Briefing For A Descent Into Hell

Courtesy of The Automatic Earth.


Ben Shahn “Scene in Jackson Square, New Orleans” 1935

Oh well, some are more equal than others. One day after Eurogroup head Dijsselbloem says France won’t get any more lenience …

France Must Respect EU Budget Rules

France must meet EU budget targets or risk damaging the bloc’s entire framework for policing countries’ spending plans, the head of the Eurogroup said on Tuesday. “I don’t think small or larger countries should be treated differently … It is crucial for the credibility of the whole fiscal framework that also France commits to it, both in fiscal terms and in reform terms,” Jeroen Dijsselbloem, who chair meetings of eurozone finance ministers, told the European Parliament. “I think that the Commission has allowed itself and France more time to scrutinise the figures but also to take more measures and prepare more proposals. The Commission will assess them first and then report to us at the beginning of March.”

… the EC overrules him. Just like he overruled them a few days ago on the proposal for Greece that EC head Juncker had prepared for Varoufakis, but which Dijsselbloem swept off the table. A tit for tat battle of the peacocks? Talking with one voice it ain’t.

France Gets More Time to Meet EU Budget Rules

European Union officials on Wednesday gave France until 2017 to bring its government finances in line with the bloc’s budget rules, despite the country’s continued failure to adhere to them. The European Commission said it was recommending that France be given what amounted to a two-year extension to cut its deficit, which is expected to come in at around 4.1% of GDP this year and next, well above the 3% ceiling for the bloc. The commission, the executive arm of the European Union, is charged with signing off on member states’ budgets to ensure they comply with Union rules.

The commission also said it would not recommend that Italy, Finland and Belgium be punished, despite their failure to meet deficit goals, owing to “account key relevant factors,” including the weak economic picture. In November, the commission gave France, Belgium and Italy a three-month extension on their budget deadlines. The decision “fully reflects the current economic situation,” Pierre Moscovici, the commissioner for economic and financial affairs, said in a statement, adding: “The commission is demonstrating both the importance of structural reforms and the respect of our fiscal rules.”

In another 180º within 24 hours, Ukraine central bank head Valeria Gontareva withdrew a measure that banned purchases of foreign currencies by banks for clients, for 48 hours. Apparently, PM Yatsenyuk didn’t agree with the measure, and never got the memo about central bank independence. He must have a bunch of wealthy friends, no wait, that weasel has no friends, make that puppeteers, who told him to yank the measure or else. Which means more cash will flee and the hryvnia can keep plunging, after having lost 40-50% (depending on the blackness of the market you would trade in) over the past 10 days.

Earlier, President Willy Poroshenko, who didn’t get that memo either, had ordered(!) the central bank to stabilize the currency at 21 to the dollar as it was trading at 32 officially and 44 on the street. Look, Wonka, no politician can order a central banker to do anything, not in an alleged democracy. Well, perhaps (s)he could be ordered to step down, but not change policy. You might as well run monetary policy yourself from your candy empire.

Besides, it’s a stupid order: central banks don’t fix rates, certainly not of countries waging wars against their own people. No matter what Poroshenko says, or Yatsenyuk, who apparently called Gontareva ‘negligent’ and claimed she should have come to talk to him first. No, that’s exactly what she should not have done. Your currency’s exchange rate is not a political instrument. Because if you open that Gontareva’s box, you lose all credibility. Just ask Ben Bernanke.

Mish Shedlock has a great series on Ukraine going, and I fully agree with his advice for Valeria Gontareva: Get the hell out of Ukraine immediately!” Because once these people see their economy crash, they’re going to try and blame you for it.

Developments in Ukraine have accelerated enormously the past two weeks or so, even if that is not always obvious. The Ukraine army is losing big time, Russia may cut its access to gas because it doesn’t pay its bills, and now the economy is in the last throngs of its debt death rattle. Even the IMF today started to backpeddle on the billions more that it promised Kiev only a few days ago. It’s prone to be a battlefield in more ways than one.

Compared to that, Yanis Varoufakis is having a tea party in Athens. Though there was the indefinite ban the government slapped on professional soccer (football) because of fan violence, and that is more important to many Greeks than their own limbs, bot other than that, compared to Ukraine, it’s smooth sailing.

One detail Varoufakis came up with yesterday had me crack a smile. He told Bloomberg TV that the ECB was sitting on about €2 billion that the bank itself admits belongs to Greece (it stems from earlier purchases of Greek sovereign bonds). Therefore, Yanis suggested, if the ECB would use that money for the upcoming payment Greece owes the IMF, that would show ‘good faith and sportsmanship’ (I’m paraphrasing here). Bloomberg records a somewhat lame response by ECB head Draghi, but, let’s say, the die is cast:

Varoufakis Counts On ECB to Avoid Greek Default in March

ECB President Mario Draghi told the European Parliament earlier on Wednesday it was a popular misconception that it was up to the central bank to return any profit from buying bonds through the Securities and Markets Program. “The profits are ready to be distributed if Greece obliges with the program,” Draghi said. “It’s a commitment by the member states, not by the ECB.”

There is a principal agreement for a 4-month loan extension to carry Greece over, though there are still plenty loose ends. There is also the fact that Europe has reacted positively to the long list of proposals Greece prepared over the weekend. So Varoufakis is not only right in saying …

“I find it very hard to imagine that Europe and the IMF will allow us to trip over what is a relatively small cash problem.”

… it’s also a great moment to bring up that $2 billion. He could have done it two weeks ago, but that wouldn’t have had the same effect. At this point in time, the ‘institutions’ are going to look vindictive, and not acting in good faith, if they decide not to throw Athens that lifeline. It’s all about perception. The money’s there, and it’s theirs.

That doesn’t mean the fight is won or over, but it does mean Greece won the day. And that’s all it has, and all it can hope for: one step at a time.

That’s kind of true for Ukraine as well, only for them, every single one of their steps marks a further descent into hell.

And I still don’t like ‘our’ role in that one bit. We’re all far too silent.

Did you like this? Share it:
About Ilene

Speak Your Mind

%d bloggers like this: