Euro Crisis

Greek Finance Minister Says Bailout Extension Granted, Then Backtracks


Earlier today Greek Finance Minister Yiannis Stournaras said that a bailout extension had been negotiated with international lenders. This was news to European Central Bank President Mario Draghi, who claimed to be unaware that an extension had been agreed:

From the BBC:

Speaking to reporters in Berlin, Mr Draghi said: "The [latest Greek] review is not yet finished.

"I understand progress has been made, but some parts need to be defined, and I don't know anything more than that."

Stournaras had told CNN that the negotiations were "to a large extent finalized."

However, Stournaras has now had to go back on his earlier comments after German Finance Minister Wolfgang Schäuble said that a deal would not be possible without a final report from the troika (European Commission, International Monetary Fund, and the European Central Bank).

Greek officials have been in discussions with the troika for weeks in an effort to finalize a spending and privatization program for the next bailout installment. Whatever gets approved will have to go before the Greek Parliament for approval.

The troika has been insisting on unpopular reforms. An unnamed Greek official spoke to The Guardian about the proposed reforms, the effect they could have on the U.S. election, and how politically difficult reforms would be to implement:

"Even if the troika give us a negative report, what are they going to do? Are they really going to not give us the instalment [to keep Greece's economy afloat] two weeks before the US elections, with everything that entails – default, bankruptcy, global market turmoil?" he asked.

"These labour reforms will turn our country into Bangladesh. They have no fiscal benefit and will actually derail the adjustment programme. The political system will collapse if we impose them.

"The troika is demanding that we commit suicide, which is why we believe this is a matter that should be solved on a political level by the prime minister and not with the troika."

Such sentiments are what are standing in the way of the reforms that are necessary to address the situation in Greece. Unfortunately, it looks like some Greek politicians are struggling to get their stories straight, let alone do what is necessary.

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  1. Speaking on European bailout, based on a thread that happened yesterday, I got to thinking about the essence of profit and loss as it relates to the complex world of finance.

    Esteemed RC was pointing out the currency swaps as a kind of ‘bailout’ occurring between the Fed and the EU. Shrike immediately came back and suggested that it wasn’t a bailout, it was just the simple day-to-day banking that takes place with profit-seekers– and the American taxpayer was making a profit. It’s just banking. No bailout happening here.

    So I got to thinking about this, “It’s just banking” stuff and realized that when you cut through all of the complexities of global finance, libor rates, credit default swaps, MBS and various structured securities, all of these deals have a beginning point, and and end point, those points are defined by buying something low and selling it high. The methodology inbetween may be complex, much like a game of Whack Bat. However, the point is that you’re scoring points.


    1. Having said that, if the Fed– this private, quasi-government partnered agency with an outsized importance with the American Economy is buyin’ stuff low and selling it high, why don’t we cut them loose and tell them to just “go Bank”. And furthermore, if we’re not going to cut them loose, then why would any right-thinking person not want to immediately audit the shit out of them right this minute, and explore these ‘just banking’ transactions. Because when one engages in the acts of buying low and selling high, sometimes you buy high and sell low, and you lose money. Meaning that the Fed might end up in deep trouble conducting these ‘just banking’ transactions without any public oversight. Ami I on the right track here?

      1. All of which you said is true, but shreik will still argue “hey, that’s just bankin’ you dumb christfag”.

        I agree that the Feds have created a mess “just bankin'” of which may prove to be catastrophic, but the one thing we have going for us is that the rest of the worlds currencies that matter are even more fucked up than ours, thus they will unravel prior to ours if its going to happen.

        Watching the Euro fall apart has been very instructive. I doubt that the folks at the Fed haven’t been paying attention to their missteps, and then promptly repeating them immediately.

        1. but the one thing we have going for us is that the rest of the worlds currencies that matter are even more fucked up than ours

          Not really.

          The one thing we’ve got going for us is military hegemony. When that goes away, the US becomes Brazil in the 70s.

      2. The FRS has $54B in equity against $2.84T in assets. They’re not a bank, they’re a hedge fund.

        1. So they’re leveraged slightly higher than 2.5x capital?

      3. Ami I on the right track here?

        No, the fed is more counterfitter than bank and they operate outside of the normal profit-loss paradigm.

    2. Regardless of whether an ordinary bank would do the deal that the Fed is doing, the Fed isn’t an ordinary bank for this reason:

      It prints the currency it uses to do these deals. My take is that the Fed is colluding with the ECB to allow the ECB to get around the controls on its purchases of sovereign debt, like this:

      The Fed prints some money, swaps it to the ECB, which is allowed to do such transactions and prints some Euros to do the swap. Now those Euros (and dollars) are out there, and what do you supposed happens to them? I believe that, either directly or indirectly (through other banks) they are being used to monetize European sovereign debt, which the ECB is not really allowed to do.

      Its an elaborate shell game in the service of the worldwide central bank strategy of monetizing, directly or indirectly, sovereign debt and junk assets held by “too big to fail” banks.

      This strategy, of course, benefits governments and too big to fail banks. Who pays? Why, everyone else, as the value of their savings are eroded, the possibility of earning income from low-risk assets is destroyed, and the value of bond portfolios is vaporized.

      Its a massive transfer of wealth from the citizenry to the financial elites in government and banking.

  2. Oh, if Romney does win this election, Citizens United.

    Just sayin’.

  3. The silly Germans have fallen into the Greek trap.

    1. I liked that. Oxi-day was a good one, too.

      “Fuckkkkkk you!”

    2. That was fucking great.

      “Greece haz a problem? No, you gave Greece the money, youse have a problem.”

  4. The Euros are just trying to help the Greeks hold out for two more weeks so that BO will be safe. Except BO is pulling a Mussolini and screwing up his much easier end of the bargain.

  5. The more I hear from Greece, the more I think Truman should have let the Communists win in 1948.

  6. Sounds like a pretty solid plan to me dude.

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