Tuesday, July 7, 2015

Germany, Russia And Greece

The relationship between these three nations may hold the key to the future of the EU and the world:

Did you notice that Greece’s creditors are not rushing to offer the Greeks a new deal in the wake of the stunning referendum result on Sunday?  In fact, it is being reported that the initial reaction to the “no” vote from top European politicians was “a thunderous silence“.  
Needless to say, the European elite were not pleased by how the Greek people voted, but they still have all of the leverage.  In particular, it is the Germans that are holding all of the cards.  If the Germans want to cave in and give the Greeks the kind of deal that they desire, everyone else would follow suit.  And if the Germans want to maintain a hard line with Greece, they can block any deal from happening all by themselves.  So in the final analysis, this is really an economic test of wills between Germany and Greece, and time is on Germany’s side.  Germany doesn’t have to offer anything new.  The Germans can just sit back and wait for the Greek government to default on their debts, for Greek banks to totally run out of cash and for civil unrest to erupt in Greek cities as the economy grinds to a standstill.
In ancient times, if a conquering army came up against a walled city that was quite formidable, often a decision would be made to conduct a siege.  Instead of attacking a heavily defended city directly and taking heavy casualties, it was often much more cost effective to simply surround the city from a safe distance and starve the inhabitants into submission.
In a sense, that is exactly what the Germans appear to want to do to the Greeks.  Without more cash, the Greek government cannot pay their bills.  Without more cash, Greek banks are going to start collapsing left and right.  Without more cash, the Greek economy is going to completely and utterly collapse.
So yes, the Greeks voted for change, but the Germans still hold the purse strings.
And right now the Germans do not sound like they are in any mood to compromise.  The following comes from a Reuters report that was published on Monday…
German Chancellor Angela Merkel’s deputy said Athens had wrecked any hope of compromise with its euro zone partners by overwhelmingly rejecting further austerity.

German Vice-Chancellor Sigmar Gabriel, leader of Merkel’s centre-left Social Democratic junior coalition partner, said it was hard to conceive of fresh negotiations on lending more billions to Athens after Greeks voted against more austerity.
Leftist Prime Minister Alexis Tsipras had “torn down the last bridges on which Greece and Europe could have moved towards a compromise,” Gabriel told the Tagesspiegel daily.

Just because the Greek people want the Germans to give them a very favorable deal does not mean that the Germans will be inclined to do so.  The Germans know that whatever they do with the Greeks will set a precedent for the rest of the financially-troubled nations all across Europe.  If Greece gets a free lunch, then Italy, Spain, Portugal, Ireland and France will expect the same kind of treatment

And remember, there is a very important Spanish election coming up in December.
If Syriza comes out as the big winner in this crisis, it will empower similar movements in Spain and all over the rest of the continent.
So look for Greece’s creditors to tighten the screws over the coming days.  In fact, we already saw a bit of screw tightening on Monday when the ECB announced that Greek banks would not be receiving additional emergency assistance

In a move sure to increase pressure on Greece’s flailing banks, the European Central Bank on Monday decided not to expand an emergency assistance program, raising fears that Greece could soon go completely bankrupt.

Basically we are watching a very high stakes game of chicken play out.  And as the cash dwindles, economic activity in Greece is slowly grinding to a halt.  The following comes from the Washington Post

The dwindling cash is sucking the life out of everything from coffee shops to taxis, as anxious Greeks economize amid fears for the future. Greek leaders also banned transfers of money abroad, meaning that very little can now be imported into the country.
Printing plants are warning that they may run out of paper to print newspapers by the end of the week. Butchers say that stocks of imported meat are dwindling.

It is inevitable that a breaking point will come.  Either the Greek government will give in, or the Greeks will leave the euro and start to transition back to the drachma.
If we do see a “Grexit”, and many analysts believe that one is coming, it could set off a chain of events that could cause immense financial pain all over the planet.  There are tens of trillions of dollars of derivatives that are tied to European bond yields, European interest rates, etc.  

But if Greece does not get a deal and ends up leaving the eurozone, that will cause bond yields to go crazy all over Europe and that would also cause tremendous chaos in the derivatives markets.
So much depends on keeping this system of legalized gambling that we call “derivatives trading” stable.  We have allowed the global derivatives bubble to become many times larger than the GDP of the entire planet, and in the end we will pay a great price for this foolishness.
Every pyramid scheme eventually collapses, and this one will too.
But the difference with this pyramid scheme is that it is going to take the entire global financial system down with it.

Russian President Vladimir Putin on Monday “expressed his support for the Greek people in overcoming the country’s current difficulties” said a Kremlin statement.
In a phone conversation on Monday, Putin and Greek Prime Minister Alexis Tsipras discussed the Greek referendum as well as Russia-Greece cooperation.
“Mr Putin and Mr Tsipras discussed the results of the Greek referendum on international creditors’ conditions for providing financial aid to Athens, and discussed several matters concerning further development of bilateral cooperation,” said the statement.
Tsipras initiated the call, the Kremlin said.
Greece has voted against austerity measures suggested by European creditors as part of a bailout package to aid the government to repay its $350-billion debt.
Early on Monday, Greece’s finance minister Yanis Varoufakis stepped down saying it would help Tsipras negotiate a better deal with foreign creditors.
“Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the prime minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today,” he said.
Greek Premier Tsipras has said his government is ready to return immediately to negotiations with creditors in a bid to open shuttered banks.
“The economic center of the planet has shifted. There are new emerging forces that are playing a more important role geopolitically and economically. International relations are more and more characterized by multi-polarity,” said Tsipras.
“Enhanced cooperation among the BRICS countries is another manifestation of the new world order at the moment,” he added.

The media outlet claims that there are potent voices in German politics who oppose Washington's anti-Russian policies and appreciate Moscow's significance for Europe.
In June, Germany's Defense Minister Ursula von der Leyen made it clear that the Cold War architecture was demolished. "There will be no return to the Cold War," she said, as quoted by DPA. "We are cross-linked around the world. We are economically so interwoven that there can be no return to the Cold War," she stressed.

Scharf Links believes von der Leyen was mainly referring to Russia. After all, Berlin wants to have good working relations with Moscow.

The remarks came at a time when Washington has been stepping up its anti-Russian rhetoric and apparently were intended as a signal to the US. As a result, "Berlin once again managed to stop and contain the American madness," the media outlet observed.

German entrepreneurs have long voiced their concerns with the anti-Russian campaign Washington launched following the outbreak of the Ukrainian civil war. European businesses were badly affected by the rounds of sanctions Western countries imposed on Moscow.

The US-led initiative has hurt the revenues but it also threatens to sever years-long ties between European businesses and their Russian partners, who are actively exploring new markets and forging new ties in Asia and elsewhere. German entrepreneurs are wary of this trend that could become a permanent feature of new economic framework.

The first step to reverse it has to involve the lifting of restrictive measures. The economic ties between businesses, which will emerge after that, will secure peace and prosperity on the continent like no other means, the media outlet said, citing German entrepreneurs. Those who depend on each other economically will never fight each other," the rationale goes.
In an interview with Frankfurter Allgemeine Zeitung in late 2014, prominent German politician Lothar de Maizière said that sanctions weaken Russia when "we must be interested in a stable Russia."
The restrictive measures "weaken Ukraine and European economy. I ask myself, who benefits from this. In my opinion, they benefit the United States, not Europe," the former prime minister of the German Democratic Republic asserted.
However, the strategy of isolating Russia has failed even with sanctions in place. Consider the warm welcome Russian President Vladimir Putin received during his visit to Italy in June.
Other European countries are also tired of the US policies with regard to Russia and want better relations with Moscow, the media outlet noted.

The media outlet calls for a change: German leaders who are content that Europe is a ward of Washington should leave foreign policy. "Heads must roll in Berlin and the White House," as well as in other European institutions, Scharf Links said.
"Isolating Russia means playing into NATO's hands and supporting its escalation policy," the media outlet pointed out, adding that the main task is to focus on building single security architecture in Europe.

Russia plans to expand its nascent high-end submarine fleet with two new fifth generation nuclear-powered watercraft, known only as an "aircraft carrier killer" and an "underwater interceptor" at the moment.
The "aircraft carrier killer" equipped with cruise missiles will be used for defeating coastal and surface targets, specifically aircraft carriers, the head of Russia's United Shipbuilding Corporation's state defense order department Anatoly Shlemov told Lenta.ru last week.
The "underwater interceptor" will be tasked with protecting groups of ballistic missile carrying subs and fighting against enemy submarines. 
Both submarines will be based on the same class but different in armaments and purposes.

The project run by the Malakhit marine engineering design bureau is part of a large-scale $350 billion military modernization program that Russia is implementing. The program is scheduled to be completed by 2020.

Russia is boasting a major advance in electronic warfare technology enabling Vladimir Putin’s armed forces to zap foreign military satellites, and “switch off” enemy weapons. 
The new system will muzzle the guidance systems of Western cruise missiles and other high-precision arms, it is claimed.
Its Russian makers say it is a “fundamentally new electronic warfare system” which can be mounted on ground-based as well as air- and sea-borne carriers.
Russia’s Radio-Electronic Technologies Group (KRET) deputy chief Yuri Mayevsky said: “The system will target the enemy’s deck-based, tactical, long-range and strategic aircraft, electronic means and suppress foreign military satellites’ radio-electronic equipment.”

The Russian hailing of its new super weapon comes as relations with the West are at their lowest ebb since the collapse of the Soviet Union, with fears of a new Cold War.
President Vladimir Putin has invested heavily in rebuilding his country’s military might, which has lagged behind the West since the end of the Soviet era.
The new technology “will fully suppress communications, navigation and target location, and the use of high-precision weapons”, said Mikheyev, who did not give further details of the claimed military breakthrough.

As their government scrambled to pull together a new package of proposals to take to Brussels, Greeks have been hit with more bad news: their banks will stay shut until at least Thursday – and may run out of cash altogether by the end of the week.
The day after Greece voted to reject Europe's previous austerity-themed rescue package for the near-bankrupt country, the joy of "no' voters was quickly tempered by signs that their economic woes are set only to get worse, at least in the short term.

Large parts of Greece's economy have been paralysed by the capital controls imposed at the start of last week to prevent the collapse of the banks.
Businesses must make special applications to buy goods – such as food, petrol and medicine – from abroad. Many small businesses now demand payment in cash, which is hard in a country where banks are closed, many ATMs are empty and the rest only dispense 60 euros ($88) a day per person.

The government is also running out of money to pay public service wages and pensions, and supply hospitals and other public bodies. To reduce financial hardship for citizens it decided to go easy on revenue-raising: in Athens the public transport is free until further notice, and tax collection has "almost dried up" according to one report.
One bank transaction processing company told the New York Times that banks could run out of cash by Friday.

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Unknown said...

We can all see something comming, a possible gathering up (faster birth pains) in the next few months.So I asked myself this question (pregnancy ). 9 months has anything caught my attention! Yes just one, thanks to scott.In January the SYRIZA PARTY came to power. (Goat)

Unknown said...

I'm am left wondering about roshashana

Peter said...

So what was Yavan in Daniel 8?

Unknown said...

I hate these new phones with auto correct, u type something out & it turns into something else.

ally said...

Scott, very odd, all the nonbiblical crew are expecting everything to go down this Sept. too. I don't know how to do a link on my phone but go to transients.info the June 26 blog. Very interesting. Sorry for my poor phone computer skills :( also please pray for my mom to go home to the Lord soon. She us really suffering

Unknown said...

Peter I can't find Yavan in Daniel 8

Scott said...

Ally sorry to hear about your mother - Yes - I'm most definitely keeping an eye on september :)

Peter said...

It's the word translated as Greece. Ionia is in Asia Minor or Turkey.

Unknown said...

Peter do u mean Javan not Yavan.Can't find any record on Yavan.Noah's sons fourth son was Javan but he is listed in genesis .

Peter said...

Yavan is the Hebrew transliteration. Greece is how it is translated. But Yavan is probably better translated as Ionia, in modern Turkey.

Unknown said...

Peter I hope u ask me to be a fb friend (quicker communication )I live in victorville Ca