Greece And The EU —– HAHAHAHAHAHAHAHA!!!!! …… And, Now, Russia!

I’ll try to keep this brief as I can, but, there are several topics and back-stories in the continuous drama series known as the Greek debt crisis.  I can’t possibly cover them all, here.  But, please read the final paragraph, if nothing else.

Let’s start with a very brief synopsis of Greece’ predicament …..

image

A guide to Greece’s financial troubles and bailout talks

ATHENS, Greece (AP) — Greece is holding an emergency meeting with its financial rescue creditors in the hope of getting more loans. Without a deal, it could default on its debts as soon as next week, which could be the first step in a chain reaction that sees the country fall out of the euro currency union.

Here is a broad look at the key issues in the crisis.

___

CURRENT ISSUE

The Greek government must make a 1.6 billion euro ($1.8 billion) loan payment to the International Monetary Fund this month. It doesn’t have the money. It is negotiating with other eurozone countries and the IMF to get 7.2 billion euros in loans — the last installment in a bailout package expiring this month. Without that money, Greece will likely default on the IMF loan. Even bigger payments come due later this summer. Its creditors are demanding that Greece make reforms and cuts, including to public pensions, before releasing the money.

___

NO BOND MARKET

Greece needs loans because it cannot borrow on bond markets at affordable rates, as other countries do to finance their spending. Greece’s bond rates — effectively what international investors demand in return for lending the country money — spiked higher in late 2009 when Greece revealed that its public deficit was far higher than expected.

___

DEAL HURDLES

Greece is having trouble reaching a deal with creditors because a new government, elected in January, says it will not abide by the terms that previous governments have accepted for years. Those terms include cuts to pensions, wages and public sector jobs as well as higher taxes.

Such budget ‘austerity’ measures aim to reduce the budget deficit but have also hurt the economy by increasing unemployment, making Greeks poorer and reducing the amount of disposable income Greeks have.

The current government, led by the radical left Syriza party, says it will not make more such measures. Creditors are insisting it should if it wants more loans, because they are worried that if Greece doesn’t get its public finances back in shape, they’ll never get their money back.

Well, first of all, the creditors will never be paid back all of the money they’ve loaned Greece.  It just isn’t going to happen.  Secondly, with the bigger payments due later, most of the $8 billion will be gone by the end of the summer, and Greece is still bleeding …. so, they’ll need another loan in a few months!  You just can’t get enough drama these days!

DEFAULT DANGER

The risks of default are that it could unsettle confidence among Greeks and cause bank runs. The banks are currently supported with emergency credit allowed by the European Central Bank. If Greece can’t pay its creditors, the government debt lenders use as collateral for their ECB loans would become worthless and the ECB could withdraw its support.

Greece would have to then support the banks itself — but it doesn’t have the money to do so. It would theoretically then have to start printing its own money to get cash flowing through the economy again. Doing so, it would effectively be leaving the euro.

___

LONGER-TERM ISSUES

Greece’s problems will not be solved forever with those 7.2 billion euros. The money would only cover its debt repayments for a few months. So Greece and its creditors need to find a longer-term solution.

Because most of Greece’s debts consist of bailout loans, the country would be helped if its creditors agreed to make the terms of those loans easier — either by reducing the interest Greece has to pay on them or extending their repayment date.

Creditors had promised last year to consider this. But they say a decision can be taken only after Greece has fulfilled the reforms demanded in exchange for the 7.2 billion euros in loans. Greece wants such a decision on lightening its debt terms now.

So, with this information, we know Greece is circling the drain and the current drama isn’t going to fix this.  So, that makes this headline a bit perplexing ……

US stocks open higher amid optimism of Greek breakthrough

NEW YORK (AP) — U.S. stocks are opening higher on hopes of a breakthrough in Greece’s bailout discussions with its creditors even as few tangible signs of progress emerged from meetings in Europe. ……

What?  Well, look the AP finance people rarely know WTF they’re babbling about, and this could be the case, here.  However, upon further investigation, there may be some reason for such optimism.  What is it that could force the EU to agree to sending good money after bad?  Glad you asked …….  Will the person responsible please raise their hand?

image

Russia willing to consider loans to Greece

Well, many may look at this as a good or bad thing, or, something differently.  I see it as simplicity brilliantly applied.  It serves a dual purpose!  Let’s read some of the article …..

…. Speaking of the pipeline deal at a meeting with top executives of global news agencies, including The Associated Press, which began nearly three hours behind schedule at around midnight, Putin said he saw no support for the Greeks from the EU.

“If EU wants Greece to pay its debts it should be interested in growing the Greek economy … helping it pay its debts,” he said. “The EU should be applauding us. What’s wrong with creating jobs in Greece?” ……

Boom!!!!  More on that in a bit.  There’s more from the article …

Tsipras’ visit gave rise to speculation that the Greeks may be seeking Russian loans — and ahead of the talks, Putin’s spokesman said Russia would consider a loan if the Greeks asked for one.

“We would do this because they are our partners and this is a normal practice between countries who are partners,” spokesman Dmitry Peskov told The Associated Press. …..

… Putin said little about Greece, although he slipped in a joke about its predicament.

“When Mr. Tsipras spoke, he said the problem of Greece was not a Greek problem but a European one. Well, that’s right. If you owe someone a lot, then it is already not your problem but the problem of the one you owe — and that’s an absolutely correct approach,” Putin said.

Boom, boom!!!!!

There’s so much to this, I can’t possibly cover all of the angles. 

Putin is entirely correct about creating jobs in Greece.  This is, and always will be the correct approach to turning an economy around.  And, for whatever little socialist who may read this, it is always and only private sector jobs which will add to government coffers. 

Now, I’m not sure if Putin is serious about lending Greece money.  But, he may very well be serious.  This gives the EU a choice.  They can allow Greece to become a Russian satellite nation, or prepare to continuously feed Greece money.  Under the EU system, Greece simply won’t change. 

The Greek budget, compared to Russia’s is a pittance.  A couple hundred $billion is pretty cheap to buy a nation such as Greece.  I think, later, Greece would find Russia’s negotiating tactics a bit different than the EU’s.  But, that would be later.   

People can consider the implications of a Russian owned Greece. 

But, on a semi-separate issue, I recall this from a previously quoted article …..

Creditors are insisting it should if it wants more loans, because they are worried that if Greece doesn’t get its public finances back in shape, they’ll never get their money back.

I’m somewhat bewildered by this.  For clarity, let’s state, exactly, who the “creditors” are.  That would be the IMF, the ECB, and the EU. 

What do these people know about growing an economy or how a nation should become fiscally solvent?  They roll from one crisis to the next, applying Band-Aids when tourniquets are needed. 

Consider, for a moment, the troika’s demand to raise, and continually raise taxes in Greece.  Did we ever identify the problem in Greece as it being that their people were not taxed enough?  No?  Then how does raising taxes fix the problem? 

Well, it doesn’t.  The problem was/is that Greece is a socialist state.  They have too many government workers.  Raising taxes on government workers ….. consider that.  That’s the most insipidly stupid fix I’ve ever heard of in my life! 

Cutting public sector jobs was a good idea, mostly because that was much of the problem.  But, you can’t raise taxes simultaneously, because that discourages private sector job growth, which is needed to replace the jobs the people need!  You can’t say, “go get a job” and then make it nearly impossible for job growth! 

Unfortunately for the Greeks, they elected a bunch of leftists, so, raising taxes is the only thing they’re open to in the negotiations. 

Lastly, consider if Russia actually loans Greece money without Greece first exiting the EU.  The implications lead to an untenable situation in Europe.   By in large, Europe, at least nominally, is mostly protected by NATO, for the most part, protected against Russia. 

A partially Russian owned EU can’t co-exist with NATO defending Europe against Russia.  It simply cannot and won’t happen.   

Personally, I see no need for NATO, today.  The dissolving of NATO should have occurred as part of the formation of the EU.  The US foots most of the bill for NATO, and, yet, the EU was formed to directly economically compete with the US.  To the member states of the EU, I say, pay your own bills.  How easy should it have been to create an economic juggernaut without much of the worry about defense spending?  But, they squandered the opportunity.  And, now, many people in the member states are thinking it’s better to trade one tyrant for another.  I don’t blame them, there are other wolves at the door, which, neither the EU, NATO, or anyone else seems concerned about.  A right and proper Russian owned satellite nation wouldn’t have to worry about the other wolves.  But, it’s an exchange for the devil they don’t know, but, should know.   

Advertisements
This entry was posted in Economics, News and politics. Bookmark the permalink.

9 Responses to Greece And The EU —– HAHAHAHAHAHAHAHA!!!!! …… And, Now, Russia!

  1. Latitude says:

    Damn good post!!!!

  2. Latitude says:

    ..and to add fuel to the fire

    The eurozone must either integrate or disintegrate

    New research shows that the single currency is amplifying the differences between its members, making the euro in its current form unsustainable

    http://www.telegraph.co.uk/news/worldnews/europe/11686707/The-eurozone-must-either-integrate-or-disintegrate.html

    • DirkH says:

      Well in fact the alcoholic autocrats in Brussels now plan a EU wide FinMin, of course with EU wide taxation. So I hope for a resounding Nein from Schäuble, best would be with a follow up starving of the EU.

      BTW nearly every MEP in Brussels has already been mugged, as it is an Arabic city and MEPs are promising Kuffar victims. Brussels Police doesn’t do anything, says, if EU wants protection, pay up first. Just came up in a German state TV talk show (omitting the word “Muslim” of course).

  3. Latitude says:

    The Eurozone is doomed and cannot survive in its current form, regardless of what happens to Greece, a major new study shows.

    New research demonstrates that members of the single European currency are becoming more economically divergent, making a single rate of interest increasingly unsuitable for the bloc.

    http://www.telegraph.co.uk/news/worldnews/europe/11687660/Eurozone-doomed-whether-Greece-leaves-or-stays-study-shows.html

  4. leftinflagstaff says:

    Greece had better be careful. Mom won’t send a repo man. A loan shark will.

  5. Ted G says:

    Lat said it all, it is a brilliant posting.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s