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Wednesday, 17 June 2015

Greece: Capital Controls and the Drachma As Soon As Possible (Costas Lapavitsas)

BBC News- "Greek central bank warns of 'painful' euro and EU exit" - "Failure to reach an agreement would... mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and, most likely, from the European Union," the Bank of Greece said in a report.

The Wall Street view - Bloomberg Businss,"Here's What the Smartest People on Wall Street Are Saying About Greece"

The Guardian - "Head of European parliament says Grexit from euro may also mean leaving EU as Athens admits it cannot pay IMF and Brussels expresses little hope in final talks"

Greek Parliamentary Committee Preliminary Findings on Public Debt (Keep Talking Greece)

New improved deal offered by Juncker? - Ο πρόεδρος της Κομισιόν παρά την χθεσινή έκρηξη κατά της ελληνικής κυβέρνησης σε μια ύστατη προσπάθεια θα διαμεσολαβήσει εκ νέου μεταξύ Αθήνας και θεσμών, προτείνοντας εναλλακτικές επιλογές στα σκληρά μέτρα (Ασφαλιστικό, ΦΠΑ) που για την ελληνική κυβέρνηση αποτελούν κόκκινο πανί. Όπως εξήγησε αξιωματούχος στις Βρυξέλλες για παράδειγμα στο Ασφαλιστικό θα προταθεί στην Αθήνα ως εναλλακτική επιλογή να προχωρήσει γρήγορα σε κάποιες μεταρρυθμίσεις, όπως η κατάργηση των πρόωρων συνταξιοδοτήσεων, και οι υπόλοιπες αναγκαίες αλλαγές να μετατεθούν για αργότερα και μετά τις σχετικές μελέτες. Ακόμη, δέχονται να καλυφθεί μέρος του κενού με περαιτέρω μείωση των εξοπλιστικών δαπανών.

Capital Controls and the Drachma?

Sakellaridis- Κανένα θέμα ελέγχου κεφαλαίων, διασφαλισμένες οι καταθέσεις

From imerisio - ο βουλευτής του ΣΥΡΙΖΑ τονίζει οτι η έξοδος της Ελλάδας από το ευρώ έιναι η πιο συμφέρουσα επιλογή. «Η ελληνική κυβέρνηση θα πρέπει να επιβάλει το συντομότερο δυνατόν ελέγχους στην κίνηση κεφαλαίων και θα πρέπει να υποβάλει αμέσως σε ελέγχους τις τράπεζες.

Lapavitsas, interviewed in Jacobin magazine

Greece: Phase Two - Greek MP Costas Lapavitsas on the economic barriers ahead for Syriza and the challenges of eurozone exit, by Sebastian Budgen and Costas Lapavitsas

Excerpt from interview:

Presumably the first step is to carry out immediate capital controls?

Let’s start the other way around again. Let’s look at contested exit. If that were to happen, the first thing that would immediately take place is a default on the debt. If Greece defaulted on its debt, it would open up a process of negotiated debt restructuring. (Because default doesn’t mean that the debt disappears; you’re simply refusing to pay it.)

If it’s not in the confines of the monetary union, it will find restructuring much easier. Much, much easier! The IMF, for instance, knows that the debt has to be restructured. The real force stopping restructuring in Greece is the European Union and the monetary union. So debt restructuring ought to become easier and more doable if Greece also, of course, exited. That’s the first thing. The debt can wait. Greece will default, the debt will sit, it can wait.

The real problems then will be the immediate problems. The immediate problems will require a series of immediate actions. We know what these are from the Cypriot experience, where the EU itself imposed them. To forestall a lot of your questions, we know the EU allows for capital controls and it imposes them itself when it has to.

So the government would have to impose capital controls immediately, and it would have to impose bank controls immediately. It goes without saying. It would have to do what the EU did in the Cyprus case. Now, how long these controls will last and what form they will take will be a matter of how the situation unfolds. They will certainly last for a significant length of time. And some form of capital controls will of course remain, as they ought to.

Bank controls, assuming the situation becomes regularized in a reasonable period of time, can begin to be lifted after a few months. But these two are immediate measures, paramount measures, that will have to done immediately.

Then there will be the issue of re-denominating everything in the new currency. That will generate a host of legal issues — we will need an army of lawyers — because the easiest way of carrying out re-denomination is essentially is one-to-one.

Re-denomination will depend on the governing law of the contracts that you’re looking at. If the contracts are under foreign law, it will be problematic. These contracts will have to be parked in some special accounts, and they will have to be dealt with over a period of time. Those under Greek law, by and large, will have to be re-denominated immediately. And that means, of course, deposits, bank debts, and other obligations. Whatever it is, whatever comes within the limit of power of the Greek sovereign, the Greek state, and the Greek legal system would pretty much have to be re-denominated immediately.

Re-denomination would create a problem for the banks, and bank nationalization would obviously be immediately necessary. But bank nationalization is clearly a vital step for the Greek economy right now because the private banking system, or the banking system generally, has failed. So we’re not doing anything particularly shocking.

Then the state will have to intervene once it has nationalized the banks and re-denominated their balance sheets, to restructure the banks. The banks need reorganization to see which banks will remain and on what terms. That’s a process that will take some time, and it will not be easy.

And you see this nationalization as a purely top-down process, or as something that would also involve a degree of popular control?

Absolutely with more popular control and workers’ participation! The bank employee unions are very active, and they want to contribute positively to what’s happening. They would have a role in running the new banks and reorganizing them, of course. It’s not just a top-down thing.

But a top-down thing is necessary. We’ll have to appoint a public commissioner for the banking system, we will have to change management immediately, and then begin the process of restructuring the banks to create, at long last, some healthy banks. Employment and production will increase.

The next thing would be, of course, in some ways the most difficult thing, the most awkward thing: to deal with particular markets and the impact of exit on those market. Now, there are three key markets here: energy, which means basically oil; food; and medicine.

The situation for Greece in these regards is much better than it was in 2010 because the country has pretty much countered the country’s imbalance. It’s more able to secure its imports than it was in 2010. But, even so, active intervention will be needed in these three areas to make sure that needs are prioritized, that people who absolutely need medicine and food and so on get it as a matter of priority.

This isn’t as difficult as some people like to make out. It will not be a pleasant period, but that’s not sufficient. It’s not enough in and of itself to say that exit should not be countenanced. In the fullness of time, the cost of a few months of difficulty amounts to nothing. And if there is some planning, that cost can be significantly reduced.

Concretely, we’re talking about rationing, aren’t we?

Yes, we’re talking about a process of rationing.

And you’re relying on the Greek bureaucracy to carry that out in an equitable and efficient manner?

Unfortunately, we are. But you show me what the option is and I’ll go for it. Not only this, but we’ve got four months. In those four months, we can take all sorts of action to prepare.

Let me tell you a couple of things. Greece is in the midst of a humanitarian crisis. There is already rationing in the country, except it takes place through the wallet. Large sections of the population don’t get enough to eat, those who rely on handouts and on so-called social groceries — in other words, places where food is available at very low prices and so on.

Yes, these are rationing mechanisms, which are already in existence. And dealing with the humanitarian crisis right now would create even more capacity in this regard. We are already putting in place mechanisms that could deal with these problems of supply shortage. So that should not be as difficult as it would have been back in 2010.

And presumably you’d have to have some important degrees of popular control to avoid clientelism and corruption?

As always. And that’s what Syriza could and should do. That’s what a left government could and should do. That’s what it’s for.

Also, on medicines, Greece exports medicines. It has a significant capacity to produce medicines. The problem is not as serious as people make out. And on energy it’s got a large capacity to produce electricity. It’s pretty much close to self-sufficiency. The shortages will be for transport, and there rationing will be necessary. Rationing is what we are living through at the moment, except that it’s rationing through the wallet. A lot of people don’t use their cars because they can’t afford it. Things are not going to change for large numbers of people in this regard.

How crucial to this process is the forging of alternative alliances with countries like Russia, Venezuela, China, Iran?

Absolutely critical. And there is reason to expect good responses from these powers....

Kathimerini: Will Greece leave the Euro?

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