A ‘Flood of Good News’
As der Spiegel recently reported, the Greek government is intent on smothering its reluctant creditors with good news (in order to be able to accumulate a reasonable amount of such, the last ‘troika’ assessment has apparently been subject to numerous delays):
“A SPIEGEL report that German Finance Minister Wolfgang Schäuble is considering a third rescue package for Greece has electrified the struggling nation. Athens wants to impress its creditors with a stream of good news. But it still has a long list of unkept promises. New loans are welcome, but don’t ask us for any new austerity measures. This pretty much sums up Athens’ reaction to Germany’s reported willingness to approve further loans to Greece to cover the country’s multi-billion euro projected financing gap in 2015-2016.
Although there was no official reaction to SPIEGEL’s report, published on Monday, government sources say that Berlin’s intentions were known to Prime Minister Antonis Samaras, adding that Germany will not pull the rug from under Greece’s feet, especially with the European election due in May.
But the Greek government has also made clear that it will not accept a new round of measures or a continuation of what are perceived by many in Greece as the asphyxiating and humiliating controls by the troika of European Commission, European Central Bank and International Monetary Fund.
Finance Minister Yannis Stournaras is preparing Greece’s position ahead of the troika’s arrival. With a fresh round of bargaining looming on the new loans, he promised an avalanche of “impressively good news” in the coming days to show that Greece doesn’t need any further belt-tightening. It only needs to press on with its structural reforms, he said.
According to a Greek Finance Ministry official, the good news will include the first increase of retail sales in 43 months, and the first rise in the purchasing managers’ index in 54 months. The “super-weapon” in Stournaras’ arsenal, however, is the hefty 2013 primary budget surplus, now estimated at €1.5 billion, well above the official budget forecast of €812 million.
The same official said the expected good news was the reason why Athens doesn’t want the troika to return earlier to conclude a much-delayed round of inspections that started in the autumn.Stournaras is expected to present Greece’s accomplishments to German officials when he visits Berlin later this week. The final details of his trip are still being worked out. Athens also plans a return to the markets by the end of 2014 in what it believes will be a definitive sign that the Greek economy is out of the woods.
With the leftist opposition alliance Syriza leading most opinion polls, some observers say the Greek government needs to be able to show success soon. Athens was therefore quick to react to the reports about new loans, telling the public it should not fear a new wave of measures.
By all accounts SYRIZA would indeed win elections if they were held today – by a solid margin of almost 8% over its nearest rival New Democracy, the party of current prime minister Antonis Samaras. Electoral support for his coalition partner PASOK – for a long time the ruling party in Greece – has all but disappeared. Even the Stalinist KKE is set to grab a bigger share of the vote.
The upcoming European as well as municipal elections in Greece are bound to see SYRIZA winning comfortably. Meanwhile, the coalition’s majority in parliament has shrunk to a mere three MPs. It won’t take much to topple it, hence all the frantic activity described above.
Greetings from Charles Ponzi
So what’s the problem if there are all those good news, including a ‘hefty primary surplus’? As an aside, said surplus is already greedily eyed by various Greek bureaucrats who have suffered salary cuts which they are currently challenging in court. As the WSJ recently reported, a few European finance ministers held a ‘private meeting’ over Greece recently, to which their Greek colleague wasn’t invited. The problem? The month of May:
“Top officials peeled away from colleagues after a gathering of euro-zone finance ministers in Brussels on Monday evening for a private meeting to discuss mounting concerns over Greece’s bailout. Greek Finance Minister Yiannis Stournaras, who was briefing the press in a building across the street at the time, wasn’t invited.
High-level officials from the International Monetary Fund, the European Commission, and the European Central Bank, as well as senior euro-zone officials and the German and French finance ministers were present.
The meeting reflects anxiety that Greece could yet disturb the relative calm in euro-zone financial markets. But the issue is unlikely to come to a head until May when Greece needs to repay some €11 billion ($14.85 billion) of maturing government bonds.
The private meeting, confirmed by several people with direct knowledge of the talks, comes as Athens struggles to meet some of the conditions set by its official creditors for further payouts from bailout funds. The Monday meeting was held to discuss how to press Athens to forge ahead with unpopular reforms to its labor and product markets, and how to scramble together extra cash to cover a shortfall in the country’s financing for the second half of the year that is estimated at €5 billion to €6 billion.The meeting was inconclusive, people familiar with the situation said.
An € 11 billion bond repayment and a shortfall of € 5 to 6 billion? Oh well, that’s why it’s called a “primary surplus” instead of just a “surplus”. “Primary” means it’s not really a surplus – only that it would be one, if not for the debtberg Greece must service. However, if servicing said debtberg costs more than Greece’s government can actually bring in, then its entire debt edifice remains a Ponzi scheme. Only, contrary to other governments that are able to finance their own Ponzi debt schemes in the markets, Greece needs Ponzi financing from elsewhere, or to be precise, from unwilling tax cows residing elsewhere. That is currently the main difference. The problem for all the other States is that it is important that people don’t start thinking too much about the essential Ponzi nature of government debt. If they do, then there might be another debt crisis. After all, nearly the entire euro zone sports a lot more debt today (both absolute and relative to GDP) than at any time during the most severe crisis months. That fact in turn means that the current calm in the markets really hangs by the thinnest of threads, propped up by misplaced confidence alone. Meanwhile, the much-lamented ‘banks-sovereigns doom loop’ has become worse by almost an order of magnitude in countries like Italy and Spain.
On the other hand, selling yet another bailout of Greece to the voters in creditor countries is quite a tall order at this stage, with the eurocracy already being subject to much scorn and revulsion (all of it well deserved).
What to do?
Helloooo, ‘European partners’ … thinking about me lately?
(Image source: The Web / Author unknown)
Let Us ‘Stipulate For All Times to Come’
Ludwig von Mises once wrote with regard to the inexorably growing mountains of government debt around the world:
“The long-term public and semi-public credit is a foreign and disturbing element in the structure of a market society. Its establishment was a futile attempt to go beyond the limits of human action and to create an orbit of security and eternity removed from the transitoriness and instability of earthly affairs. What an arrogant presumption to borrow and to lend money for ever and ever, to make contracts for eternity, to stipulate for all times to come!”
In the case of Greece, the eurocrats seem to have precisely such an arrogant presumption in mind:
“The next handout to Greece may include extending the maturity on rescue loans to 50 years and cutting the interest rate on some previous aid by 50 basis points, according to two officials with knowledge of discussions being held by European authorities.
The plan, which will be considered by policy makers by May or June, may also include a loan for a package worth between 13 billion euros ($17.6 billion) and 15 billion euros, another official said.Greece, which got 240 billion euros in two bailouts, has previously had its terms eased by the euro zone and International Monetary Fund amid a six-year recession.
“What we can do is to ease debt, which is what we have done before through offering lower interest or extending the maturity of loans,” Dutch Finance Minister Jeroen Dijsselbloem, who heads the group of euro finance chiefs, said yesterday on broadcaster RTLZ. “Those type of measures are possible but under the agreement that commitments from Greece are met.”
Good luck with that last one boys. Greece is still the same over-bureaucratized corrupt swamp it was prior to the bailouts. There will be a deep freeze in hell before the ‘commitments are met’.
Since we mentioned the banks earlier, here is the next non-suprise:
“As Greece seeks to meet its aid conditions and unlock more money from its existing bailouts, it’s also looking for ways to make the most of 50 billion euros that was set aside for bank recapitalization. The country had hoped some money might be left over for other financing needs. That now looks less likely because the Greek banks will need more capital, according to an EU official close to the bailout process.”
You really couldn’t make this sh*t up.
This is what happens when unsound debt is artificially propped up instead of being liquidated. Now there is a never-ending drama. Creditors keep throwing good money after bad, into what appears to be a kind of financial black hole – money falls inside, but it looks like it will never come back. Meanwhile, the population of Greece has been so thoroughly ground into the dirt by the crisis that it is prepared to rather vote for Nazis and communists than continue with the situation as is. What a great accomplishment!
Quick, this thing still needs some more glue …
(Image source: The Web / Author unknown)