Contemporary state polemics.pptx

Contemporary State Polemics :
The Case of Greece.

By Alkis John Corres, 25th of March 2017.
Is there anything to disturb this uneasy equilibrium?

One word about the equilibrium's nature. To borrow terms from economic analysis this equilibrium is neither stable nor meta-stable.
An external shock can throw any and all bilateral, trilateral and multilateral rapports in disarray without any foreseeable new equilibrium position in sight.
It is a classic case of an unstable equilibrium without any clues about the time frame needed and/or the nature of the next equilibrium position.

Let us review some possible game-changers.



Part Four:
Any chance for a resolution?
The situation is in multiple deadlock with no solution in sight.
Let us pause for a moment and reflect on the basic reasons behind this impasse.
The Greek debt for various reasons has grown out of proportion after joining the euro zone with numerous publications alleging foul play involving tampering with national statistics after 2007. This may be the apparent cause of the accident, but not the fundamental reason as we have seen in the previous slides.
Euro zone institutions and member states are obliged to play by the rules applicable. IMF and the ECB also need to respect their own charters. There has been a lingering suspicion that the regulatory environment may have been used in the polemics to make them look legitimate.
With four official players in the foreground (IMF, EU Commission, European Central Bank and the Government of Greece) and an unknown number of shadow players influencing their decisions, no predictions can be made about the future.

Let us consider who are losing from this situation.
Greek people are suffering while their own political parties play politics trying to ensure re election. Governmental action is purely reactive , not proactive, while trying to masquerade harsh economic measures as successes.
Many euro zone members have problems defending in parliament the continuation of Greek borrowing through issuance of state guarantees.
EU institutions would have loved not to have been involved in all that.
Non euro zone states of the EU are watching in awe considering their own adoption of the euro as a big problem and trying various ways to postpone it.
Even the IMF has problems at Board and General Assembly level with the size of the Greek debt and demands it to be reduced so it can comply with the requirement of its own charter to fund only viable debt.
It is fair therefore to conclude that the EU side loses from the continuation of this situation.

A. State departures from the euro zone.
It is common knowledge that the departure of even one big state from the euro zone could lead to the collapse of the common currency.
The big countries are four: Spain, France, Germany, Italy. This is a highly political issue and – as we have seen in the case of Brexit – quite difficult to predict. Such considerations are fuelled by the German ideas about austerity policies which today are openly challenged by other country members.
Significant damage to the euro could also be caused by the creation of a two-speed Europe using different currency values. As a matter of fact, this kind of arrangement could eventually lead to either the collapse of the euro, or to a series of developments leading to the split of the EU in smaller groupings.
Resolution: Greece will need to return to its previous currency and will regain control of its battered economy. Currency devaluation and new export orientation.

B. Refusal of one or more euro zone members to continue guaranteeing the Greek debt following defeat of such proposals in parliament.

In many occasions in the past the extension of state guarantee provisions has become object of political disputes which may threat party coalitions.
These phenomena become more intense as the Greek debt continues to increase as a direct result of the austerity policies forced upon the Greek economy by the troika.
A rapid deterioration of the Greek debt following domestic economic mayhem will mathematically lead to the need for more guarantees thereby increasing the relative importance of this issue.
Tensions also intensify during pre- election periods in cases when individual parties see possible electoral gains in this matter.
Resolution: Greece will lose the supporting guarantees and will leave the euro unless the European Central Bank becomes the equivalent of the Federal Reserve.
C. Turkish aggression in the Aegean sea.
Turkish aggression in and around Greek territory has been a daily phenomenon for at least two decades and has led to downed helicopters and fighter jets missing.
This type of activity, also including open threats to Greece, has gone over the top with Erdogan who appears to have realized that a possible division of the Turkish state favoured by many, would materialize during his own term of duty.
There is no secret that Turkey has been eyeing the gas deposits of Cyprus and Greece for some time.
In absence of a Common Defence Policy in the EU, Greece cannot rely on strategic support by other member states. However, compliance with covenants and caveats while under attack is unthinkable. In short, if Turkey decides to attack Greece, the entire support system set up by the lenders will be blown to pieces as national defense will take priority.
Resolution: Greece will leave the euro causing losses to EU banks.


Patriam amamus non quia magna est
sed quia nostra.
We love our country, not because it is big,
but because it is ours.
If you think a European Federation is a long shot or a pipe dream, you better brace up, as there is turbulence ahead.
In view of the previous analysis, a long overdue European Federation is an immediate and absolute necessity so that it can defend itself.
The EU needs to become a single political entity, a Federal State with its own:
Constitution,
Federal institutions/courts/legislation/budget
Common external borders/territorial waters,
Common defense policy,
Common external policy.
ECB to get Federal Reserve status.
Single currency.
Working models are available in the United States.
Any of the previously analyzed developments, can provide a destabilizing shock either in standalone or in combination mode.
History's continuum does not move with linear projections, it does so through upsets, and upsets we have been talking about here.
Unexpected developments and other changes are bound to happen, this is certain. What is not certain is when these will occur and in what shape.
Henry Kissinger has aptly remarked in the 1970s: "Control oil and you control nations; control food and you control the people." As energy has a pivotal role in geopolitics, the fight for control of diminishing energy resources will probably continue worldwide. Therefore a cessation of polemics is not likely to happen before the target (secure and cheap energy) is met, or something else happens.
The EU in its present form cannot provide to its member states security from polemics, nor can it defend its own resources. This is unacceptable.




D. Growing inability of Greek citizens amid high unemployment to pay ever increasing taxes, or widespread refusal to pay as a means of protest.

Impoverished Greeks families , hungry children at school and record high company closures set the alarms ringing. Such widespread poverty has not hit Greece since WW II and even then it had not lasted that long. Inability to pay has impacted social security funding and state revenues.
The Greek economy has been crippled by the harsh terms forced upon it for a record period of eight years. Unknown how long this can continue.
Few Greeks understand what has been going on as the enemy remains stealth.
Greeks have lost faith in the traditional democratic ways of protesting choosing a passive stance reminiscent of people under seige.
If increasing numbers refuse to pay, governmental threats about imprisonment and fines will be sounding more like a joke.
Resolution: Grexit, total economic collapse, similarities to Germany after WWII.
Enough about analysis, are there any findings?
Finding Number One: The situation is untenable, the Greek population has become impoverished and there has been a corresponding shift in votes in favour of extreme right wing parties. Therefore, the option ''Do Nothing'' should not exist, it would be tantamount to consenting to poverty with social disruption.
Finding Number Two: As long as the Greek economy is obliged to operate under this increasingly oppressive regime applied by the ''institutions'' there is no hope of recovery. One could be excused to think that the true aim of the measures is the inverse of economic progress for the reasons explained.
Finding Number Three: Past and present Greek governments have been negotiating under the threat of a sudden death in case of exiting from the euro. Therefore the choice presently is between a protracted economic death within the present regulatory framework, and a sudden death outside it.
Economic death is the end result in both cases.

Who is gaining? Let us see some of them.
European banks loath the idea of a Greek debt reduction which would translate in themselves incurring losses in place of interest gains currently made. Therefore the continuation of the present status quo suits them.
Germany in its stride to establish an EU political and economic dominance.
Exporting countries to the EU which want the big market of 600 million people intact.
Private funds, state funds, big investors etc see opportunities in snapping up Greek assets of all sort earmarked by the troika for mandatory sale within strict dates. Ports, airports, power generating plants, energy resources and so on.
Geopolitical gamers can eye benefits in cheap energy from having to negotiate with a financially exhausted country seller.
Enemies of Greece in the region may also see opportunities in the Greek economic plight from the viewpoint of a weaker national defence.
Greece today ranks only 27th among the OECD's 36 member-states in terms of people's disposable income, way below fellow countries of the European south, such as Portugal, Spain and Italy.
In practice the disposable income in Greece appears to have shrunk in the period 2008-2016 by at least by 57 billion euro and at a rate almost twice as big as the country's economic contraction rate.
In other words the polemics appear to have worked well, Greece is getting poorer with leaps and bounds while its relations with the rest of the EU members are deteriorating.
What is also worrying is that drillings are not expected to commence until later this year in Western Greece and much later in the South. Income from the fields will not be coming in the next few years.
This will mean that the suffocating pressure on the Greek economy is here to stay until the deals are sealed as Greece has no other new source of income to look forward to .
The scene is therefore set, unless something unforeseen happens.


While forecasts are forecasts, the known exploitable gas deposits in Greek territorial waters are currently estimated to the tune of 4 quadrillion cubic meters.

To get an idea of the size of these deposits, they correspond to 6,175 shipments of the world's largest LNG carriers.*
By comparison, the annual domestic consumption of Greece would only require the equivalent of nineteen ships of this size.
It is evident that the bulk of gas production will be exported, therefore the first issues will be: Drilling contracts, Contractual Priorities in Exports and Economic Terms. These are the main areas of negotiation.
Recent events in Libya are nevertheless indicative of the intensity with which negotiations can be pursued to ensure meaningful energy deals.
* Calculation based on a vessel Q Max, 266,000 cubic meters capacity with gas in deep freeze liquid form, equivalent to 161,994,000 cubic meters with the gas carried in uncompressed state).
The World Bank has been making its expectations about long term oil price development quite clear. Double prices in just ten years.




Part Three:
TOWARDS A DIAGNOSIS
Energy literally makes the world go round, hence its dominant role in a geostrategic context.
There are two basic reasons why energy has suddenly become – in the course of the last three decades – a scarce resource:
The discovery of new oil deposits has been slowing down worldwide and the cost of extracting it has increased dramatically.
The hopes for its eventual replacement globally by renewable sources have been dashed due to their limited output and high investment cost.
There is little doubt that oil prices in the medium/long term will reflect its scarcity, therefore everyone has been searching for alternatives which need to be friendly to the environment.
These alternatives today are basically two: nuclear power with its well known risks and limitations, and natural gas.
Ladies and Gentlemen Good Evening and Welcome.
Our presentation today has no
academic intentions, nonetheless
it is educational in character.
We are going to examine what happens
to the economy of a state when its
resources become targeted by another.
Historically, the method used to lay
hands on others' wealth has been the declaration of war.
However, in our times this has become difficult to sustain and manage in international fora, so alternative ways have been devised to lead to the same outcome.
Our case today is Greece and the unacceptable effects of economic warfare on its economy followed by reasoning about prospects of a resolution.







PART ONE




Part One
THE BACKGROUND




Part Two:
THE EFFECTS ON THE ECONOMY

A description of the ways through which a euro zone member with an acceptable external debt level becomes bankrupt within a period of a few years lies outside the scope of this presentation.

The series of events that have taken place in Greece have shown how inefficient the EU is in protecting its own members on one hand, and how useful the control over international institutions can be, on the other.
The prerequisite has been achieved. Greece today is technically bankrupt and in huge debt. The other euro zone members have been guaranteeing its borrowing to service its debt obligations to EU's financial institutions to prevent a collapse of the euro. Its negotiating power is minimal.
The European financial institutions, with the technical assistance of the IMF which is also a lender, have applied amid global depression wrongful (in IMF's own admission) and cruel measures to Greece with the silent consent of the other EU members (in order to prevent their own guarantees from being enforced). The effects of these measures are shown in the following three slides.

Private sector bank deposits

Source: Bank of Greece

119 billion euro in March 2017
176 billion euro in 2008
In sport, fitness plays a very important part in winning.
A healthy and fit athlete has much better chances to win compared to an athlete who is less fit, let alone if in poor health.

Using a parallel logic, in a bilateral negotiation concerning a long term energy deal, a financially stronger player would have the advantage over a financially weak opponent.
In our case the weaker opponent is the owner of the oil deposits and open aggression has been ruled out in absence of a dictatorial regime as in Iraq or Libya. Ways must be found to make agree to a low selling price.
In order to maximize the chances of a bargain deal the weaker opponent must be in desperate need of funds. Ideally should be bankrupt.
If that is so, bankruptcy becomes an important prerequisite to a good deal.

The measures kicked in in 2008.
Stabilized at 23.1 % since September 2016


January 2017 est. 191.3
545 billions lost, 60.9 billions yearly average
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