Home > Uncategorized > Link of the day. The ‘mark-to-market’, household and business centered plan of the Greek government

Link of the day. The ‘mark-to-market’, household and business centered plan of the Greek government

You can trust a con man to double down on his lying and cheating whenever something – or someone – is exposing his lies. Which is exactly what Schauble, minister of finance of Germany does. And I don’t mind. He is a politician – it is what he is supposed to do. But that’s the point. Much of the press believes him, for instance when he – or somebody from his coterie around him, like mr. D. – is talking about Greece. And he will only be as honest as the press forces – forces! – him to be. At one point, even the existence of Greek ideas and plans was put into question. Well, here they are, via a part of the Greek press which, by the way, is owned by the oligarchy. The failure of the press clearly is not caused by any kind of class struggle. It’s just bad reporting. An excerpt (mind the realist ‘mark-to-market’, non-dogmatic and even bourgeois nature of the piece):

Mr President,
Dear colleagues,

This government’s task is to carry out the deep reforms that Greece needs to arrest the combined forces of deflation and negative debt dynamics, bring about investment-led recovery and, thus, maximise the net present value of our debt repayments to our creditors. The Greek government fully respects its commitments to our partners and to the institutions that we are party to. Our difficulty in declaring a commitment to the current program, and to its “successful conclusion”, is that in our estimation this program was not conducive to recovery and, thus, inherently impossible to conclude successfully. To many, our reluctance to accept the phrase “extend the current program and successfully complete it” stems from the determination of this government never to issue a promise that it cannot keep. We fear that if we accept the priorities, the matrix, of the current program, and only work within its overarching logic, even if we change some aspects of it, I fear that we shall be giving the debt-deflationary spiral another boost, we shall lose our people’s support, and, as a result, the country will be very hard to reform henceforth. As a recently appointed finance minister of a country that has a credibility deficit in this room, I trust that you will understand my reluctance to promise that which I do not believe I can deliver. Nevertheless, there is much that we can deliver that is of mutual benefit. To do so, we need a short-term (three to six month long) agreement that will allow us to establish the “common ground” mentioned by President JD and Prime Minister at last Thursday. It is in no one’s interest if, over the next days and weeks, as a result of a political failure on our part Greece languishes under a collapse in activity, a collapse in revenue and continued deposit outflows. We need an in-principle agreement that during this period the Greek state will be funded under a minimalist menu that solves the short term cash flow problem (e.g. transfer to the IMF, in lieu of Greece’s repayments, of the €1.9 billion that the Greek government is due from the ECB ‘profit’-rebate agreement; a flexible ELA, a rise in the artificial cap of T-bill issues etc.) and commits the Greek government to a number of conditionalities:

 The Greek government reiterates its commitment to the terms of its loan
agreement to all our creditors
 The Greek government takes no action that threatens to derail the existing
budget framework or that has implications for financial stability
 The Greek government will take no action toward a haircut of its loans’
face value

The Greek government is deeply concerned about the deleterious effects of non-performing loans on the capacity of Greece’s private banks to extend credit to firms and households and is, thus, keen to find means, utilising the unused capacity of the HFSF to cleanse them. Similarly, we are eager to find ways of writing off the accumulated penalties on taxpayers in arrears that have mounted up to €70 billion. Naturally, the Greek administration understands that any such write offs must be designed to avoid rewarding strategic defaulters and, most certainly, to prevent a long term tendency to delay paying debts and taxes. Still, we think that the backlog of arrears and NPLs are a major impediment to recovery. To this end, we shall seek the advice of our partners before legislating appropriately.

In exchange of the above commitment that the Greek government is prepared to give during the period of the extension/bridge, our partners ought to agree that, during the same period:
 There will be no measures that we consider recessionary such as pension
cuts or VAT hikes.

Regarding the specifics of the short term financing, or of the above conditionalities, we believe that these technical issues can be resolved within a day or two, as long as the political will is present. In any case, let me remind you that we are talking about a short space of a few months of stability that is necessary to establish the parameters of the longer term framework within which Greece and Europe and the IMF will establish so as to put Greece on a sustainable path.

The Greek authorities are determined to use these few months effectively, as opposed simply to buying time for the purpose of doing little. We propose to concentrate on a few reforms that are essential and which can be implemented immediately, with the assistance of the institutions plus of the Organization of Economic Cooperation and Development. Among them, we intend to:

 Cut the Gordian Knot of bureaucracy – through legislation that bans public sector departments from asking of citizens or business information, certificates or documents that the state possesses already (and which
reside in some other department)
 Tax authority reforms towards greater independence, propriety and
 Create an efficient and fair tax court system
 Modern bankruptcy system
 Judicial system reforms, in general
 Creating a competitive and sound electronic media environment that enhances transparency and yields tax revenues for the state
 Dismantle the various cartels

Ladies and gentlemen, dear colleagues, unlike previous governments we shall not make promises which we know we
cannot fulfil. I could, for instance, placate everyone by accepting for example the €5 billion privatisation target, so as to reach agreement. But I know that I cannot deliver. Just like previous governments could not deliver in a marketplace of collapsing asset prices. Similarly with foreclosures of non-performing mortgages. Independently of our ideological differences (and whether you agree with our government that family homes should not be auctioned off in the midst of a depression on ethical grounds), the fact remains that it would be non-sensical to throw hundreds of thousands of families on the street at a time when there are no buyers and, as a result, such foreclosures will yield no capital for the banks, will fuel the already hideous humanitarian crisis and, in the end, destroy what is left of the real estate market. To recap, our government is ready and willing to apply for an extension of our loan agreement till the end of August (or any other duration that Eurogroup may deem fit), to agree on a number of sensible conditionalities for the duration of this period and to commit to having a full review complete by the European Commission at the end of this interim period – a period that will allow Greece and its partners to design together a new Contract for Greece’s Prosperity and Growth.

  1. Alex
    February 19, 2015 at 9:25 am

    I crossread the PDF-document you linked, and all I read was typical politician bla bla bla. Dozens of “we will this” and “we will that”. But, who believes any of that? Who is stupid enough to believe that? I believe in history, and history is clear: whenever a radical leftwink/socialist/communist party took over power in a country, the country was some years later more or less economically devastated (and yes, a country can be MUCH more economically devastated than Greece is now). And it was the more economically devastated, the more radical leftwing/socialist/communist the party was. It will be same with Greece…

    • merijnknibbe
      February 19, 2015 at 10:08 am

      .”and yes, a country can be MUCH more economically devastated than Greece is now”

      1) Yes, countries can be more economically devastated. Excluding cicil war etcetera, examples which come to mind are the former Svoiet Union, where ill devised market reforms led to an enourmous decline in output and a record peace time decline in lif expectancy. It is, however, pretty hard to find any example of a country more devastated in the Atlantic economy (Western Europe, the USA and Canada), even when we include the thirties. And though some south Asian countries experienced somewhat comparable declines around 1998 sharp and sudden devaluations enabled a rise of domestic demand and domestic employment which did not at the same time wreck the current account, a way out at this moment not open to the Greek.

      2) Please, do not just crossread the document. The proposals are not typically those of a radical left wing party. What do you think that the German CDU and CSU would do when 20% of house owners in Germany were threatened with eviction and loosing their property? And modernizing the very slow Greek bankruptcy system (i.e. writing debts down and dividing the spoils faster) is typically a market oriented reform (a really modern system would of course make banks come last, while ‘commercial credit’ debts would get higher priority, therewith enhancing the value as well as the liquidity of these debts).

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