The Corner

OXI Dokey

As Greece prepares to vote on a bailout package that is technically no longer there, the Marxist clown who is its finance minister does his bit for diplomacy.


Greek Finance Minister Yanis Varoufakis has accused Athens’ creditors of “terrorism”, the day before a referendum on an international bailout.

Writing in the Financial Times, Chris Giles explains just how wicked those creditor-terrorists have been:

Let us be absolutely clear about this. Greece has already benefited from massive debt restructuring. The face value of its debt might be 175 per cent of national income, but it faces a lighter interest payment burden than Italy, Spain and Portugal (and one barely heavier than Germany’s).

As Klaus Regling, head of the European Financial Stability Facility, said this week, Greece has already received by far the most generous lending conditions ever granted to bailout countries. The EFSF loans have an average maturity of 30 years, and for the vast majority of these loans Greece enjoys a grace period on interest and principal payments until 2023.

More on that here.

Meanwhile, the Daily Telegraph’s Ambrose Evans-Pritchard reports on the deteriorating financial and political climate within Greece:

The daily allowance of cash from many ATM machines has already dropped from €60 to €50, purportedly because €20 notes are running out. Large numbers are empty. The financial contagion is spreading fast as petrol stations and small businesses stop accepting credit cards….

 Constantine Michalos, head of the Hellenic Chambers of Commerce, said lenders are simply running out of money. “We are reliably informed that the cash reserves of the banks are down to €500m. Anybody who thinks they are going to open again on Tuesday is day-dreaming. The cash would not last an hour,” he said.

 ”We are in an extremely dangerous situation. Greek companies have been excluded from the electronic transfers of Europe’s Target2 system. The entire Greek business community is unable to import anything, and without raw materials they can’t produce anything,” he said. Pavlos Deas, owner of an olive processing factory in Chalkidiki, told The Telegraph that he may have to shut down a plant employing 250 people within days…..

And about those banks.

The Financial Times:

Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears the country is heading for financial collapse, bankers and businesspeople with knowledge of the measures said on Friday. The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.

Evans-Pritchard again:

Four members of the nationalist Independent Greeks party (Anel) – the junior partners – said they would break ranks and vote “Yes” to creditor demands – though no offer is now on the table – admitting that they were aghast by the closure of the banking system and the drastic events of recent days.

My guess is that many Greeks feel the same way. Although most polls shows the yes (ναί) and no (όχι) votes running within the pollsters’ margin of error, the ‘yes’ camp appears to have the edge, and my guess (puts head in noose) is that yes will win, probably helped, I suspect, by the existence of quite a few shy ναί’s.

 But the leader of the Independent Greeks has no time for his rebel MPs.

The party’s hardline chief and defence minister, Panos Kammenos, dismissed them contemptuously. “We are at war and there will be no backing down. Whoever does not have the stomach for war, be gone,” he said….

As a reminder, Kammenos created something of a stir with his claim late last year that Greece’s Jews paid less tax than other Greek citizens, an allegation that he decided to make a few days after a drive-by shooting at the Israeli embassy in Athens.

Back to Evans Pritchard:

The mood within the Syriza movement is increasingly bitter and polarized. One MP appeared to have lost confidence in the party leadership. “We have had months of childish tactics. They thought they could blackmail Europe into making concessions instead of going to the root of the problem facing this country and accepting that we have to break free altogether. They don’t know what they are doing,” he told The Telegraph.

There are plenty of theories to go round. Did Syriza (the far-left grouping that dominates Greece’s government) always intend to create the impasse that would lead to Grexit (something that most Greeks do not want) or have they blundered into a situation where it could conceivably (I wouldn’t put it at more than that) now happen?

But the MP quoted by Evans-Pritchard has one thing right. Greece should leave the euro.

Writing in the Spectator, Matthew Lynn observes:

Greece before it joined the euro was pretty much what it had always been: a slightly ramshackle, inefficient Balkan economy, rife with cronyism and corruption. But it got by. It took the special magic of the euro to turn Greece into the epicentre of a major financial crisis. The single currency has a kind reverse alchemy: everything it touches quickly turns to rubbish. Greece ran up too much debt, and spent a bit too much. But in normal circumstances, it could have devalued its currency, and renegotiated what it owed, just as [Milton] Friedman argued.

“A bit too much”: That’s an understatement, just as Lynn’s observation that “public spending has been cut to the bone” is an overstatement, but he’s correct to argue that “inside the euro, there seems no chance of Greece ever recovering”, even if he is too sanguine about what Grexit might look like:

Most countries that collapse out of dysfunctional currency unions do pretty well. In 2002, Argentina tumbled out [of] its peg to the dollar, in the middle of a banking crisis, but between 2003 and 2007 it averaged 8.5 per cent annual growth. Greece should do just as well. It will not suddenly turn into Switzerland, except with more olive groves. But that was never very likely anyway. Instead, it will be a slightly wobbly, middle income country, with a weak-ish currency.

There’s a decent chance that’s how it will end up, but the road there would be far rockier (and politically far more dangerous) than he suggests. Argentina (unlike Greece) is an inherently rich country, and, after breaking the dollar/peso peg was given a huge (and coincidental) boost by a surge in commodity prices (it’s a major food exporter).  Of course, its government eventually squandered the fruits of that break. Bad governments are like that, something of which anyone thinking of investing in a Syriza-led (if that was the case) post-Grexit Greece would be all too aware.

There’s no easy out. 

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