Monday, January 26, 2015

Greece Greece Baby

The Greeks are going to force the issue and Europe is trembling:
 Greece rejected the harsh economics of austerity on Sunday and sent a warning to the rest of Europe as the left-wing Syriza party won a decisive victory in national elections, positioning its tough-talking leader, Alexis Tsipras, to become the next prime minister.

With almost 98 percent of the vote counted, Syriza had 36 percent, almost nine points more than the governing center-right New Democracy party of Prime Minister Antonis Samaras, who conceded defeat. The only uncertainty was whether Syriza would muster a parliamentary majority on its own or have to form a coalition.
So all that money that Greece owes? Well, good luck, creditors:
But his biggest promise — and the one that has stirred deep anxiety in Brussels and Berlin as well as in financial markets — has been a pledge to force Greece’s creditors to renegotiate the terms of its financial bailout, worth 240 billion euros, or about $267.5 billion. Squeezed by policies intended to stabilize the government’s finances, Greece has endured a historic collapse since 2009; economic output has shrunk by 25 percent, and the unemployment rate hovers near 26 percent.

While setting up an imminent showdown with creditors, led by Chancellor Angela Merkel of Germany, Mr. Tsipras has argued that easing the bailout terms would allow more government spending. That, he said, would stimulate economic growth and employment as well as help the Greeks who are most in need.
So how would one renegotiate the terms, you ask?
Mr. Tsipras has demanded that creditors write down at least half of Greece’s €319 billion public debt to give the country more breathing room for a spending stimulus.
Do you think the Germans will agree to that? I don't. Especially since other countries are watching what's happening with great interest:
A Syriza victory would lift hopes elsewhere for parties that are critical of the European Union, especially in Spain. There, the left-leaning, anti-austerity Podemos party, which is less than a year old, already is drawing 20 percent support in national opinion polls. The leader of Podemos, Pablo Iglesias, joined Mr. Tsipras last week for Syriza’s final campaign rally.

“What the whole debate about Greece and Syriza highlights is that voter anxieties, voter resentment and electoral disillusionment over austerity policies can be expressed at the ballot,” said Jens Bastian, an economic consultant based in Athens and a former member of the European Commission’s task force on Greece. “The example of Greece today may become a precursor to what happens in other countries like Spain, Portugal or Italy.”
Podemos translates to "we can" in Spanish. And if Greece can, Spain can. A big fight is coming. Watch carefully.

9 comments:

Gino said...

So, what if germany just forecloses on greece and much of europe...

W.B. Picklesworth said...

I don't really feel sorry for Germany or the others for lending easy money to spendthrifts. Greeks have been bearing the burden of their greed and stupidity for the past 5 years. Why shouldn't German bankers writhe a bit for their own sins?

jerrye92002 said...

Somebody is about to find out that "sooner or later, you run out of other people's money." What happens when nobody lays the track for the gravy train? I'm guessing hard times are comin' and I hope the other Euro countries stand firm against the socialist fantasies.

Mr. D said...

Gino, the problem with foreclosure is that it involves the use of force to make the foreclosure stick. Most people are rightly concerned when Germany uses force, given its track record.

WBP, I get the sentiment, but it won't stop with Germany. And bankers, especially central bankers, never writhe alone.

Jerry, I suspect that we're getting closer to that endgame. It's gonna get ugly, but it's difficult to see a graceful exit at this point.

jerrye92002 said...

Unfortunately, these socialist schemes never get blamed for their natural and inevitable results. Whatever befalls, you can almost guarantee that it will be blamed on those nasty bankers who wanted their loans to be repaid rather than graciously (and stupidly) throwing more money down a rathole.

Gino said...

jerrye: europe is not just running out of other people's money, they are running out of other people as well, with an aging population and declining birthrate.
just like us here in USA, but worse.

Bike Bubba said...

Probably what happens, sad to say, is that Greece at least gets a partial victory due to political pressure. The only solution here is to get government out of the business of loaning money to other nations--imagine the Greeks going to Wells Fargo or Warren Buffett and asking for a few billion bucks. They'd simply be laughed out of the building, as they should be.

Government, playing with our money instead of their own, for some reason doesn't catch on to basic things like credit scores.

Mr. D said...

Bubba, I think you're right — the Greeks are going to get a partial victory. And when the similar endgame starts to play out in Portugal, Spain, Italy and other mendicant members of the Eurozone, they'll expect a similar result. Let's see how that goes.

Gino, excellent point about populations — it takes a lot of people to support a welfare state and there aren't enough to go around. And when you import people from other places, they may not see things your way, as the editorial staff of Charlie Hebdo learned rather suddenly.

Bike Bubba said...

I think it drags all of Europe into a deeper recession, because the central banks are already gearing up for QE to cover what's going to be lost. Hence inflation and lower interest rates, hence people do not invest in capital, hence people do not get jobs.

Kinda like here, and count on the media to cover up for who caused it.