The war of words between Greece and its creditors took a leap in intensity
today, with Greece declaring its debt illegal and odious, and Germany calling
the Greek leaders "clowns".
Debt Illegitimate, Odiousness, Illegal, Unsustainable
Please consider a few snips from a translation of the Executive Report of the Hellenic Parliament's Debt Truth
Committee.
Several legal arguments permit a State to unilaterally
repudiate its illegal, odious, and illegitimate debt. In the Greek case, such
a unilateral act may be based on the following arguments: the bad faith of
the creditors that pushed Greece to violate national law and international
obligations related to human rights; preeminence of human rights over
agreements such as those signed by previous governments with creditors or the
Troika; coercion; unfair terms flagrantly violating Greek sovereignty and
violating the Constitution; and finally, the right recognized in
international law for a State to take countermeasures against illegal acts by
its creditors, which purposefully damage its fiscal sovereignty, oblige it to
assume odious, illegal and illegitimate debt, violate economic
self-determination and fundamental human rights.
People's dignity is worth more than illegal, illegitimate, odious and
unsustainable debt
Having concluded a preliminary investigation, the Committee considers that
Greece has been and still is the victim of an attack premeditated and
organized by the International Monetary Fund, the European Central Bank, and
the European Commission. This violent, illegal, and immoral mission aimed
exclusively at shifting private debt onto the public sector.
CSU Secretary General Calls Greek Leaders
"Clowns"
Let's also take a peek at the Reuters story Greece's Future in EU in Doubt if Talks Fail, Central
Bank Warns.
A warning by Greece's central bank that the country risked
being driven from the euro zone and, ultimately, the European Union failed to
break a deadlock with creditors before a potentially decisive meeting of
European finance ministers.
"People are getting anxious on both sides. Athens expects Brussels to
move. And Brussels expects Athens to move. And it’s stuck," said a
senior EU diplomat, who declined to be named. "It’s very dangerous, and
we may have an accident."
Making clear the huge stakes at play, the Greek central bank said reaching an
accord was "an historical imperative" that the country could not
ignore.
"Failure to reach an agreement would ... mark the beginning of a
painful course that would lead initially to a Greek default and ultimately to
the country's exit from the euro area and, most likely, from the European
Union," the Bank of Greece said in a monetary policy report.
Highlighting the fraying tempers, German Chancellor Angela Merkel's Bavarian
allies accused Athens on Wednesday of not grasping the seriousness of the
situation, with CSU Secretary-General Andreas Scheuer calling Greek
rulers "clowns".
Failure to Grasp
Seriousness of the Situation
It is Germany, not Greece that fails to grasp the seriousness of the
situation. In fact, Germany fails to grasp the fundamental picture I outlined
at least four years ago.
- What cannot be paid back, won't.
- European taxpayers, will foot the bill one way or
another, either by debt forgiveness or default.
- German taxpayers will take the biggest hit because
Germany has the largest percentage responsibility of any country in the
eurozone.
All along, I was pretty sure default was inevitable because at no stage of
the way did Eurozone leaders admit point number one.
Yesterday, I posted this approximate hit taxpayers will have to shoulder.
|
Mish Calc
|
Bilateral
loans
|
Guarantees on
the borrowings of EFSF to fund its loans
|
Implicit share
of TARGET2 claims of the Eurosystem
|
Implicit share
in the SMP holdings of bonds by the Eurosystem
|
Total
|
|
France
|
11.389
|
31.02
|
24.47
|
5.439
|
72.32
|
|
Germany
|
15.165
|
41.308
|
31.07
|
6.903
|
94.45
|
|
Italy
|
10.008
|
27.259
|
21.25
|
4.722
|
63.24
|
|
Spain
|
6.65
|
18.112
|
15.26
|
3.391
|
43.41
|
|
Total
|
52.9
|
141.8
|
118.0
|
27
|
339.7
|
I took the IESEG numbers and plugged in €118 billion as a total Target2
liability, split as shown.
I heard from Eric Dor, Directeur des Etudes Economiques, IESEG School of
Management, Université Catholique de Lille, today. He thinks my Target2
number is too high. He suggests that it's more like €100 billion now. If so,
mentally lower the balances slightly. I have an email in to him for
clarification. The main point stands, however. Liabilities are high and
rising. Hollow Threats
There is no provision by which the eurozone can expel Greece. Nor is it
possible for Greece to be forced out of the EU.
Foreign Policy answers the question Could Greece Get Kicked Out of the European Union? with a
simple one word answer: "No". Here's the longer explanation:
EU bylaws provide no mechanism for expelling a member
state. Indeed, the EU’s laws in spirit are integrative and unifying,
"conciliatory" rather than "punitive." Therefore, in
letter, they provide no option for kicking a country out, no matter how much
other member countries might want to. Even if Greece invaded France — and it
would take as much for Brussels to contemplate expulsion — the European
Commission, a body of ministers that initiates EU laws, would have to craft
new legislation to do it.
Real Threats
In contrast Greece has "real threats".
Imposition of sanctions on another country requires unanimous consent by
treaty. Greece can kill EU sanctions on Russia at a moment's notice.
And as I have pointed out, Greek Prime Minister Alexis Tsipras Meets Russian President Vladimir Putin on
Friday June 19.
Unless there is a deal favorable to Greece, the sanctions will end in
January. Curiously, Moscow Times reports just today that EU Agrees to Extend Economic Sanctions on Russia Until
January.
Did Greece really agree to that? Perhaps. Greece needs help from Russia and
removing that bargaining chip now would reduce that leverage.
It appears to me that Greece has played its cards very well every step of the
way.
Blame Game
Finally, when this finally blows, and it appears now is the time, expect
Greece to blame Germany and Germany to blame Greece.
Assigning blame is much more complicated. The short answer is both are partially
to blame but so is the fundamental nature of the eurozone itself.
More importantly fiat currency issues and the trade policies of Germany come
into play as does political arrogance.
For the proper way to look at this pathetic mess, please consider From ZIRP to NIRP: Virtues of Germany vs. the Vices of
Greece; What About "Speece"?
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
