Greece to reject bailout; wants reparations due from World War II

Greek Prime Minister Alexis Tsipras gave his first speech to parliament yesterday and proved beyond a shadow of a doubt that he was living in a dream world.

Not only is Tsipras dismantling the terms of the $272 billion bailout; the far left leader announced that Greek would seek World War II reparations from Germany (good luck with that, Al).

While making good on his campaign promises to move away from austerity measures, Tsipras is setting Greece up for a terrible fall; an exit from the euro zone and a default on its 315 billion euro debt.

Reuters:

In his first major speech to parliament since storming to power last month, Tsipras rattled off a list of moves to reverse reforms imposed by European and International Monetary Fund lenders: from reinstating pension bonuses and cancelling a property tax to ending mass layoffs and raising the mininum wage back to pre-crisis levels.

Showing little intent to heed warnings from EU partners to stick to commitments in the 240-billion-euro ($272 billion) bailout, Tsipras said he intended to fully respect campaign pledges to heal the "wounds" of the austerity that was a condition of the money.

Greece would achieve balanced budgets but would no longer produce unrealistic primary budget surpluses, he said, a reference to requirements to be in the black excluding debt repayments.

"The bailout failed," the 40-year-old leader told parliament to applause. "We want to make clear in every direction what we are not negotiating. We are not negotiating our national sovereignty."

In a symbolic move that appeared to take direct aim at Greece's biggest creditor, Tsipras finished off his speech with a pledge to seek World War Two reparations from Germany.

Tsipras ruled out an extending the bailout beyond Feb. 28 when it is due to end, but said he believed a deal with European partners could be struck on a "bridge" agreement within the next 15 days to keep Greece afloat.

"The new government is not justified in asking for an extension," he said. "Because it cannot ask for an extension of mistakes."

Athens, which is shut out of bond markets and will struggle to finance itself without more aid quickly, plans to service its debt, Tsipras said.

"The Greek people gave a strong and clear mandate to immediately end austerity and change policies," he said. "Therefore the bailout was first canceled by its very own failure and its destructive results."

There is a debate over whether Tsipras is acting crazy like a fox and will engineer a Greek exit ("Grexit") from the euro while making it look like the EU's fault, or whether he truly believes the nonsense he's peddling and actually expects Europe to fund the Greek welfare state indefinitely.

I think Tsipras is a true believer and thinks he can negotiate this "bridge" by asking the EU to roll over and give in. Indeed, despite brave talk from the EU about the euro surviving a Grexit, other observers don't think that's possible.

The former head of the US central bank, Alan Greenspan, has predicted that Greece will have to leave the eurozone.

He told the BBC he could not see who would be willing to put up more loans to bolster Greece's struggling economy.

Greece wants to re-negotiate its bailout, but Mr Greenspan said "I don't think it will be resolved without Greece leaving the eurozone".

Earlier, UK Chancellor George Osborne said a Greek exit would cause "deep ructions" for Britain.

Mr Greenspan, chairman of the Federal Reserve from 1987 to 2006, said: "I believe [Greece] will eventually leave. I don't think it helps them or the rest of the eurozone - it is just a matter of time before everyone recognises that parting is the best strategy.

"The problem is that there there is no way that I can conceive of the euro of continuing, unless and until all of the members of eurozone become politically integrated - actually even just fiscally integrated won't do it."
"Politically integrated" is shorthand for forming a "United States of Europe" - a single, continental government to make decisions on everything from fiscal to foreign policy. At the present, that notion is several bridges too far. So there's a chance - a small one - that the rest of Europe will swallow hard and give in to Mr. Tsipras' demands rather than see the European experiment meltdown as a result of Grexit and the resulting default of Greek's debt.
 
But if the EU gives in on Greece, they will have to make deals with Portugal, Ireland, Spain, and Cyprus who also have received bailout money. Would the consequences of blowing up the bailout regime be any worse than a Grexit? No one knows and few in Europe want to find out.
 
But in the end, Germany is likely to put its foot down and risk a Greek default in order to save the rest of the eurozone. With the reform of the European Central Bank, allowing it to buy soveriegn debt, it may be possible to avoid the worst of a Grexit and have the European experiment continue to limp along, always on the edge of failure.
 
 
 
 

Greek Prime Minister Alexis Tsipras gave his first speech to parliament yesterday and proved beyond a shadow of a doubt that he was living in a dream world.

Not only is Tsipras dismantling the terms of the $272 billion bailout; the far left leader announced that Greek would seek World War II reparations from Germany (good luck with that, Al).

While making good on his campaign promises to move away from austerity measures, Tsipras is setting Greece up for a terrible fall; an exit from the euro zone and a default on its 315 billion euro debt.

Reuters:

In his first major speech to parliament since storming to power last month, Tsipras rattled off a list of moves to reverse reforms imposed by European and International Monetary Fund lenders: from reinstating pension bonuses and cancelling a property tax to ending mass layoffs and raising the mininum wage back to pre-crisis levels.

Showing little intent to heed warnings from EU partners to stick to commitments in the 240-billion-euro ($272 billion) bailout, Tsipras said he intended to fully respect campaign pledges to heal the "wounds" of the austerity that was a condition of the money.

Greece would achieve balanced budgets but would no longer produce unrealistic primary budget surpluses, he said, a reference to requirements to be in the black excluding debt repayments.

"The bailout failed," the 40-year-old leader told parliament to applause. "We want to make clear in every direction what we are not negotiating. We are not negotiating our national sovereignty."

In a symbolic move that appeared to take direct aim at Greece's biggest creditor, Tsipras finished off his speech with a pledge to seek World War Two reparations from Germany.

Tsipras ruled out an extending the bailout beyond Feb. 28 when it is due to end, but said he believed a deal with European partners could be struck on a "bridge" agreement within the next 15 days to keep Greece afloat.

"The new government is not justified in asking for an extension," he said. "Because it cannot ask for an extension of mistakes."

Athens, which is shut out of bond markets and will struggle to finance itself without more aid quickly, plans to service its debt, Tsipras said.

"The Greek people gave a strong and clear mandate to immediately end austerity and change policies," he said. "Therefore the bailout was first canceled by its very own failure and its destructive results."

There is a debate over whether Tsipras is acting crazy like a fox and will engineer a Greek exit ("Grexit") from the euro while making it look like the EU's fault, or whether he truly believes the nonsense he's peddling and actually expects Europe to fund the Greek welfare state indefinitely.

I think Tsipras is a true believer and thinks he can negotiate this "bridge" by asking the EU to roll over and give in. Indeed, despite brave talk from the EU about the euro surviving a Grexit, other observers don't think that's possible.

The former head of the US central bank, Alan Greenspan, has predicted that Greece will have to leave the eurozone.

He told the BBC he could not see who would be willing to put up more loans to bolster Greece's struggling economy.

Greece wants to re-negotiate its bailout, but Mr Greenspan said "I don't think it will be resolved without Greece leaving the eurozone".

Earlier, UK Chancellor George Osborne said a Greek exit would cause "deep ructions" for Britain.

Mr Greenspan, chairman of the Federal Reserve from 1987 to 2006, said: "I believe [Greece] will eventually leave. I don't think it helps them or the rest of the eurozone - it is just a matter of time before everyone recognises that parting is the best strategy.

"The problem is that there there is no way that I can conceive of the euro of continuing, unless and until all of the members of eurozone become politically integrated - actually even just fiscally integrated won't do it."
"Politically integrated" is shorthand for forming a "United States of Europe" - a single, continental government to make decisions on everything from fiscal to foreign policy. At the present, that notion is several bridges too far. So there's a chance - a small one - that the rest of Europe will swallow hard and give in to Mr. Tsipras' demands rather than see the European experiment meltdown as a result of Grexit and the resulting default of Greek's debt.
 
But if the EU gives in on Greece, they will have to make deals with Portugal, Ireland, Spain, and Cyprus who also have received bailout money. Would the consequences of blowing up the bailout regime be any worse than a Grexit? No one knows and few in Europe want to find out.
 
But in the end, Germany is likely to put its foot down and risk a Greek default in order to save the rest of the eurozone. With the reform of the European Central Bank, allowing it to buy soveriegn debt, it may be possible to avoid the worst of a Grexit and have the European experiment continue to limp along, always on the edge of failure.