Posts Tagged Greece
NOVEMBER 7, 2012
NATION SPENDS $2.5 BILLION ON NOTHING
POSTED BY ANDY BOROWITZ
NEWS ANALYSIS (The Borowitz Report)—One day after the costliest Presidential election in U.S. history, Americans awoke to the ugly realization that the nation had spent $2.5 billion with absolutely nothing to show for it.
“Four years ago, Barack Obama was elected President of the United States, and that is still the case,” says Professor Davis Logsdon of the University of Minnesota. “The only difference is that we as a nation are out $2.5 billion.”
Mr. Logsdon claims that America’s system of egregious political spending “has made us the laughingstock of the world,” arguing, “Even Greece would know better than to blow through money like that.”
But “not so fast,” says Tracy Klugian, President of the Negative Advertising Association of America, which represents the nation’s leading producers of political attack ads.
“When people complain about how expensive these political campaigns are, they’re forgetting about the millions of Americans who are employed making negative ads,” he says. “Say what you will about lies, vitriol and character assassination, they’re job creators.”
In fact, Mr. Klugian says, America’s costly and interminable campaigns are the nation’s most reliable source of employment: “They gave a completely unskilled person like Mitt Romney a steady job for eight years.”
Acknowledging that the $2.5 billion spent this year was a “tidy sum,” Mr. Klugian says, “If we took all the money we spend on political ads and used it to educate our children and feed the poor, we wouldn’t be America.”
- Romney’s Wife to Stand Next to Him at Debates : The New Yorker (mbcalyn.com)
- The Republicans’ Closing Argument : The New Yorker (mbcalyn.com)
- Poll: By Wide Margin, Democrats Want Biden in All Remaining Debates : The New Yorker (mbcalyn.com)
- Apple Says New iPhone 5 Feature Gives Life Meaning : The New Yorker (mbcalyn.com)
- Romney Airdrops Two Billion in Small Bills Over Ohio : The New Yorker (mbcalyn.com)
- Obama’s New Debate Strategy : The New Yorker (mbcalyn.com)
- The New Yorker’s Endorsement of Barack Obama : The New Yorker (policyabcs.wordpress.com)
- US blogwatch: Nerves and dirty tricks… it’s the final countdown (standard.co.uk)
- Romney Says He Favors Abortion in Cases Where It Makes People Vote for Him : The New Yorker (mbcalyn.com)
- Storm-hit New Yorkers rage at six-hour queues as ballot machines fail again (standard.co.uk)
MONDAY, JUNE 25, 2012
I’m surprised it has taken this long for Someone Serious to make the argument set forth in a new article by Simon Johnson at Bloomberg, which in short form says “You are dreaming if you think a European financial crisis stays in Europe.”
Johnson somewhat undercuts the urgency and importance of his article by working from the assumption that the eurozone dissolves back into its earlier configuration of one currency per nation. Economists and analysts have discussed other scenarios, such as a exit by Greece, which has the potential to precipitate contagion in Portugal, Spain, and Italy; an exit by Germany; a split into more economically homogeneous sub-groups (most likely north v. south). And Bloomberg refrains from putting the real sizzler in the headline: Johnson considers JP Morgan to be vulnerable and explains why.
No matter how you look at it, the most important step that needed to be taken to prevent the recurrence of a global financial crisis was to reduce the interconnectedness of the major players. That has not happened to any meaningful degree. There are efforts underway to move more activities to clearinghouses, but nothing is operational, and the industry is working hard to limit the scope of these plans. So despite all the brave talk about how much better capitalized the big banks are, they’ve beaten back, delayed, and weakened efforts to deal with the biggest source of risk.
Johnson flags one major risk: what happens if a country exits and by legislative fiat, redemoninates contracts entered into by its government, and say, by the banks it has chartered, from the euro to a new domestic currency? That question has gotten some attention with regards to Greek bonds, with experts focusing on how many bonds are governed by Greek law, where the government could redenominate them by fiat, versus those governed by UK law (note that Johnson finesses that issue by positing the dissolution of the eurozone, meaning the euro no longer exists). And with the restructurings of Greek debt leading to new, senior borrowings being put in place, the older Greek law bonds are subordinate and less of a source of bargaining leverage than they once were.
Nevertheless, there is a much more basic reason to be worried. If any country were to leave, it would redenominate the currency of deposits held in domestic banks. For any periphery country, the value of the new currency is presumed to be lower than that of the euro. So depositors lose.
This concern has led to deposit flight from Greek banks and slower-motion runs on other periphery country banks. If Greece were to exit, it isn’t hard to imagine an acceleration of deposit departure from banks in periphery countries. The ECB could step in, but Germany officials have repeatedly nixed the idea of deposit guarantees in the absence of a banking union, which is not something you put in place on a crisis timeframe.
Johnson focuses his worries on the biggest source of excessive connectedness, derivatives, and also debunks JP Morgan’s “fortress balance sheet” claim:
For example, in recently released highlights from its so-called living will, JPMorgan Chase & Co. revealed that $50 billion in losses could hypothetically bring down the bank. (All big banks must provide their regulators with a living will to show how they could be shut down in an orderly fashion if near default.)
JPMorgan’s total balance sheet is valued, under U.S. accounting standards, at about $2.3 trillion. But U.S. rules allow a more generous netting of derivatives — offsetting long with short positions between the same counterparties — than European banks are allowed. The problem is that the netting effect can be overstated because derivatives contracts often don’t offset each other precisely. Worse, when traders smell trouble at a bank that has taken on too much risk, they tend to close out their derivatives positions quickly, leaving supposedly netted contracts exposed.
People with experience regulating or analyzing financially distressed institutions greatly prefer to measure potential losses with the European approach, in which netting is allowed only when contracts expressly incorporate settlement on a net basis under all circumstances.
When one bank defaults and its derivatives counterpart does not, the failing bank must pay many contracts at once. The counterpart, however, wouldn’t provide a matching acceleration in its payments, which would be owed under the originally agreed schedule. This discrepancy could cause a “run” on a highly leveraged bank as counterparties attempt to close out positions with suspect banks while they can. The point is that the netting shown on a bank balance sheet can paper over this dynamic. And that means the JPMorgan living will vastly understates the potential danger.
According to my calculations with John Parsons, a senior lecturer at MIT and a derivatives expert, JPMorgan’s balance sheet using the European method isn’t $2.3 trillion but closer to $4 trillion. That would make it the largest bank in the world.
What are the odds that JPMorgan would lose no more than $50 billion on assets of $4 trillion, much of which is complex derivatives, in a euro-area breakup, an event that would easily be the biggest financial crisis in world history?
Note that the issue isn’t the magnitude of exposures to a single counterparty; one defaulting counterparty leaves supposedly netted positions suddenly not netted all across the banking industry. That leads to more defensive behavior, namely, cutting exposures (say by increasing haircuts or closing out positions) with the weakest players. That of course pushes them closer to the brink. In the worst of the crisis, banks weren’t able to repo Treasuries, that’s how extreme the fear of counterparty exposures had become. (For those who want to know more, Lisa Pollack provided a great primer on gross and net CDS exposures; it gives a simplified but useful example).
And the $2.3, or per Johnson and Parsons, $4 trillion of JP Morgan “balance sheet” exposures don’t tell the whole story. Banking expert Chris Whalen has described JP Morgan as a $2 trillion banks attached to a $75 trillion derivatives clearing operation. Why do you think, when Lehman and MF Global got wobbly, that JP Morgan became more and more difficult to deal with? Because their role as clearer made them particularly exposed.
Now you might say, “didn’t JP Morgan submit a preliminary plan for an orderly wind down? Surely we can manage this sort of thing now.” Don’t hold your breath. Top bankruptcy lawyer Harvey Miller objected to the decision to put Lehman into bankruptcy in haste, warning that the failure of a mid-sized broker/dealer (and Lehman was clearly bigger that) disrupted markets. JP Morgan’s outline assumes (and the FDIC has taken up this line) that in a worst case scenario, the authorities can wind down the holding company, wiping out equity holders and cramming down bondholders as needed, and keep the operating subs going. The problem is that neither the FDIC speech on this topic nor the JP Morgan presentation deal with derivatives, collateral, or repo. Derivatives contracts are not at the holding company level but are booked in the depositary. I’m told foreign counterparties would seek to terminate these agreements, and sources guesstimate that 30% to 50% of JP Morgan’s derivatives agreements are subject to UK law. Thus it is not hard to imagine that distress at the holding company will prove difficult to contain. In other words, there is likely to be a considerable difference between how the Orderly Liquidation Authority works in theory versus in practice.
Johnson’s warning is clear: a eurozone crisis is not likely to be contained, and the biggest US banks are exposed. And it is looking more and more likely that we’ll find out whether the regulators can, as they insist, manage a big bank failure without engaging in massive bailouts.
- Simon Johnson: The End Of The Euro: A Survivor’s Guide (huffingtonpost.com)
- Simon Johnson: The End Of The Euro: A Survivor’s Guide (huffingtonpost.com)
- The moral core (economist.com)
- The End Of The Euro: A Survivor’s Guide (baselinescenario.com)
- Eurozone crisis: Banking sector could be ‘wiped out’ if weakest nations leave (guardian.co.uk)
- Greece to Leave Euro Odds now at 30-50%: JPM (valuewalk.com)
- The moral core (economist.com)
- What History Tells Us About A Possible Greek Exit (businessinsider.com)
- Fitch: Impact of hypothetical Grexit on eurozone banks (ekathimerini.com)
- What Argentina tells us about Greece (economist.com)
New York Times’ Adam Davidson Strikes Again, Tells Us to Ignore Downer Jobs Data and Trust the Confidence Fairy | Economy | AlterNet
New York Times’ Adam Davidson Strikes Again, Tells Us to Ignore Downer Jobs Data and Trust the Confidence Fairy
Davidson’s latest foray into “Stupid-nomics” is wildly out of touch with America’s massive jobs crisis.
June 24, 2012
While Adam Davidson’s current New York Times column, “How to Make Jobs Disappear” refrains from blatant advocacy of the interests of the 1%, his “Let Dr. Pangloss explain it” approach to economic news is still flattering to the established order. To the extent that anyone in the officialdom pays attention to his work, he’s holding up a rosy-colored mirror to their stewardship. And for the rest of us, his relentless “see, everything really is fine, now take your Soma” denies the reality of the hardships and stresses most ordinary Americans face.
It’s hitting the point where I’m getting such sharp, annoyed commentary about Davidson’s columns by e-mail that I have to work to read his columns with a fresh eye. From one correspondent:
Can we make Adam Davidson disappear? He seems to have carved out a special niche: Stupid-nomics. WTF is his point here? That Adam Davidson is an oh-so-reasonable-guy-who-just-wants-the-silly-competing-economic-theories-to-get-along so we can all feel good? That jobs would magically appear if we would just stop paying attention to them?
His articles seem to be an experiment how somebody with either innate or willful ignorance of macroeconomics — but a superficial curiosity coupled with a desire to preserve and not jeopardize his paycheck –would view economic questions. His assumptions –i.e. if Greece could just pay off those debts and sell some good stuff all would be well — are so wildly simplistic and wrong-headed that it’s hard to go on to the next sentence, because you know you’re heading down a path led by somebody who is blind. And you smack your head against the wall. Where is the aspirin?
If you haven’t encountered Davidson’s latest offering, he starts with the claim that the monthly nonfarm payrolls release has become a key (his breathlessness implies THE) indicator of economic performance, and is now driving hiring decisions. Davidson tells us this is terrible because actually knowing roughly how many jobs are being added when the results aren’t great frightens employers into not adding them and consumers into not spending.
Based on this sort of thing, it looks as if Davidson lives in some sort of weird alternative reality of as he styles himself, “econonerds” which I imagine consists of heavily of economics-oriented journalists and analysts. This crowd is in the business of having to be out, quickly, with a take on new information. But just because their business is to attribute meaning to various data releases doesn’t mean they have this sort of news has same impact in the wider world as it does in the media hothouse or with quick-trigger investors.
First, nonfarm payrolls aren’t a “one number to rule them all” release. They are prefigured by ADP employment report, published just prior to the Friday BLS report. Normally they tell more or less the same story. But the ADP reported less awful job creation for May (133,000 v. 69,000 for the NFP). And more worrisome, the report indicted the average number of hours worked fell a smidge. And there are other reports that give fairly current economic readings, such as retail sales. And for prospective indicators, there are releases like the Factory Orders Report and the forward looking sub-indices (such as new orders) in the various manufacturing indices. Thus, contra Davidson, the stock market (which is treated much more as a one-stop indicator of America’s financial prospects by the media than the monthly jobs release) rose since the last downer NFP, and cracked last week, ostensibly on other data showing that the economy wasn’t looking all that healthy.
The next leg of Davidson’s argument is even nuttier. Businesses aren’t hiring and consumers are being scared from spending as much by the big bad NPF release! That old NPF release is SOOO unreliable anyhow, wouldn’t it be better if we just ignored it and went out and shopped, and left this all to technocrats who’d be cool headed enough to look at longer term trends?
Reading this, one has to wonder if Davidson knows anyone in the real economy. Small business has long been the engine of job growth in the US. Large companies were shedding jobs even in the last expansion. It’s difficult to imagine that much of any small businesses caring about the monthly jobless numbers. They look at their drivers of revenues, which are always more specific. There are businesses that lead the economy, lag the economy, and are countercyclical (tailors being the classic example). Most see their demand track influenced by local/regional or industry-specific factors. And the same is true of most people. Either they feel somewhat insulated from the vagaries of the economy (they have a decent job security with a pretty solid employer, or operate a recession-resistant business, like a mortician, or are part of the 1%) or they are in a more precarious position (self employed, owner of a small business working for a small firm where their job or hours depend on how well the business does, or un or underemployed).Those who are less secure similarly have their willingness to spend influenced by personal considerations (level of cash and savings buffers, level of current and prospective earnings), not the latest Big Data Release.
Davidson is also saying, to the extent a business is in a field where national job gains are germane, that we should ignore information and cheerlead. He also implies that the reactions to adverse data releases are at least as pronounced as to good ones. That’s hogwash. First, psychologists have documented a bias in most people towards optimism, and that is very much enforced in the US (notice how many business and self help books stress the importance of being gung ho, and how “negativity” is an even worse pejorative than “liberal”?). Second, we have entire industries dedicated to cheerleading: equity fund managers and analysts (who are ex hedgies are structurally long and therefore need to be bullish most of the time), the PR industry, and increasingly, the Obama administration, which seems to believe the answer to every problem is better propaganda. Third, there actually might be real performance problems beyond the ability of the confidence fairly to solve. Davidson dismisses that with his “we’re not Greece” discussion. But this ignores the lasting impact of a global economic crisis and the continuing impact of private sector deleveraging, made worse by the bad policy decision to zombify the financial sector rather than restructure the bad debts and use aggressive fiscal stimulus to offset the resulting downdraft. That means ex a change in course is the best we are likely to get is a halting recovery.
Davidson does deviate from channeling Dr. Pangloss to imagine an even better world, one in which the lion and the lamb, or in this case, Keynes and Hayek, would settle their differences and make sense of all that noisy data. We’ll just leave aside that Hayek would be rolling in his grave to have the fact that he and Keynes had friendly discussions taken to mean he’d happily participate in a world where “major economic decisions” were made by “non-partisan technocrats”. Reader Mrs. G took on the “non-partisan” part of this history-mangling fantasy:
Hayek as a nonpartisan technocrat immune from a “breathless” media cycle?? How ignorant can this guy be about Hayek and partisanship? He really needs to Google “Hayek” and get a clue. Or maybe he’s paid not to.
I must confess I have a vested interest in debunking Davidson. Given his interest in changing mass psychology, I imagine I’d be included in reprogramming efforts to make sure there is plenty of happy thinking so we all get the prosperity we deserve if we do our duty and spend enough. And you might be too.
- My chat with Adam Davidson (lbo-news.com)
- Gas pains (scaypgrayce.wordpress.com)
- Seeing the world from another perspective (colleensharen.wordpress.com)
- Is Peace Possible? (wnyc.org)
- Are We In a Golden Age For Inventors? (InnovationToronto.com)
- Who Wants To Buy Honduras? | Adam Davidson | NYT | 08 May 2012 (nytimes.com)
- Panel Nerds: If You Haven’t Heard NPR’s Planet Money, It’s New To You (mediaite.com)
- Some People Don’t Always Try to Maximize Personal Profit, and the NY Times’ Adam Davidson Is ON IT! (mikethemadbiologist.com)
- India’s Super Rich Help Fuel Art Market (india.blogs.nytimes.com)
Europe Needs a Federal Reserve
By AARON TORNELL and FRANK WESTERMANN
Published: June 20, 2012
As the world economy teeters again, pressure is mounting on central banks to reopen their spigots, make it even cheaper for companies and households to borrow money, and prop up commercial banks to prevent another financial crisis. On Wednesday, the Federal Reserve, which had already promised to keep short-term interest rates near zero until the end of 2014, extended its latest, modest strategy to keep long-term rates down, too.
The Fed’s counterpart, the European Central Bank, was created in 1998 to maintain price stability in the new euro zone. With so many depositors taking their money from troubled banks in Greece and Spain, observers are urging the central bank, based in Frankfurt, to fire another round of the “big bazooka” — the roughly 1 trillion euros in cheap loans that it granted to banks in December and February.
But even if it is willing to do this, the central bank is not equipped to do so without putting Europe’s financial system at risk. Its design is flawed. To save the euro, the 17 countries that use the shared currency will not only need a more unified fiscal policy. They will also need a single institution to tide over troubled financial institutions, and a single banking authority to supervise banks and, if necessary, close or merge them.
Bizarrely, although the deutsche mark, franc and lira are gone, members of the euro zone still have their own national central banks, which can step in and lend euros. Since 2007, the credit extended by the central banks of Italy, Spain, Greece, Portugal and Ireland has increased tenfold, in part because the criteria for the collateral put up in exchange for central-bank loans were relaxed significantly in 2008 (and later, in Greece,Ireland and Portugal, almost completely discarded).
What ails the euro zone is not a Teutonic allergy to inflation, or a timidity about extending loans, but what economists call the tragedy of the commons. Here’s an example: A group of people go for a drink and agree to split the tab. They tend to drink a bit more than when each goes alone. Each person gets to enjoy 100 percent of the marginal benefit of an additional drink, yet she is responsible only for a portion of that drink’s cost. So she has an incentive to outdrink her friends and exploit the common pool of money that will be used to pay the tab.
The central bank system in Europe is akin to letting the government of California issue bonds, pledge them as collateral at the San Francisco branch of the Fed, and then get fresh dollars to pay for its budget deficit. If this were reality, imagine the strong temptation for California to tap Fed resources to indulge imbalanced spending and borrowing.
If the system isn’t fixed, it will lead to another financial crisis. In the past, many countries that pursued expansionary credit policies to avoid economic turmoil precipitated only a deeper crisis. In 1994, for example, Mexico’s central bank significantly increased loans to private banks, in an attempt to forestall a recession before a presidential election. The result: capital flight, a speculative attack on the peso and a financial crisis.
Europe is heading toward a similar mess. Since 2008, hardly any banks have been shut down in the euro zone, while American regulators have closed hundreds of institutions. Bank “stress tests” in countries like Spain continue to underestimate the true extent of bad loans. Greek banks were deemed solvent — and therefore eligible for loans from Greece’s central bank — even as nervous depositors withdrew hundreds of millions of euros.
Only the European Central Bank, not national regulators, should have the power to decide if a bank is financially sound, and eligible for central-bank loans.
If the European Central Bank were to gain this power, it could shut down insolvent (zombie) banks, limit excessively high levels of central-bank credit, and make it clear to the euro zone’s members that help from Frankfurt cannot go on forever.
Under Jean-Claude Trichet and now Mario Draghi, the European Central Bank has forestalled a panic and avoided setting off inflation so far — a priority for Germany, Europe’s largest economy. But it has been powerless as bank insolvencies mount, and it has failed to pressure governments to lower their budget deficits and implement economic reforms.
The national central banks — including Germany’s Bundesbank and the Bank of France — should become subsidiaries of the European Central Bank like the 12 Federal Reserve Banks (in New York and San Francisco, etc.). Voting rights at the European Central Bank should be reorganized so that they are proportional to the share of the loss that each country would bear in case of default. Those who bear the largest share of the cost should have greater say as to when the drinking should stop.
To bolster ailing banks in southern Europe, some have called for the European Central Bank to insure deposits. Fine, but in exchange, all banks, not only the biggest ones, should be under the supervision of regulators in Frankfurt. They should have the sole authority to shut down, or merge, failing banks. When they offers credit, they should accept only marketable securities as collateral.
Without these reforms, zombie banks represent another financial crisis waiting to happen.
- Op-Ed Contributors: The European Central Bank Needs More Power (nytimes.com)
- A central-bank failure of epic proportions (economist.com)
- Ponzi Comes Full Circle: ECB Will Rate Sovereign Bonds It Accepts As Collateral (zerohedge.com)
- High & Low Finance: European Bank Deposits Tell a Tale of Euro Uncertainty (nytimes.com)
- Central banks prepare for turmoil after Greek vote (reuters.com)
- Tinker Bell Is Dead (lewrockwell.com)
- Italian Plan to Reduce Borrowing Costs Gets Close Look (nytimes.com)
- Could This Weekend Be The Most Important Since The Fall Of 2008? (ritholtz.com)
- Euro to fall to $1.15: Barclays (blogs.marketwatch.com)
- Central banks urged to keep markets stable (telegraph.co.uk)
Greece Election Results Too Close To Call, Exit Polls Show
ELENA BECATOROS 06/17/12 12:49 PM ET
ATHENS, Greece — In an election crucial for Greece, Europe and the world, exit polls on Sunday showed the two top contenders in Greece to be neck-and-neck.
The outcome of Sunday’s vote could determine whether Greece remains in the euro or is forced to leave the joint currency, a move that could drag down other European countries and have potentially catastrophic consequences for the global economy.
The exit polls showed that the conservative New Democracy party is projected to win between 27.5 and 30.5 percent of the vote while the anti-bailout radical left Syriza party may get 27 to 30 percent.
Syriza head Alexis Tsipras has vowed to cancel the terms of Greece’s international bailout deal and repeal its austerity measures – a move many think will force Greece to leave the 17-nation eurozone. New Democracy leader Antonis Samaras says his top priority is to stay in the euro but renegotiate some terms of the bailout.
Whichever party comes first in Sunday’s vote gets a bonus of 50 seats in the 300-member Parliament.
As central banks stood ready to intervene in case of financial turmoil, Greece held its second national election in just six weeks to try to select a new government after an inconclusive ballot on May 6.
The two parties vying to win have starkly different views about what to do about the (EURO)240 billion ($300 billion) in bailout loans that Greece has been given by international lenders. One wants to tear up the deals and void the harsh austerity measures demanded by lenders that have caused Greek living standards to plummet. The other backs the bailout deal but wants to amend it.
The choice – the most critical in decades – could determine whether Greece abandons the joint euro currency and returns to its old currency, the drachma. But there are no rules governing a country’s exit from the eurozone, and a Greek exit could spark a panic that other debt-strapped European nations – Portugal, Ireland, Spain and Italy_ might also have to leave.
That domino scenario – known in economic terms as contagion – could engulf the euro, causing a global financial panic not unlike the one that gripped the world in 2008 after the investment firm Lehman Brothers failed in the U.S.
The vote Sunday was also coming after a difficult week for Spain and Italy, which saw their borrowing costs soar. Tens of thousands of Italian workers rallied Saturday in Rome to protest pension cuts, tax hikes and labor reforms.
The big question Sunday was how far deep Greek anger at the bailout terms would propel the radical left, anti-bailout Syriza party led by 37-year-old Alexis Tsipras. But no party is likely to win enough votes to form a government on its own, meaning a coalition will have to be formed to avoid yet another election.
“I’d like to see something change for the country in general, including regarding the bailout,” said Vassilis Stergiou, a voter in Athens. “But at least for us to get organized and at the very least do something.”
Inconclusive elections on May 6 resulted in no party winning enough votes to form a government, and coalition talks collapsed after 10 days. The vote, which also sent the formerly governing socialist PASOK party plunging to historic lows, sent a very clear message that Greeks have lost patience with the deep austerity imposed in return for the bailouts.
Tsipras, a former student activist, has vowed to rip up Greece’s bailout agreements and repeal the austerity measures, which have included deep spending cuts on everything from health care to education and infrastructure, as well as tax hikes and reductions of salaries and pensions.
But his pledges, which include canceling planned privatizations, nationalizing banks and rolling back cuts to minimum wages and pensions, have horrified European leaders, as well as many Greeks. Tsipras’ opponents argue that the inexperienced young politician is out of touch with reality, and that his policies will force the country out of the euro and lead to poverty for years to come.
Virtually unknown outside of Greece four months ago, Tsipras and his party shot to prominence in the May 6 vote, where he came a surprise second and quadrupled his support since the 2009 election.
Journalists and television news crews from across the world jostled for space to see Tsipras vote Sunday in Athens.
“We have beaten fear. Today we open a road to hope,” Tspiras said, adding that he was confident of victory. “Today we open a road to a better tomorrow, with our people united, dignified and proud. In a Greece of social justice and prosperity, an equal member of a Europe that is changing.”
The young left-wing leader has accused his rivals of attempting to terrorize the population by casting him as the man who will ruin the country. He insists he will keep Greece within the euro – something that opinion polls have shown about 80 percent of Greeks want – but European leaders have made it clear there is no room for Greece to reject the bailout and stay in the eurozone.
Greece has been dependent on the rescue loans since May 2010, after sky-high borrowing rates left it locked out of the international markets following years of profligate spending and falsifying financial data. The spending cuts made in return have left the country mired in a fifth year of recession, with unemployment spiraling to above 22 percent and tens of thousands of businesses shutting down.
Samaras, meanwhile, has cast Sunday’s choice as one between the euro and returning to the drachma. He has vowed to renegotiate some of the bailout’s harsher terms but insists the top priority is for the country to remain in Europe’s joint currency.
“Today the Greek people speak. Tomorrow a new era for Greece begins,” Samaras said after voting in southern Greece.
Separately, Greek police were investigating the discovery Sunday of two unexploded hand grenades outside private Skai television station on the outskirts of Athens. Greek government spokesman Demetris Tsiodras denounced the action as an attempt to spoil the smooth running of the elections.
Police also said they have notified Twitter about a forged message purportedly sent out by Greece’s Communist Party urging voters to cast their ballots for Syriza.
Strong winds in the Greek archipelago also forced the cancellation of some ferry routes Sunday, raising doubts about whether some voters would be able to get to island polling stations.
- Greeks head to polls in crucial vote (cbc.ca)
- Greek vote ‘too close to call’ (bbc.co.uk)
- Greeks Vote In Election Critical to Euro Zone Future (blogs.barrons.com)
- Greek elections: Greece returns to the polls – live coverage (guardian.co.uk)
- Greeks go to polls in vote that could shake world (worldnews.msnbc.msn.com)
- Breaking: First Round of Greek Polls Shows Incredibly Tiny Lead for New Democracy (businessinsider.com)
- Greeks vote in critical election (boston.com)
- Greeks vote in critical election (news.yahoo.com)
- A Critical Vote in Greece on Its Standing in the Euro Zone (nytimes.com)
- Greeks Begin Voting In Election That May Determine Fate Of Europe (ibtimes.com)
16 June 2012
Germany’s Merkel urges Greek commitment to austerity
Mrs Merkel has come under pressure over austerity with many countries insisting on growth policies
German Chancellor Angela Merkel has urged Greek voters to elect leaders who will stick to austerity measures.
Mrs Merkel was speaking on the eve of crucial elections which could determine the country’s future in the eurozone.
She said Europeans cannot make commitments which they then ignore.
The main contenders, the left-wing Syriza and right-wing New Democracy, are at odds over whether to broadly stick with the tough EU bailout deal, or reject it and boost social spending.
Tough austerity measures were attached to the two international bailouts awarded to Greece, an initial package worth 110bn euros (£89bn; $138bn) in 2010, then a follow-up last year worth 130bn euros.
Many Greeks are unhappy with the conditions attached to deals which have been keeping Greece from bankruptcy.
The poll, the second in six weeks, was called after a vote on 6 May proved inconclusive.
Sunday’s vote is being watched around the world, amid fears that a Greek exit from the euro could spread contagion to other eurozone members and send turmoil throughout the global economy.
Germany, the biggest economy in Europe, has been a key advocate of austerity as a way for Greece to reduce its debt.
It says that Greece, like other member-states which have received international bailouts, must abide by the austerity conditions.
On the eve of the vote, Chancellor Angela Merkel said: “It is extremely important that tomorrow’s Greek elections lead to a result in which those who form the government say, ‘Yes, we want to keep to our commitments.”
The head of New Democracy, Antonis Samaras, told supporters on Friday that he would lead the country out of the financial crisis, while staying in the eurozone.
He broadly accepts Greece’s international bailout, but says he will renegotiate the terms of the agreement to seek a better deal for Greeks.
“We will exit the crisis; we will not exit the euro. We will not let anyone take us out of Europe,” Mr Samaras said.
The youthful head of Syriza, Alexis Tsipras, rejects the bailout, but wants Greece to stay in the eurozone, saying a bailout is possible without the kind of drastic cuts demanded of Greece.
“Brussels expect us, we are coming on Monday to negotiate over people’s rights, to cancel the bailout,” he told a final rally on Thursday.
The BBC’s Europe editor, Gavin Hewitt, says the vote is likely to leave big questions for Europe’s leaders when they meet for an EU summit at the end of the month in Brussels.
Chancellor Merkel was one of several European leaders who took part in a video conference on Friday ahead of a G20 summit, starting in the Mexican resort of Los Cabos on Monday, which is set to be dominated by the eurozone crisis and the aftermath of the election.
Greek bailout: Where the parties stand
Stance on bailout
Share of vote May
Keep bailout but more time for restructuring and EU help to stimulate growth
Keep bailout but subject it to a “structured and courageous revision”; implement fiscal adjustment over three years, not two
Cancel bailout, nationalise banks and freeze privatisations, but stay inside eurozone
Reject bailout but remain in eurozone
Gradually disengage from bailout but stay in eurozone
Unilaterally cancel debt, leave the EU and restore Greece’s own currency
Tear up the bailout but not necessarily abandon the euro
- Greek election: Parties make final push for votes – BBC News (bbc.co.uk)
- Greek Elections: A Referendum on the Euro? (world.time.com)
- Uproar over FT Deutschland giving election tips (ekathimerini.com)
- Is Grexit good for the euro? (economist.com)
- The European countdown (bbc.co.uk)
- Alexis Tsipras: Angela Merkel’s Europe ‘belongs to the past’ (telegraph.co.uk)
- Merkel declines to offer Greeks voting advice (ekathimerini.com)
- Q&A | Greece elections on Sunday pose a crucial dilemma (kansascity.com)
- Lone, fragile future beckons the Greeks (smh.com.au)
- European leaders hold video conference to avert a market meltdown next week (guardian.co.uk)
It’s grim in Greece as voters go to polls
ATHENS // Greek voters could hold the fate of the world economy in their hands as they head for the polls today, but with their society on the brink of collapse many are ready to reject the harsh austerity measures imposed by the international community.
“I am one of the lucky ones: I was fired last week,” said Tasos Kostopoulos, a journalist with 25 years’ experience at one of Greece’s leading daily papers.
He had not been paid for 10 months. Now that he has been officially sacked, there is at least a chance of compensation.
“If the paper goes bankrupt, perhaps I will receive something in a year or two.”
This is what passes for good fortune in Greece today, two years after a debt crisis sent the country into a spiral of recession and unemployment – now at a record high of more than 22 per cent.
Since then, the country has been forced to accept severe austerity measures, including huge cuts in public spending, as part of an international bailout. Critics say austerity has exacerbated the downturn and brought the country to the point of social and economic collapse.
Ominous signs are everywhere. Shops are closing one after another. Adverts offering cash for gold have sprouted like weeds on every corner.
Cafes are deserted and hassled by beggars, previously a rare sight in downtown Athens. At one central station, a man in a fraying suit checks each ticket machine for loose change.
Most observers expect a tight two-horse race in today’s election, a rerun of the inconclusive poll last month that left the leading parties unable to form a government.
It is an ugly choice with huge stakes.
On one side is New Democracy, one of Greece’s traditional leading parties that supports the austerity package as the price of continued international support. If they win, Greece could see a repeat of the violent anti-austerity street protests that convulsed Athens last October.
Their main opponent is Syriza, a coalition of 13 left-wing parties that rejects the terms of the bailout and says it will pull out of the deal. If foreign lenders refuse to renegotiate, Greece could be forced out of the euro. That would further devastate the Greek economy, and possibly trigger a crisis of confidence in the whole euro zone that would have huge implications for the global economy.
Syriza’s charismatic leader, Alexis Tsipras, has taken the party from obscurity to the brink of victory on the promise that the international community is bluffing and cannot afford to let Greece leave the euro. Many Greeks are willing to take that risk simply because they feel there is nothing left to lose.
The port at Piraeus, half an hour outside the capital, dates back to the fifth century BC when the navy of classical Athens dominated the Mediterranean. In recent decades, its shipyards have been the backbone of a booming maritime industry.
A visit on Friday found the docks silent, the 10,000-strong workforce that built and repaired ships reduced to a skeleton crew of a hundred. The rusting hulk of a half-built tanker lays abandoned, its owners unable to keep up payments.
“People took great pride in their work here,” said Babis Dinakis, who has spent 20 years in the close-knit Piraeus community and runs a store for tools and parts.
“It was highly specialised, often dangerous work – freezing in the winter, over 40 degrees in the summer. There was a culture that jobs were always delivered on time – no matter how many hours were needed.”
But many here have been out of work for 18 months, while families face new taxes and pension cuts prescribed by the bailout package.
Locals have set up soup kitchens and food collections for the worst off, but even the famously strong support network of this working-class community is stretched to breaking point.
“People come to my store and beg to work for €10 a day,” said Mr Dinakis. “These are people who have been experts in their job for 25 years.”
This week, members of the neo-Nazi Golden Dawn party trashed the shop of a well-known Egyptian fishmonger in Piraeus and hospitalised him, a sign of the spreading anti-immigrant extremism that has accompanied the crisis.
“He was well-liked and well-integrated, but this is the sort of anger that is growing,” said Mr Dinakis. Golden Dawn took more than 10 per cent of the vote in Piraeus last month, compared with 5.3 per cent nationwide.
Many in the international community are frustrated with Greece’s apparent unwillingness to pay the price for years of excessive spending, exorbitant welfare schemes and a bloated, over-protected public sector.
While many Greeks accept that cuts need to happen, they still question the way in which austerity has been implemented. The perception is that front line staff are bearing the brunt while politically connected officials are untouched.
“The kids had no exercise books for four months at the start of the year,” said Anjelica Sapouna, a secondary schoolteacher in Athens and parliamentary candidate for Syriza. “In winter, there was no heating because schools couldn’t afford fuel.”
There are daily reports of pharmacies blocking access to medicines for lack of money, and children fainting in classrooms because they are no longer eating breakfast.
“Doctors and nurses have their wages cut in half, but pointless people in ministries keep their jobs,” said Ms Sapouna. “There is no political will to change the medieval system of patronage and corruption.”
Having never been in power, Syriza is free from the taint of corruption and its promises of a new approach to the crisis based on growth and job protection has struck a chord with those desperate for some glimmer of hope.”
But many remain unconvinced by the economics of their plan, and fear a Syriza win could mean a tumultuous exit from the euro.
“This isn’t about politics or even economics,” said Kostas Stamatiou, a 52-year-old attorney in the crowd of a New Democracy rally on Friday evening. “This is a civilisational choice – do we want to stay part of the European way of thinking? Syriza would take us out of that, which would be a disaster.”
- Greek election: Parties make final push for votes – BBC News (bbc.co.uk)
- Europe on the brink as Greek crisis approaches climax (business.financialpost.com)
- Greek Elections: A Referendum on the Euro? (world.time.com)
- Fisher: Europe totters on the edge as Greece drama approaches its climax (canada.com)
- Greece can have it all. Yes Euro, no austerity. Alexis Tsipras on @BloombergTV (investmentwatchblog.com)
- Lone, fragile future beckons the Greeks (smh.com.au)
- Polls: Greek’s pro-austerity parties gaining (hosted.ap.org)
- Greeks pull $1 billion out of banks and stock up on food prior to destiny-shifting election (theextinctionprotocol.wordpress.com)
- Q&A | Greece elections on Sunday pose a crucial dilemma (kansascity.com)
- Meet the Greeks (thedailybeast.com)
How Greece Squandered Its Freedom
By NIKOS KONSTANDARAS
Published: June 14, 2012
MY country is hurtling toward an election that will decide its fate — whether Greeks will fight on to remain part of Europe’s core or succumb to their own weaknesses and turn inward, choosing isolation, anger and uncertainty greater than that from which they wish to flee.
The vote on Sunday will change our lives — determining not only whether we remain in the euro zone but also the nature of our society and the fate of the democracy that was re-established just 38 years ago after a dictatorship. We are bitterly divided between those who want to carry on with the reform process and those who want to turn back the clock. Our partners in the European Union are frightened of the consequences of our vote, but seem otherwise indifferent to our fate.
At a moment when the choices should be as clear as possible — between reform and stagnation, between Europe and isolation, between painful progress and the deceptive comfort of surrender — the issues are hopelessly confused by false expectations, by false choices and by the total failure of a political class that can’t propose solutions to the country’s problems and can’t forge a minimal national consensus on what is at stake and what needs to be done.
We face a choice between two deeply flawed alternatives. On one hand, there is New Democracy, a center-right party that has done much to undermine Greece’s economic reform and revival over the past two years. It refused to support the bailout agreement signed by the Greek government, the European Union and the International Monetary Fund on the grounds that it would stifle growth and so it undermined initiatives like tax reform that would have helped combat tax evasion by self-employed professionals and businesses. Yet it is now presenting itself as the responsible force that will stick to austerity and keep Greece in the euro zone.
On the other hand there is Syriza, a fractious coalition of 12 radical groups that has anointed itself the herald of leftist change throughout Europe and declares that it will immediately annul the bailout agreement while demanding that our partners continue to lend us money. The latter course could lead to the country’s swift exit from the euro and a chaotic and unpredictable future.
Since last October, after the first suggestion that Greece might be forced out of the euro zone, we have lived with desperate uncertainty. Suicides, once few, are on the rise as the pressure becomes too much for some. Meanwhile, families and the disorganized and underfunded social security system can no longer cope. In a country of fewer than 11 million people, more than a million are jobless. Everyone else lives in fear that he or she may be next as companies close or lay off workers. Migrants are leaving and Greeks are emigrating. A recent study conducted on behalf of Panteion University in Athens suggests that 7 out of 10 Greeks between the ages of 18 and 24 hope to seek their fortune elsewhere.
This uncertainty has inspired radical choices. A cousin of mine, and his wife, left with their young child a few weeks after she was offered a job in Dubai, in the United Arab Emirates. They reasoned that one job in Dubai was more secure than two in Greece. In villages around the country, the unemployed and pensioners from cities and towns are returning to the land to clear fields and grow crops that they feel they and their extended families will need if the economy gets even worse. A friend, a successful lawyer, is thinking of going into farming as he sees his clients falling by the wayside. My elderly parents follow the news carefully, anxious about possible shortages of medicines. Having lived through many ups and downs, they are more sanguine than most: “Whatever happens to the many will happen to us as well,” my mother says.
The insecurity shakes us to our core. When I go to the A.T.M., I hold my breath until I hear the reassuring whirring sound that says the machine will give me what I’ve asked for. I wonder whether I will be so lucky next time. My wife and I have been working for more than 25 years, saving for our children’s education, because even though about half our salaries go to taxes and social security, we know that we must pay for private schools, that we cannot count on state hospitals, and that our pensions are not guaranteed. (All this because others do not pay taxes, and because successive governments did not do their work.)
Every day we wonder whether we have done the right thing, jeopardizing our savings in a stubborn statement of confidence in a country that, since its founding, has declared bankruptcy several times. How will we tell the children that their lives would have been better if we had been less inert, less idealistic, more adaptable to circumstances? In a few years’ time, will they be able to travel and study abroad as easily as we once did? We don’t know.
The choice Greeks face on Sunday might appear simple — between tightening our belts and remaining in the euro or leaving it and facing an economic meltdown. But politics is never simple here.
The discredited New Democracy party, which governed Greece from 2004 to 2009, represents the failed political system that allowed Greece to fall so deeply into debt in the first place and then signed on to harsh austerity measures.
And a coalition led by the left-wing coalition Syriza wouldn’t be the breath of fresh air that its 37-year-old leader, Alexis Tsipras, would like us to believe. Its platform is populist to the point of nihilism as it tries to suck up the support of those who’ve abandoned the mainstream parties and their failed policies: it promises to annul the reforms and austerity measures of the past two years, nationalize banks, block privatization plans and even take back some of the state companies that were recently sold off.
Meanwhile Pasok, the socialist party that until May had been Greece’s other major political faction, alongside New Democracy, has withered to near irrelevance because it is blamed both for policies that stacked the public sector with political clients and bloated state spending, and for implementing the austerity and reforms demanded by our creditors.
None of these parties have advanced a serious agenda to avoid disaster. Those who are deeply in debt — or who aspire to gain at the expense of others — hope that the economy’s slate will simply be wiped clean. Those who have stashed their money abroad will be able to buy assets on the cheap if Greece leaves the euro zone. But the people who work hard and pay taxes, who have a stake in reform and progress, who carry the burden of every mistake, have no credible representative to vote for. Those who want a better Greece have to look for the least bad option.
The widespread feeling of loss is worsened by the understanding that we wasted most of the past four decades — the longest period of peace and prosperity that the country has known. Greece made great strides toward achieving the standards of its European partners, with major infrastructure projects, hospitals and schools, and with European Union subsidies and markets helping to create a booming economy and a new middle class. But we allowed development to become a bubble. We lost the self-discipline, moderation and inventiveness that once helped the Greeks achieve great things, and we succumbed to political expediency, delusions of grandeur and a fatal sense of entitlement.
EVER since the Greeks began their war of independence against the Turks in 1821, these different aspects of the national character have been in perpetual conflict, resulting in breathtaking swings between glorious heights and desperate depths. The heroic resistance to the German occupation in World War II was followed by a terrible civil war between left and right that still cripples our politics; the inspiration of the Athens Summer Olympics in 2004 was followed by the economic, social and political ineptitude that brought us to today’s collapse of the main political parties, and what is turning out to be the destruction of the country’s backbone: small businesses and the middle class.
We hear that about 80 billion euros has been pulled from bank accounts and that 500 million to 800 million euros is being withdrawn each day. Some of this goes toward paying bills, while the rest is being hidden or moved abroad. And yet, last month there was still about 170 billion euros in Greek banks, despite the growing chorus of economists declaring that Greece will leave the euro. Why? Maybe when the volcano rumbles, when the thugs come for our neighbor, when a society gives up the fight for progress, the familiarity of our routines numbs us to the dust and roar of the coming stampede. Maybe we do not think bad things will happen to us.
Maybe that’s what the people of Constantinople felt before it fell to the Ottomans in 1453, or the Greeks who were swept out of Asia Minor in 1922, or the innocents sucked into the civil war of 1946-49.
What I want to remember from Greece in 2012 is how laziness and years of intellectual sloppiness can waste the gift of freedom and leave open the gates of the city — how we allowed our leaders to pander to us until we had no one capable of leading us, no one next to us at the barricades.
Nikos Konstandaras is the managing editor and a columnist at the Greek daily newspaper Kathimerini.
- Most Aid to Athens Circles Back to Europe – NYTimes.com (mbcalyn.com)
- Postcards From Greece – NYTimes.com (mbcalyn.com)
- George Osborne warns of dire consequences of Greece leaving eurozone (independent.co.uk)
- Meet the Greeks (thedailybeast.com)
- Italy on right path with reforms: German finance minister (vancouversun.com)
- Greek elections: Alexis Tsipras – kingmaker or deal breaker? (guardian.co.uk)
- Greece’s Choice: Bargaining versus pleading (a piece to appear in the Huffington Post) (yanisvaroufakis.eu)
- Going, going, gone? (economist.com)
- Is a Greek Exit from the Euro Inevitable? (business.time.com)