"It is impossible to imagine why the government, instead of stressing the increasing instability in Europe and the country’s good fortune at already having secured a loan from the IMF of 12 billion euros at a rate of 4 percent, insists on borrowing from the markets, where the yield of Greek 10-year bonds has skyrocketed to 7 percent" - Ekathimerini, October 16, 2014
"Typically, the more stable and reliable funding is more expensive while the 'hot' money may often be cheaper and less cumbersome to obtain. With Greece's sovereign debt, the opposite is true. The stable and reliable funding comes from EU institutions and, as far as I know, it accounts for almost 80% of Greece's sovereign debt by now. Its cost, if I am not misinformed, is 2% at the most; perhaps even closer to 1,5%. The cost of the anonymous bond money has been down to 5% earlier this year, albeit only for a 3-year tenors. 10-year bond money, which is still rather short-term, would probably cost today 6-7%. Somebody needs to help me out with logic: there is 2% stable and reliable money available but the current government does everything it possibly can to switch to anonymous bond money for shorter terms and at 5% more cost? There must be a reason for doing that except --- I can't fathom it!" - Klaus Kastner, October 2, 2014
There couldn't have been a better example than the last couple of days of what can happen if one throws one's luck into the hands of anonymous bond markets! This only re-emphasizes the question why the government is so eager to throw its luck into the hands of anonymous bond markets. My understanding is that the government's desire is driven by Alexis Tsipras' promise to 'tear up the memorandum' (Greek translation: 'get rid of the shackles of slave owners') once he is in power. So the government seems intent on pre-empting that promise, not by tearing up the memorandum but, instead, by letting it lapse.
The various, extremely painful downsides of the memorandums (if not to say their mistakes/errors) have been debated ad nauseum and I will not belabor them here. However, there has been far too little focus on the infinitely more valuable aspects of the memorandums. I will now be rather controversial and argue what would have happened to Greece if there hadn't been those memorandums; if there hadn't been EU-support; if there hadn't been support of the Euro financial system. Those who think that I am exaggerating are invited to look at Argentina. There it happened more than once during the last 30-40 years.
Without the memorandums; without EU-support; with the support of the Euro financial system ---
1) The Greek state would have had to default on a large portion of its domestic liabilities (wages/salaries, pensions, etc.).
2) Capital controls would have had to be implemented including a domestic deposit freeze.
3) The banks would have had to be nationalized.
4) Imports of many goods would have come to a sudden stop.
5) Within a short time, Greece might have had a GDP only half the size of what it was before.
This is assuming that Greece would have decided to hold on to the Euro. Had Greece opted for the Grexit, the situation would have been even more dramatic.
Why does the Greek government fall for Alesix Tsipras' tactics instead of pursuing a self-confident and constructive strategy. A strategy which focuses on the positive aspects of the memorandums and which promises to correct the mistakes/errors of the memorandums which have caused unneccessary pain?
My sense is that, in the present situation of the Eurozone, Greece could get from the EU just about everything it wants as long as it is within a constructive and controlled framework. If Greece wanted to reprofile its debt to official lenders with a significant extension of maturities, it would get it. If Greece wanted a reduction of interest rates on the debt to official lenders, it would get it. If Greece wanted some financial room for maneuver to establish a social safetey net for the one-third of the population in poverty, it would get it. Etc.
My sense is also that the only thing which the EU does not want is a Greece which returns to its former ways. A Greece which becomes destructive and uncontrollable, and - frankly - a danger for the Eurozone and a nuisance for the EU. Isn't that a legitimate case?
Even if that were not a legitimate case, it is still in the selfish interest of Greece to continue on a constructive and controlled course. The energies must be used for striking better bargains with the EU; not for self-destruction!