BVerfG and the ECB’s OMT programme

Today 21 June 2016 the BVerfG has affirmed the legality of Mario Draghi’s OMT programme. In doing so, it followed the lead of the CJEU. Nothing remarkable here, but two important issues arise:

  1. the BVerfG had initially insisted on a ban on debt restructures (no pari passu treatment of ECB held bonds in case of a sovereign default). This is absent from the final decision.
  2. the exclusion of Greece (or any other non-conforming/non-rescue programme participating Euro member state) is a prerequisite for the legality (no direct financing Treaty provisions) of ECB actions.

We learn this therefore: The ECB can do ‘whatever it takes’ so long as the Eurozone remains under strict supervision and conditionality. Otherwise the ECB is exposed to risk of loss that would be considered illegal.

This is not necessarily good news for Greece, or anyone planning ‘alternate’ paths (think Spanish election).

Read my background article on the BVerfG and the ECB’s OMT programme on the EU Law Analysis blog.

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@iGlinavos

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We Are Vlakes

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To the delight of all Greece watchers, the show in the circus has kicked off again after wikileaks alleged leaking of discussions between Poul Thomsen and his IMF staff on the future of the fund’s participation in the Greek Bailout.

Supposedly Thomsen and Velkouleskou are talking about options for Greece and the role of the IMF in the programme. The gist of it is that the IMF wishes debt relief, or exit from the Greek bailout. Wow (as Prophet Varoufakis would have said). We only heard this before, what, a million times? Thomsen himself has said time and time again in his IMF blog that the Greek programme is barely sustainable and debt relief is needed.

Thomsen’s point is simple and correct. For Greece to have sustainable finances it needs severe reductions in expenditure (especially in pensions) or debt relief, or a combination of the two. As Germany (primarily) and Europe (ECB and Commission) are adamant on no debt relief, the burden of the programme falls on fiscal measures. The problem for the IMF as everyone well knows is that it is not allowed by its charter (and logic) to participate in a programme that does not add up. The current combo of fiscal measures and lack of debt relief does not work. It will not reduce Greek debt/GDP to 120% as required.

Two options therefore exist for the IMF, recognition that Greece will sustain debt/GDP ratios way above 120% for a long long time (and exit of the IMF from the programme), or debt relief.

Now, I am telling you what you know and this is not much fun. You know what is fun? The Greek government’s reaction! Yes, you got it, Tsipras is furious, at the IMF, for requesting… eh… debt relief for Greece.

You done laughing? Take a breath and read this:

“The Greek Government asks the IMF for explanations whether pursuing the creation of bankruptcy conditions in Greece, just before the British referendum, is the Fund’s official position,” government spokeswoman Olga Gerovasili told state television.

Commenting on the leak, Greek Prime Minister Alexis Tsipras told weekly newspaper Ethnos: “It seems that some people are playing games with an aim to destabilize us. We will not allow (IMF’s) Thomsen to destroy Europe.”

So, the IMF is trying to destroy Europe according to Mr Tsipras. You could not make this stuff up. This comes from the man who supposedly allowed Varoufakis to negotiate the country almost to death in order to achieve what? Debt relief.

Now, why is Tsipras doing this? Is he that stupid? What could be the agenda? Lets venture a guess. Merkel has agreed with Athens that they will let things drag on, turn a semi-blind eye to the lack of enforcement of measures required by the bailout and continue the drip-drip of disbursements. They want to do this because they are sick of Greece and have bigger fish to fry (refugee crisis, Brexit). The IMF will not play ball and insists on its projections instead of the European Commission’s rosier estimates. Something has to give. Tsipras has been ratcheting up the rhetoric against the IMF in recent months not because he does not want debt relief, but because he knows Merkel cannot allow it, and he cannot stomach the alternative (meeting the milestones and satisfying IMF expectations).

We end up therefore in this new farcical episode in this sorry saga. One has to smile. The usual band of useful idiots has jumped in to yell again #ThisIsACoup, evil evil IMF, baaaaad neoliberalism.

Goodnight and good luck

idiot2

@iGlinavos

 

 

 

Resistance for its own sake

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We all resist so much. We have to. Or do we?

What are we actually resisting all the time? As academics, as scholars we take pride in our capacity to critique, analyse, deconstruct. To what end?

I am as responsible as the professor next to you. I wrote aplenty about neoliberalism, capitalism, democracy, the deficiencies of the state, the EU, the constitution, participation, emancipation.

For a while I felt secure behind the veil of critique that shields academia from real life. My job was to deconstruct I told myself, not to propose policy solutions. This was a job for the politicians.

Alas, the politicians offered no solutions. People like me took power in Greece, in Portugal, threaten to take power in Spain. Even in the US a ‘socialist’ candidate is making headway, unheard of.

But there is often a pronounced lack of governance from the professionals of critique. The best example is Prof. Varoufakis. We have written similar stuff in similar ways based on different, yet consistent literature. We reference Stigliz, Krugman, Marx, Foucault. We critique away. But, when the crisis reaches us, we come face to face with life, then we need to propose policy as well as to whinge about the inequalities of capitalism, the deficiencies of the EU, the errors of bureaucracy. We need to propose solutions that help, rather than hurt the population.

We need to improve the lives of real people, rather than the abstractions of voters, citizens, activists.

Why all this reflection you may wonder? Who cares what I critique anyway? The reason for this post is the inauguration of Varoufakis DiEM25, the lurch into Utopia.

Thinking ‘Utopia’ is exactly why we got into this mess to begin with. Tsipras and his band of merry bandits were thinking Utopia. Had no vision as to how to run an actual country with actual breathing people (and yes this includes breathing people who need to feed, beyond the Syriza close and dear who get cushy state jobs).

Varoufakis, urging us to debate, think, engage with the abstract aim of ‘improving’ the EU is asking us to continue to do what we have been doing already. Sit on the couch and pen blog posts about democracy and participation.

Greece is sinking, Europe is disintegrating. Varoufakis and his buddies are dreaming. Let them dream, but the rest of us need to wake up.

monkey

@iGlinavos

People animals and sex

It has been a while now that commentators have expressed concern that the wave of immigration passing through Greece will be stuck in Greece. After the cascade of border closures from Austria all the way down to Macedonia (FYROM for the nationalist readers of this blog), the inevitable has come to pass. While Syrians and a select other nationalities are allowed to pass on, everyone else (considered a migrant and not a refugee) is stuck on the Greek side of the border.

After the collected groups of people reacted to their predicament by blocking the railway line linking Greece to the Balkans, the government took action to remove them and offer some ‘progress’ on this issue.

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What did they do? They pilled everyone into buses and dropped them in Athens in one of the disused (Olympic legacy anyone?) Olympic stadiums. Here is what the international press said about this ‘solution’.

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Al Jazeera reported that hundreds of asylum seekers lined up to receive food outside a former Olympic Taekwondo centre – now a makeshift camp for refugees and migrants – while dozens of heavily armed Greek riot police watched.

You may think that these are young men, looking for work, so they can take a bit of rough sleeping? The Guardian told us the story of Amina:

is eight years old and running a fever. In her thinly padded pink anorak, hood pulled up over her curls and pallid face, she watches listlessly from the couch as her parents listen carefully to the doctor’s instructions over her medication.

In another place, in another city, at another time, perhaps, this sick child would be taken home to be tucked up in bed with hot drinks. But Amina has no home any more and tonight her bed is a grey donated blanket on the concrete floor of the tae kwon do stadium in Athens. Once this building was the pride of Greece’s 2004 Olympics; this weekend it is a squalid, cold place full of desperate people.

Yesterday (15.12.15) the people were informed that they will participate in a novel type of Immigrant Olympics and move to a different ex-Olympic venue, this time in Hellinikon (site of the old Athens Airport). Today (16.12.15) everyone was told to await evacuation and relief teams (volunteers) were told not to prepare provisions. Alas, no one had bothered to arrange transportation and those who made it to the new site found the venue closed and unavailable, as teams are trying to clean it from debris collected during the years of ‘use’ after the Olympics.

What sort of government is this you may ask, which brings hundreds of people into its capital city and leaves them stranded to fend for themselves? It is a government represented by this guy, Panos Kammenos, the Minister of Defense.

kamThe government, beyond ignoring border safety, internal security and basic human rights is actually doing something progressive. Civil partnerships for gay couples are getting debated in parliament. Well done to Syriza for bringing this to Parliament and passing the first committee hearing (You see, I am not always negative!).

The aforementioned Mr Kammenos takes a different view however. He is against it, and his MPs are voting against the proposal. Asked by a friendly (oh so friendly) journalist yesterday on national TV whether he is homo-phobic, Mr Kammenos offered this gem:

“Καλά, ο Ομπάμα μπορεί και να τους παντρεύει αν θέλει. Και στη Γερμανία έχουν αποφασίσει να κάνουν οίκο ανοχής για κτηνοβάτες, θέλει ο άλλος να πηγαίνει με σκύλο με γάτα, με καμήλα, με καμηλοπάρδαλη. Επειδή λοιπόν το κάνουν στη Γερμανία, θα θέλω εγώ να παντρεύεται ο άλλος καμήλα;”.

[my translation] “Ok, Mr Obama can marry who he wants. And in Germany they have decided to open brothels for bestiality, if one wants to sleep with dogs, cats, camels, giraffes. Because they are doing it in Germany, would I want someone to marry a camel?”

You have to appreciate the parallel. While the government of Syriza is treating refugees and immigrants like animals, a minister is teaching us about the options for animal sex in other Member States.

Splendid. Given the choice between Mr Kammenos and a camel, I know which I would choose.

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@iGlinavos

Grexit Daily News – 12 July 2015

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12 July 2015  —  Lies, myths and misconceptions


It is easy to get captured within myths and misconceptions. It is easy to identify oneself as left and progressive and start seeing reality through constructs and systems instead for what it is. I have always struggled with ‘interpretive frameworks’, perhaps this is why I have been unsuccessful in being a ‘lefty’.

What is it we are trying to save in Greece by resisting European demands for ‘modernisation’? Oh, but they are undemocratic, they are being unreasonable, they are being neo-liberal, you may say. Lets take a moment to de-construct these accusations.

We are the ones asking them for money. We are the ones who have run our country to the ground and are now begging for help. We have decided to assert out democratic rights, you might say! Assert away, Schaeuble says, but with your own money. Democracy ends when you ask other people to pay for it. This sounds awful? I agree it sounds awful. My human rights and my ability to self-determine do not stop my rent from going up every year. Attempting to blame others for our troubles is silly at best and devious at worst. Sure, Syriza blames everyone but themselves and Greeks love seeing conspiracy theories everywhere. They do not envy us because we have the nicest beaches: We messed up.

But their demands are unreasonable! Yes they are, austerity is pro-cyclical, a high primary surplus does not help service an unmanageable debt burden because it entrenches recession. Fine I agree, I can read Varoufakis books and nod away while I am eating Egina pistachios. What have WE done to present a credible alternative? We talked and talked. There is nothing wrong with the Greek state? There is nothing wrong with the Greek economy? What has Tsipras done over the last 6 months to deal with a dysfunctional state that is weak yet pervasive, predatory yet subject to capture? What did Samaras, Papandreou, Karamanlis, Simitis, Mitsotakis, the Dad Papandreou and so on and so forth? It is fine to decry a bad solution, but lacking an alternative you have no solution. Is the medicine killing the patient? Well, Greece supposedly never dies, but it cannot persist in an eternal zombie state either.

But hang on, this is an attempt by the Europeans to remake Greece in their neoliberal image! Yes it is. This is the whole point of Germany now playing hardball. They have a particular potion of neoliberalism and ordoliberalism that they think is best for Europe, and having failed to convince the Eurozone to go there voluntarily, they are now trying to push the Eurozone in that direction. This is terrible. What is our alternative as a small, bankrupt nation but to follow? This is horribly sad and horribly undemocratic, but Greece needs to acknowledge it has FAILED. Our political and economic system has FAILED. Our culture has FAILED. This was not done to us by others. WE FAILED.

Do I not have pride as a Greek? How can I say these things? Isn’t this is exactly what the ‘expert’ Paul Mason means when he accuses people of being ‘nazi-collaborators’ (historical surrealism aside)? Fine ok, lets do pride. Lets have Zoi Kostantopoulou as PM, Lafazanis as Foreign Minister and Lapavitsas as Finance Minister. Let us envisage a future outside the Eurozone and the EU. Where we will have pride and dignity. Where we will also have no money, a standard of living akin to the 70s, alliances with unpleasant imperialist dictators. Is this your alternative? Or will Greece become a loving commune where everyone is poorer but happier? I am thinking North Korea of the Mediterranean is a more likely outcome of this option.

Take a moment to think this through. What is the alternative? What is the non-Euro, non-EU future for Greece. Blame me for having insufficient imagination, but I do not see one.

@iGlinavos

150 days of solitude

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Having started my blog in January this year, my entries have served as a chronicle of my thoughts, hopes and aspirations for Syriza’s government. What has been billed as the ‘first’ left government of Greece (I guess if one does not accept Andrea’s PASOK 1981 win as a left win) has had a turbulent start and is likely to soon make the landmark of its first 150 days. These have been 150 days of solitude however. The following narrates how Syriza lost my trust and will explain why it will soon lose the trust of the rest of its supporters too.

At the beginning of January, with the election approaching in Greece, it seemed like Syriza could offer the chance to start a rethink of the neoliberal settlement that has dominated European politics for decades. The 2008 crisis (I wrote) had within it the seeds of a challenge to the dominant neoliberal paradigm, alas the challenge was never realised. Could Syriza restart a debate on finding an appropriate balance in the market-state relationship, bringing back the state as the protector and supporter of the less strong in society?

This period also brought hope that politics could once again retake the ground ceded to technocrats (see here). I had identified in my work a long time ago the danger the retreat of politics in favour of technocracy posed to democracy. An election of a government with an overt political agenda could help (I hoped) to recalibrate the role of politics in economic management; to put the people back in control of fundamental choices as to how their lives are run. I also commented on how salvation from economic crisis in Europe was beginning to look ominously like the creation of a new type of ‘fiscal’ authoritarianism, a ‘dictatorship of finance’ as I wrote in my book (see here). Syriza again was identified as a potential solution, linking popular demands with economic management and reviving democracy in Europe. With these hopes and aspirations therefore I declared my support for Syriza. This was a difficult step for me, as I have never publicly supported a Greek political party before.

I was delighted with Syriza’s win and supported Varoufakis in his European tour, where he explained why the existing programme was not working for Greece. My hope was that Europe was ready to make a change. That our partners had realised (perhaps with the exception of the Germans) that non-stop austerity is self-defeating. Perhaps they were waiting for a little push to change their minds, and Varoufakis was offering them this opportunity, for the benefit of all. I was not oblivious to the risks of re-negotiating the bailout deals however. Already at the beginning of February I cautioned Varoufakis and Draghi not to upset Greece’s difficult liquidity environment. Suicide was preventable, I said, a compromise solution was achievable (see here). I was unhappy with the role of the ECB and the measures it took to restrict liquidity to the Greek economy. This was clearly motivated by a desire to push Syriza to compromise, to say: There can be no salvation via the Bank if you cannot reach agreement with the Eurogroup (see here).

My faith in Syriza’s ability to guide the country through this impasse, and achieve a better deal with our creditors than Samaras, Venizelos and everyone prior was shaken by the events following the 20 February agreement. The February agreement seemed like a sensible compromise. It was evident that there was no support for Syriza from anyone, especially the Germans. Too much political capital has been invested in Europe supporting austerity to allow for a change of course. This is regrettable, but nonetheless true. Syriza could have a deal, which was in some aspects better than what was achieved before, but Greece would not be given a ‘good’ deal. The February deal was a step in the right direction in what would clearly be a long road. What shook me was Varoufakis’ response. When asked to present a series of technical measures, he submitted a list of odd and in places nonsensical proposals (see here). Was this done due to incompetence or calculation? Either way, it was not good.

It all went downhill from there. The negotiations dragged on, the economy stagnated, progress (whatever progress one had seen) was lost. The rhetoric hardened and Tsipras lost his window of opportunity to achieve something better. Faced with double-speak, lack of trust and gimmicks, the Europeans who were not positively inclined to Syriza anyway, and could not politically afford a change of tack, lost interest and started demanding that Greece gets its act together and completes the evaluation of the current programme review in order to receive any money. Varoufakis committed a criminal error in not achieving the disbursement of the bailout tranche after 20 February, leading to a credit crunch that drove us to the dire straights we are in now. It was obvious from the 19 March leaders meeting that things had gone off the rails (see here).

On 21 April I published my ‘Basta Yani’ piece (see here) that asked Syriza to make a deal now. I argued that Syriza was not elected with a mandate to take the country out of the Euro. If a deal that Syriza could live with could not be achieved, then they had a responsibility to resign after signing it and hold an election. This election should be fought on Euro-In/Euro-Out lines so the Greek people got the make the horrible choice that befell them: Capitulate to the demands of the creditors with the hope of a long drawn recovery, or risk return to the drachma in the hope for long drawn recovery. I strongly rejected the idea of a referendum with the rationale that such complex questions need to be the subject of an electoral platform, not an in-out single question on a single ballot (see here).

By mid-May I had lost my faith in Syriza. The lack of a clear position, the inability to demonstrate achievable goals for the negotiation, the disorganisation and disinterest in the state of the economy, the lefty fascism of members like Zoi Kostantopoulou, and finally the parading of the holy bones in hospitals proved too much for me (see here). I was never a member of Syriza, I was briefly a supporter, but I could not bring myself to stand beside Varoufakis and Tsipras anymore. I am unsure as to what Tsipras is trying to achieve. I am not sure he knows himself. I know what people like Lapavitsas want, but I can bet you the Greeks did not sign up for Grexit and its consequences when they voted on 25 January (see here). My change of position attracted a lot of hate mail/commentary, so I decided to post a satirical piece hoping to demonstrate in a different way the perils of Grexit (see here).

The outcome of all of this is that the (almost) 150 days of Syriza’s solitude have fundamentally changed my view of whether a ‘left’ government points the way forward for Greece. It does not. It has demonstrated clearly that it is charting a route to disaster. Even if a deal is reached (I hope there will be one for the sake of all of us) tomorrow (22.6.15), I will still believe that Syriza has made Greece’s problems worse, lost us friends and allies and increased the size of the mountain we have to climb to exit the crisis. I am disappointed and feel betrayed by the incompetence, short-sightedness and fanaticism of those who seemed like our saviours.

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@iGlinavos

I would like to thank the German people (a letter to Germany)

The Greek and the German government have been both complaining about a propaganda war that is obstructing the truth and makes the successful conclusion of negotiations difficult. Talking to a German friend today, I realised that what is considered obvious on the one side, is far from clear to the other. I thought therefore of laying out my personal take on Greece’s recent history, in the hope that this will give the German public a different narrative from the often hostile rhetoric of Greek media and (many) politicians.

AGOUDIMOS LINES - Ionian Spirit

AGOUDIMOS LINES – Ionian Spirit

The Greece I grew up in was a very different place form the one you see today. I will not bore you with statistics that you can easily see elsewhere, but I can tell you this: It did not feel like Northern Europe. Things were basic, but progressing steadily during the 1980s, and despite the occasional hiccup, people got progressively richer and life was gradually becoming easier.

Still, the best thing you could wish for your kids, was a job with the state. Why? Because in a sluggish economy the steady salary, permanent employment offered by the state was the best insurance against poverty. Were Greeks opting for state jobs because they were lazy? No, they were opting for state jobs because permanence made up for boring bureaucracy and modest salaries. This is a pattern explained by historical factors in states with weak institutions making the transition from agrarian to city economies.

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The political system both exploited and bred the desire for state jobs. Nepotism and clientist politics were the norm. There is nothing surprising about this, as a wide literature on emerging economies suggests. Local politicians made careers by finding jobs for their supporters and the state mechanism was closely connected with the party political machine. While things were not exactly ‘soviet’, there was no such thing as an independent civil service.

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The 1990s brought with it some maturing of the political system, but also a deepening of corrupt relationships and backslapping cozy deals. Kostas Simitis embarked on a project of modernisation and Europeanisation of the country aiming to make Greece part of the ‘core’ European states, with the ultimate aim to join the planned Eurozone. Of course modernisation in this context in the mid-1990s meant a particular type of oligarchic neoliberalism that imported some semblance of modernity, yet entrenched elites and a deeply corrupt political establishment.

Volkswagen Polo (3)

This brings us to Germany and her role in all of this. This is all well documented, but the Euro created the following situation. The South of Europe (Greece in this case) by joining the Euro was able to borrow at a much cheaper rate than was previously possible. Who lent them and what did they do with the money? Northern European Banks (many of them German) were happy to lend money to the new markets in the South. What did the Greeks do with the money? They spent it on goods produced in the North, primarily German goods. Indebtedness in the European Periphery is the mirror image of industrial success and growth in the North. This is what people mean when they say that Germany benefited from the distortions of the Euro area, both when its banks raked in profits, and when its industrial production found willing buyers close by.

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The Greek state for its part, masked the lack of real economic growth, modernisation and progress by borrowing cheaply and allowing tax evasion to mask stagnant real wages. Who would complain about their salary not being enough to buy that Volkswagen, when they could subsidise their teacher’s salary with the undeclared income of a few rent-a-rooms by the sea?

Would this go wrong? Of course it would and we knew at the time of the Athens Olympics that something was up. Sudden wealth spread across the country, large infrastructure projects were being built everywhere, there was a consumer boom and a lot of conspicuous consumption. How could all these young men drink coffees at 7 Euros a cup in the middle of the day, apparently not working? And it did go wrong, it went badly wrong. It took a worldwide financial collapse to expose the rotten core of the Greek economy, but the party came finally to an end.

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The question is what to do now? The Greeks are not lazy scroungers any more than the Germans are cold-hearted capitalists. Germany benefited in the same way as Greece during the boom years and now there is trouble for both, albeit Greece is ahead on this one with a depression more pronounced than the Great Depression that has fundamentally changed many lives already.

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It is worth thanking Germany for their support and the German taxpayers for funding that support (for two bailouts already). We all need to realise however that at a time when the ECB is creating billions and pouring them into the European economy to fight deflation, it is a morally repugnant thing to ask Greek pensioners and workers to suffer more cuts in their incomes. This problem is not a problem for faceless markets, it is a problem for real people. How would you feel if your salary went down 10% or 20% or 40%? How would you live? How would you explain to your kids the change in lifestyle? Would you say it is the fault of ‘governments’ so its ok that YOU pay? Can the German taxpayer really say that Greek families need to pay for the faults in the design of the Euro, the manipulations of Goldman Sachs, the actions of predatory elites foreign and domestic?

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There are many things wrong with Greece, and many things wrong with the Greek leadership at the moment. Yet, in a rotten system, rotten policies like the deflationary, recessionary austerity that the German government is insisting on are not pointing to a path of prosperity and peace for Europe. Blame not the Greeks for the current troubles and allow some of the money printed out-of-thin-air by the ECB to actually invest in the real economy, as opposed to making profits for financials. Greece needs a change, but families do not deserve to suffer for historical and institutional failures. Why are the workers of Europe blaming each-other instead of the machinations of elites?

Thank you for keeping an open mind.

@iGlinavos