IOWA CITY, Iowa (Reuters) – U.S. Democratic presidential hopeful Hillary Clinton on Tuesday joined calls for changes in U.S. bankruptcy laws that would enable Puerto Rico’s public entities to restructure some $72 billion in debt.
In Washington, two Democratic senators hope to move forward within weeks with legislation in Congress that would allow the U.S. territory to restructure debts in bankruptcy court, instead of risking chaos.
Governor Alejandro Garcia Padilla of Puerto Rico dropped a bombshell on debt holders a week ago by saying he wanted to restructure debt and postpone bond payments. He urged changes to U.S. bankruptcy laws that currently exclude Puerto Rico.
Like U.S. states, Puerto Rico cannot file for bankruptcy protection. But Puerto Rico’s public entities do not have the ability of U.S. municipalities to enlist Chapter 9 of the U.S. Bankruptcy Code to restructure their debt.
I agreewith Edward Harrison: this is an attempt by the ECB to force a decision—Greece can deal or leave. And pretty much now. The haircut is particularly brutal, reducing the amount of credit already available.
If the ECB wanted Greece and its creditors to have time to make a deal it could do so. All Tsipras asked for 3 billion. Pocket change.
This is an abrogation of the ECB’s responsibilities as lender of last resort, and appears to me to be a blatant political act. It will be noticed not just by Greece but by all other countries who use the Euro.
Greece’s one possible fudge is to start producing Euro denominated notes itself. They won’t be worth what the official ECB ones are, but it can buy some more time to see if a deal with “institutions” is possible.
In other news, Varoufkis stepped down as finance minister at Tsipras’s request because he was hated so much by the negotiators on the other side. If negotiations fall thru, however, Tsipras might want to bring him back.
It surely doesn’t mean that Europe is proud that little Ireland was forced to bear the cost of a bank bailout put last week by Patrick Honohan, governor of the Central Bank, at €100 billion and rising. At the level of reality, it doesn’t actually mean anything at all. But that doesn’t mean that it’s a harmless fiction. “The Pride of Europe” is a makey-up story that is intended to take the place of the realities it displaces. It’s not a stand-alone narrative. It has an evil twin: Greece. It belongs to a particular genre of fiction: the morality tale. Ireland is the pride of Europe because it is the anti-Greece. We are good because we play along with the bigger stories of the euro zone crisis. Greece is evil because it stopped doing so.
One of those stories is that the crisis had nothing to do with reckless lending (by, for example, German state banks) and was created purely by reckless borrowing. The other, even more fantastical, is that so-called austerity (in reality a programme of sucking citizens dry to transfer their resources to private banks) produces economic growth.
These stories are as patently false as Enda’s fairy tale, but Ireland is the pride of Europe because it has gone along with them and Greece is the shame of Europe because it has not been able to sustain the suspension of disbelief.
Greece’s membership of the euro zone was always a fiction – a story that everyone agreed to believe because it was more convenient than reality. Greece never met the fiscal criteria for membership. So how was it allowed in? By cooking the books. A right-wing Greek government worked with Goldman Sachs to hide its debts using massive currency swaps at fictional exchange rates. Euro zone governments went along with the story.
When the crisis hit in 2008, there might have been a moment of truth. Instead we had the classic dynamic of a lie spawning more lies. The banks that lent so recklessly were bailed out by transferring their debts to European taxpayers and the IMF – their culpability disappeared from the story. A new fiction was invented – that Greece could simultaneously have its economy shrunk by relentless austerity and pay back hundreds of billions of euro.
The European authorities administering Greece’s bailout insisted upon the new job cuts before they would release the next $9.2 billion in rescue funds. As a result, 15,000 jobs will be eliminated, and another 10,000 will not have their contracts renewed when they expire later this year. The job cuts mean thousands more without disposable income in a country already three years deep in a vicious economic cycle driven by austerity.
An old man publicly kills himself in Greece. The austerity crowd shake their heads and wonder why people don’t appreciate the very hard work they’re doing to keep the bond vigilantes happy!
“The occupation government… has literally wiped out my ability to survive, based on a respectable pension which I had paid for during a 35-year period,” the pensioner said in an excerpt published in Greek newspapers.
“I find no other solution for a dignified end before I start sifting through garbage to feed myself,” he allegedly wrote in red ink.