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  • Tsipras sees solution to debt crisis? [View news story]
    Virtually everyone agrees that there would eventually arrive a day when Greece would have to have its debt restructured (again). Tsipras is merely moving that day forward.
    Jun 19, 2015. 09:25 AM | 2 Likes Like |Link to Comment
  • Tsipras sees solution to debt crisis? [View news story]
    Cutting off ELA would result in immediate default and haircut of the 240b or so in loans extended Greece and losses of likely as much as 50% on it. Extending an add'l 1.5b or so as long as there seems a chance of a negotiated solution seems better. Especially considering one of the Greek proposals is to place the debt into the EFSF.
    Jun 19, 2015. 09:23 AM | Likes Like |Link to Comment
  • Greek tensions weigh on markets [View news story]
    Talks of "Regime change" being forced upon Greece:

    U.S.-based economic analyst Jacob Funk Kirkegaard cast doubt on the Athens government's longevity. He said Europe seemed to be giving up on trying to coax Tsipras toward the political center, opting for confrontation that might lead to "a new more realistic government"... The euro area thus has no real choice but to seek regime change in Athens," he said on the website of the Peterson Institute for International Economics.

    I expect a deluge of bad press about Tsipras/Syriza and "polls" showing "Greek dissatisfaction" with Tsipras in coming days as a concerted campaign is waged to try and force Syriza out of power by its "partners".
    Jun 15, 2015. 08:10 AM | Likes Like |Link to Comment
  • What Behavioral Finance Tells Us About The Greek Negotiations [View article]
    The current administration of Greece has been explicitly told to refrain from legislating even on matters both sides are in agreement on. Explicitly stated by Varoufakis himself in a recent interview. The troika policies have failed. As a result of misunderstanding the nature of the Greek economy. It's time to to step aside and try something different.
    Jun 13, 2015. 03:33 PM | Likes Like |Link to Comment
  • Greek deal not yet near as IMF team returns to D.C. [View news story]
    Yes dogmatic, considering how many parties and from which camps have discussed precisely this.
    Jun 12, 2015. 10:40 PM | Likes Like |Link to Comment
  • What Would Happen After A 'Speech Of Hope'? [View article]
    Apologies, there was a brief mention to tourism in the article, although it's importance was glossed over. Perhaps that is why I thought it wasn't even there.
    Jun 12, 2015. 08:49 PM | Likes Like |Link to Comment
  • Greek deal not yet near as IMF team returns to D.C. [View news story]
    Your reply is dogmatic, not pragmatic, as the reality is that those pharma bonds existed and then ceased to exist, just like California's IOUs.

    As for ELA, I quite clearly stated that indefinite was entirely unlikely and that tomorrow is just as likely as next week or next year.
    Jun 12, 2015. 08:43 PM | Likes Like |Link to Comment
  • What Would Happen After A 'Speech Of Hope'? [View article]
    "Tsipras and Varoufakis believe that it has an over-levered capital structure and could be fixed with an equity injection."

    I disagree. Varoufakis had an interesting interview here: where he explictly states the goals of the Syriza admin.

    Although he suggests part of the problem is in the 'over-levered capital structure' he goes on to say much more, much of which is quite in line with what is stated as the German orientation of "getting the right market mechanisms in place".

    Also, there is a significant lack of understanding in the makeup of the Greek economy, which is unfortunately exhibited by most observers.

    Two of the major components of what makes Greece, Greece, is its tourist industry and its shipping industry. Not one single mention or analysis of either in this article. Both industries being looked at and intended to be addressed by Syriza once its hands are untied by its creditors and it is allowed to legislate.

    Another item completely missing from this analysis which also indicates unfamiliarity with Greece is the fact that as what is considered a modern industrial country, it lacks many of the elements that compose those. For example, an accurate, updated, and complete land registry. An electronic tax remittance system. Things that require INVESTMENT to be brought into existence, things that Syriza intends to do, things it cannot do without development capital over and beyond its debt service.

    Varoufakis: "The first day I was in office I asked: how many tax inspectors do I have access to? You know what the answer was? 100. 100 for the whole of Greece."

    As per usual, articles about Greece completely miss the point, completely misunderstand the nature of its problems, and completely undervalue what Syriza is bringing to the table.
    Jun 12, 2015. 08:38 PM | Likes Like |Link to Comment
  • What Behavioral Finance Tells Us About The Greek Negotiations [View article]
    Greece going to the Drachma in order to boost trade competitiveness as a vehicle to exit the current paradigm is only proposed by people who misunderstand the nature of the Greek economy. Much like the proscriptions of the Troika misunderstand the Greek economy and have caused more pain instead of increasing competitiveness. The key to getting Greece on a sustainable future is getting the Troika to step aside and allowing Syriza to fix the broken regulatory regime in place (the origin of the inefficiency of the economy) in order to create domestic economic activity.

    Greece has an educated workforce willing and able to perform, significantly multilingual, but the horrid regulatory regime makes starting businesses and encouraging foreign direct investment a nightmare.
    Jun 12, 2015. 08:16 PM | Likes Like |Link to Comment
  • Greek deal not yet near as IMF team returns to D.C. [View news story]
    As far as time, to clarify, there could be "zero" time if ELA is pulled, but as long as months if it isn't. Missing the IMF payment at the end of the month won't immediately trigger a default unless participants choose to make it so. The ECB payments could potentially be paid as well once the IMF payments are skipped...

    So it really depends: Greece is negotiating, and continues to do so. The only rationale to pull ELA right now is whether Greece is deemed to be incapable of completing the current program, and/or incapable of future solvency. But pulling ELA will absolutely result in insolvency, at significant cost to the ECB, and the ECB likely doesn't want that.... That's why the ECB said "we'll only pull ELA if the politicians tell us to..." since they don't want to be the originators of losses to European taxpayers (side note: European taxpayers, in the form of the official sector funds extended to Greece in its restructuring, have yet to take any losses as far as I can tell - it was only the private sector that took writedowns).

    So, so messy. Point being: time? There could be lots, there could be none.

    As to your point about recapitalization: I think you and I understand "currency" differently. I consider the zero coupon pharma bonds Greece issued to make good on debts owed to pharmaceutical companies ( currency. That linked article even depicts how effective devaluation would occur since those bonds were immediately sold at discount.

    I also consider California's IOUs ( ) currency.

    The *domestic* economy could continue to function on some type of note, which is pretty much what currency is, without reverting wholesale to a new unit such as a Greek Euro or a Drachma, while capital controls are placed on the Euros inside the country.

    The fallout from that would be interesting as well, likely in the form of a giant sucking sound as Euros are instantly removed from any of the weaker/periphery economies and placed in 'safety' in core banks, creating other types of problems.

    All of this has been discussed at length and theorycrafted many times and in many places.
    Jun 12, 2015. 07:47 PM | Likes Like |Link to Comment
  • Greek deal not yet near as IMF team returns to D.C. [View news story]
    I respectfully disagree with most of what you said quant.

    If talks fail - and I place the onus of failure on the creditor side with which you disagree, which is fine - the ECB will pull ELA, which will precipitate capital controls. You are assuming that pulling ELA will lead to immediate and catastrophic economic collapse and I disagree, and I cited Cyprus for this reason, but Cyprus is not the only example. Without going into the Cyprus case and others in excruciating detail, I'll simply propose you are missing the fact that all existing money and deposits won't immediately disappear in a puff a smoke.

    What will of course happen is loans and credit will be restricted severely, likely disappear entirely in most instances, asphyxiating what's left of the economy. Which will lead to Greece necessarily defaulting on all debt. Which will lead to major haircuts and a restructuring of the debt. And all that implies. Which is what we've really been talking about all along.

    The difference is, with a deal we avoid default and a painful transition into new debt programs: in other words Greece and its creditors cooperate for a mutually beneficial agreement. Greece is attempting to obtain a credible, realistic, reform program that will enable it to pay its creditors, and is being threatened with having ELA pulled and a hard default. Which will lead to what Greece already wants anyway, just the hard way. (And I'll add, the 'hard' way still doesn't necessarily imply exit from the EMU, and ejection is not an option.)

    These abstract and ominous threats of "Greece will suffer" bear in mind not a whit the suffering already imposed on the Greek economy by ineffective measures imposed by foreign actors with no interest in sustainably restructuring the economy.

    As for the 7b in Jul-Aug, it won't much matter if Greece misses the 1.5b to the IMF end of this month. The ship will already have sailed, because the "current" program will not have been fulfilled, so Greece won't get the remaining tranche of its bailout funds so there will simply be no money left. (On the other hand, missing the payment to the IMF may be cause for the ECB to pull ELA right then and there.) Greece may continue making payments in order to run out the clock, or it may not, so that's where the "more time" comment comes from, but it will be a different negotiation by far.
    Jun 12, 2015. 10:23 AM | Likes Like |Link to Comment
  • Greece hopes for deal on June 18 [View news story]
    Varoufakis editorial in NYT:

    "We shall desist, whatever the consequences, from deals that are wrong for Greece and wrong for Europe. The "extend and pretend" game that began after Greece's public debt became unserviceable in 2010 will end. No more loans-not untill we have a credible plan for growing the economy in order to repay those loans, help the middle class get back on its feet and address the hideous humanitarian crisis.
    Jun 12, 2015. 07:42 AM | Likes Like |Link to Comment
  • Greece hopes for deal on June 18 [View news story]
    I find it pretty amazing you can completely miss the point that wildly.
    Jun 12, 2015. 07:34 AM | 1 Like Like |Link to Comment
  • Greece hopes for deal on June 18 [View news story]
    SA might also consider reporting the Greek position. Varoufakis had a fantastic interview discussing the negotiation issues reported here:


    "It is not true that they made concessions and we made concessions and that there is a deadlock. They made no concessions. When we met the first time in February they came up with pretty much what they have now offered. Then we had months of negotiations in the so-called Brussels group. And there was a lot more convergence there.

    We sat down and made a record of those areas where there was agreement and of those areas where there was disagreement. We wrote down our position but also further concessions in order to get closer to the other side. This was what we presented as a proposal last week. What was presented by Jean-Claude Juncker to Prime Minister Alexis Tsipras with the support of Angela Merkel and François Hollande, was a return to the starting position as if the negotiations had never happened. This is a proposal you make when you don’t want an agreement.

    To be very clear: We are not asking for one new euro for the Greek state. What we are proposing is an intra-troika debt swap. We have €27 billion that we owe to the ECB, bonds from 2010 and 2011. They are maturing now very quickly, €6.9 billion alone this summer. These debts are a major problem because they prevent Greece from participating in Draghi’s “Quantitative Easing”…

    One of the very first things I said to my Eurogroup colleagues was, why don’t we push some of the legislation we agree on – the taxation system, the anti-corruption rules – through parliament and meanwhile continue the negotiations? And I was actually told a number of times if I dare to suggest this again this would constitute reason to settle the negotiations."

    There's a lot more interesting stuff at the link.
    Jun 12, 2015. 07:11 AM | Likes Like |Link to Comment
  • Greek deal not yet near as IMF team returns to D.C. [View news story]
    Cyprus had its ELA pulled by the ECB, and the ECB stated in Greece's case it wouldn't do that (although who knows). In fact, it's worth remembering all the details of Cyprus, here it is from Reuters

    There are many many similarities although there are of course differences as well. Cyprus was hardly the beneficiary of a benevolent bailout, so I hope that's not what you are saying.

    As for prolonged instances of capital controls, there are many instances of it, and there are dozens of ways this can play out according to many observers. Greece has already had an episode of it, where Greece issued zero coupon pharma bonds. While in the EMU.

    Greece can default to the IMF without it being a credit event according to ISDA. It would take several weeks to play out. So even if Greece misses that payment the truth is there is more time, lots more time.
    Jun 11, 2015. 09:49 PM | 1 Like Like |Link to Comment