A deal has been done between Greece and its creditors. Camerlot has won a remarkable exemption. There will now be a day full of conflicting headlines and daft opinions, cries of victory and much hailing of things. But it will all be bollocks, and it should not go ahead.
I suggest you go to this link: it is a Greek Finance Ministry email outlining the progress made so far by Greece – but more importantly, what they will have to sell as State assets to keep everything on track between now and 2015.
The list is divided into three sections: things we are ‘on the way to’ selling; things we have ‘initiated procedures’ about selling; and things we need to ‘accelerate’. Put more realistically, these are, respectively, things we reckon people are interested in, things we’ve asked a Mandarin to think about, and things we need to sell but we haven’t a clue if anyone wants them.
There are in excess of fifty huge concerns mentioned in the email. What we’re looking at here is, effectively, a sovereign garage sale. The Greeks are being asked to sell control of their own destiny – to pass everything currently done (allegedly) in the interests of the community into the hands of those who care only about the interests of the shareholders. It’s a sort of Thatcherisation on amphetamines. But it took Thatcher fifteen years to sell roughly a third of this lot.
Nobody in the Troika wants to think about this, but concerned EU citizens must. If half the Greek population started selling the assets tonight, with free access to Sothebys and Ebay forever, they’d be hard pushed to shift 20% of it. First because the due diligence would be enormous. Second because bids would start at 10p and not move up much (this is a fire-sale, remember). And third, becasue I can’t imagine who (apart from the very bad guys) would want to buy bits of a Greek State descending into chaotic politics and violent social reaction.
But let’s try and apply a little foresight anyway. It’s pointless, because the sale is patently unworkable and unlikely to raise even 25% of the target set for it. But humour me.
Suppose – just suppose – that Muhammed El-Arian of PIMCO had a cerebral episode tonight, and decided he’d buy the whole lot at a premium of 20% over the asking price….in return for becoming King Muhammed I of Greece. Will that sum make the difference between survival and default? To which the answer, once you do the maths, is ‘absolutely not’.
The Troika target plus El-Arian’s 20% premium comes to €60bn which – if even if we give the Greeks until 2020 – still leaves their national debt at 104% of GDP.
But that assumes a rapid economic recovery sufficient to restore bond market confidence – such that bond yields stay static or even reduce – and that interest rates stay close to zero for the next nine years. Economic performance globally is waning, bond yields are rising in the eurozone, and the pressure on Western interest rates is getting hotter with every month.
Thus the most likely outcome is that Greece will BOTH default AND wind up having sold all its assets.
Has anyone in Berlin, Washington or Brussels thought of what would happen then inside Greece? Winding up with a country renamed Mhuammed I’s Kingdom of Greekman Sachalopoulos would be bad enough: the reality is that there would be a revolution of the old-fashioned kind.
But fair enough, let’s go one step further and assume that El-Arian does the business and persuades every PIMCO client to pour money into a Greek export and technological update programme. So Greece just about survives.
What happens in Ireland, Portugal, Spain and Italy? What happens, in fact, when so much precious money has been thrown after bad bailouts, even the ECB can’t sell its bonds any more, and France begins to look dodgy? When the German export markets collapse, and everyone pulls out of Deutschebunds? When the welfare monies disappear, and the Exchequers are empty, and the police have taken their truncheons home, and oh for Heaven’s sake, this is ridiculous.
We must start to take debt forgiveness seriously now. We are destroying sovereigns to save banks: not only is that sociologically idiotic, it won’t work. There isn’t enough money to save the banks from pain – and morally, they haven’t made much above 5% recompense for the damage they’ve caused to date.
Stop talking haircuts and start thinking crewcuts. Stop thinking EU and start thinking the West. Stop thinking IMF and start thinking China. The politicians and their new banking masters are leading us towards expensive and completely unnecessary disaster. This is notional money, and the vast majority of it must be written off. And none of these ideas are worse than just letting the bucket keep sliding down the hawser on its way to Hell.
The Slog 