The last 6 years in Greece have proven the wit and wisdom of the late Yogi Berra to be very prescient.
It’s like deja-vu, all over again.
One clear example of that is that there is an extraordinary Eurogroup meeting of ministers today to discuss yet more plans for Greek austerity. It will also discuss how they can provide Greece with even more debt relief. Oh and just to add to the repetition all of this has to be done before the next set of bonds owned by the European Central Bank mature in July as Greece is unable to repay them on its own. There has been an extraordinary inflation in the number of Eurogroup meetings on the subject of Greece which is odd don’t you think when we are so regularly told how well things are going?
The Official View
Only on Friday Klaus Regling who as the head of the European Stability Mechanism is the main lender to Greece told us this in an interview with Corriere della Sera.
. The situation has improved compared to some years ago:
Poor old Klaus hits trouble in the same interview later as he tells us that Italy is not Greece!
Also, the two countries are not really comparable, Greece is in a completely different situation: it lost market access five years ago and needed huge amounts of money to stay in the euro area.
That does not seem like much of an improvement to me I do not know about you. Indeed Klaus hits more trouble as he tries to blow the trumpet for the program for Greece.
Greece has now a primary surplus, so it doesn’t need money every month to finance its budget. At the end of July, there is a real need for liquidity due to a sizeable debt repayment.
So it can finance itself except it cannot. Actually the primary surplus point is particularly important as it was presented back in the days of “Shock and Awe” from Christine Lagarde amongst others as a sort of Holy Grail. Once it was achieved the economy would grow – believe it or not but these clowns forecast 2.1% economic growth in Greece in 2012- and the debt burden would fall.Instead of course an economic depression was worsened and the debt burden rose. This means that Klaus needs to try to rewrite history and hope that nobody notices that it is the opposite of the May 2010 and following PR spin and hype.
the starting position in terms of economic problems was far more serious than that of the other programme countries.
The Debt Burden
Let us take a look at how much Greece now owes. First let us remind ourselves as to what the IMF forecast back in May 2010.
In Greece, debt would peak at 149 percent of GDP only in 2013. A pending data revision was expected to raise this projection by 5–7 percentage points.
Remember that we had the debt default called PSI in 2012 as the numbers instead ballooned. So with the success trumpeted by Klaus Regling it is now in better shape? Er no.
Greece owes some 321 billion Euros according to the latest estimates. This represents some 184% of Greek GDP which means that in this respect the original program failed in two ways. Firstly this debt peak has been some 30% or so higher compared to GDP so far at least and secondly the time-span was three years longer and counting..
The various flaws outlined here means that the official creditors of Greece have it in hock to just under 126% of its GDP. Klaus himself is responsible for debt totalling 87% of GDP. This is why he feels it necessary to churn out phrases like this.
So we are not close to any default.
The IMF holds a relatively small 14.7 billion Euros of Greek debt or about 8.4% of GDP. So you see the Euro area could easily replace it. What it cannot replace is the credibility that an IMF stamp on proceedings provides. When you review how far IMF credibility has fallen in recent years that is another sign of how bad things are.
The ECB is also a player here with 20.5 billion Euros left of the Securities Markets Program. Back in the early days it skulked off into the background with the profits from this but even the Euro area bureaucracy spotted that it was round-tripping the Euro area taxpayer and it now puts such money back in the pot.
Along that road you may note that media references to Greek bond yields are much less important than they once were as the real game is elsewhere.
Economic Depression
Euro area ministers try to distract us from this in the manner of “look away now” or “move along, nothing to see here” but the reality has been a 6 year economic depression as opposed to the sunny uplands they promised. This has been the major player in everything else going wrong as the 2.1% economic growth promised in 2012 turned into a near 10% decline. That had a good go at wiping out all the gains from the 2012 PSI default.
In the first quarter of 2010 as in just before “shock and awe” Greek GDP was 59 billion Euros as opposed to the 46.1 billion of the last quarter in 2015. So we see a near 22% decline which is how you define an economic depression and perhaps the worst part is that according to the latest piece of data it is still getting worse.
The seasonally adjusted overall volume index in February 2016 compared with the corresponding index of January 2016 recorded a decrease of 3.0%.
Those retail sales numbers are an example of one of the deepest parts of the economic depression as the volume index were 2010=100 is 64.6. To put that another way they are buying less than two-thirds of what they did back then. Currently the most troubling aspect is the 5% fall in food purchases as the amount spent was already much lower. I guess the establishment can ignore that as they so often tell us such purchases are “non-core” . Even the sentiment indices are still struggling with the Markit manufacturing PMI at 49.7 still indicating stagnation.
This is happening when the rest of the Euro area has just had its best quarter for a while, due in my opinion to the beneficial impact of the lower oil price and the lagged impact of the past fall in the value of the Euro. Yet Greece seems unable to hitch much of a ride.
Austerity
There is a rather wearying repetition as triumphant statement begets economic disarray and is followed by yet another triumphant statement. From the Guardian.
Greece has ‘basically achieved’ reform goals, says Jean-Claude Juncker.
Ah “basically achieved”, what again? Of course the man who told us he finds it necessary to lie has his own credibility problem! Meanwhile the Greek face yet another austerity program and yet more cuts to pensions. From Kathimerini
Sunday night of overhauls of the Greek tax and pension systems…..All 153 coalition lawmakers backed the legislation, which is worth 5.4 billion euros in budget savings.
Each time this medicine has been applied before the patient has become even more ill rather than improving as it turns out that the mathematics was supplied by Yogi Berra.
Baseball is 90 percent mental and the other half is physical.
Comment
It is now 6 years since the Euro area met to discuss and then approve the “shock and awe” program of May 2010. What they created was in fact a severe and long-lasting economic depression which is showing few if any signs of ending even now. This result is the opposite of the promises made back then. Greece was on a downwards trajectory but what it needed was a rope thrown to it to pull it up not a further shove in the back. Later we learned from US Treasury Secretary Geithner that more than a few at the meetings wanted to punish Greece and sadly that is the one part which did suceed.
Meanwhile the ordinary Greek has suffered from the economic depression which ensued. In essence the problem was this from the IMF.
Greece embarked on a far-reaching program of reforms in May 2010.
If it had then we would not be where we are and the first incarnation of the Syriza government looked hopeful but then engaged reverse gear. So the Greeks have been let down on so many levels. Even the latest austerity program will hit them again and miss the wealthy with of course the irony that if the truly wealthy had been taxed much of this would never have been necessary. Still there is Europe Day to celebrate.
Notayesmanseconomics's Blog 
What a sad post (but very interesting). The explanation for all this is fairly simple IMHO:
1. The ECB doesn’t give a toss about Greece;
2. The EU doesn’t give a toss about Greece;
3. Juncker doesn’t give a toss about Greece;
4. Merkel doesn’t give a toss about Greece;
5. The IMF doesn’t give a toss about Greece.
In contrast, all of the above DO give a toss about preserving the ever closer union, the Euro, at any cost. The only slightly recalcitrant party is the IMF, as non-Europeans funding the IMF for some reason don’t seem to understand that the European dream is worth any price. Luckily, it is currently headed by Ms Lafarge, who is a classic Europhile, to keep it in line.
I imagine that the plates will be kept spinning until at least 24th June, but predict that nothing will be done to help Greece before or after that. The show will rumble on as before, with inconvenient facts never allowed to spoil a good story spun by our Brussels masters.
There’s also the unerring probability that the vast bulk of the Greek electorate
1. doesn’t give a toss about ECB
2. doesn’t give a toss about the EU
3. doesn’t give a toss about Juncker
4. doesn’t give a toss about Merkel;
5. doesn’t give a toss about IMF.
‘The show will rumble on as before, with inconvenient facts never allowed to spoil a good story spun by our Brussels masters.’
Too true
Hello Shaun,
and people wonder why I call the EU the Franko-German Empire !
punish Greece ! indeed what did they mean ? the people of Greece or its rulers ? or someone else ?
The EU is touted as a “democratic” organization and yet its leaders feel fit to punish a certain group of its voting public !
I have said in the past that if any Greek improvement occurs it will be pounced on by the pollies as their “success” and as the poor Greek people get made poorer and poorer sadly it seems that bit is all “their fault ” .
is it too late to go the Iceland route ?
will I be able to go on a cheap Greek holiday next year with a new dracma ?
Forbin,
Ps : Madrid , wife was there at the weekend – not much reported here about their protests either
Hi Forbin
Madrid have their circus do they not of the Champions League final? Should Greece see some sense and take the default and devalue route then yes the new Drachma would be a fair bit lower than the Euro giving the Forbins a cheap holiday. As to any Greek recovery being claimed by the politicians well the “Grecovery” theme tried that in 2013 and 14 but seems a lot quieter these days! Maybe that means there is a little hope.
As to being too late I do not think so……..
Shaun, what proportion of the Greek government budget is currently spent on debt servicing? How does it compare with the proportion of the UK government budget spent on debt servicing? What is the risk of a a sudden rise in Greek debt-servicing costs? I think these questions are more relevant than looking at debt-to-GDP ratios and I suspect that the answers would show that Greece has had an enormous measure of practical debt relief.
Hi Ian
Yes Greece has received a lot of debt relief but some care is needed as it has been on interest costs but in some cases has added to the total debt. Let me start with the interest numbers given by Klaus Regling of the ESM.
” The official creditors at the same time granted debt relief by extending the maturities of our loans, reducing the interest margin and granting interest deferral.All this was very important for Greece, because it meant that since 2012, Greece saves substantial amounts of money every year on debt service payments. We have estimated that the annual savings for Greece are around €8 billion, coming from these measures in 2012, and that is equivalent to 4%
of Greek GDP every year. ”
Could costs rise well that depends on whether the funding costs of the ESM rise so in essence bond yields.
” One point to remember is that the interest rates we charge on our loans
are determined by our issuing activities. ”
But some of the gains are added to the debt.
“You also asked how an interest deferral works; we have one in place since 2012, so Greece does not need to pay right now the major part of interest payments on EFSF loans. They are small, because we only charge our funding costs, which are low, given our good rating and the guarantees from our
Member States, and the global interest rate environment. But still, there is a non-payment of interest due. This is not forgiven; it’s added to the debt stock,”
Hi Shaun
Do I detect exasperation /anger?
“but these clowns forecast economic growth of 2.1% in Greece in 2012” you are correct but no one is laughing.
Greece is the whipping boy others are in the same boat or worse Italy Spain are obvious but the US Japan(incredible) and the UK are heading for the same fate.
The only difference is Greece are in the water and the Sharks are circling,the others are still on board but the water is rushing in and when the boat sinks ,which will be soon.1929 and 2008 will look insignificant.
You can’t solve a debt crisis with more debt…..simples! Not to the clowns.
the 1930 depression has been seen by the current economic elite as one of a asset collapse
it was feared that the great crash of 2008 was going to be the same – so they pumped in money like the dot com collapse
however it can be seen to all that this was a move to delay the problem as this time growth did not re-appear as expected .
the head scratching now revolves around why there’s no growth .( I discount the so called growth of the past decade as its become obvious that all and anything that can be called “growth” has been thrown into the mix , and event made up on the spot – imputed, my bottom! )
Same as inflation figures has been polluted as to be irrelevant.
thus with the wrong ideas and the wrong metrics you end up far away from your intended goal
Forbin
Yep Forbin. Its all wrong.
Do we really want the b*stards who have done this to Greece to have ANY say in how we run our country?
The Greeks must have been REALLY bad in a previous life to be lumbered with their governors; they’re WORSE than OURS!!!!
“No” is the answer to your question
Klaus and all those involved in the Greek “we’ll call a bank subsidy a bailout” are violating the ‘No crossborder bailout clause’.
In the event of a Greek default, the ECB 87% needs sharing among Eurozone members, some of whom look insolvent. So they keep pretending all is well, singing along to Pink Floyd “The show must go on”
Hi ExpatInBG
As I read you first sentence I was reminded of the number of times that Mario Draghi has told us that the ECB is a “rules based organisation.” Well until they are inconvenient anyway…
The sort of debt burden sharing applied in the Euro area has the problem that the next weakest countries in line are the most adversely affected. Step forwards Italy which could least afford finding that debt equivalent to 2.7% of its GDP ( Q3 2015) was not going to be repaid.
A few more Jean Claude Junkerisms:
Monetary policy should be discussed in secret dark places
On voting outcome ‘ if it’s a Yes then we say ‘on we go’ if it’s a No then we say ‘we will continue’
On the EU project – ‘Of course there is transfer of sovereignty but would I be intelligent to draw public attention to the fact?’
On the workings of the commission and introduction of the Euro – ‘ We decide upon something, leave it lying around and wait and see what happens. If no one kicks up a fuss mainly because most people don’t understand what has been decided, we continue until there is no turning back’
This is the man who is effectively leader of the EU and who will govern our future and make our laws. Something to keep in mind on June 23rd!
Hi Pavlaki
He certainly has left a trail of mischief and misrepresentation. Also there is the issue of banking and money laundering in Luxembourg.
I am an American living in Berlin and have been watching the Greece situation from here.
People do not understand Merkel. She works for the NWO. The refugee situation here is horrible. It is about destroying the nation-state (Soros). She is fully aware of what she is doing and she is now sitting on an earthquake reaction against her. She is for spying, accepting heroin from Afghanistan (via Ramstein US AFB, Germany), sanctions against Russia, moving troops to the Russian border (she hates Putin because she cannot play her games with him), the ECB against savers, having Germany control the EU etc. She is now destroying her own CDU political party.
Greece is about two things. Austerity. What that means to Merkel is genocide. I am sure you understand the mentality of the NWO. Merkel is fully on board. Her real name is Faust (as in Goethe’s Faust).
Secondly, Merkel must know that the Deutsche Bank is corrupt and bankrupt. If Greece goes down, so does the DB as holder of Greek debt. Therefore she resists all attempts at debt relief. The Finance Minister here has lied to the public saying that there is no problem with the DB. Well, as you know, the DB is in deep trouble for a whole range of criminal activities. Last year they fired Herr Jain, a co-CEO, who was head of the derivatives department. I wonder why!!!
I am no longer a customer of the DB.
Because the German press is controlled by the CIA (Udo Ulfkotte in youtube in English), the Germans do not really know any of this though more than 60% don’t believe the German MSM. It was the CIA Süddeutsche Zeitung who released the Panama Papers. Nor do the Germans understand that Merkel is deliberately trying to destroy the country as they do not know about the NWO and the Satanists. Nor about Josef Ratzinger (ex-Pope) who is a Satanist and sacrifices children to Satan (http://itccs.org – Kevin Annett).