It's 1941 again. Except this time, instead of the German military invading Greece, it's the European Central Bank, prodded by Germany, threatening the Greek financial system if the current Greek government doesn't bend to its will.
Even by the standards of bank thuggishness, the move by the ECB against Greece last night was a stunner. Americans have become used to banks taking houses under dubious pretexts when both the investors and borrowers would do better with a writedown. But to see the ECB try take a country is another matter entirely. As one seasoned pro said, “If anyone had tried something like this against a country with a decent sized military, the tanks would be rolling.”
The ECB’s bombshell was to put Greece at risk of an intensification of its ongoing bank run in order to pressure it to agree to a deal with the Troika under an impossibly tight timetable, even shorter than the February 28 pre-existing deadline that Greece Finance Minister Yanis Varoufakis had planned to extend until June.
http://www.nakedcapitalism.com/...
Even though we warned that the ECB was likely to use its control over liquidity facilities to stymie Syriza’s plans and force Greece to the negotiating table sooner rather than later, the smackdown was even more brutal than we imagined possible.
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The Greek government can implement emergency measures, like capital controls and restrictions on daily bank withdrawals, to reduce the bank run. Measures like nationalizing all domestic banks and implementing a plan to allow foreign banks to leave the country in an orderly manner works only if the Greek central bank can backstop the domestic banks, and that in turn works only in the event of a Grexit, since the central bank needs to be a currency issuer.
And of course, Greece can default.
In response to an e-mail tonight, Varoufakis wrote, “One thing we will not do is capitulate.”
But perhaps it's time for Greece to think about an exit.
There is no guarantee that Greece will be as successful with a return to the drachma, but there are reasons for optimism. First and foremost, the country now has both a primary budget surplus and a trade surplus. The primary budget refers to the national budget without counting interest payments. Greece is now running a primary budget surplus of more than 3 percent of GDP (the equivalent of $500 billion a year in U.S. GDP). This means that if it didn’t have to pay interest on its debt, it would not need to borrow to make ends meet.
Since Greece has a trade surplus, it already doesn’t need to borrow to finance essential imports. (The recent plunge in oil prices could save Greece $9 billion a year, or close to 4 percent of GDP.) The drop in the drachma relative to the euro will further improve its trade position, leading to a boost in net exports and a sharp upturn in employment. It is certainly plausible that Greece’s economy will in very short order make up the ground lost to an initial period of instability and then continue on a path of robust growth.
This is where the EU has inadvertently done Greece a favor. It has damaged Greece’s economy and society so severely that the disruptions caused by leaving the euro are likely to seem minor by comparison.
https://rwer.wordpress.com/...
Of course the irony is that a country named Germany had half its debt written off. Only 8 years after its devastation of Europe had come to an end.
http://cadtm.org/...
But apparently what was good for Germany is not good for the country where tens of thousands of people died at German hands.