Monday, July 13, 2015

Today's Links

1--Iran agrees to EU pipeline (to replace Russia?)
Iranian companies signed a $2.3 billion agreement on Monday to build 1,300 kilometers of pipeline which the country sees as its most important conduit for future gas exports to Europe. ...

Iran is expected to initially deliver 4 million cubic meters of gas per day (mcm/d) before raising it to 35 mcm/d later to feed three electricity generation plants in Iraq.
Gharibi said final tests of the pipeline are underway and the gas flow is expected to begin in the next month.
The agreement for exports of the Iranian gas to Basra is also expected to be finalized in the “new future”, he added

2---EIA Confirms: Oil Production Peaked

3--Fed "loses control" of long term rates

The move is further evidence the Federal Reserve is losing control of the yield curve by putting off a long-anticipated rise in interest rates, Boockvar told CNBC's "Squawk Box."

If the Fed does not raise interest rates in September, the market will continue to drive long-term rates higher, said Boockvar, chief market analyst at The Lindsey Group. The central bank can regain control of rates by hiking its benchmark at its next Federal Open Market Committee meeting, he added.
"Either way we're in a rising interest rate environment. It will be slow. It will be methodical. It will take its time, but rates now are moving higher. Its just dependent on which end area the curve its going to happen," he said.

4---Germany "Saves" the Euro by Humiliating Greece, Pepe escobar

And labor productivity in Greece was higher than in – yes – Germany. Up to 2008, Greece’s real GDP growth was at a 3.6% average, and Germany’s at a mere 1.3%. So much for the myth — largely peddled in Germany and other northern European nations – that Greeks are a lazy bunch sucking on generous pensions and unemployment benefits.
Germany’s “wasteland” victory may yet prove more then Pyrrhic. The lofty “institutions” of this undemocratic idea of Europe are vastly ignored – if not despised — by their so-called citizens. United States of Europe? It won’t happen. Ever. No wonder assorted cynics and stoics are now floating the idea of bringing back the Hadrian Wall – to separate the barbarians in the north from the cradle of Western civilization

5--EU's days numbered

As puts it (hat tip Swedish Lex):
As the dust settles this morning on the Greek bailout crisis, it is increasingly clear we are witnessing one of the most daring raids on national democracy in post-war political history. If this new plan passes the Greek parliament, Greece can no longer be said to be a genuinely sovereign state. Brussels and Berlin are taking over Athens. Even one of Alexis Tsipras’ minor victories – that a £50 billion privatisation fund would be based in Athens, not Luxembourg – was entirely superficial. As Angela Merkel insisted this morning, it would not be under Greek control....

The major terms include:
Increasing and simplify VAT
Cutting pensions. More on that shortly. The terms here look to be vastly worse than the cuts Greece fought a few weeks ago
“Requesting” continued IMF “support” (monitoring as well as financing)
“Introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions”
Sequestering €50 billion of assets, nominally supervised by Greece but under strict oversight of the creditors. Half will go to recapitalizing the banking system
Implementing labor market “reforms” along the lines sought by the creditors
Not only is there no debt relief, there is no prospect of any debt relief unless Greece meets targets. And forget about principal reduction. From the letter:
…the Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods) aiming at ensuring that gross financing needs remain at a sustainable level. These measures will be conditional upon full implementation of the measures to be agreed in a possible new programme and will be considered after the first positive completion of a review.
The Euro Summit stresses that nominal haircuts on the debt cannot be undertaken....

This gives you an idea how much it falls short of being able to pay pensions:
To cut a long story short, the total assets of the greek social security funds would not pay for ten months’ worth of pensions and benefits, even if we could somehow liquidate them all without causing a fire sale...

I’m taking the liberty of quoting Wolfgang Munchau’s new article at some length, since it articulates what a horrorshow this deal is for Greece and for Europe (hat tip Swedish Lex):
A few things that many of us took for granted, and that some of us believed in, ended in a single weekend. By forcing Alexis Tsipras into a humiliating defeat, Greece’s creditors have done a lot more than bring about regime change in Greece or endanger its relations with the eurozone. They destroyed the eurozone as we know it. They demolished the idea of a monetary union as a step towards a democratic political union and reverted to the nationalist European power struggles of the 19th and early 20th century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order. The best thing that can be said of the weekend is the brutal honesty of those perpetrating this regime change.

But it was not just the brutality that stood out, nor even the total capitulation of Greece. The material shift is that Germany has formally proposed an exit mechanism. On Saturday, Wolfgang Sch√§uble, finance minister, insisted on a time-limited exit — a “timeout” as he called it. I have heard quite a few crazy proposals in my time, and this one is right up there. A member state pushed for the expulsion of another. This was the real coup over the weekend: regime change in the eurozone.
The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be back on the table when you have the slightest political accident — and there are still many things that could go wrong….

What should the Greeks do now? Forget for a moment the economic debate of the last few months, over issues such as the impact of austerity or economic reforms on growth, and ask yourself this simple question: do you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?  
6--Russian Politician Predicts U.S. Coup Ousting Putin Within Two Years
7--FBI Director Comey demands “backdoor” access to encrypted data

8---The consequences of Syriza’s betrayal: From terms of surrender to terms of occupation

Syriza’s abject surrender ranks among the most miserable betrayals of the working class in history. Just eight days ago, Greek voters, in a referendum called by Tsipras, overwhelmingly rejected new austerity measures demanded by the European Union. Tsipras and his cabinet immediately repudiated this popular mandate and four days later submitted a proposal to impose even more savage cuts (worth €13 billion) than the €9 billion in cuts rejected by the Greek masses.
Now they are preparing to go even further, imposing deeper cuts and giving German imperialism and the banks veto power over Greek government policy and effective control of the economy.
Media reports on the closed-door meeting made clear the humiliation delivered to Greek Prime Minister Alexis Tsipras and that what is being demanded is the reduction of the country to the status of a Third World colony. Bloomberg headlined its report “EU Demands Complete Capitulation From Tsipras.” The Guardian, in an article headlined “Greek crisis: surrender fiscal sovereignty in return for bailout, Merkel tells Tsipras,” cited a senior EU official as calling the treatment of Tsipras an “exercise in mental waterboarding....
Meeting late into Sunday night, euro zone heads of government issued new ultimatums to Greece that would effectively strip the country of its sovereignty and turn it into an economic colony of the German banks.
The German government has been the most aggressive in insisting that either the Greek parliament pass a series of laws by Wednesday night imposing an array of onerous measures or Greece will be expelled from the common European currency. That would likely precipitate an immediate collapse of the Greek economy.

A draft statement by euro zone officials listing their conditions for initiating talks on a new bailout includes: higher budget surplus targets and automatic spending cuts if these targets are missed; more sweeping cuts in pensions; higher regressive sales taxes; more extensive privatizations of public institutions; the gutting of protections against layoffs; the imposition of restrictions on collective bargaining and the right to strike; and the scrapping of laws passed since Syriza came to power that “have not been agreed with the institutions [the European Union, European Central Bank and International Monetary Fund] and run counter to the program commitments.”

Another demand discussed at the meeting was for the Greek government to place €50 billion in public assets in a fund controlled by an outside firm, to be used to pay down the country’s debt. That sum is approximately equal to the size of the loan Greece is requesting from the EU’s European Stability Mechanism ....

Germany and the major EU powers are treating Greece as a conquered and occupied country. They are seizing the country’s wealth and imposing dictatorial control over its economic and social policies. They are demanding iron-clad guarantees that cuts in jobs, pensions and social services that have already slashed working class living standards in half and shattered the country’s health care system be intensified, with no end in sight.
It is difficult to quantify the level of suffering these policies will impose. They will mean mass destitution, disease and death. Greece is being turned into a laboratory for imposing in peacetime the type of conditions previously associated with war.
The aim is to make Greece an object lesson and precedent for imposing similar conditions on the working class across Europe. The attack is being led by an imperialist power, Germany, that invaded Greece three quarters of a century ago and killed hundreds of thousands of its citizens....

Tsipras’ claim that he has acted to protect the Greek people from an even worse catastrophe is a lie. He is not negotiating to save the Greek people, but to save the Greek bourgeoisie. What is being demanded is more or less the suicide of Greek society to save the interests of the Greek elite at the expense of the Greek masses.
The interests of the Greek working class require a different strategy. To defeat the European Union and the banks, the Greek working class must be mobilized against imperialism’s fifth column within Greece—the Greek bourgeoisie. This means a break with Syriza and all other representatives of Greek capital and the development of an independent political movement for a workers’ government based on a socialist program.

9--Worse than Versailles

Of the many provisions in the treaty, one of the most important and controversial required "Germany [to] accept the responsibility of Germany and her allies for causing all the loss and damage" during the war (the other members of the Central Powers signed treaties containing similar articles). This article, Article 231, later became known as the War Guilt clause. The treaty forced Germany to disarm, make substantial territorial concessions, and pay reparations to certain countries that had formed the Entente powers. In 1921 the total cost of these reparations was assessed at 132 billion Marks (then $31.4 billion or £6.6 billion, roughly equivalent to US $442 billion or UK £284 billion in 2015). At the time economists, notably John Maynard Keynes, predicted that the treaty was too harsh — a "Carthaginian peace", and said the reparations figure was excessive and counter-productive, views that, since then, have been the subject of ongoing debate by historians and economists from several countries

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