Greek Prime Minister George Papandreou faces a confidence vote today, and there’s a lot of confusion over the outcome and the aftermath. One set of reports says that he will lose the confidence vote, and that he’s being urged to resign prior to it. Another set says that there’s a deal in place for Papandreou to resign after the confidence vote passes, and that a unity government will be established before snap elections within a month. This is what the opposition New Democracy party has been seeking.
We do know that there will not be a referendum, as Finance Minister Evangelos Venizelos confirmed. Venizelos got out of a hospital bed and off to Cannes to meet with French and German officials earlier in the week, and after that issued a statement that showed cracks in the unity among the PASOK party. Venizelos essentially scotched the referendum by himself. Too much democracy was not allowable. And if you think a new government will mean a new position on the austerity-for-bailout package, think again. France and Germany have shown their hand by bullying the Greeks, and whoever emerges to lead the country will meekly agree to whatever terms, rather than suffering Papandreou’s fate. The New Democracy leader, Antonis Samaras, said he would accept the bailout terms. So the “snap elections” will not offer much of a choice.
Then there’s this ominous report:
Meanwhile, there have been a new wave of withdrawals from Greek banks in recent days, according to a report by Greek news website ekathimerini Thursday night. The banking system could be endangered if more liquidity is removed.
A bank run is frankly expected, given all the instability and the ease of movement made through the adoption of the euro. Sarah Kliff discussed this element of the crisis with Daniel Gros of the Centre for European Policy Studies:
“If there’s a run on the Greek banks, how can they actually satisfy that?” he asks. “Greece doesn’t have any more collateral to give the European Central Bank. Then the question becomes, will the European Central Bank give them any more loans?”
Greece and the European Central Bank have had a bit of a bumpy relationship: as The New York Times reported earlier this year, Greek banks have felt “pressured” to stop relying on a central fund. In May, the European Central Bank stopped accepting Greek bonds as collateral for loans to Greek banks.
But the prospect of a Greek default poses a difficult decision for the ECB. If it says no more loans, that’s probably the end: the Greek banks default, and that sends a shock of instability through the euro zone. “Will it say yes one more time? It’s very tough,” says Gros.
Gros essentially says it’s too late to stop this outcome, especially with a conservative ECB. New leader Mario Draghi did lower interest rates yesterday, but dealing with bailouts of Greek banks may not be on the menu.





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I suppose this settles the question of whether Prime Minister Papandreou was seized by a moment of democratic scruples in declaring the vital need for a vote on the EU’s economic-suicide austerity program for Greece.
Even taking into account the bullying from Sarkozy and Merkel – who are on the verge of going down in history as the leaders who wrecked the EU – Papandreou didn’t put up much of a fight for his referendum once the conservative opposition signed on in theory to the economic suicide pact. For those of us who have seen the EU as an historic vehicle to encourage democracy and promote peaceful relations among European nations, seeing Merkel and Sarkozy turn it into a collection agency for the banksters is leadership failure on a 1914 scale (though without the immediately lethal consequences).
And consider this, from Naked Capitalism, regarding who is the actual insurer of all that Greek debt: http://www.nakedcapitalism.com/2011/11/michael-hudson-on-the-showdown-in-greece.html
i suspect papandreou’s move may have been a shrewd gambit to force the greek opposition to endorse the bailout plan, which they had been attacking without proposing any alternative
i could be mistaken, of course, but that appears to be the net result
what i am most interested in at this point is what role the u.s. is playing in the eurocrisis: the so-called frankfurt group includes the usual euro-suspects along with the imf and obama/geithner as honorary members representing wall street
i would love to hear some explanation from u.s. officials about what they are urging the europeans to do: for instance, i have read reports that it is actually obama/geithner who are determined to grind greece into dust with austerity in order to protect the banksters
and this hardly seems farfetched, especially as one encounters the austerity fetish dominating the dc bubble
beat me the the punch
bravo!
naked capitalism is must-read
Agreed. You didn’t think I can do all this reality-checking without help, did you? ;-)
I agree. And it worked quite well.
Boxturtle (Were I a greek citizen, cancelling that referendum would have inspired me to build a guillotine)
BINGO!
yes, well, there is that detail: the greek people may revolt and the greek state may crumble
but at least the “leaders” are now in consensus
i really believe that the world “leaders’ — obama and dc, i’m looking at you — have simply lost control and have no more ideas other than to forever double down on bailing out the banksters
they see the edge of the cliff approaching but they still can’t change course
That’s an interesting link — the nugget being Michael Hudson, a scroll down to near the end.
It’s my understanding that there’s also counterinsurance in play, i.e., insurance on insurance, kind of like insurance pools for a hurricane. It’s nothing I’ve dug into, but if that’s the case there’s no telling how murky it will get. Dominoes, no?
This reminds me most of 1927-32. In Britain the Macdonald Labour government slashed spending in the belief that it was doing the right thing to reassure the financial and business sectors with the result that the economy went deeper into the slump and Britain finally was forced off gold. The Weimar government did pretty much the same thing with even more disastrous results. I see the Greek tragedy playing out pretty much the same way, with a possible authoritarian coup in store if the Greeks protest too much.
Let it crash and burn. The effects will be felt largely through the G5 countries, that is, Europe and the USA. Once this corrupt, broken, unworkable economy is finally broken, we as a WORLD can form a new, fair system of distribution.
The world has to work for all of us not just a tiny percentage.
The human race is too big to fail.
No coup can stop this snowball. It has the momentum of 99% of the human race.
The cliff edge is closer than you think. By the end of this year, our present economy will be a thing of the past.
Viva la human race!
Is it reasonable for a layman to feel queasy about the Fed Reserve buying a lot of Euro bonds from the ECB in order to provide ECB with dollars?
At some point, some one has to ask the obvious question what greater good is being achieved by these draconian policies. I understand perfectly the bankers’ interest, which no one expects to be other than self-interest. But what exactly do the public servants charged by the public with protecting its interest think is the greater good to be expected from this needless suffering? It seems to me to come back down to the Confidence Fairy. No one in authority seems to have the capacity any more to think straight.
Bottom line would seem to be that many hedge funds and money market funds made the same disastrous bets as MF Global, and we see how that’s worked out. Incidentally, guess who is lucky enough to have his only client’s futures trading account at MF Global? C’est moi. So, this shit is getting very personal for me. And I was already getting enthusiastic about investing in guillotines and tumbrels. :-(
Nobody in power is thinking about the “greater good” as you or I conceptualize that. They are only thinking about the “greater good” of the banking class that, as always, pulls all the strings.
not at all and good catch
this is the trillion dollar question: how does obama manage to use american taxpayer money to bail out the eurozone and save wall street yet again from its treachery
i think the imf is the most likely vehicle but i’m sure they’ll try anything
keep your eye on the ball: the problem is simply that there is not enough liquidity, i.e., money, in the world financial system because the banksters have already stolen so much
they need fresh money and lots of it: gives more meaning to taibbi’s giant vampire squid metaphor
Considering Mario Draghi is a Goldmanite (previously head of Goldman Sachs’ European operations), the situation does not look good.
Was it not J.P. Morgan who loaned the Government money sometime around the turn of the century? He did it out of self interest and eventually the uber wealthy will pitch in to avoid a criticality this time. Unfortunately we will be eating bugs and foraging for roots and berries when this happens.
RC I happen to know you can get $25 grand for a healthy kidney at Cedars-Sinai in Beverly Hills.
I have been reading a little Old Testament to prepare for a class I am teaching, and this whole thing is reminding me of the way the ancient empires of the Middle East (Assyria, Egypt, Babylon, Persia, etc.) dealt with the neighboring little countries they drew into their sphere of influence. They offered a deal: pay a yearly tribute and do what we say, and we will let you go on your own way. Or we come and conquer your country and put somebody new in charge. This is what happened to the Northern Kingdom of Israel:
As the book also says, there is nothing new under the sun.
Knut: “No one in authority seems to have the capacity any more to think straight.” John Kenneth Galbraith said that with all the ink spilled over the causes of the First World War, the role of just plain stupidity was usually underestimated. It’s probably short-sighted even for the banksters to insist on self-destructive austerity economics. But even Masters of the Universe can make the mistake of believing their own ideology even when reality strongly contradicts it.
My sentiments exactly. The greatest enemy we face today are the uneducated or pseudo educated wealthy class who think they are smart and know they are more important and valuable than other less worthy humans. In Harvard and Yale and consequently Wall Street it is not intended as a joke when they say “The Masses are asses” they really believe they are superior in intellect all evidence to the contrary. A good example is the horses ass Trump who basically has been squandering his inheritance since his father died making him the “Pia Zadora” of Wall Street. Many investors (apologize for the straw men there but you could look it up) have studied Trump’s fortune and concluded he would have a higher net worth right now if he just let someone else handle his money that the inherited.
J.K. Galbraith is never around when you need him, and his sons are a mere shadow of the giant. (I once was alone in an elevator with Galbriath pere, and he WAS A GIANT. 6’7″ I think.)
Stupidity to an extent I’ve not seen in my lifetime.
Great reporting and insightful comments all around. Cheers! And agreed, Yves Smith, aka Susan Webber, is a must read. Btw, don’t miss Ian Welsh’s latest take down of Kevin Drum’s analysis of the Greek debt crisis.
http://www.ianwelsh.net/what-passes-for-smart-on-the-greek-debt-crisis/
I’m also queasy about counterfeit money (or what it sounds like to a layman).
“Special” IMF Money (drawing rights) considered:
http://online.wsj.com/article/SB10001424052970203804204577016554222191164.html
Do these people also play liar’s dice?
nice piece on your blog
as for the wildly-overrated kevin drum, he has now updated his post to say this:
Look again at that last sentence.
No. Banks should not be bailed out with taxpayer money. Ours shouldn’t have been bailed out in 2008 and Europe’s shouldn’t be today. The fact that someone purportedly on “the American Left” is arguing to the contrary would be astonishing but for my exhausted store of astonishment. The world financial system is collapsing and it must complete its cycle. Taking regular people’s money to throw it down the rathole so the rats can hole more away is both stupid and unconscionable. And any American who hasn’t realized that in the past 3 years should be lustily ignored.
LOL. I’m willing to sell my body, but not part-by-part. At least, not yet.
The bills always come due eventually. That’s what these financial geniuses try to defer, and what they always forget. There is no free lunch.
So can I check back in a few months….I might be able to get a commission? :)
Sure. You could start working right now on “rent-to-own” possibilities lol.
FWIW, for anybody who’s got a trading account that is NOT frozen, I expect a big drop in the market from about the Dow 12,100-12,180 level.
Gosh, things do happen when you take a couple of days off to entertain Kiwi rellies (with CNN Michael Jackson interminably in the background).
I’ve got considerable catching up to do, but thanks as usual, David. I’m picturing the mindset of the Greek population who had been anticipating at least a chance to register a definitive opinion on the record about the austerity plans – imagine how you’d feel if that happened here and then got snatched away?
My cousins got to see a truly spectacular cottonwood flameout right on the cusp of the first hard freeze – it was if the trees knew the next day was curtains, and it was. That’s how quickly things are changing.
When change through the ballot is not possible, and the circumstances of the population are increasingly desperate, revolution becomes inevitable.
Thanks for the heads up on the market but most of my portfolio is tied up in the tank of gas I just liquidated.
A question to the economists here, can China save the day in Europe?
HSBC is owned by China, they could but I don’t think they would.
Exactly. And when the bill does come due they hand it to the taxpayers. The Global Financial Elite has transformed international finance into a casino economy preferential to the real economy. That is why they are willing — eager, I’d say — to starve the real economy with austerity in order to feed the financial economy.
Yes, it is astonishing and completely unconscionable as you say. With global capitalism in such deep crisis, with an impending global meltdown and even greater human suffering on the horizon, the 1% show themselves to be craven sociopaths. What’s that say about those that a cheer-leading these bail outs?
For an authoritarian coup you need soldiers willing to follow your side’s orders. This may not be possible under Greece’s current desperate conditions (Leon Trotsky has a good analysis of this phenomenon in his History of the Russian Revolution).
Understood, but that was really meant for everybody. I like the idea of getting money into the pockets of lefties. ;-) Nobody’s ever lost money on one of my market calls here.
You nailed it. It’s all for our own good, of course. ;-(
Im new here but didn’t the greek people benefit from the financial and social policies that got them where they are now? I know that the banks took a risk when they lent the Greek people these funds (what, isn’t it someting like over a national debt of $500 Billion?) and are at risk if there is a default. But the bondholders have agreed to a 50% loss in this latest plan.
The big issue is not who will lose the last euros that were lent to the Greek people. It is who will ever lend to them again if they do default, drop out of the EC and refuse the austerity measures that hev been proposed.
Just sayin
Welcome. Everything you wrote is perfectly accurate, so far as I understand it. Have you read, “Confessions of an Economic Hit Man,” by John Perkins. It explains how the banks and their surrogates engineer and then take advantage of these kinds of situations. Easy to read, and highly recommended.
The “austerity measures” proposed for the Greek People will not and are designed to lead the Greek economy out of depression. In fact, they will do just the opposite, as the Eurozone itself knows, a fact recently been made public in a leaked report and which may even have triggered Papendreou’s call for a referendum. Since the “austerity measures” will merely prolong and worsen the Greek People’s misery why should they agree to them instead of defaulting — which everyone knows is inevitable — and starting over like Iceland did? And the fact that the “austerity measures” have the effect of indemnifying the counterparties who recklessly insured against European default — Wall Street, to be precise — is lost on no one at this point. It’s just like AIG and Goldman Sachs.
I will have to read that. I’m always wary to say the banksters take advantage of sovereigns. It’s not like we’re talking about Upper Volta here – this is a country that is a part of the second largest economic community in the world and I am sure there are more than a few smart peopleon the Greeks’ side as well.
Nevertheless, it’s the Greeks’ spending and social policies that casued them to get into this hole. Now, maybe the banksters gave them bad shovels, but the hole is the Greeks’ fault.
They’re in on it together, the banksters and the government officials. That’s how plutocracy works. The people are the victims.
You lead me to predict a legal market in human organs in the US, becoming necessary for economic reasons.
It can already be done outside the borders, on the sly, but I expect the pay’t is a whole lot more than $25k for a kidney.
Kinda dangerous aside from being ghoulish.
Democracy has been “on hold” since November 22nd, 1963.