default.

        Make this very clear – this is not a bailout… this Greece’s time to leave. They will still have EU membership – which will also be found to be withdrawn as the Greeks inevitably radicalise.

        No country in Europe will say boo – or attempt to save the Greeks. Socialist France is being very quiet…

      • “what’s wrong with being sensitive to sexual assault victims anyway”

        What’s wrong with an overt emotional response ahead of mapping in your mind that a figure of speech is being used, is you become a censor.

        We now have the stage where during the most recent NUS national conference in the UK, clapping was banned because people were sensitive to it, and it was replaced with jazz hands.

        If you use a emotional stance as your primary marker, rationale will go out the window.

        No one here endorses rape, the west is very anti-rape. Rape is not being trivialised, and your efforts to censors are far from welcome.

        If you aren’t strong enough to resist being triggered from the use of the word, you are probably not suited participating in the type of discussion taking place.

      • Rape – ‘an act of plunder, violent seizure, or abuse; despoliation; violation’
        Seems accurate to me. The word has no special privilege above others.

    • I agree, i don’t think there is anything wrong with considering how accurate our use of langauge is and how it affects others. It’s no different from sifting through other thoughts that might randomly come to mind that are ultimately not useful in a rational and civilised conversation.

    • I agree with tmarsh.
      I’ve pointed this out before.
      There are many other words available that are far more appropriate.
      It is not a case of being PC, it is a case of using the correct word.
      Also, the misuse of the word diminishes its effect.
      I know people who have spent years working with the victims of abuse and rape and it is something that I would not wish upon anyone else.
      Even if the standards within the comments section slips away the post authors should not let the initial content follow it down.

    • tmarsh, you never come across to me as a PC type but this whole argument has all the makings of a Monty Python skit. Context is everything, don’t you agree brothers and, er, sisters?

  4. Even StevenMEMBER

    Greece is not innocent in this. The tone of the articles on MB seems to be ‘the poor things. Look at that big, bad Eurozone bullying the cute little puppy’.

    But if you replace ‘puppy’ with ‘greedy, corrupt parasite’ you’d be a little closer to the truth.

    Again, not saying there won’t be great hardship and pain for many Greeks who did not actively participate in the greed-fest over the past two decades, but they passively bore witness, and must bear some responsibility.

    • At the end of the day its one set of oligarchs having a blue with a lesser status set of oligarchs… the people are just along for the ride.

      • Thats the problem in a nutshell skippy. Greece is hardly innocent their economy was a corrupt mess but the Eurozone isn’t innocent either. And the “reforms” are really self destructive. Leeches might be the fashionable cure but the patient is still going to get sicker until the doctors are driven out and some real therapy applied.

  5. The important outcome is that this is that the start of the collapse.
    The average debt to GDP of the Eurozone is 92%.
    The wonderful wizards of the zone have helped Greece go from 107% debt to GDP in 2009 to 170% debt to GDP in 2015.
    So the result so far is horrific.
    I admit that this is taking a long time but the obvious result is the greatest world depression of all time.
    It is always sad when an individual has such delusions of grandeur but when it involves every federal government and their central bank in the world, it becomes a little disconcerting.

  6. Hmmm IF Greece were a CAS nation, Would we be having this discussion? Honestly would anyone anywhere care how much Peter owed Paul if they all lived under the same roof….the world only cares because these Greek debts are the foundations of German Savings, logically to denounce one, one must denounce the other, which brings me back to the illogic of savings having this protected status, especially illogical is the notion of trans-national savings.
    Modern Economics teaches us that Debt is a tool that helps emerging nations, yet it does seems that MANY of those nations that successfully make the transition do so without incurring debt Indeed the most successful seem to become CAS countries. Sure CAS often equals Beggar thy Neighbor, but what does that make CAD?

    • CB
      I know you are coming from that article you quoted. We DO need savings. It is a way to stop this world rapidly heading into a resource and ecological disaster. If someone wants to consume more then somebody else needs to consume less….simple stuff.
      The modern notion that economics exists in a world of its own and that all that is required is to manipulate numbers is false. We all live in a real world with limited resources. The valuation of savings art zero values debt at zero. So all the resources have a zero cost. Whatever it is, if there is no cost on anything, it always pays to extract it and extract it at the fastest possible rate – which is what we are doing.
      RE trans-national savings. Nations go through different phases as is now clear to us surely. These phases may well be multi-decades long – 50, 60 years whatever. Let’s take Japan. It has gone through a multi-decade period of high domestic savings, combined with a very productive workforce that resulted in a long period of CAS’s and investment. It now faces a long period of CAD’s during which we might expect some of the savings and investment it has made to be liquidated. (Now importantly we are just illustrating here) Supposing in the meantime Japan had invested in an African country and that country saved and developed. Perhaps by the time, decades later, the Africans are ready to pay Japan foreign currency to buy the mines.
      The problem I have is not CAD’s as such nor CASs as such. It’s the blind insanity of just consuming and consuming and consuming while selling off our country to finance that. Current policy of govt and RBA is to drive that model even further with lower and lower rates. We need to save and those savings need to be real enough to be apparent as savings in another currency, be it yen, USD or Yuan, that can be used to buy our own nation back. Savings are real and are of benefit.
      The notion as per your article that the debt, founded on BS, results in savings that are therefore BS is not the full picture. Sure these morons at teh US Fed (the home of the world’s reserve currency)keep printing up more and more and more and more money that their mates then deposit back at the Fed for a profit, or that results in a US CAD which they just print up paper to cover, makes it look like the world is awash with savings. In the long run however those USD scattered all over the world are a liability to the US. They can buy US produced goods or assets. Let’s say goods – then the US will be producing goods for a cost and selling them for no increase in their well being – in fact, at that point the MMT theory that exports are a liability appears be true – except for the FACT that the goods are being produced to reduce a liability that occurred because nobody saved in the first place.
      Alternately the US just sells assets for the repatriated USD and doesn’t need to cut back its living standard at that point – it cuts back its children’s living standard just as Aus has done already!!!!!

  7. GREEK BAILOUT … EXPLAINED … h/t JR, London UK …

    It is a slow day in a little Greek Village. The rain is beating down and the streets are deserted.

    Times are tough, everybody is in debt, and everybody lives on credit.

    On this particular day a rich German tourist is driving through the village, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

    The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.

    The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.

    The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel.

    The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the taverna.

    The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit.

    The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note.

    The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything.

    At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town.

    No one produced anything.

    No one earned anything.

    However, the whole village is now out of debt and looking to the future with a lot more optimism.

    And that is how the bailout package works!

    • Even StevenMEMBER

      Except the debt is owed EXTERNALLY, not internally.

      And debt is seldomly so evenly distributed that debt cancellation can occur.

      But it’s a cute story.

  8. Yanis Varufakis article that I referred earlier..

    I think this nails it..
    The euro crisis has expanded this lacuna at the centre of Europe hideously. An informal body, the Eurogroup, that keeps no minutes, abides by no written rules, and is answerable to precisely no one, is running the world’s largest macro-economy, with a Central Bank struggling to stay within vague rules that it creates as it goes along, and no body politic to provide the necessary bedrock of political legitimacy on which fiscal and monetary decisions may rest.

    Unelected Technocrats (an euphemism for lawyers and bankers) like Schauble, Draghi or even our own Emperor Glenn shouldn’t be allowed to take any fiscal and monetary decisions.