Greece, Europe, and the United States

[bemildred]

The full brutality of the European position on Greece emerged last weekend, when Europe’s leaders rejected the Greek surrender document of June 9, and insisted instead on unconditional surrender plus reparations. The new diktat—formally accepted by Greece yesterday—requires 50 billion euros’ worth of “good assets”–which incidentally do not exist—to be transferred to a privatization fund; all financial legislation passed since SYRIZA took control of parliament in January to be rolled back; and the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) to return to Athens. From now on, the Greek government must get approval from these institutions before introducing “relevant” legislation—indeed, even before opening that legislation for public comment. In short: as of now, Greece is no longer an independent state.

Comparisons have been drawn to the Treaty of Versailles, which set Europe on the path to Nazism after the end of World War I. But the 1968 Soviet invasion of Czechoslovakia, which ended a small country’s brave experiment in policy independence, is almost as good an analogy. In crushing Czechoslovakia, the invasion also destroyed the Soviet Union’s reputation, shattering the illusions that many sympathetic observers still harbored. It thus set the stage for the final collapse of Communism, first among the parties of Western Europe and then in the USSR itself.

Six months ago one could hope that SYRIZA’s electoral victory would spark a larger discussion of austerity’s failure and inspire a continent-wide search for better solutions. But once it became clear that there was no support for this approach from Spain, Portugal, or Ireland; only polite sympathy from Italy and France; and implacable hostility from Germany and points north and east, the party’s goal narrowed. SYRIZA’s objective became carving out space for a policy change in Greece alone. Exit from the Euro was not an option, and the government would not bluff. SYRIZA’s only tool was an appeal to reason, to world opinion, and for help from outside. With these appeals, the Greeks argued forcefully and passionately for five months.

In this way, the leaders of the Greek government placed a moral burden on Europe. Theirs was a challenge based on the vision of “sustainable growth” and “social inclusion” that has been written into every European treaty from Rome to Maastricht—a challenge aimed at the soul of the European project, if it still had a soul. No one in the Greek government entertained illusions on that point; all realized that Greece might arrive at the end of June weakened, broke, and defenseless. But given the narrow margins for maneuver, which were restricted both by SYRIZA’s platform and the Greek people’s attachment to Europe, it was the only play they had.

http://harpers.org/blog/2015/07/greece-europe-and-the-united-states/

[bemildred]

1. Merkel 'gambling away' Germany's reputation over Greece, says Habermas

Jürgen Habermas, one of the intellectual figureheads of European integration, has launched a withering attack on the German chancellor, Angela Merkel, accusing her of “gambling away” the efforts of previous generations to rebuild the country’s postwar reputation with her hardline stance on Greece.

Speaking about the bailout deal for the first time since it was presented on Monday, the philosopher and sociologist said the German chancellor had effectively carried out “an act of punishment” against the leftwing government of Alexis Tsipras.

“I fear that the German government, including its social democratic faction, have gambled away in one night all the political capital that a better Germany had accumulated in half a century,” he told the Guardian. Previous German governments, he said, had displayed “greater political sensitivity and a post-national mentality”.

Habermas, widely considered one of the most influential contemporary European intellectuals, said that by threatening Greece with an exit from the eurozone over the course of the negotiations, Germany had “unashamedly revealed itself as Europe’s chief disciplinarian and for the first time openly made a claim for German hegemony in Europe.”

http://www.theguardian.com/business/2015/jul/16/merkel-gambling-away-germanys-reputation-over-greece-says-habermas

[dixiegrrrrl]

3. yep.

Very little coverage of this, tho:

Draghi just now: ECB exposure to Greek debt is €130 billion.
In other words, out of the ~300ish outstanding, the European Central Bank has roughly half of it and is thus exposed to a 100% loss on the entire sum should Greece walk off.

How did they wind up with that exposure? That's simple: Post the first two bailouts they "bought" it from the commercial banks that formerly had it, transferring the risk from private concerns that had taken it on with the intent to make a profit to the entirety of the EU citizenry.

I remind you that the ECB has single-digit billions in capital; their leverage on this debt alone is well over 10:1 without any exposure to anything else.
Given that everyone says that Greece cannot pay the ECB is factually bankrupt right here, right now.

https://market-ticker.org/akcs-www?post=230378

[daleanime]

2. K&R.....

[geek tragedy]

4. part of me suspects that they'll get around to reducing the debt but

that it'll have to go through the tedious bureaucratic quagmire of the EU's various bodies, treaties, etc.

SYRIZA managed to get the worst deal possible through their own lack of a plan.

Reason, world opinion, and support from outside doesn't keep a banking system running.

Europe's version of the Articles of Confederation was going to hit an iceberg at some point.

[bemildred]

5. The debt will never be paid in any meaningful way.

And that was always obviously the case.

This is all, at bottom, a stall, to keep from admitting that while the perps remain above ground.

At the root the problem is using debt to finance government's continuing operations and for graft and dipshit "investments" that do not pay like dams that silt up in a few decades. And the failure to tax appropriately and adequately.

[geek tragedy]

6. Everyone knew Greece was doing this in the

1980's. Some willful blindness on the part of the EU admissions committee.

[bemildred]

7. Well rewarded willful blindness, perhaps even self-interested willful blindness.

I'm not buying any "we really meant well" bullshit either.

[Ghost Dog]

8. Accurate, imho.

... SYRIZA was not some Greek fluke; it was a direct consequence of European policy failure. A coalition of ex-Communists, unionists, Greens, and college professors does not rise to power anywhere except in desperate times. That SYRIZA did rise, overshadowing the Greek Nazis in the Golden Dawn party, was, in its way, a democratic miracle. SYRIZA’s destruction will now lead to a reassessment, everywhere on the continent, of the “European project.” A progressive Europe—the Europe of sustainable growth and social cohesion—would be one thing. The gridlocked, reactionary, petty, and vicious Europe that actually exists is another. It cannot and should not last for very long.

What will become of Europe? Clearly the hopes of the pro-European, reformist left are now over. That will leave the future in the hands of the anti-European parties, including UKIP, the National Front in France, and Golden Dawn in Greece. These are ugly, racist, xenophobic groups; Golden Dawn has proposed concentration camps for immigrants in its platform. The only counter, now, is for progressive and democratic forces to regroup behind the banner of national democratic restoration. Which means that the left in Europe will also now swing against the euro...

op. cit.

[bemildred]

9. Yep.

Don't get me started, I tend to rant and fume about that. For guys that want to run an empire, a hegemonic system, they seem very ignorant of the requirements to run such systems successfully. It presents a vivid display of the ignorance and irresponsibility of insulated economic elites, again. I expected better of Europe. Silly me.

[reorg]

10. Greece Surrendered: But to Whom Exactly?

On July 12, Greece surrendered abjectly and totally. Prime Minister Alexis Tsipras, who had promised to combat the austerity measure that are driving the Greek people to ruin, poverty and suicide, betrayed all his promises, denied the will of the people expressed in the July 5 referendum, and led the Greek parliament to accept an agreement with the nation’s creditors even worse than all those that had already caused the economy to shrink and which further abandoned the last scraps of national sovereignty.

...

In reality, very many Germans, from the right-wing Finance Minister Wolfgang Schaüble all the way to the former leader of the left party “Die Linke” Oskar Lafontaine would have preferred a very different solution: Greece’s exit from the Eurozone. Schäuble was thinking of German finances, while Lafontaine was thinking of what would be best for the people of Greece – and of Europe as a whole.

...

The European surrender to the United States occurred about seventy years ago. It was welcomed as a liberation, of course, but it has turned into lasting domination. It was simply reconfirmed by the July 12, 2015, Greek surrender. And that surrender has been enforced by an increasingly hegemonic ideology of anti-nationalism, particularly strong in the left, that considers “nationalism” to be the source of all evil, and the European Union the source of all good, since it destroys the sovereignty of nations. This ideology is so dominant on the left that very few leftists dare challenge it – and Syriza was leftist in exactly that way, believing in the virtue of “belonging to the European Union”, whatever the pain and suffering it entails. Thus Syriza did not even prepare for leaving the Eurozone, much less for leaving the European Union.

As a result, only “right-wing” parties dare defend national sovereignty. Or rather, anyone who defends national sovereignty will be labeled “right-wing”. It is too easily forgotten that without national sovereignty, there can be no democracy, no people’s choice. As the Greek disaster obliges more and more Europeans to have serious doubts about EU policy, the mounting desire to reassert national sovereignty faces the obstacle of left-right stereotypes. Much of the European left is finding itself increasingly caught in the contradiction between its anti-nationalist “European dream” and the destruction of democracy by the EU’s financial bureaucracy. The Greek drama is the opening act of a long and confused European conflict.

Diana Johnstone

http://www.counterpunch.org/2015/07/17/greece-surrendered-but-to-whom-exactly/

[KoKo]

11. Robert Reich: "How Goldman Sachs Helped Create the Greek Debt Crisis" (+Mario Draghi)

Robert Reich: How Goldman Sachs Helped Create the Greek Debt Crisis
Posted on Jul 17, 2015

The Greek debt crisis offers another illustration of Wall Street’s powers of persuasion and predation, although the Street is missing from most accounts.

The crisis was exacerbated years ago by a deal with Goldman Sachs, engineered by Goldman’s current CEO, Lloyd Blankfein. Blankfein and his Goldman team helped Greece hide the true extent of its debt, and in the process almost doubled it. And just as with the American subprime crisis, and the current plight of many American cities, Wall Street’s predatory lending played an important although little-recognized role.

In 2001, Greece was looking for ways to disguise its mounting financial troubles. The Maastricht Treaty required all eurozone member states to show improvement in their public finances, but Greece was heading in the wrong direction. Then Goldman Sachs came to the rescue, arranging a secret loan of 2.8 billion euros for Greece, disguised as an off-the-books “cross-currency swap”—a complicated transaction in which Greece’s foreign-currency debt was converted into a domestic-currency obligation using a fictitious market exchange rate.

As a result, about 2 percent of Greece’s debt magically disappeared from its national accounts. Christoforos Sardelis, then head of Greece’s Public Debt Management Agency, later described the deal to Bloomberg Business as “a very sexy story between two sinners.” For its services, Goldman received a whopping 600 million euros ($793 million), according to Spyros Papanicolaou, who took over from Sardelis in 2005. That came to about 12 percent of Goldman’s revenue from its giant trading and principal-investments unit in 2001—which posted record sales that year. The unit was run by Blankfein.

Then the deal turned sour. After the 9/11 attacks, bond yields plunged, resulting in a big loss for Greece because of the formula Goldman had used to compute the country’s debt repayments under the swap. By 2005, Greece owed almost double what it had put into the deal, pushing its off-the-books debt from 2.8 billion euros to 5.1 billion. In 2005, the deal was restructured and that 5.1 billion euros in debt locked in. Perhaps not incidentally, Mario Draghi, now head of the European Central Bank and a major player in the current Greek drama, was then managing director of Goldman’s international division.

Greece wasn’t the only sinner. Until 2008, European Union accounting rules allowed member nations to manage their debt with so-called off-market rates in swaps, pushed by Goldman and other Wall Street banks. In the late 1990s, JPMorgan enabled Italy to hide its debt by swapping currency at a favorable exchange rate, thereby committing Italy to future payments that didn’t appear on its national accounts as future liabilities.

More and a Good Read at......

http://www.truthdig.com/report/item/how_goldman_sachs_profited_from_the_greek_debt_crisis_20150717

[copernicusrev]

12. +100