Greece needs to leave the Euro and default this bank holiday weekend

28th May 2012 by Shaun Richards

As the crisis in the Euro area continues to spread and develop it is easy to forget the economic destruction that has been inflicted in Greece where the first signs of the current problems emerged. That is of course unless you live there! Politics is not my area so today I wish to look at the economics. If we look back we see a crisis which began with government overspending which the past New Democracy government hid and which the more recent Pasok government tried but failed to deal with the consequences of. This led to a call for international rescue the mishandling of which saw Greece’s economy spiral downwards. In short economic contraction led to austerity which led to further economic contraction and repeat. So far there is no sight of an end to this madness.

How is Greece’s economy doing?

According to the official statistics her economy shrank at an annual rate of 6.2% in the first quarter of 2012. To give an idea of the incompetence of the “rescue” effort the original “shock and awe” plan forecast 1.2% growth for Greece in 2012.  If we look at industrial production we see that as of March it was falling at a year on year rate of 8.5% with the underlying index where 2005=100 being at 72.6. The volume index for retail sales looked even grimmer when it was shown to be falling at an annual rate of 13% in February with an underlying index of 79.2 where 2005=100. The only area of hope has been exports which have risen although sadly the rate of increase slowed to 10% in March. Indeed inspite of a collapse in import levels and genuine export growth  and Greece still ran a trade deficit of  just over 2 billion Euros in March which is pretty much what she exported. It is often ignored but another way of analysing her problems would be to start with her trade deficit.

If we move from official data to survey data to bring ourselves as up to date as possible we have seen that Greece’s manufacturing sector fell even further into contraction in April as her Purchasing Manager’s Index fell to 40.7 where 50 represents unchanged. Even worse there seems to be a complete lack of trade and credit finance inspite of all the various bank bailouts which only seem to have supported banks which have metamorphosed into Zombies. Perhaps the horror film The Day of the Living Dead represents them best as they soak up another 19 billion Euros. Or as Kathimerini puts it.

Loans to households and enterprises have fallen by about 11 billion euros in the last two years.

And her Financial Markets?

Both Greece’s stock market and its bond market have collapsed. That is not too strong a word for a stock market which on Euro entry was over 6000 and is now at 500 as represented by the Athens General Index. And her government bond market has fallen even further since her debt haircut with her ten-year bond yield being just under 30%. So investors and pension funds must have taken quite a caning overall and any wealth effects on her economy must be strongly negative.

It never rains but it pours

I guess all readers are familiar with the fact that luck very rarely appears when you most need it and in fact it seems to operate in an inversion fashion to need. Take a look at this from the Financial Times.

The price of premium-quality extra virgin olive oil in the wholesale market fell this month to $2,900 a tonne, the lowest since 2002 and down more than half from nearly $6,000 a tonne in 2005, according to the International Monetary Fund.

I guess you are already waiting for the next bit.

Spain, Italy and Greece are by far the largest producers of the commodity, accounting for 70 per cent of the world’s olive oil output.

A familiar list is it not? The cause has been reduced demand in those three countries (particularly Italy and Greece) due to their economic difficulties and a bumper crop in Spain.  And if you add in the exchange rate it is even worse because in 2002 the Euro and US Dollar were approximately at parity but now if we take US $1.25 per Euro we see that US $2900 bought 2900 Euros then but only 2320 now. Ouch.

I wonder whether Spain now thinks it was a good idea to encourage and subsidise olive oil production. Oh what a tangled web we weave and all that!


If we consider the poor we see that olive oil producers in Greece will be having a hard time right now. However there is the other side of the coin which is that consumers of olive oil can buy it more cheaply and this will particularly help poor consumers. So whilst looking at Greece’s production this is bad news for her consumers it is good.

So is there a level of commodity prices we like? We need to be careful to avoid just complaining of inflation when they rise and producer pain when they fall! But for today’s purpose and Greece’s economy where proportionately there are more production than consumption it does not help.

So another problem for Greece and a thought for you to consider when you see The Euro Is Collapsing headlines as since 2002 it is still up by 25% or so.

I would be interested if any readers are regular buyers of olive oil and have noticed any price falls at the retail/consumer level.

Tax Trouble

This remains a serious problem with Kathimerini reporting this.

May has been a particularly bad month for state revenues as in the first 20 days of the month, which included a general election, the inflow to public coffers was at least 20 percent lower than in the same period last year.

And this.

State revenue from VAT in the period between January to April was down by 800 million euros compared to the same period in 2011.

The same VAT which has seen its percentage rate rise on more than one occassion. Greece is demonstrating it sown version of the Laffer Curve. And a familiar issue gets a mention too.

Officials will focus on those with debts of up to 3,000 euros in a bid to make a dent in a total sum of 45 billion euros in uncollected taxes.

All countries have some uncollected taxes but imagine the difference in Greece’s circumstances if she managed to collect even half of these arrears.

Greece’s Merchant Fleet

Symbolic of the issues described above was this.

Greek shipping retained its position as world leader in 2011, as it controlled 14.83 percent of the global capacity in deadweight tonnage……The Greek-flagged fleet amounted to 2,014 vessels with a capacity of 43.39 million dwt, constituting 39.52 percent of the total European Union capacity.

There is money around somewhere.

Step Back in Time

I took a look at the back data on taxes from Eurostat and we see that Greek tax revenue feel as a proportion of the economy into the crisis from 34.6% of GDP in 2000 to 30.5% in 2009 compared to a Euro area average of 38.9% in 2010. And here is another thought in 2010 the two countries Euro area countries with the lowest level of consumption taxes were Spain (14.6%) and Greece (15.8%).


Greece is currently trapped in an austerity/depression dance where one feeds into the other in a so far endless cycle. If we look back to only February we can recall that yet another 3.3 billion Euros of austerity was passed by her interim government which if it is ever implemented will only make things worse. If 2012 continues on its present trajectory then ever more will no doubt be called for.

As soup kitchens and poverty spread in Greece we see a carousel of people telling us that a Greek exit from the Euro would be a catastrophe! Somewhat bizarre and out of touch is my view on that. We are also seeing extraordinary estimates of what it might cost with the head of the IIF weighing in with a trillion Euros. What a load of rubbish! He doesn’t know that and it ignores the gains from it. You ‘s think his members (banks) had a vested interest in it….

As for me I remain of the same view that the best way out for Greece is to leave the Euro and devalue and default. There are dangers and risks in a devaluation but all roads are dangerous for her now and as well as an increase in competitiveness I would like to add another factor ,shock. We as human beings are often irrational and the shock effect of such a move would be likely to shake up Greece’s political and economic establishment and I certainly hope that it would. A new start can be a powerful motivation and compared to seeing an ever increasing debt burden it must be a turn for the better.

As to timing well she has a bank holiday next Monday so there is a long weekend….




40 thoughts on “Greece needs to leave the Euro and default this bank holiday weekend”

  1. Sovjohn says:

    Hi Shaun, good article as always, let me supplement your article with reasons why this won’t happen, though :)

    The whole Euro ordeal is political in nature first and foremost, and not financial. Since the May 6th elections the level of scaremongering and plain FUD which has been broadcast from ALL mainstream media (newspapers, radio, TV and internet sites), is insane.

    Apparently if Greece leaves the Eurozone, ever, the 4 Horsemen of the Apocalypse will decapitate all mortgage owners, the country will slide back to the 19th century, fire will rain upon the skies, blood will fill the seas, everyone will be raped to death and the star system will collapse.

    I kid you not, these might have been actual “arguments”. The bit about the 19th century has been actually said…

    Furthermore, the sheer scale of “warnings” thrown by international media has received absolute coverage, with any different opinions or analysis carefully buried.

    As such, I don’t foresee a Grexit anytime soon, mostly because the way I see it it’s a “more expensive option” for the lenders first and foremost. I’m not ruling it out for all eternity, just not June or so…

    Autumn might be different. Then again, I think that maybe (?) other countries will be closer to an imploding point by then (Spain comes to mind…) so I don’t know what political rabbits will the politicians decide to conjure out of hats…

    1. Anonymous says:

      Hi Ioannis

      I understand your points and the media over here is awash with them too. But how do they cover off the dire straits that Greece is in now? Do they ever refer to the current situation and likely trajectory?

      1. Sovjohn says:

        Sure. There is a discussion that the average salary level has dropped even beyond the aspirations of the Troika, and they want to initiate a discussion to partially undo, I suppose, the 22% cut to national minimum wage (which led most wages down by more than 22%).

        Other than that, nobody ever wants to make an analysis about leaving the Eurozone. Whoever says that is branded an extremist cannibal who wants to buy the country’s assets dirt-cheap with the money they have stashed outside Greece :)

        Apparently the new rhetoric of Pasok & New Democracy talks of a prolonged MoU with the remaining measures spread until 2017 or something.

        If = future course is not = outside the Eurozone then = all is good.

        I suppose you get it :)

  2. Drf says:

    ” If we look back we see a crisis which began with government overspending…”  Is that not true of all fiscal crises?  What we really need to address is the principal reason that modern governments over-spend; the difficulty is that when rationally examined the principal reason is about politics?

    “I wonder whether Spain now thinks it was a good idea to encourage and
    subsidise olive oil production. Oh what a tangled web we weave and all
    that!”  Rather, perhaps we should be asking the question: is it ever a good idea in any economy to subsidise, since ultimately subsidies distort markets and destroy the natural price finding functionality. The natural equilibrium is never really restored even when subsidy ends, because supply has been permanently affected and so generally never reverts to the mean.

    All of these considerations eventually come down to sound markets and sound money; as soon as politicians distort these to attempt to enforce their political idiologies based on sheer fantasy, then these are the typical problems which emerge.  No country is ultimately any different, apart from the specifics.

    Of course you are correct in your conclusion that Greece needs to leave the EZ, and soon.  The politicians main concern at the moment is to protect those banks which will suffer huge losses as a result , and to preserve their Totalitarian Socialist dreams for a Nazi United States of Europe. However, it must be remembered that the only reason Greece leaving the EZ is necessary and the only reason it is now the only tolerable solution is that it will allow gross debasement via the new Drachma (some indicate as much as 65%)!  Debasement is never a good thing. Even Keynes did not advocate it, but rather condemned it.  It is economically destructive, most of all in an advanced economy of today. You would not think so, if you listen to so many present politicians and supposed “economists”. And like lemmings there follows a number of other countries, who want to be able to also use debasement as a solution to their political difficulties. So Greece leaving the EZ will doubtless precipitate a flock of others queuing up wanting to do the same. The UK is of course able to debase freely already and has done so to a frightening degree.  The full effect of that debasement has not yet fed into the economy, and yet now they are advocating still more! The global future begins to look extremely bleak. This time even Switzerland has now effectively joined in the race to the bottom.  But, I have to ask; where exactly is the bottom now and what will it be like to get there?

  3. JW says:

    Hi Shaun
    Of course you are correct , but why it won’t happen….FEAR.
    Fear in the Greek populace that Grexit will be worse than staying in, but mainly Fear in the EZ that Grexit will cause a run on banks across southern europe and ensuing mayhem.
    Fear will keep making this worse.

    1. Anonymous says:

      It is not only fear. It is also a very strong feeling of hope that there will be a political intervention at the last minute and it will save the EZ as a total collapse is bad for all. For this reason the majority of people want to stay in the EZ. I don’t know if this will happen (frankly I believe that it won’t) but EU mentality has always been like this: The political over the economic argument (otherwise the Euro woudn’t have been here at the first place). Moreover, I take the risk of a generalisation, deep down people in south do not believe in free markets, they believe in manipulation of markets by politicians and this is what they believe it will happen in the end. I think we are heading for a nasty surprise but it is difficult to argue against this almost religious belief. And Shaun does not do politics. They won’t argue against Shaun’s position, they will say that the underlying problem is political and it will be solved in the realm of politics.

      1. Anonymous says:

        Dear Vasilis,

        Suppose that both Greeks and
        EZers  reject Shaun’s economics in favour
        of politics.

         Scenario 1)Voters do as they are told and vote in a New
        Democracy/Pasok govt that agrees to conditions.  In gratitude, Brussels activates the EU
        Maritime Policy, injects it with unspent billions from other budgets  and makes generous grants to dozens of  Greek tourism, port, fishing and ship
        transport projects. These are leveraged by more billions  on advantageous terms from the European
        Investment Bank (or conceivably even  World Bank or EBRD).  This could be started in 3 months, though it
        would probably  take 3 years.  .
        Scenario 2) Socialist refuseniks are voted
        into government and default on all loans, leaving, Shaun estimates,  3% primary deficit to be financed. Adopts
        fully socialist solution by emergency  nationalisation of all land (or non-church
        land or developed land worth more than X00,000 euros), compensated by tradable 50 year zero
        coupon index-linked bonds (thus kicking can a long way down road). Property
        leased back on a rent of 5 % of value to plug revenue gap.
         Of course, neither of these fantasy
        scenarios would deal with banks or competitiveness.  

    2. JW says:

       I should add Fear also in the ECB if/when it turned off the ELA to the Greek banks, no-one knows what happens next.
      As an aside Bankia was given Spanish Govt bonds in return for shares, so it can now use these directly with ECB to raise funds. So a third means of support is opened, ELA, TARGET2, and now these Bonds, does Germany know how much of Spain its already supporting?

      1. Anonymous says:

        Hi JW

        Has that gone through yet? As I was expecting resistance from the ECB which must be afraid of more and more of this happening and it becoming the indirect vehicle for yet more bank bailouts……

        Spain’s strength is in arguing that it is similar to what Ireland did..

        And should more and more of these go through the balance sheet of the ECB just looks worse and worse!

        Oh and didnt Rajoy deny this sort of thing only a few days ago?

  4. Nemesisforpredators says:

    You say euphemistically: “What a load of rubbish! He doesn’t know that and it ignores the gains from it. You‘d think his members (banks) had a vested interest in it….” 
    I’d think it’s been their intended plan all along! Their desperate plan is backfiring and they are being hoist by their own petard. 
    The suffering they have tyrannically imposed on their victims will have to be seen to be believed.
    They have set up their own nemesis. They wanted financial war and that’s what they’ve created. Just like the sorcerer’s apprentice their game is about to blow up in their (and our) faces.
    Sooner they’re brought to book the better for all of us.

  5. Robin Plampton says:

    Olive oil

    1. Anonymous says:

       Hi Robin Plampton,
      We apologise for the difficulties you are having posting comments.
      We have contacted disqus, so hopefully the issue will be resolved shortly.
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  6. Spacemanc says:

    “Greece’s Merchant fleet…….there is money around somewhere”
    I think I’m right in saying that the Greek shipping industry is a tax free, so they don’t even have to bother avoiding tax.The Orthodox church is the biggest land owner and they have their fingers in many other pies – again they operate tax free!I’m sorry but I still have little sympathy for Greece because they appear to try absolutely anything other than face the hard decisions that need to be made. There’s a total lack of leadership in their politicians – and as a democracy the politicians represent the Greek people. I’m sure we will see a prefect example of this in a few weeks time.Makes me think of ‘Just’ by RadioheadIs that you do it to yourself
    Just you and no one else
    You do it to yourself
    You do it to yourself Harsh but true.

    1. Spacemanc says:

      For some reason paragraphs disappear on my posts?



      1. Anonymous says:

        Hi Spacemanc,
        We apologise for the difficulties you are having posting comments.
        We have contacted disqus, so hopefully the issue will be resolved shortly.
        Community Manager

    2. Jason Aris says:

      Agree, Spain has just forced the church there to pay appropriate taxes the Greeks need to do the same (and for their shipping companies too) it is ludicrous that others are being expected to pay for this mess when these two vested interests get away scot-free

      1. Anonymous says:

        Hi Jason

        On a similar tack I did see a suggestion today that Italy’s problems would be lightened significantly if the Vatican and the Catholic church paid some tax on their wealth.

    3. Anonymous says:

      Hi Spacemanc

      Sorry about the glitch with disquss. Shipping industries are not the easiest to tax and I recall various issues about the flagging and status of the UK merchant fleet. But for the UK it is a more minor issue..for Greece it is relatively much more important.

  7. Anonymous says:

    The best value extra virgin olive oil (according to various press reviews) is from Lidl. As I am a keen buyer of this I can confirm that it has been £3 per litre for several years. It is bottled in Italy.

    I will not hold my breath for a price reduction as I am sure there must be other inflationary issues (glass, transport etc) that will keep the retail price up.

    1. Anonymous says:

      Hi Kit

      So like the old cricket commentary am I right in assuming that it is “no change there (Ritchie)?

  8. Dave S says:

    Shaun, I don’t dispute that Greece should and inevitably will leave the Euro but I still fail to see how growth will be restored after devaluation.

    Exactly how will Greece grow ? Even if its labour costs are cheap relative to the rest of Europe, it will still be expensive relative to almost limitless supply of cheap labour that globalisation has created. Are we expecting the Greeks to work for $2 a day in future ?

    Neither can I see investment capital flowing in to build the factories and infrastructure required – where would the capital come from – certainly not Germany – why would anyone make risky investments in a shrinking European market when the growth is happening elsewhere in the world ? There is no guarantee that Greece would even remain in the Common Market.

    Tourism has traditionally been a big export – but surely this will be badly damaged by the social upheaval caused by devaluation and hyper-inflation – it will be a long time before German tourists dare to venture back in any numbers.

    And then there is agriculture – except maybe for olives………….

    I wondered if you could explain post-devaluation, and in the context of an increasingly impoverished Europe, how you think the Greek economy might recover ?

    1. Anonymous says:

      Hi Dave S

      I didnt break down the export figures I gave earlier but Greece is in the middle of an export boom to the rest of the world i.e not Europe. Exports overall grew by 10% in March but if I remember rightly ones to the EU only grew by 3.9% so if Greece could continue like this and also get a more competitive currency there is a little light at the end of a tunnel that may for once not be an oncoming train!

  9. Frakno22a says:

    For Dave S;
    You’re absolutley incorrect about Greece’s tourism. If Grece will leave the Euro, the dracma will be a cheap paper currency. Tourism will skyrocket overthere for sure!

    1. Dave S says:

      Perhaps, but it will take a lot of time recover the 2million + german/austrian visitors they will lose and it assumes optimistically that the British and other European visitors will be in a position to keep spending money on foreign holidays or that their own currencies won’t collapse too ! 

      1. Spacemanc says:

        Apart from people who are unemployed, I don’t think that many people cancel their holidays when they’re economising  – they choose cheaper places, so Greece would be very popular, just like Turkey has become very popular due to them not having the Euro.

  10. Noo 2 Economics says:

    Hi Shaun, I agree about Greece but now I doubt the future of the Euro and think the EZ should return to the old Common market. Every one has their own sovereign currency and no tariffs are imposed. The free exchange rate would compensate for differences in countries competitiveness, unlike the present system which has been a major cause of the PIIGS problems (notwithstanding the bank bailouts who should been allowed to go bust and the Governments buy them up at a penny on the pound and the Greek reluctance to collect tax) , after all, imagine a Eurozone without Germany. What would be the value of the Euro then?     

    1. Anonymous says:

      Hi Noo 2 Economics

      Thats an easy question much lower with Germany trying to cap its new currency just like the Swiss are trying with theirs. Let me also give another forecast Germany would be battling with the concept of negative interest-rates rather than veering on the edge of them as it is now…

  11. Jason Aris says:

    Can they wait till the following weekend, I’ve got some Euro’s I need to get rid of and am off to Belgium for a few days next week

  12. Anonymous says:

    If the Bulgarian crisis is anything to judge by,  a default & exit would allow stabilization and recovery. That crisis created a shock which caused the Socialist Party to loose power. The subsequent government implemented enough reforms for the economy to recover, though Ivan Kostov’s government did not do enough to tackle corruption. Ever since ALL Bulgarian politicians have avoiding excessive borrowing and tried to balance the budget.

    After a default Greece will also need to balance their budget and they can expect much lower wages. Reforms are needed too. On the plus side – a floating drachma will allow markets to set prices correctly, reducing living costs and encouraging businesses to power the way to recovery.

  13. Anonymous says:

    Shaun – another good piece. Having read the comments from Vassilis_101 and sovjohn  who know full well what is happening on the ground, I can only add a quote from Michel Foucault:
     “People know what they do. They frequently know why they do what they do. What they don’t know is what they do, does.”

    Or perhaps this should be in the negative when speaking of the EZ?

  14. Bill says:

    Step 1 – Form a government – Can’t see anyone in Greece could exit the Euro without having some sort of mandate from the people to do it.
    Step 2 – Form a pact with the other PIIGS to either devalue the Euro (how about a dose of hyper-QE) or suggest an exit by Germany
    Step 3 – Exit the Euro – For although 1 & 2 are logical enough I can’t see any of the other national politicians barve enough to stand up to Germany.  Do they really think that if they are nice (cowardly) enough, then Germany may bail tyhem out?  No chance!

    1. Sovjohn says:

      Hehe. For a long time I have thought that the european South should be perfectly united because when the music stops, they are not that different from each other. Well, Greece is the worst – but the others are not that different.

      They don’t seem to unite very much. Although I imagine that Monti is pulling Italy’s weight (as a founding member, let’s not forget that) much better than Berlusconi did.

      I just hope the South has realized that if Greece falls, they are not protected at all from “becoming Greece”, and their interests ultimately are not aligned with Germany’s.

      Then again, I think they are already green with envy at Germany’s 0% debt interest rates, so I think they will pile up the pressure in a “what do you think you are doing” scenario…

    2. Anonymous says:

      Hi Bill

      Or there is my three Euros suggestion…

  15. Rods says:

    Hi Shaun,

    Another good article.

    I paid £2.25 for a 750ml bottle of Extra Virgin Olive Oil at Aldi a couple of weeks ago. The have recently changed from glass to plastic bottles, which are smaller and lighter, so reducing their packaging and transportation costs.

    Personally, I can’t see anything happening in Greece before the election. Then I think there is a good change that their New Democracy party who are now poll leaders will be the biggest party.

    The Greeks have had their protest election, the EU and the main parties are turning up the horror story propaganda, that a Eurozone exit will make Armageddon look like a kiddies tea party, to try and get them to vote the ‘right way’ this time.

    If New Democracy win it will be more austerity and pain until the pips are fully squeezed, unless Greek society totally breaks down before then. I can see German and France pulling out all of the stops until the Greeks have paid off enough of the German and French bank’s exposure to Greek dept through the EU assistance funds, so if they then leave the Exposure is shared by all of the Eurozone countries, some other EU counties and more globally through the IMF.

    If the above is the case then I think that with the speed of the deterioration of the Spanish economy and the size of it, they may well get to kick the ‘rotten door frame’ before the Greeks.

    With Bankia being supported with Spanish bonds, which they have lodged with the ECB in return for the bailout money. It would be interesting to know what sort of safety margin is built in to guard against potential losses from Spanish bonds collapsing / defaulting, or will it be a case of the Eurozone tax payers picking up the tab?

    I see that the Spanish Government a spinning the same rubbish as we were in this country over RBS and Lloyds, that they are holding the shares as an investment on which they will make a profit when they sell them in the future. With such clear crystal ball foresight on what the bank shares will be worth in the future, it makes you wonder why Spain and the Eurozone, didn’t use this crystal ball earlier and avoid all this mess… or err maybe they did!

    1. Anonymous says:

      Hi Rods

      Thanks have their been any price changes you can remember? I claim no expertise in retail olive oil prices.

      As to RBS and Lloyds I try to remember every now and then who promised us a profit so I can name and shame them when we make a loss! Can you remember who they were?

      I can feel another post on the ECB’s balance sheet coming on…

      1. Rods says:

        Hi Shaun,

        I found this on the bailout: 

        The bailout was announced by Gordon McRuin Brown and his side kick Alistair Darling. With McRuin described the bailout as an ‘investment’.

        There again this was the man who sold a large chunk of our gold reserves at the bottom of the market to buy Euros. I think he must of overheard Del boy tell Rodney, don’t forget: ‘Buy high and sell low’!

  16. DaveInSpain says:

    Hi Shaun

    So the Greeks opt for bailout and austerity? Right up until the
    moment of implimentation…because thus far their successive 
    governments havent shown much effort in that regard.

    On the flip side, it’s actually quite laughable the blatant efforts Merkel, Lagarde and
    co are making to minimise the fallout for their own banks prior to
    booting Greece into touch. For that they will, sooner rather than later,
    no matter which way the Greeks vote on June 17th.

    Meanwhile, the bigger chickens come home to roost – judging by the
    way the Spanish banking system is collapsing, and every hedge fund and
    corporation is on the last capital flight out of the €-zone before the
    inevitable plunge over the cliff…

    As an aside, my wife and I are Bankia (Bancaja) customers as a byproduct of buying a “distressed” sale from one of their mortgaged customers(not leaving much in to, be sure!).

    Here’s an extract from David Jackson’s blog at (localrestaurant critic with one eye on the bigger picture) which sums up how things work in Spain in general, and pertains to our own bank:

    With thanks to David Jackson, the article from his blog is reproduced below.

    disgraced banker who has been charged with fraud, corruption and
    financial crimes after running the Banco de Valencia into the ground has
    been given the top job at Bancaja after the President quit unexpectedly

    Antonio Tirado, the new head of Bancaja, has been
    charged by a court in Valencia with multiple financial crimes after he
    ran the Banco de Valencia into the ground (it collapsed last year). 137
    shareholders signed a joint querella against him which was accepted by a
    judge and later bundled together with a series of charges from the
    Financial Prosecutor of Valencia. He has been charged, but the trial has
    yet to commence. Shareholders alleged that he lied for years about the
    state of the books at the bank until one day he couldn’t scrape together
    enough cash to pay the wages, and the state had to nationalise it (it
    was then offloaded for a euro to Bancaja, I believe, who already had
    about 30% of the shares).

    José Luis Oliva, the old President of
    Bancaja, quit last night for no apparent reason. Although it is only
    fair to assume that nobody in Madrid wants the financial markets to know
    that Bancaja is also collapsing, in the midst of the 12 billion euro
    bailout of Bankia. (Bancaja is next weeks problem, expect more on this
    soon, and meanwhile get out of it if you can). Officially he is in
    dispute about the forced merger with Caja Madrid, but his parting shot
    to the board, via a press conference, was with the ominous words “I am
    aware that during the last eight years many things have happened here
    that are difficult to explain and understand… [..] I want to apologise
    for any mistakes I may have made in the past but my first interest was
    always that of this Banks” (El Mundo).

    Make of these words what you will. Bottom covering in the extreme is my guess.

    made a show of not wanting the job, but the board of directors insisted
    (as no-one else came forward, and he was vice-president of Bancaja). So
    now he’s lead two major banks into collapse.

    José María Mas
    Millet, a respected economist proposed by Valencia region for the job,
    refused point blank to touch the job with a barge pole, and walked away
    shuddering. In fact, I am given to understand he put out a press release
    refusing the job before Valencia actually confirmed he had been put

    Tirado, who was the socialist mayor of Castellón for
    most of the 80′s, has been a board member of Bancaja for the last 25
    years. Interestingly enough, despite being a PSOE boy for the last three
    decades, and being a bit of a heavyweight, the PSOE voted against him
    getting the job. (Why does the PSOE get  a vote in who runs a bank?)

    the shareholder’s association that filed the original criminal
    complaint against Tirado, said that it was unbelievable that “this man
    can still work in finance”, but added that it was understandable that he
    continued in the sector “as not one single person in power has had the
    common decency to tell this fraudster to go home”.

    “If he was a
    real man” they concluded, “he’d quit, go home”. (and live off the
    millions he’s already stolen was given to understand).

    The mind boggles.

    Now if we could only find an alternative bank over here that isn’t massively exposed to either sovereign or property debt…

  17. Anonymous says:

    Hi Shaun , regarding exports the idea was to internally devalue by driving down wages. I have read that the real effective exchange rate for Greece based on unit labour costs was 6-7% higher in Jan 2011 than it was in 2006. Can you bring this up to date…

    1. Anonymous says:

      Hi Shire

      The ECB dataset is a little confusing as they have changed it but on unit labour costs it rose from 97.85 in 2006 to 110.98 in 2011 and the effective exchange rate was little changed. So the numbers which improved in 2011 compared to 10 and 09 may actually be worse than the estimate you read.

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