Oxi-Notes on the Morning in Europe

 

8af78d0e-fdf3-45f2-8677-72d06bd7b58c1) Headline writers throughout Europe have been manfully resisting all variants on the obvious Oxi-moron joke. This is perhaps because everyone on Twitter came up with it first. (I measured this.)

2) Game theorists are frantically trying to discern the strategy behind Greek Finance Minister Yanis Varoufakis’s abrupt resignation. Has he been inspired by Nash Equilibria or by Nash Schizophrenia? As yet unclear.

3) At least the result of the vote was overwhelming. I say “at least” because one of my fears was a vote so close as to make accusations of fraud and vote-rigging credible. So that’s a good thing, at least.

4) European leaders are now in an “emergency summit” here in Paris. (It seems to me silly to keep calling these “emergency” summits. Surely we need to keep some terminology in reserve? I haven’t yet ventured out to gather man-on-the-street reactions, but I predict that when I do, I’ll see nothing that looks like an emergency. I do expect to hear nonstop griping about the way traffic has again been brought to a crawl by the daily emergency summit.)

Update: It seems I’m not the only one to think this. According to The New York Times, French Finance Minister Michel Sapin has downgraded it to a “deep conversation.”

5) I’m puzzled by the prominence of locutions such as this in the media: “The risk of fallout from Greece’s collapse directly hurting other European countries is relatively small. Most of its debt is held by governments who could cope with default.” Does anyone who writes such a thing ever ask himself where, exactly, governments obtain the resources to “cope?” Could I be the only one who suspects taxpayers might somehow be involved?

4) The vice-president of the European Commission for the Euro, Valdis Dombrovskis, is offering reassurances: “We have all the necessary tools to assure the financial stability of the euro zone … it’s clear we’re capable of defending” the single currency, he insisted, even if the results of the referendum “obviously complicate things.” With every word he uttered, investors reacted with more of what The New York Times mutedly calls “muted dismay.”

5) France and Germany don’t seem to be of the same mind about what the outcome of the referendum means. “The basis of a dialogue is on the table, but it’s up to Greece to show us that it takes the dialogue seriously and that it knows it can stay in the euro and that there are decisions to make,” said French Finance Minister Michel Sapin.

Le Monde reports that President François Hollande told Tspiras that he was ready to help him. “But you’ve got to help me help you.”

A majority of European states already want to throw Greece out of the Euro, and even if France doesn’t wish this to happen, it can’t for long stand up to them if Athens fails to demonstrate signs of good political and budgetary will. “Tspiras must absolutely show that he’s ready to deal,” said a confidential government source.

(Perhaps Varoufakis’s resignation was meant to be a sign that Tsipras is ready to deal?)

Germany? Not so emollient. Government spokesman Steffen Seibert put it thus: “Conditions to start negotiations on a new aid program are not met yet.” The Greeks, he said, had voted against the principle that solidarity requires countries to take responsibility. (I note that even in print he speaks with a noticeable German accent. The whole subject-verb-object thing just defeats him.)

Deputy Chancellor Sigmar Gabriel likewise said that renewed negotiations with Greece were “difficult to imagine.” Tsipras had “torn down the bridges” between Greece and Europe. A debt cut for Greece, said a finance ministry spokesman, “is not on the agenda for us.”

Dutch Finance Minister Jeroen Dijsselbloem found the referendum result “very regrettable for the future of Greece,” but Italian Foreign Minister Paolo Gentiloni wasn’t so dismayed. “Now it is right to start trying for an agreement again.” On the other hand, he added, “there is no escape from the Greek labyrinth with a Europe that’s weak and isn’t growing.” (A Greek labyrinth, get it?) But Italy, he said, “has always worked for a solid and more integrated Europe. It was true yesterday and it will still be true tomorrow.”

The ECB’s Ewald Nowotny, who’s also president of the National Bank of Austria, seemed to be on the “firmly regrettable” side. Any new Greek deal would take time, he said. Expecting an agreement within two days, as Greece has hopefully proposed, is “illusionary.” (I suspect that’s a mistranslation of “delusional,” but I’m not sure.)

Ah, cheer up! The upbeat Spanish Economy Minister Luis de Guindos just weighed in. His government, he says, is ready to talk about a third Greek bailout. “Everyone wants Greece to stay in the euro,” he declared, leaving it unclear who “everyone” was. But “the rules for the euro remain the same as they were two days ago,” leaving it unclear what those rules were.

And of course there’s Cyprus. “Cyprus will stand with Greece to achieve a loan restructuring that will make its debt sustainable,” President Nicos Anastasiades assured his European countrymen. “The first thing is the absolute respect for the decision of the Greek people, not only from us, but also from all Europeans and in particular from all the European governments.” He too seems to be using the word “all” in a highly limited sense, perhaps as a synonym for, “That’s what I think, anyway.”  Cyprus’s finance minister, Harris Georgiades, assured Europe that his bailed-out country would leap to the rescue to write off its rescue loans to Greece — if Germany went first, of course.  

Spot any patterns here?

_83943903_who_owns_greeces_deb_v2_624

In Oxi-short, Henry Kissinger would still be at a loss if asked what number he should dial to reach Europe. (The journalist in me does wonder what would happen if I dialed this one. I’m awfully tempted. I’ll ask them if they keep Prince Albert in a can.)

 

Published in Economics, Foreign Policy, General, History
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  1. Umbra Fractus Inactive
    Umbra Fractus
    @UmbraFractus

    Pleated Pants Forever: That is when it gets interesting. If Greece defaults, who is next in line asking for the same (Italy/Spain/Portugal)? If they go the drachma/devalue route and the sun still rises the next day in Athens without being on the Euro, what is the next currency to return (lira/peseta/escudo)?

    From the admittedly anecdotal rumblings I’ve been hearing over the last few years, it might be the mark.

    • #31
  2. Umbra Fractus Inactive
    Umbra Fractus
    @UmbraFractus

    Snirtler: Partly historical baggage. European politicians saw regional economic integration as the means to tame nationalism and reduce the likelihood of another war in the continent after the two world wars.

    Personally, I think the EU makes war more likely in the long term. I’ll bet that in my lifetime one of two things will happen:

    1. Some country, my money’s on the UK, will try to leave the EU and the Germans and French won’t let that happen, or
    2. The Greek situation will get so desperate that the EU itself will invade Greece and install a puppet government.

    Note that I can also see scenario 2 being the impetus for scenario 1.

    • #32
  3. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Old Bathos: I still don’t get why anyone bought Greek bonds.

    Canada didn’t!

    • As Greece defaults on loans from the International Monetary Fund, we are reminded that the Liberals and NDP called for Canada to join the list of countries now owed billions by Greece.
    • In 2012, the Globe and Mail reported, “Liberal MP John McCallum, a former Royal Bank chief economist, was unequivocal in supporting additional Canadian pledges to the IMF.” (Globe and Mail, June 8, 2012)
    • NDP Leader Thomas Mulcair criticized our Conservative Government for refusing to join those loaning billions to Greece saying, “At the G20 meeting in April, the Minister of Finance led the effort to block an international plan to resolve the European economic crisis.” (National Post, June 11, 2012)
    • NDP Leader Thomas Mulcair even referred to our refusal to send Canadian tax dollars to Greece “the shame of the Conservatives”. (National Post, June 11, 2012)
    • Despite the chaos today in Greece, the NDP continue to support the policies that created this chaos in the first place.  NDP MP Niki Ashton said “NO to austerity! YES to democracy!” (Nicki Ashton, Twitter, July 5, 2015)
    • #33
  4. Butters Inactive
    Butters
    @CommodoreBTC

    I’m skeptical these ECB bureaucrats would allow a socialist state to be seen to fail or leave the EU. It would set a precedent.

    Their power and worldview is more important to them than the strength of a currency.

    • #34
  5. Eric Hines Inactive
    Eric Hines
    @EricHines

    Claire Berlinski, Ed.: 1) Headline writers throughout Europe have been manfully resisting all variants on the obvious Oxi-moron joke.

    An alternative word for NO is ουχί, which also translates as “ouchi.”  Or so Google Translate assures me.  Perhaps something can be made of that.

    Claire Berlinski, Ed.: 5) I’m puzzled by the prominence of locutions such as this in the media:… Could I be the only one who suspects taxpayers might somehow be involved?

    Let’s look at Germany’s holdings of Greek debt (while carefully eliding the German portion of the ECB’s holding).  Germany holds some €56 billion of Greece’s debt.  Germany’s GDP is in the neighborhood of €4.2 trillion.  Germany’s population is around 81 million.  The Greek debt holding works out to roughly €700 per person.  This is typical of the rest of the EU polities.  I certainly don’t begrudge Franz’ concern for that money, but at bottom, the locuter’s point is sound: this is in the noise of year-on-year budget variance.

    In the end, as Gabriel noted, the bridge is burned.  I don’t see anything fruitful happening (though the EU may yet fold) until the Greeks get a new government.

    In the event, the Greeks are better off both with a new government and outside the EU.  And so is the EU.

    Eric Hines

    Updated to clarify the referent to Franz’ portion of the Greek debt held by Germany.

    • #35
  6. Eric Hines Inactive
    Eric Hines
    @EricHines

    Old Bathos: I still don’t get why anyone bought Greek bonds.

    It’s an interesting play for those with the scratch to lose their whole investment.  The leverage is especially there for junk-rated debt instruments: their price is so low that any favorable increase in confidence can easily yield a large increase in price.

    Separately, if there’s any likelihood of no default (and most junk bond issuers don’t default–it’s how junk bond mutual funds make money), the income stream can be handy.  Though that particular risk, unamortized across a number of holdings, is not one that I’d take.

    Eric Hines

    • #36
  7. user_69341 Inactive
    user_69341
    @StuartCreque

    On a game theory level, it is possible that Tzipiras will play the part of the Mayor in High Noon: The Greek electorate, like Marshall Kane, wants to stand up to the band of outlaws coming on the noon train, but Tsipiras, like the Mayor, believes that an outright confrontation will destroy the country.  He can say that the No vote means the Greek people are effectively united behind him in cutting a new deal with Greece’s creditors, and then say that the only deal that works is one on the creditors’ preferred terms.

    • #37
  8. Ricochet Inactive
    Ricochet
    @TonyRyan

    Ah we seen all this before!

    In 2008 Ireland held a referendum on accepting the European Union constitution – the Lisbon Treaty –  and we voted a clear “No”.

    That was the wrong answer. Cue a lot of scaremongering and sabre-rattling by the political class (and liberal media needless to say) and low and behold a slightly repackaged version of the same junk suddenly found itself getting a “Yes” vote in the hastily arranged re-vote.

    It will be the same with Greece. All this current noise and meaningless Greek referendums and empty banks and empty shelves is just another game to get Greece a slightly better deal. Everyone is just currently looking at ways to save face first before this new deal is miraculously reached. It’s a pity vulnerable Greek citizens have to be pawns in this game but that’s the way politics rolls.

    Anyone hoping to see the end of the EU is in for a big disappointment I’m afraid.

    • #38
  9. Marion Evans Inactive
    Marion Evans
    @MarionEvans

    Tony Ryan:Ah we seen all this before!

    In 2008 Ireland held a referendum on accepting the European Union constitution – the Lisbon Treaty – and we voted a clear “No”.

    That was the wrong answer. Cue a lot of scaremongering and sabre-rattling by the political class (and liberal media needless to say) and low and behold a slightly repackaged version of the same junk suddenly found itself getting a “Yes” vote in the hastily arranged re-vote.

    It will be the same with Greece. All this current noise and meaningless Greek referendums and empty banks and empty shelves is just another game to get Greece a slightly better deal. Everyone is just currently looking at ways to save face first before this new deal is miraculously reached. It’s a pity vulnerable Greek citizens have to be pawns in this game but that’s the way politics rolls.

    Anyone hoping to see the end of the EU is in for a big disappointment I’m afraid.

    Hmm maybe. I think Greece will exit the Euro. It has one main fix for its economy: a new devalued currency. Greece is not Ireland. One measure is Transparency International’s Ranking: Ireland is at 17 in line with the US and ahead of France and Austria. Greece is at 69, below Cuba, and (bad omen) in line with Italy.

    • #39
  10. Douglas Inactive
    Douglas
    @Douglas

    Tony Ryan:Ah we seen all this before!

    In 2008 Ireland held a referendum on accepting the European Union constitution – the Lisbon Treaty – and we voted a clear “No”.

    Wikipedia dismisses this as a mere question of turnout, so we know whose partisans are editing that page.

    Denmark also voted no to Maastricht, and was promptly told by their political and media classes that they were going to keep voting until they got it right. So you may have a point.

    • #40
  11. Claire Berlinski, Ed. Member
    Claire Berlinski, Ed.
    @Claire

    Tony Ryan: In 2008 Ireland held a referendum on accepting the European Union constitution – the Lisbon Treaty –  and we voted a clear “No”.

    The mood feels very different now. I don’t know how good I really am at sensing “the mood in Europe,” given that I haven’t ventured beyond Paris in weeks. So discount what I’m saying appropriately, given that I could in fact be describing “my mood.” But I do remember the 2008 referendum well — and don’t forget that the French and the Dutch rejected the European Constitution in 2005, and were steamrollered in just the same way. I wrote about that at the time. I was appalled that the voters were so obviously viewed as a mere speed bump, and said so; I was roundly mocked — everywhere in Europe — as outlandish for being appalled. From what I could tell, “the mood” was entirely opposed to the argument I was making. For what that’s worth. 

    The political class does still have to answer to voters, and the voters seem a lot angrier now than in 2008. My instinct is that things have really shifted since then. But I’m not sure they’ve shifted in the direction of “honoring the principle that voters should have a say” so much as they have in the direction of “Screw the man.” 

    The latest from the ECB does not suggest that they’re in the mood for ever-closer union anymore, that’s for sure. Can you imagine a European official saying something like this in 2008? Dutch PM Rutte: “Did Greeks really think that if they voted ‘no,’ we would come and ask: ‘how else would you like it?'” 

    • #41
  12. Ricochet Inactive
    Ricochet
    @TonyRyan

    Claire Berlinski, Ed.:

    The latest from the ECB does not suggest that they’re in the mood for ever-closer union anymore, that’s for sure.

    I think there is a lot of posturing going on at the ECB though – they have to play the stern disappointed parent with Greece for a little while at least in the hope that other countries don’t decide to play the same game with their debts.

    You are correct that the general voter “mood” is pretty angry but everyone is angry in different directions with their own grievances so its hard to see anything of substance coming out of any current rebellious spirit.

    • #42
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