Friday, February 10, 2012

Greece Still Can Do the Right Thing

Greece has considerable power in the form of two possible routes to take – and I suspect they are the only routes available to a patriotic Greek leadership. The current path, if supported by Greek leadership is mendaciously anti-Greek if not for all Europeans.

The two paths Greece must take, and I think will take:

1. 1 1. Mutually Assured Financial Destruction of all Europe with self imposed default – this would serve only the Greeks interest and would be predatory to all other Europeans, but is the correct route to take if the following path is not taken;


2. .........2. Absorb and agree to the essence of the troika and German party demands, but retool the method so all of Europe, including Greeks, prosper and a federal EZ results.

The first route, the MAD route, would first require the refusal to acknowledge the authority of the troika or unique EZ representatives, but insist that the only voice Greece will now discuss the issue with are the actual bond holders themselves. The Greeks would then insist that all those on record as owners of Greek debt as of February 1st 2012 will be counterparties and all bearer bond forms and other non-registered bond holders will have no voice. Then the following terms provided, dictated by Greece, noting the failure in the EU to provide transfer relief or Schengen Plan mobility as sufficient justification:

  1. Greece will leave the Euro and convert to the drachma at the rate of 1:E0.01 .
  2. Conversion will be on all assets and liabilities of Greek entities and citizens as of February 1st 2012.
  3. The Greek CB is leaving the EACB system immediately with all assets and liabilities converted to drachma as per the above.
  4. Tariffs on all Germany sourced goods may or may not be imposed upon competitiveness review.
  5. All debt of Greece if held by Greek entities or citizens on the record date will be converted to new issue at par.
  6. All Greek sovereign debt held by all those not on record or non-Greek entities or citizens will be voided under the justification of a national emergency.
  7. Greece will immediately withdraw from NATO given costs and the emergency.
  8. Greece will seek to form a common market union with Turkey and North Africa in general.
  9. Greece will seek to form a security pact with the USA.

If it were clear that the above will occur unless the second route below is followed, it would be insanity for Germany not to step away from their current position and support the dismantling of the troika plan.

The second route would be the best for all of Europe, including Greece and in the great tradition of the EU as acknowledged by Jean Monnet, would use the energy from the crisis to move Europe to a construct that would be in the best interest of all.

  1. Greece will implement the decisions of a new Euro Commission, with that agreement pre-authorized by all parts of the Greek government if not a national plebiscite.
  2. The new EC forum will composed of a national of each EZ member for a total of 17.
  3. Each EZ member will appoint this member via national popular election.
  4. Each EZ member will agree to affirm and agree to the decisions of this EC forum.
  5. Any policy or decision or remedy the EC forum decides for Greece will be applied to all EZ members in all matters from employment to tax rates and collection to fiscal policy.
  6. The EC forum will become permanent to provide compliance and to report on the general status of the EZ , Greece being one of 17 members in those reports.

It is obvious this EC forum, started to manage the Greek crisis, becomes permanent and the “upper house” or senate of the EZ and provides direct representative democracy and governance which will not only remedy the current Greek crisis, but maintain minority rights going forward and prevent such crisis in the future.

Now the equal loss of sovereignty for all EZ countries might make such a forum impossible. Then sadly Greece must follow through with the first option. Of course this would be a disaster but is the second best course of action for not only the Greeks but all of Europe. Likely such an experience will move the remaining EZ members into the second path for I see no other way to prevent contagion and the ruin of all of the EZ otherwise. In that case Greece could be forgiven and brought back into the EZ, but this will only occur if Greece presents both options now, for the record.

The worst pathway for Europe and the world is what is happening now for it is clearly a strange usurpation of power without a democratic mandate provided by various factions and blocks, one being the corporatist plutocratic block of near stateless EU bureaucracy. In fact the current path seems to only benefit this plutocracy as Germany and all are about to find out if this is the remedy. In that regard I consider the current crisis the results of what is effectively a plutocratic putsch.

Greece is at an epic and important point, yet they have considerable power they can wield on both the behalf of all Europeans and more importantly for themselves.

The machine that brought Greece here is of course the debt.

Almost all the justification of those using positions of power to impose the troika and German position is based upon qualitative and moral stances considering the notorious tax avoidance in Greece, the out of control patronage for Greek civil service jobs and the myth of indolent Greeks.

And Greeks have made this rather easy for the troika and the rest with some good street drama and chicanery which seems to confirm the veracity of the stance. The justification of the incredible austerity planned and forcing of imbalances resolution through only drastically raised unemployment so a Greek competiveness can be established in relationship to intra-EZ trade.

However these imbalances are not caused by Greek actions or mischance, but these Greek patterns would only have made the levels of debt slightly less or perhaps more easily noted and monitored – but Greece would have been in this position nonetheless.

The cause of the current Greece debt crisis is the intense intra-Europe mercantalistic trade stance of Germany (and to a lesser degree the Netherlands and Finland) which is dedicated to forcing Greece into a debtor status so as to finance German industry. Of course other countries are doing the same, but Greece being the weakest and least competitive nation from the start of the EZ was the most vulnerable.

The ineffectiveness of the Schengen Plan thesis, the extreme avoidance or refusal of transfer payments, and the lack of a competitive export industry in Greece has made the current crisis a fate. Even if Greeks had paid all taxes and swept the streets and worked as hard as Germans – they would still be at this crisis point with only a slightly stronger point of negotiation. The truth is the Greeks save more and work harder than Germans, and the tax avoidance is caused from a long history going back to the days of the Ottoman of corrupt governance that works on patronage and bribes. This culture in Greece can certainly never be remedied under duress – duress just confirms that the actions taken by the average Greek were spot on and thank God they didn’t pay those taxes as they would now face starvation – and can only be remedied under prosperity.

The above absolves Greece of any blame or need to answer and atone.

It requires that any Greek leadership, if they do not wish the leadership to go to the street and barricades, to refuse to even listen to any justification of the German party nor the troika. They must now with use of every bit of Greek power available arrive at a status that is the most beneficial to the Greek people, and after that duty is met to be mindful of the European people at large.

Tuesday, February 7, 2012

What the Greeks Can and Must Do for the Sake of Europe - First Close Down Access to Comme Chez Soi

[Comme Chez Soi is the most expensive restaurant in Brussels where I am told only the most senior Eurocrats can gain a table……]

Clausewitz stated that war was continuation of politics via another means. In an era where most feel that hard power no longer has relevancy and soft power is all, then the current play in Greece is a fascinating lab showing what happens now when war no longer is a political tool.

Germany and the troika as it approaches Greece is making a most serious error. They are not considering that that what they feel is the justification of their mandate to provide direction to Greece is based in the world of war, that economic might being the precursor to being able to prevail in war means they have the right to dictate terms to Greece.

But in fact, the relevancy of German GDP or German debt levels or German competiveness to Greece would mean all in terms of 60 German army divisions coming south, as it did in 1940 and 1941, but it is meaningless now.

In fact, though few seem to realize it, that in the “soft power” world Greece is, as far as policy design, every bit the equal to Germany. That in truth Germany has no leverage over Greece and in fact Greece as this massive borrower has huge leverage over Germany.

So Greece should realize this and come up with a game plan which empowers Greeks in this negotiation.

First, Greece has to understand a bit about what brought them here, who is providing leadership for them now, and decide where they wish to go towards. What brought Greece to this point is certain traits of cynicism and extreme local near tribal sensibilities tempted Greece to strike hard and massively at this surfeit of funding that came their way. And the funding had to come their way for Germany had to balance the accounts and fund Greece given the German predatory trade surplus. In many ways the funds that came Greece’s way are of the same “smell” as predatory lending funds for the US home markets came to broad swaths of questionable home markets in the USA. Germany could have played nice and instead of the lending could have made transfer payments to Greece, like sensible Canadians do as Ontario pays off Newfoundland for their internal trade imbalance. Germany could have said; “look, we came into the Euro with a bizarrely cheap DM conversions as we need to repair this East German mess. Let s do this for a decade and we will make transfer payments in the meantime. We will then settle out when done and help Greece with the transformation they require.” But no, like Greentree or Countrywide, Germans (and also to an important degree those sneaky fellow travelers like Finland (cell phones), Netherlands (high end goods) and others snuck into the deal) trumpeted virtue and attempted to dump on Greeks, counting on the obvious silliness and corruption of the Greeks to mask the true source of the debt load.

Now the Greek leadership, ever since that first dinner at Comme Chez Soi that they attended on the invite at their fellow Harvard or MIT or Georgetown alum (though French and oh so polished or tres chic) and which made their head spin, are like guys from Iowa who made it big in NYC – they will do anything to not go back and serve in Athens. They love Brussels. They love the French. Finally they are recognized for the true intellectual giants that they are despite their bushy mustaches. Finally they are Europeans! No, they are Supra-Europeans! They are “New Men” of the third way, a way beyond ugly back rooms in Athens and that rather embarrassing stint washing dishes for the Porcelain Club dinners in Cambridge, MA. They had finally transcended Greekhood! And they will sell all the islands of the Aegean and betray any Greeks and even sell Greece itself to maintain these new sparkling privileges. They are never going back. They are betraying Greece and in the most insidious way possible by first fooling and betraying themselves. All for the pressed duck at Chez Soi.

Greeks should immediately see that unless they too can get a seat at Chez Soi (they cannot), they better dump all the current leadership. A pretty good way is to declare that due to the emergency - and of course there will be errors for many, but this is an emergency – anyone educated in the great graduate schools of the USA and also served in any function for the EU machinery in Brussels will be locked up for the next few months. Sorry – but the spirit of Demosthenes calls for their sacrifice.

Now what to do, and what are the Greek strengths in the bargaining.

The Greeks should ask themselves if they still wish for a federal Eurozone which they will be a member of and share in a common currency. And if so what form should that EZ take. Obviously the current form sucks and requires great changes. Greece should understand, that as likely the weaker sister in the EZ for decades to come, the EZ should be in a form that empowers minority rights. It is not hard to define the optimal form – just take advantage of the USA education with a million causalities from the Civil War and what has transpired there since– for the USA Civil War was all about, because of their embrace of the odious system of slavery, weaker member states who had to face more populous and economically powerful states and still divide the pie with any equality. Greece has a huge leg up here as they don’t have to do a back flip to dump anything like slavery – maybe do a bit of work on local level political corruption and brush up on civitas, but that’s it. Greece then obviously has only one path or form which would make the EZ bearable and workable for Greeks (and really all PIIGS) and that is to have one of the governing bodies of the EZ which would have full equivalency of power to any other EZ governance bodies but be an upper chamber with the same number of deputies or senators or whatever they are called per each EZ member state. And that to maintain that equivalency requires a supreme judiciary to define and maintain that equivalency between units, and to judge things, this judiciary needs a constitution to work over. So Greeks should determine that the only acceptable form the EZ can take is where one of the governance bodies has to be an upper house with equal representation per state, no matter how small or large that state is and that no other arm of the government can have more power.

So once the objective is realized, the Greeks have to table this as a nonnegotiable requirement for any discussion.

Second, the Greeks must insist on the sanctity and priority of Europe upon itself. There is absolutely no roll for any suprasovereign institution like the IMF. For if the IMF is involved , some will not like the outcome and the presence of the IMF forever weakens the binding of the agreement outcome and justifies insurgency.

Next, the Greeks require as nonnegotiable that all EZ members form the body that negotiates the settlement, replacing the troika, and that all representatives of this body be made up of one per member country, and that this member be authorized to negotiate based upon a legislative ruling. And that this member in the forum not be the executive of the country. No Merkel, no Papademos. Of course this forum becomes the seed for the “upper house” senate and begins to set precedent for federal empowerment.

Then, the Greeks should insist as nonnegotiable that any solution or remedy be bonded for performance equally by all members of the EZ and that any application of the remedy in terms of reorganizing Greece procedures or governance become adopted in exactly the same manner by all members. Then Greece would then comply with the outcome.

Crisis solved and the basis for a federal EZ laid in the doing.

But all the above is required on a nonnegotiable basis – what leverage or bargaining strength does Greece have to gain this forum?

The most important factor is Clausewitz is off the table. There are no 60 divisions of German soldiers headed towards Greece (this time) and Greece can thereby make certain the above forum occurs. Greeks can do this by making the alternative so loathsome, so unpleasant for the rest of the EZ that there is compliance. Since there is no possibility of a war of enforcement or a punitive adventure, it is not difficult for Greece to design such actions. But it is crucial that the current leadership not be the ones to level the threat nor the design – for Chez Soi calls always. Also the choice cannot be a threat but communicated with firmness and great clarity and assured implementation if the above forum is not provided. This must be the financial and economic equivalent of a thermo nuke for this is in essence a policy of assured mutual destruction – MAD.

The MAD weapon:

Irrevocably and completely at Noon February 9th, 2012 Greece will enact the following:

  • All Greek debt held by institutions without at least 30% Greek ownership will be repudiated;
  • All Greek debt held by the ECB or any non-Greek EACB will be repudiated;
  • All property domiciled in Greece that is not held by at least 60% Greek ownership will be registered as “foreign held”;
  • All such foreign held property will have a surcharge tax of 10% of asset value levied as of January 1st 2012 which if not paid in 5 business days will be forfeitured to the Greek state;
  • All such foreign held property will be levied an annual tax of 8%;
  • All Euro denominated assets, whether cash or financial or property, will be exchanged for drachma at the rate of 1: E0.0050;
  • All Euro denominated debt, no matter where the domicile owed by Greek institutions or citizens will be converted to drachma at the rate of 1:E0.0050;
  • Greece will immediately withdraw from NATO;
  • No right of passage will be provided to any non-Greek military vehicles;
  • Greece will immediately require visas for all other EU member citizens;
  • Greece will provide a 0% corporate tax rate for all new ventures for 10 years;
  • Greece will lower the corporate tax rate to 10%;
  • Greece will lower the capital gains tax rate to 10%;
  • Greece will abolish estate tax;
  • Greece will impose a 25% flat tax on all income with no deductions for 10 years.
  • Greece can only rescind the above and revert to the Euro and the EZ provided a E250 billion subsidization fund is made available and the above repudiation remains.

As soon as Germany realize that the above will happen without the federal forum and elimination of the troika and the subsuming of Germany current approach to only one voice among 17, Germany will comply and then do as they always should have done and seek consensus via the democracy that Greece first presented to the world in the days of the Demos.

I will even go further. The above isn't far fetched and I strongly feel that ether in a hodge podge and chaotic fashion or with leadership and vision the above will occur. It is far better for the EZ if the forum approach becomes the pathway applied now. These swaps between ECB and EFSF and so on and so forth are canards, ruses.

What is striking is that the Chez Soi sell out is not Greek specific but is actually infecting all of the EZ. In fact it can be perceived that under the smoke and sparks of the specifics of the Greece situation, a general supra-sovereign putsch is underway and that Merkel , assuming she is dedicated to the German constitution, is a dupe of this Chez Soi cabal. That “something happened” over the last decade where the likes of Jean Monnet and Adenauer were replaced by a subtle but very powerful stateless plutocracy. Chez Soi diners all. What I proposed and the logic I table was actually the expected development and outcome for the formation of the United States of Europe. That only a crisis like that occurring now would wake folks up and get them past their deadly and inefficient and destructive tribalism of area nationalism. I think the crisis has achieved that objective, but what Jean Monnet did not plan for or expect is this vast organized international cabal of stateless, proudly so by the way, plutocrats who wish to simply abolish sovereignty and federalism entire and impose a plutocracy. That the descendants of Marxism and other corporatists would use the opaque confusion and complexity of deconstrustionalism of the French with the neo-Adorno Habermasian ‘deliberative democracy” and basically carry off a putsch. With Clausewitz out of the room very strange mutations have occurred indeed.