Tsipras’ Bailout Referendum Sham

At 1:00 AM in Athens on Saturday morning, Greek prime minister Alex Tsipras announced that Greece would hold a referendum on July 5 on whether to accept the terms provided by the creditors in order for Greece to obtain €7.2 billion in “bailout” funds as the final part of a loan package provided to Greece in 2012.

The bailout in fact expires on June 30. It would require the approval of each and every one of the 18 other countries in the Eurozone to extend the bailout beyond June 30. In some countries, most importantly Germany, extending the bailout requires parliamentary approval. The New York Times reported that German chancellor Angela Merkel told Tsipras that the latest offer was “extaordinarily generous.” It has also been widely reported that her stance towards Greece is more generous than that of the German Finance Minister, Wolfgang Schauble, and Schauble’s views on this issue carry more weight in the Bundestag that Merkel’s do.

Now of course, since Schauble taunted Tsirpas in early May that Greece should consider calling a “helpful” referendum, on can argue he can hardly reverse himself now. But his suggestion came in early May, which is an eternity ago, and when a referendum did not conflict with the bailout end. Thus to have this referendum at all requires a approval of Eurozone countries who for the most part are already unhappy with serial Greek brinksmanship, and may well see this as a stunt too far.*

Germany had already demanded that Greece pass legislation consistent with the bailout terms by the end of this weekend as a condition for approval by the Bundestag. It is thus hard to see, absent Schauble having a sudden conversion experience by virtue of a visit by The Ghost of Christmas Future, that a bailout extension would be approved. Other bailout extension offers made by the more Greece-sympathetic European Commission have also been conditioned on Greece agreeing to structural reforms, aka pension cuts and increases in tax collections (curiously, Greece may actually have won a concession of sorts from the creditors in that labor market “reforms” no longer seem to be a major bone of contention). In keeping, the Wall Street Journal reports that, “Some European Union officials in Brussels suggested it would be difficult to persuade other eurozone governments to extend Europe’s bailout program beyond June 30, the current expiration date.” And a morning tweet from the Financial Times’ Peter Spiegel echoes the skepticism:

Confirming our suspicions, the initial reactions from German MPs do not seem too positive:

The Bundestag’s high odds of rejecting a bailout extension alone makes the referendum seem more a desperate ploy than a real exercise of democracy. And let us not forget that some other Eurozone countries, such as Finland, Latvia, and Spain, are if anything more bloody minded on the subject of Greece than Germany. And as Yannis Koutsomitis also tweeted, the creditors could pull the referendum rug out from under Greece by withdrawing their bailout offer this weekend, although if I were them, I’d let the German parliament and like-minded governments do my dirty work.

Remember that Syriza promised to get relief from austerity when as we have discussed at length, it retreated from the promise early on when Yanis Varoufakis said that Greece would always run primary surpluses. It is now embarking on a path that makes an IMF arrearage certain, which likely means the IMF portion of the bailout funds, €3.6 billion, goes poof.

Thus a cold-blooded weighing of the odds means the “referendum” looks like democracy theater. It gives Tsipras and Syriza cover as they have effectively decided to go into arrearage with the IMF (IMF-speak for default, since the IMF is used to dealing with third-world countries) and are relying on the kindness of governments that are already none too pleased with them to not have the bailout expire. So take your pick: is Tsipras deluded, or is he cynically having his cake (leading Greece to a rejection of the bailout due to well-known creditor constraints) while trying to eat it too (packing the outcome as of now as a voter choice)? One measured assessment:

Key events between now and July 5:

¶ Greece goes into arrears on its €1.5 billion payment to the IMF due June 30. Once a country has gone into arrears, the IMF cannot lend new funds. The Telegraph had reported previously that Greece would lose access to certain types of trade finance in the event of an IMF “default.” As Open Europe pointed out:

The short term impact of not paying the IMF may not immediately be dire in economic and financial terms, though of course it would involve serious reputational damage and further widen the already mammoth gap between Greece and its creditors. It may take a month before cross default clauses could be triggered and even then it rests with decisions of highly political institutions such as the EFSF. Such decisions would likely be managed to achieve the least controversial ends, but equally could quickly spiral out of control.

¶ Month-end pension and government salary payment are due. Even when it withholds funds from the IMF, the government will be under great strain to these payments in full in euros. Analysts and even some Greek government officials have speculated that Greece will come up short, and that seems even more likely given the poor results for May tax collection. From Greek Reporter:

Meanwhile, despite the attempts to regulate Greece’s debt a significant revenue collapse was recorded in May, which preludes to the wild taxation that may be imposed during and after this summer.

The public revenue receipts shortage reached 1 billion euros, of which about 650 million come from unpaid taxes. A fact that partially contributed to this shortage was that the tax declarations for Greek citizens have not yet been submitted.

That would mean some or all of these payments would be made in scrip. In California, IOUs called “registered warrants” issued during its budget crisis that paid 3.75% in interest were not accepted by banks as cash and traded at discounts to face value. So the issuance of scrip in lieu of cash will, in economic terms, amount to a partial default on its wage and pension obligations

This is what is likely to happen between now and July 5:

¶ The creditors impose capital controls on Greece, if Greece does not do so itself. This move was already seen as a likely outcome if Greece rejected the bailout terms over the weekend. Greek citizens started draining ATMs immediately after the announcement of the referendum, which means they will probably be emptied by the end of the weekend.

Ekathimerini also provided anecdotes from Saturday morning indicating ATM visits were a priority among people just learning of the referendum.

Eurogroup ministers and European leaders had already been discussing imposing capital controls on Greece in the event it refused to accept the bailout terms, which would represent an unheard-of measure (governments are supposed to have the good sense to do this on their own). Since capital controls can be imposed in varying degrees of stringency (including having the ECB through the Bank of Greece require Greek banks to limit cash withdrawals), we expect that we’ll discuss this topic at greater length after the Saturday summit meetings give a clearer reading on how stringent an approach the ECB and other nations intend to take.

¶ Greek banks run out of liquidity. Given the intensification of the bank run, even with restrictions placed on cash transfers and redemptions, Greek banks could run out of physical cash.** That also raises the specter of if and when Greece is forced to impose a bank holiday. Jens Weidmann of the Bundesbank sent what many reads as a warning that if Greece turned down the bailout, the ECB would not be able to continue supporting Greek banks: “If a country were to decide not to fulfill the commitments attached to the aid, the basis for aid would disappear.” As we’ve stated, the referendum ploy is tantamount to a rejection of the bailout. The question remains open as to what the ECB board would regard as the proximate cause for refusing an increase to the ELA, which would amount to putting all the Greek banks into bankruptcy and forcing the imposition of a bank holiday. Observers overwhelmingly believe, as we’ve argued, that the ECB will not act unless it has political cover, despite the clear unhappiness of Weidmann and other national central bank presidents. However, as we have stressed, the ECB will find it very difficult to resist calls to be more stringent with Greece in the event of a default on a €3.5 billion bond payment due July 20. It is hard to see how the Greek banking system can tolerate any more tightening of the ECB choke chain.

Let us consider the standards by which Tsipras’ and Syriza’s conduct should be judged. Syriza knew that Merkel rejected a request by the the Samaras government to have more time to implement politically toxic (and economically damaging) pension and labor market “reforms”. Merkel saw them as unfinished business of the so-called second bailout of 2012. Syriza came into power as a result of this outtrade, promising to negotiate better treatment after the old government had failed while staying in the Eurozone.

The creditors are known thugs. They have engaged in harsh austerity, putting it in one of the very worst downturn in an economy not in a state of war , used Greece to launder bailouts to French and German banks, not given Greece credit for having implemented numerous “reforms” and broke the last government. Paul Mason is correctly very critical of how the creditors behaved last week. Even I was surprised that they’d press their advantage so far when Tsipras has already crossed a red line while desperately trying to pretend he hadn’t by claiming he wasn’t cutting pensions when actually doing so by requiring increased contributions from retirees.

But again, this goes back to the underlying and still apparently unresolvable gap between the creditor and Greek positions: many of the governments, all of which must approve a bailout, need to have Greece make what they see as meaningful pension cuts. Greece, as Samaras told Merkel in 2014, can’t go as quickly down that path as the creditors demand. And the IMF rejected the Greek finesse of tax increases because Greece has been told for years to fix its collection apparatus and has failed to do so. However, the brutal response should have been no surprise. Anyone who followed how Cyrpus was treated in its banking crisis would know how ruthless Eurozone institutions can be (in that case, the heavy was the ECB)

Among Sun Tsu’s rules of war are “Know your enemy” and “Know yourself”. Syriza appears to have not bothered understanding what they were up against They have seemed to be in denial for the last two months that the creditors were not afraid of a Greek default. Their assumption appears to have been that the national governments would find it too politically toxic to recognize losses on the debt they had extended to Greece through the EFSF and the Greek Bailout Fund. But maturities on these facilities have been extended and payments deferred. And the national governments do not have to mark to market. They will recognize losses only if and when Greece fails to make payments, which is years down the road. And even then, the pain is spread out over decades. That means Greece’s supposed nuclear weapon turns out to be a pop gun.

Thus the question is, will the course of action that Syriza has chosen make the lives of ordinary Greeks better? Are partial defaults on pensions and salaries good for the extended Greek families that Syriza professes to care about? Are capital controls and the likely failure of the Greek banking system, which includes depositors taking near-total losses on any funds they weren’t able to extract? Remember, the parties that are most likely to be stuck in that position are medium-sized businesses, meaning the impact will be seen in even more business failures and loss of jobs (remember, capital controls and bank holiday alone will go that, as the recent example of Cyrus attests).

And a big piece that I have yet to see commentators acknowledge: Greek defiance of its creditors will make it more, not less dependent on them in the next year. How badly things turn out for Greece will depend in significant degree on how much they do to ameliorate the impact of the implosion of the banking system, whether they take extreme measures to keep Greece in the Eurozone, and if Greece tumbles out, how much they provide in humanitarian aid and targeted trade financing (most important, for petroleum imports).

Let us look at the alternate scenario and assume that a large percentage of the Bundestag gets brain transplants in the next day or for other reasons decided to be uncharacteristically kind to the Greek ruling coalition. Greece miraculously gets its bailout extension and so the July 5 vote is not moot. Doesn’t that redeem Tsipras as a leader?

In a word, no. What the did Greek government know as of this weekend that it did not know earlier to justify delaying a referendum so long that it it will probably be moot? As Costas Lapavitsas of Syriza’s central committee pointed out in early March, it was evident that the Troika and Eurogroup were not willing to negotiate a new deal, in both senses of the word, with Greece. Tsipras’ strategy had failed and it was time to change course.

Given Syriza’s now clearly contradictory campaign promises, the party could have done extensive, rigorous polling or held a referendum to determine what to do. Tsipras was clearly aware of that as an option; he kept bringing it up in talks with creditors, apparently thinking it was a threat. But Tsipras already had a fresh election and strong popular approval and yet the creditors were not moved. It did not appear to occur to him that they had an easy defense: that Greece may be a democracy, but so to are the 18 other nations that have to agree to a bailout. As misguided as the beliefs of their electorates might be, they have as much of a right to a say as Greece. But Syriza remained fixated on its domestic needs and never even made a decent argument for why there were some legitimate reasons its pension spending was so high, giving it the appearance of having more generous pensions than those of the countries being asked to fund them. The Wall Street Journal made a better case, for instance, than I ever saw from Greek officials.

If the ruling coalition had any doubt that the creditors would not relent in this game of chicken, they should have been settled as of mid-May. In early May, as we mentioned, Schauble taunted the Greek government, suggesting they have a referendum, a clear statement that Germany was indifferent to a Greek default or exit. In mid-May, Tsipras told Merkel and Hollande that Greece would not be able to make an IMF payment due May 11. He claimed later not to know that the government could do what it did, borrow from an IMF reserve as an emergency source of funds. From Merkel’s and Hollande’s vantage, the default threat was no doubt real and they did not blink.

Similarly, Tsipras should have held a referendum long before he stripped the Greek government of funds to keep paying the creditors, since a default is better managed with some cash on hand.

So the only conceivable excuse for waiting this long is for Tsipras to attempt to save himself. If he were to reject the bailout, the decision is unquestionably his and that of his allies. That it precisely the sort of decision that government leaders are expected to make. Or he could just as well accept the bailout, recognizing that as bad as things are, that the country would be plunged into an even deeper economic sinkhole, putting the survival of even more citizens at risk. It would take forming a new coalition with To Potami and New Democracy, and that would mean that his and Syriza’s position would become far more tenuous and he would be fiercely denounced by many if mot most Syriza MPs.

Thus the referendum ruse looks to be about trying to spare Tsipras and Syriza the worst consequences of his having underestimated the creditors and not preparing for worst-case scenarios, which is another responsibility of leadership that he and his party have neglected.

Greece and Germany are operating from deep cultural impulses. One of Greece’s greatest achievements is creating different dramatic types, among them, the tragedy. No matter how the bailout power struggle winds up, Greece is unlikely to obtain any relief. But the country has yet to experience its moment of tragic recognition. By contrast, one of Germany’s cultural touchstones is Wagner’s Ring cycle. In it, Brunnhilde loses her divine status. In the last opera. Gotterdammerung, to remove the curse of the ring at the center of the plot, she creates a bonfire in which she immolates herself. That fire burns down the gods themselves. We’ve said that Germany’s refusal to relent on its contradictory policies, that of running sustained trade surpluses, not being willing to finance its trade partners, and not supporting more European integration, most of all Federal-level fiscal spending, will burn down Germany’s export markets and eventually engulf Germany itself. Will Merkel be cut down to size in the estimation of history from her current revered status? Gotterdammerung has a much longer running time than any of the great Greek tragedies, so it will take some time to see if the Germans play true to form.

____
* And that’s aside from the fact that the referendum appears to violate the Greek constitution (not that that is a matter to be decided by the creditors, mind you, that’s internal to Greece, but it allows for more unfavorable messaging in the press). Per the Financial Times:

The referendum also raises legal questions. Patroklos Koudounis, head of the Athens-based Adequate group risk consultancy, said the Greek constitution stipulated that referendums were not allowed on fiscal issues. “In the way that Mr Tsipras described the question, it appears that question falls within the category of fiscal issues,” he said.

** As Nathan Tankus notes by e-mail:

There would be an argument that the Bank of Greece should print Euro banknotes because the ECB is supposed to preserve the integrity of the payments system above all other goals. I say would because the Bank of Greece can’t legally take any direction from politicians so Syriza can’t make that case at all. In realpolitik terms, if ELA was cut off Bank of Greece officials would be told (officially or unofficially) to not print any more banknotes. If Syriza took over the Bank of Greece and started delivering Euros to the banking system I would not be surprised if proceedings to suspend Greece from the EU began very quickly (under the pretense that there was significant threat to the “rule of law”). Once they were suspended the other member states would have great leeway to punish Greece for their transgressions.

Remember we do not see this sort of raw power play as imminent. The ECB has kept itself out of the headlines as much as possible and no doubt would prefer to keep it that way. It would only go to these lengths if the Eurozone members were of the view that Greece had breached Eurozone rules in a serious way.

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247 comments

  1. kemal erdogan

    Another explanation for the referendum would be to inform the citizens that it is time to withdraw as much cash as they can. This would be a “tacit” declaration of a delayed capital controls at the expense of ECB. Brilliant! If the ECB does not let the referendum happen then he can throw his hands and go ahead with the plans (which is clear now that they probably made quite some time ago) with a strong public support.

    Either way this is game over and Syriza won with the best possible outcome under these circumstances: continued public support and some hard currency in the hands of citizenry.

    1. Maju

      What you say, Kemal, is very interesting. Rather than the “Greece can do nothing, Syriza are challenging the gods” discourse that Yves has espoused recently, your brief analysis makes good sense to me: all these negotiations were maybe never anything else but mass pedagogy, formal bankruptcy and EU exit, cum socialist policies “Bolivarian” style, was always the only way ahead but the peoples had to realize it first of all. I’d say that six months of “therapy” is a record time.

      Incidentally I would add that the best Greek “tragedy” of all is the one where Prometheus, the god who loved humankind, challenged the Olympus. No Germanic god ever challenged Valhalla, much less for love of humankind. Before literature there was legend. Anyhow Greeks also plundered Troy, conquered Asia and are in almost every aspect at the roots of Europe (from Neolithic to Christianity), I would not write them off too fast.

      1. Pancho

        Don’t believe it was Plan A, because throughout the party’s history, Syriza has credibly advocated a European solution.

        However, once it became clear that the creditors don’t want the negotiations to succeed, the “negotiations” were prolonged until the Greek public fully understood that the much-desired “honorable compromise” is an impossible outcome. And that it’s impossible because of the creditors’ stance rather than any kind of Greek negotiation strategy.

        Now, Greece will say Oxi. And the neo- and ordoliberal, post-democratic powers that be – they get scared to death of losing hegemony. Only at some point they will understand that they already lost it.

        So a new world order is about to emerge – we just don’t know yet how it’s going to look like. The BRICS will play a major role in it, but the US might also say once again “Fuck the EU” and turn towards a new Eastern Mediterranean Alliance. Not the worst perspective for Greece and the whole region.

        1. Lambert Strether

          Again, pom-pom waving for Syriza without a shred of evidence. Stunning. You write:

          [O]nce it became clear that the creditors don’t want the negotiations to succeed, the “negotiations” were prolonged until the Greek public fully understood that the much-desired “honorable compromise” is an impossible outcome.

          First, it should have been “clear” (and this is generous) months ago:

          What the did Greek government know as of this weekend that it did not know earlier to justify delaying a referendum so long that it it will probably be moot? As Costas Lapavitsas of Syriza’s central committee pointed out in early March, it was evident that the Troika and Eurogroup were not willing to negotiate a new deal, in both senses of the word, with Greece. Tsipras’ strategy had failed and it was time to change course.

          Second, I like the lack of agency in “the ‘negotiations’ were prolonged until the Greek public fully understood ….” Never mind that that “mass pedagogy” seems to be the new talking point here (eerily parallel the “He’s only been in office ____ months” talking point that Obots deployed in 2009, and that there’s no evidence for it at all. No, the amazing, except not, part is that the sentence should read:

          Syriza prolonged the negotations until the Greek public understood

          Think about that, and think about what that means — heaven forbid — comments like this are representative of the European left. Granting, for a moment, that default/Grexit will net out positive for the Greek people (which Yanis V. does not believe) is means that Syriza deliberately prolonged the suffering of the Greek people “to teach them a lesson.” First, Syriza — follow me closely here — is the elected government of Greece. They can go on TV and make a speech explaining reality of the situation whenever they want. FDR would have. Second, morally, how exactly is that different from the behavior of the neo-liberals that the Juvenile Left Adventurists claim to be fighting? Meet the new boss, same as the old boss!

          1. RepubAnon

            I’d say Syriza knew that the negotiations were doomed to failure, and that exiting the Euro was the only realistic choice for Greece. However, the Greek public has to date been unwilling to accept this outcome. They may have become resigned to this now.

            It’s more like the joke about the thief who was brought up before the king for punishment. When the king sentenced the thief to death, the thief said that the king should not execute a man who could teach animals to talk.

            “You can teach animals to talk?” said the sceptical king.

            “Yes”, replied the thief. “I can even teach your horse to sing the national anthem!”

            “OK. I’ll give you a year.” said the king. “If my horse isn’t singing by then, it’s off to the headsman for you!”

            The next day, one of the thief’s friends looked through the window of the stables, where the thief was chained to the wall and singing songs to the horse, and said: “Why did you tell the king that silly story – you can’t teach animals to talk!”

            The thief replied: “But I got a year, and a lot can happen in a year. I might die. The king might die. And who knows, perhaps the horse will learn to sing!”

            I’d say that Syriza felt that playing for time in the hope that if the long-shot negotiations with the Troika didn’t succeed, dragging them out would move more of the Greek public from anger and denial into acceptance.

            1. Lambert Strether

              Lots of “I’d say.” No evidence. And again the model of Syriza never, ever levelling with the Greek people, which is what “dragging them out would move more of the Greek public from anger and denial into acceptance” comes down to.

              I like the joke, though; but like so many other comments on this thread, more suitable to a creative writing blog.

                1. TheCatSaid

                  Thanks for that chart.
                  It reflects what I suspected might be happening. Nice to see some evidence.

            2. Yves Smith Post author

              “Greek public has to date been unwilling to accept this outcome”? That is Tsipras’ doing. Have you missed that he has been lying to the public for months, telling them repeatedly that a deal was nigh, that he and the creditors were not far apart, when representatives from the creditor side would clear their throats and say “Um, no, we’re still really pretty far apart”? Any lack of “acceptance” was created by Tsipras himself.

              1. Cugel

                Yves, the only alternative Tsipras had to talking up the negotiations, is talking DOWN the negotiations and saying “I see no chance of a deal.”

                If he had done that at any point the exact same thing would happen as is happening now – a run on the Greek banks. How would that have helped anything?

                I’m really surprised that you seem to believe that telling the Greek people the truth was an option. Can the FED chairman just say anything he feels like without causing massive market reactions?

                I’d say you could criticize Syriza for not being discrete enough about the talks, they certainly have had more than their fair share of leaks, but if there was the slightest chance for the talks to succeed in postponing the crisis through July, he had to keep the Greek people optimistic.

                Realistic would have been to admit defeat back in January after the first creditor meetings. Just ask yourself what would have happened had Syriza done that?

                Answer: Collapse. And the blame would have been on the government for not “negotiating in good faith.”

                The prime political necessity was to play the innocent martyr. It still is. The Greeks cannot give the middle finger to the Troika, they have to be pushed out.

              2. THOMAS BARTON JD

                what say you, yves, about saraceno’s cogent essay it’s the politics stupid..it is the lead essay at economistsview site.

                1. TheCatSaid

                  http://economistsview.typepad.com/economistsview/2015/06/greece-its-the-politics-stupid.html

                  Good article.

                  “Well, contrary to what is heard in European circles, most of the concessions came from the Greek government. On retirement age, on the size of budget surplus (yes, the Greek government gave up its intention to stop austerity, and just obtained to soften it), on VAT, on privatizations, we are today much closer to the Troika initial positions than to the initial Greek position. Much closer.”

                  ” The point that the Greek government made repeatedly is that some reforms, like improving the tax collection capacity, actually demanded an increase of resources, and hence of public spending. Reforms need to be disconnected from austerity, to maximize their chance to work. Syriza, precisely like the Papandreou government in 2010 asked for time and possibly money. It got neither.

                  Tsipras had only two red lines it would and it could not cross: Trying to increase taxes on the rich (most notably large coroporations), and not agreeing to further cuts to low pensions. if he crossed those lines, he would become virtually indistinguishable from Samaras and from the policies that led Greece to be a broken State.”

                  And an excerpt of his conclusion:

                  “. . . Creditors cannot afford that an alternative to policies followed since 2010 in Greece and in the rest of the Eurozone materializes.

                  Austerity and structural reforms need to be the only way to go. Otherwise people could start asking questions; a risk you don’t want to run a few months before Spanish elections. Syriza needed to be made an example.”

        2. Merf56

          Just off the phone with close business colleagues/friends in Athens. Shocking to me but each are 100% for this referendum ( and they began as anti Syriza) and quite enthusiastic for taking the country into default and beginning anew. They speak of months of worsening austerity then a renaissance of economic activity…. I guess we will see…..

      2. Lambert Strether

        As I said, the me-tooism and pom-pom waving continues to stun.

        I love real 75-cent phrases like “mass pedagogy.” Alas, as is the rule with cheerleading posts, the comment presents no evidence whatever that this was Syriza’s goal; rather like a “Just So” story for children. Of course, Yves addresses the “pedagogy post” directly:

        What the did Greek government know as of this weekend that it did not know earlier to justify delaying a referendum so long that it it will probably be moot? of the word, with Greece.

        Sadly, inventing flowery phrases is no substitute for providing evidence, or even reasoning.

        But the 75-cent phrase that’s even better — here I pause to take of my hat to an exponent of the late George Orwell — as “therapy”. Yves asks:

        Thus the question is, will the course of action that Syriza has chosen make the lives of ordinary Greeks better? Are partial defaults on pensions and salaries good for the extended Greek families that Syriza professes to care about?

        And of course our Juvenile Left Adventurist has no answer. “Challenge” is all; the Greek people are there as props to be used.

        UPDATE Adding:

        Rather than the “Greece can do nothing, Syriza are challenging the gods” discourse that Yves has espoused recently

        That’s an outright lie in the “Any stick to beat a dog” category. It’s not even a pardonable rhetorical exaggeration. If this commentary is a fair sample of European thought — being generous, here — I weep for the future.

        1. Chris in Paris

          Yves has been saying over the past six or so months and in a very consistent manner, that Syriza has burned or left on the table very powerful negotiating points and has also been very poor in making their case to the institutions.

          I can’t see that as a “Greece can do nothing, Syriza are challenging the gods” but more a real empathy for the Greek cause and sadness at the loss of a chance for some justice and a social democratic turn in events.

          1. Cugel

            Yves has attempted to point out certain negotiating positions that were not really tried. That’s a long way from saying that any negotiating position would have worked.

            “The creditors are known thugs. They have engaged in harsh austerity, putting it in one of the very worst downturn in an economy not in a state of war , used Greece to launder bailouts to French and German banks, not given Greece credit for having implemented numerous “reforms” and broke the last government.”

            What kind of “negotiation” would they accept? Answer: none. They told the same thing to Tsipras they told Samras – “no debt relief. Implement the Memorandum 100% or default.” Their negotiating position has not changed at all since 2014.

            And what’s the proper response to thugs if they have you tied to a stake and are preparing to light the bonfire? To call them thugs and villains? Heroic defiance because it feels good – until of course they light you on fire?

            The only thing that will bring relief to Greece is to go through the economic collapse that is coming and somehow get someone to extend some relief. That will eventually happen. The EU cannot permit a failed state in the midst of Europe. It’s just that unimaginable suffering will happen between now and then. But, it could never happen if Syriza simply acted the part of radical rejectionists and voluntarily took Greece out of the Eurozone. Then THEY and not the Troika would bear the blame for all the economic collapse.

    2. vteodorescu

      To me it seems that Tsipras declared the referendum at the right time. A week ago he might not have had as much support as now…

      Yes, in January and February they botched things up, but given the present situation it looks like a good play.

      1. Yves Smith Post author

        Huh? All he had to do was explain that he had to cross his red lines of cutting pensions. That happened when the creditors presented a primary surplus target of 1% for 2016 (the famed five page memo in response to the Syriza 47 page plan, which happened roughly three weeks ago). Nothing has changed from that point. The creditors stated that that was their basis for negotiation and any deal had to be in adherence with that. And they meant it. When Trirpas presented his latest plan earlier this week and the creditors countered with their markup, it was to bring the Syriza plan into conformity with their earlier statement of principles. They had said their position was not terribly flexible and they meant it

        Moreover, you forget that Greece signed a memo in February that the negotiations were to be wrapped up by the end of April. That memo didn’t say much about how the substantive differences were to be resolved, except that the negotiations were to take place in the framework of the current “memorandum” as in the already agreed structural reforms. It was made clear informally later that Greece could substitute changed but they had to show they’d have the same fiscal impact.

        The memo was also VERY clear on process, that the institutions were to review Greece’s detailed proposals and then after they’d been approved (as in negotiated), they were then to be approved by the Eurogroup (the finance ministers of the Eurozone countries).

        Instead of focusing its energies on preparing proposals and negotiating, the Greek side spent a huge amount of energy trying to renegotiate the shape of the table by forcing the discussion to a “political” level. That did not succeed. Even though Tsipras talked to Merkel and Hollande a ton, Merkel has said she won’t back any deal that the IMF did not approve. And the other side has become far more hostile and unbending as a result of Greece not doing what it agreed to except when pressured to (for instance, Greece did not submit a full proposal until it was clear the creditors had started working on their own due to the lack of a completed Greek one and the approaching bailout deadline).

        In other words, kf Greece had focused on getting the proposals done on a timely basis, and then tried going to a political level after they hit an impasse, this would have come to a head sooner.

        1. Ruben

          “The creditors stated that that was their basis for negotiation and any deal had to be in adherence with that. And they meant it.”

          You are assuming to know much more than you can possibly know. One thing is certain though: the Greeks negotiators know much more than you about the creditors stance because they were actually there, at the meetings, feeling directly the creditors background motivations.

          “Instead of focusing its energies on preparing proposals and negotiating, the Greek side spent a huge amount of energy trying to renegotiate the shape of the table by forcing the discussion to a “political” level.”

          Because the underlying dynamics is mostly political. The Europeans want Siriza defeated as an example to the other similar non-establishment movements across Europe, and the Greeks negotiators could see that, feel that in person. From the point of view of the Greek negotiators, trying to change the underlying political dynamics was the only rational thing to be attempted. They failed, because the fight was extremely asymmetrical (unlike a marriage break-up), but there was a slight chance that the outsider could be accepted into the realm of the acceptable European political spectrum. They acted pretty civilized and talked European all the time. But there were strong forces coming from some countries where the establishment in under threat of losing their privileges and access to coveted State positions.

          Siriza has taken their defeat honorably though, they are going down in the way that the Greek electorate decides it to be: surrender to the Troika’s ultimatum, or face the darkness of the unknown.

    3. matt

      Is that Kemal Ataturk or RT Erdogan? Haha ;)

      Concerning those euros that Greece prints with or without permission. I’m sure there are observers making sure each and every ones’ serial number starts with a Y for Greece. So if Greece doesn’t have a printer and blueprints of new Drachmas in place, they can just use their Greek euros as Drachmas instead. Cash currency problems that were discussed in various places on the interweb solved. No need to change the hoppers in the ATMs either.

      Of course that would complicate the euro project, but I don’t see it having much life left to it. To each his own country serial number and let’s split it up for the good of Europe.

      1. Kemal Erdogan

        This is my real name. Erdogan is a very common name in Turkey which I unfortunately share with RTE

        1. matt

          Some call him the Sultan don’t they? As I understand it last names in Turkey are a relatively recent phenomenon, lets say Turks started using them around a hundred years ago. But I could be wrong….

    4. Je' Czaja

      Thank you, Kemal. I found the article a bit confusing: exactly what did you expect them to do? They stepped into a wicked situation. Prolong the agony? What do the people want? Probably like most people, they want it to be magically better somehow. Until the pain of changing becomes greater than the pain of staying the same, people will stay the same. We’ll see.

      1. Lambert Strether

        I can’t account for your confusion; my suggestion would be to discipline yourself and read it again. You ask:

        Exactly what did you expect them to do?

        Well, what we expect you do to is read the post:

        Similarly, Tsipras should have held a referendum long before he stripped the Greek government of funds to keep paying the creditors, since a default is better managed with some cash on hand.

        So, if you’re going to do a referendum, do it then. And there have been many other concrete suggestions given, both tactical and strategic, that you might consider reading up on.

          1. Lambert Strether

            For my part, I consider it rude not to read the post, or, when invited to a party, to throw your drink in the host’s face.

            No accounting for taste, I suppose.

            1. Kunst

              This kind of attitude is why I no longer read this site regularly, and stopped donating money to it.

              1. Lambert Strether

                Then I hope you find happiness elsewhere — and another party where you can throw your drink in the host’s face. Reddit might work for you. This is serious stuff, not a parade with pom-pom waving and balloons. That’s why we expect commenters to read the posts.

          2. Ben Johannson

            Rude? Seems like a remarkably restrained comment, given my immediate response would have been “Don’t be a fucking idiot.”

        1. OpenThePodBayDoorsHAL

          But hey at least the Greeks do get some real “democracy theater”, they get to line up and vote for something, in the US we get fake “democracy theater”, we just get to watch elected representatives violate the wishes of their constituencies and candidates get “support” based solely on which media mogul and billionaire they’re owned by. Even the theater of the primary elections gets subverted, think Ron Paul in North Carolina, Maine, and Iowa, and then there’s Diebold. Wouldn’t it be great if we had real democracy theater: I wonder how the vote would go for the TPP, the new boots on the ground in Iraq, the Monsanto Protection bill, and on and on (let alone LGBT!)

          1. financial matters

            Those are some excellent points. This seems somewhat in keeping with Joe Firestone’s reinvent democracy project. http://reinventdemocracy.net

            I thought Alex Andreou had similar views in his article today Do Not Blink, Greece

            “It seems extraordinary how averse we have become to democracy. How alien an honest leader, who is unwilling to sell the country out in exchange for continuing power, appears. Take a breath. Allow your eyes to adjust. Tsipras is what all leaders should actually be like. We have simply become so accustomed to seeing things through the warped prism of political expedience, that democracy as it should be appears twisted.”

            1. tegnost

              The point i’m getting out of it is tspiris has not communicated his position well. I won”t speculate why, but will say that it’s not been effective, particularly. It’s also clearly stated with good basis that “the institutions” are bullying, again can’t speculate why with any degree of certainty. We can’t know what either side expected to gain from their incoherent stances. This is an important point to not be distracted by, or overlook. When comments suggest motivations that is purely wishful thinking. The eleventy dimensional chess angles all create hope where there is none, or divert the discussion to less effective arguments.

        2. Kurt Sperry

          I espoused the same at the time, but if the polling isn’t there, you don’t hold a plebiscite you know you will lose. It seems likely such a referendum at the time on Grexit combined with hardball threats–even if it were the correct tactical move as far as bargaining with the troika–was never a real political possibility. The polling I’ve seen from then supports this take.

          Syriza needed a plebiscite to move towards default/Grexit, that what was not what they campaigned on and in any case and given its consequences not a path to take without the explicit consent of the governed.. Syriza must now take an enormous political risk and strongly back a Grexit vote and hope it wins to have any hope of gaining initiative. If the plebiscite fails, the Syriza project thus does as well. As forced Grexit looms, the risks of a managed exit diminish in proportion. Now may not be the best possible time, but it may be now or never.

          1. Lambert Strether

            This argument is precisely parallel to the Obot argument “He didn’t have the votes.” In that case, as here, we ask: Well, what did they do to move public opinion? As for “not what they campaigned on,” politicians break promises all the time. FDR campaigned in 1932 on a balanced budget, among other things. Needless to say, he broke that promise at once, and rightly. Syriza when elected had the perfect chance to say “We didn’t know how bad it was!” — entirely possible, given that they’d never been out of power — and start with a plebiscite or anything else.

            1. Kurt Sperry

              The largest commonality I see between Syriza and the Obama presidency is a common predilection to the path of least resistance, which leads to policy dissonance as that path increasingly diverges from the message put forth. There is as a result sometimes what seems like a strangle laziness or passivity in both cases.

              Maybe it’s asking a lot of a newly installed neophyte government to have immediately pushed hard for a direct confrontation with the troika that was likely to cost significant political capital with so many other plates in the air needing minding.

              1. Yves Smith Post author

                In theory, yes, but they campaigned on doing just that (the confrontation with the creditors). Now it is fair to say they were done a dirty, since one of the super hardliners, Finland, pushed for and won the bailout originally expiring in February, which pushed Syriza into immediate negotiation mode, even before they had really taken control of the government. The other Eurozone countries had wanted the bailout to expire June 30, which is why they were amenable to pushing the expiration out.

                But Syriza should have understood all that when they campaigned. They really seemed to believe they could have a nice civilized chat with the creditors and persuade them to change behavior.

    5. susan the other

      I wondered that too. Tsipras and Varoufakis stated in January that Greece was bankrupt. Period. That the EU kept insisting on more bailout and austerity was way more absurd than the interesting behavior of the Greeks.

    6. Lambert Strether

      “…to inform the citizens that it is time to withdraw as much cash as they can…”

      Oh come on. I’ve heard a lot of stupid arguments, but this one takes the biscuit; that’s like burning down your house because you feel too hot and want to open it to the air.

      If the goal is to “inform the citizens” — follow me closely here — why not just inform the citizens? There’s no need to make a referendum speech at 1AM to do that (and if this made-up reason is the real reason, 1AM is an awfully poor time to inspire people to head out to the ATM machines).

      The convoluted logic continues to stun, as does the immediate “me too” pom pom-waving. Personally, I think one very good effect of the close analysis Yves is doing is to save the reputation of the left from how Syriza is handling its challenges. Comments like this, however, don’t help.

      1. tegnost

        I agree, “the devil is in the details” is the only appropriate slogan i can think of. As i watch the moderation of this argument it appears to me that the left really does harm itself with the generalized sloganeering as broad sweeping generalizations generally contain a fair amount of innaccuracy, while what I’ve been learning as i study yves explanations of how these very specific negotiations play out is as i said earlier, in the details. speculation is thus not only likely incorrect, it’s incorrectness is harmful because it hides the pertinent details and serves to misdirect

    7. Oregoncharles

      Very appealing idea. How would it actually work? I can see the advantage of Greek citizens and businesses owning a huge stake in hard currency, or at least Euros (not so hard after a Grexit); hopefully a lot of it is in non-EU bank accounts.

      But a cash economy is going to be awkward, to say the least.

  2. James Levy

    You start to understand why bad decisions get made the deeper you go into a crisis: everyone is exhausted by the details and everyone wants closure. I’m sure plenty of wars have started simply because the leaders became so punch-drunk from all this sparring that they opted to fight just to end the mental strain and had had their nerves and will eroded from physical and mental exhaustion to the point where they couldn’t stand it any more.

    1. Lambert Strether

      Yes, that happened in the 2008 crash as well, and in the US there’s a lot more support structure for decision makers. That comes under the heading of “know yourself,” to know what your organizational capacity is.

  3. Swedish Lex

    Thanks for long analysis.

    Not sure I agree with all.

    While Tsipras, Syriza & Co. certainly are not the team that would win the Super bowl, far from it, they are nevertheless not worse than the Troika in terms of incompetence, internal inconsistencies, having made populistic and crazy promises to voters on false pretenses, etc. Greece is the unruly teenager and the Troika are supposed to be the enlightened and responsible parents, even if it means being harsh. What we have instead is one entirely dysfunctional family.

    My point is that even a 24 karat Greek Government would have an impossible task in negociating with the Ayatollahs of the Troika.

    This game is therefore (unfortunately) not about acting rationally. Doing the right and responsible thing will not make you win or at least lose less.

    Therefore I think that Tsipras move to launch a referendum is not bad. If the ECB shuts off the ELA – a couple of days before the citizens of Greece get to vote on the situation – then the ECB will (again) be confirmed at the Institution that kills democracy.

    The Greek referendum has in my view been an option for the Greeks all the time. By doing it now “Ach mein Gott, way too late”, the Greeks show that the creditors, and their parliaments, do not own the agenda (and hence cannot use it as pressure point).

    What we are witnessing is clearly not a negotiation. It is political warfare with one pygmy state against a totally overwhelming force. I do not expect Greece to win this, in the end, but I hope that they will lose with dignity while the creditors win in infamy. This is not irrelevant since the next generation of Greeks will need to know that their parents refused to surrender to the, objectively, suicidal demands of the creditors.

    The Finnish people fought the Soviet Union, pretty much alone, in 39-40. Finland lost (70.000 Finnish casaulties, 320.000 Soviet) and had to give away territories. The Winter War was however one of those defining moments in a country’s history, meaning that the Finns may have lost the war, but the peace, and the aftermatch, was entirely theirs. What we are witnessing in Greece in my view is the same. There will probably be capital controls and things will get worse before they get better. But the Greeks are in my view already winning in terms of how future générations of Greeks will look back at this.

    1. Swedish Lex

      I also believe that a Greek default would blow a big hole in the ECB’s balance sheet, meaning that the euro states would have to inject tens of billions of new equity. Real money. TBC.

      1. Freddo

        I wonder how Merkel is feeling right now. I would interpret telling Tspiras to “shut up” as a sign she sees her legacy disappearing down a drain. Powerful leaders holding all the cards don’t talk like that. Maybe she has suddenly realised she doesn’t hold all the cards.

      2. Lambert Strether

        Not sure what mechanism you have in mind. From the post:

        [Syriza’s] assumption appears to have been that the national governments would find it too politically toxic to recognize losses on the debt they had extended to Greece through the EFSF and the Greek Bailout Fund. But maturities on these facilities have been extended and payments deferred. And the national governments do not have to mark to market. They will recognize losses only if and when Greece fails to make payments, which is years down the road. And even then, the pain is spread out over decades. That means Greece’s supposed nuclear weapon turns out to be a pop gun.

        Granted, these are country losses (after they were left holding the bag for German banks) but you do’t explain how the ECB would lose. Would you, please?

        1. Cugel

          Varoufakis last year explained everything before Syriza even took power. He stated that default would be “catastrophic” and that he saw his job as “attempting to save capitalism from itself.” In short exactly the role that FDR played in the U.S.

          The difference of course is that the U.S. had a sovereign currency and could run deficits and FDR didn’t have to answer to the Troika. So, Syriza tried to get the creditors to see reason and see that it was in their long-term best interests to grant debt-relief. They failed because of EU arrogance, blind adherence to dogma, and short-term thinking. But, they certainly didn’t have any other choice.

          Yves has criticized them severely for not negotiating better. It is impossible to prove she’s wrong that Syriza missed opportunities for finding a workable compromise, but I’ve never seen it as remotely plausible that the creditors would agree to anything Greece could accept.

          The attempt at a referendum is obvious political theater and will be rejected by the Troika. It wouldn’t work anyway. It is just another political ploy by Tsipras to cast the blame on the Troika by making them look bad, but they are long past the point of caring and just want Greece out of the EU.

          1. Yves Smith Post author

            This is precisely the basis of our criticism of Syriza. They did not investigate the terms of the debt instruments or how and whether the creditors would be required to recognize losses. The German government, which is very conservative, has taken the view they will report losses only as incurred, as in when money does not show up. Other European governments will therefore follow suit.

            And remember, as we discussed, there is no scenario under which Greece gets away with debt repudiation. Even Argentina, which had to contend only with private creditors, renegotiated its debt. And it paid the IMF in full.

            The IMF looks like it plans to declare Greece in arrearage immediately upon non-payment, as opposed to waiting 30 days to inform the board (this also is apparently on the request of the board). The ECB is holding over 3 billion euros of interest on Greek bonds which the Greek government seems to think it should have. The IMF is the most senior creditor. It is not inconceivable that the IMF could demand these funds to satisfy the arrearage (although I am sure a complicate process would be involved and it would not happen overnight).

      3. Ben Johannson

        I can see no evidence that eurozone CB’s must be in positive territory regarding its balance sheet or that member states must make any “hole” whole. They may demand it anyway given the leaders of the eurogang are likely as stupid as they look but it isn’t an inevitability given the ECB does not require balance sheet solvency to conduct its operations.

        1. kemal erdogan

          Jens Weidmann seems to fit your description who repeatedly warned that they would not accept ECB to operate with a negative balance.

          Given Germany’s influence the loss that ECB has to take on Greece can very well be big problem.

    2. Nick

      “But the Greeks are in my view already winning in terms of how future générations of Greeks will look back at this.”

      More like Greece will now face the fate of many Eastern European countries, depopulation and economic stagnation. The youth will abandon the homeland in search of greener pastures westward.

      1. Swedish Lex

        They already left. A direct consequence of the Troika’s and the corrupt Greek government’s management of the situation.

        The territories Finland had to give up in 1940 resulted in 12% of the Finnish population being displaced: https://en.wikipedia.org/wiki/Evacuation_of_Finnish_Karelia

        If/when a Greek default turns into a humanitarian crisis, the creditors will have (more) blood on their hands.

      2. Swedish Lex

        Big chunks of the youth has already left as consequence of the Troika’s policies and of former Greek governments playing along.

        12% of the Finnish population, 410.000 people, relocated from the territories lost to Russia and, obviously, had to leave everything behind.

        Greece will no doubt have to continue to pay a big price whatever happens. The EU will have more blood on its hands if/when this becomes a (deeper) humanitarian crisis.

        And Greece, on top of that, has to deal with huge flows of refugees from Syria and Africa. With hardly any support or solidarity from the European “partners”

        1. Lambert Strether

          “Big chunks of the youth has already left” …. Meaning that rebuilding Greece with a population that skews old and will skew older will be even more difficult than it would otherwise be.

          1. Nameful

            Meaning that rebuilding Greece with a population that skews old and will skew older will be even more difficult than it would otherwise be.

            It actually is even worse. The young people that leave are the ones that are hireable elsewhere, a.k.a. a good percentage of the educated and willing to work ones. It’s not just a resource migration, the resources lost are the ones needed for rebuilding.
            At the opposite pole, the ones who learned how to game the system are certainly not leaving – and that exacerbates the problem. It has been a common phenomenon in Eastern Europe coming out of the communist era – poverty generates extensive corruption (which is already in place in Greece, but bear with me) which, in turn, makes the people who would work and pay taxes leave for countries where they would actually see a benefit from taxes paid, as opposed to enriching various corrupt officials and their extended families/connections.
            I have yet to see brough into discussion the lack of action from Yanis V.’s office towards improving Greece’s tax collection problems (here’s a factoid for you, Yves – if you go to Greece and see lived-in houses with rebar jutting up from the top floor, it’s because the owners can claim the house is unfinished and avoid paying property tax on it; my understanding is that it’s not an uncommon situation, either, but I’d love some corroborating info). To really rebuild Greece, Syriza needs to cut down on corruption and incentivize people to remain in the country and participate in the real economy (as opposed to the underground one). I would have liked to see that from this ‘leftist’ government who professes ‘care for the people’ – and I agree with Lambert on this, the argument that ‘they have only been in power for X months’ is … weak, by now.

    3. ennui

      not just greece. the collusion between the ECB and the French and German governments/banks, along with the IMF sends a clear message to all the European “junior” states. the fact that the ECB has conducted a slow bank run in Greece destroys any trust national political leaders might have in a European banking system. you can’t have a central bank which is willing to destroy the banking system of a member state to advance the political aims of other member states….

      1. Lambert Strether

        Indeed. I’m at a loss why Syriza didn’t take every opportunity to hammer home the so-called 2010 bailout left EU countries holding the bag for German banks. In the glorious fight against neo-liberalism, and all. (Anticipating a wave of they saidan. But Syriza didn’t get the message through. Fair or not.

    4. Christer Kamb

      “kicking the can” seems familiar!

      Do you know why(truth) they decided to bail-out the banks in full? I guess you could say they(we all) were in shock because of the Goldman-swap! I see this swap as a bumerang for lack of regulations and weak understandings by politicians and EU-bureaucrats about markets in general and derivatives in particular. There is also weak moral incitaments to criminally prosecute banks. Italy was the only one trying as I remembered. Embarrassing!

      As a swede you have experiance about nationalizing banks. Why not in this case? Well of cource EU is bigger, more banks, bigger markets etc. Still the EMU can be seen as “one country” but with 19 sov-bonds, 19 centralbanks and 19 treasuries. Yes, it is difficult to come to mutual decisions but under the gallow intelligent people usually do the right thing, don´t they? I am sure and likewise sorry to say they were badly influenced by the banking-lobby.

    5. ckimball

      Yes. you have reminded me that at the end, when much has dropped away,
      there is the possibility of the underlying essence remaining so whole that it can
      become a most powerful legacy which can inform and inspire.
      Isn’t power a tricky business. I am grateful to be reminded of the importance of how
      and what we leave for the generations to contemplate. I believe your hope will somehow
      be realized. I believe the people of Greece have a stubborn mandate instilled inside their
      collective psyche, Know Thy Self (sometimes this process can preclude knowing others very well)

    6. Ralph Musgrave

      “then the ECB will (again) be confirmed at the Institution that kills democracy”. Democracy being the right to vote yourself other people’s money, presumably. In which case I vote myself 50% of Swedish Lex’s income for the rest of my life.

      But I’m not expecting a regular check from Swedish Lex because the Swedish Lex’s of this world don’t practice what they preach.

      1. pascal

        I guess the point here is that is is hard to build a country s economy with a money that 20% to 30% historically overvalued, notwithstanding the mark s under evaluation and drachma overvaluation when joinging. Make that for a few year and watch the deficit grow.

    7. Oregoncharles

      “My point is that even a 24 karat Greek Government would have an impossible task in negociating with the Ayatollahs of the Troika.”

      As I understand it, this is what Yves has been saying all along. However, there is more than one conclusion to be drawn from it.

  4. steviefinn

    Swedish Lex

    Agreed – & what is the difference in the end result between bowing & scraping & at least putting up some sort of fight ? Strikes me that it would eventually end up in much the same place anyway. Maybe morals don’t count in this counting house world anymore, but however it ends, I personally am grateful to Syriza for allowing us more insight into the dealings of the EU Junta – which hopefully others will learn from, leading to a way of destoying this hydra.

      1. Alphonse Elric

        Steviefinn did not say their lives were worth less than a romantic gesture. He said that he saw no reason to believe there was a difference in the body count, and THEN considered the significance of the gesture.

        But even if your less generous reading of Steviefinn’s intent is correct, I still think it deserves a more careful response. Romantic gestures matter in human lives. Man cannot live by bread alone. Asking someone else to die for a cause you believe in is a heavy thing indeed. But Steviefinn didn’t do that. He expressed gratitude to Syriza for choices they’ve already made (presumably without significant input from Steviefinn). That distinction matters to me.

        (Let none of what I’ve written here be construed to mean that I support Tsipras’ negotiating strategy, trust Syriza’s intentions, or am attempting to dispute Yves’ position, well-argued in this blog, that a Grexit would be a great deal worse than continued austerity in the foreseeable future)

        1. Lambert Strether

          Finn said exactly that. Here is what he said:

          Agreed – & what is the difference in the end result between bowing & scraping & at least putting up some sort of fight

          Yves wrote:

          Thus the question is, will the course of action that Syriza has chosen make the lives of ordinary Greeks better? Are partial defaults on pensions and salaries good for the extended Greek families that Syriza professes to care about?

          If Greek lives counted for Finn, he would have answered Yves question — and since this question is so obvious, I would have expected those who develop and deploy Syriza talking points to have answered it. That there is no answer speaks volumes.

          The romantic gesture is all; the suffering of the Greek people (whether great, or greater) is nothing. Another fine example of Juvenile Left Adventurism.

          And as we might expect, Finn deploys the “mass pedagogy” talking point again:

          I personally am grateful to Syriza for allowing us more insight into the dealings of the EU Junta – which hopefully others will learn from

          Yes, that’s what this entire series of posts is about: Learning. Alas, it looks like those who could best benefit from lessons in “cold-blooded weighing of the odds” are least able to do so (if, again — God forbid — these talking points are representative of thinking on the European left).

          1. Ben Johannson

            “Juvenile Left Adventurism” is a good encapsulation of the phenomenon. It’s a thoughtless worship of romanticism that gets us Cultural Revolutions and turns nations into torture chambers.

          2. Alphonse Elric

            I can’t tell if you’re responding to what you think I believe or what you think I think Steviefinn believes.

            If you’re just criticizing Steviefinn’s position above, then, well, I agree it’s a treacherous ground, and Nathan Tankus’s reply below is the “more careful response” I thought his comments deserved.

            I did not write “The romantic gesture is all”. I wrote “romantic gestures matter”. I also believe that “cold-blooded weighing of the odds” matters quite a bit, and I value the analysis you and Yves provide. I attempted a guess down in the comments below on those strategic questions, trying to analyze Tsipras’ motives, which got a lot less attention than my quibble here over wording.

            Though perhaps that’s because what I wrote below is either obviously true or obviously and embarassingly false.

      2. steviefinn

        The last estimate I saw regarding deaths from austerity about 2 years ago, was for 20,000 lives throughout Europe. Ok so lie down take it up the ass & let that figure increase overtime – is that non-romantic enough for you ?

        Always plenty of talk & figures bounded about in terms of the cost of revolution or fighting back, with added info on say Napolean led to German militarism etc – a load of bollocks as the in-bred European families were quite capable of sending their cannon fodder out to fight what would have been inevitable wars anyway.

        History doesn’t however list the millions who died as a result of what revolutions fought against or those that would have died but for these revolutions & progressive policies – as in the case of my Mother who would have died from diphtheria but for the NHS.

        Still many more who now watch from the sidelines will have to die or suffer before they too realise they are grist to this stinking mill……..& don’t tell me I care nothing for people just because I believe people should fight back – I get angry because I care deeply about this. According to your logic nobody should have ever fought back at all & I am fully aware that the reality is very far from being romantic, even if as in Northern Ireland where I live….. they sing songs about it.

        1. steviefinn

          Thanks Alphonse & Yves is very probably right on Grexit. I just think in comparison to the other cocksucker EU governments well represented by their Finmins – Syriza have at least made an effort to avoid the ‘ Let’s go screw the poor people ‘ modus operandi & at least deserve some credit for that.

          My worry now is that the Greek people who by this time must realise that they are stuck in a banker made gin trap, sprung by their lickspittle supporters will, seeing no other way to express their legitimate anger – head to the extreme right.

          1. susan the other

            Or Left. Because if Greece leaves the EU and NATO (?) then it is free to deal with Russia. It would be poetic justice for the Greeks to contract for the Turkish Stream to run thru Greece, Macedonia and out to Albania. Let the rest of Europe come to them. And charge them an exorbitant markup. And then the thought also occurs to me that that is the briar patch – that’s exactly where Europe wants to be in order to get out from under US controls and Russian sanctions. Who knows. If I were advising the Greeks I’d say they should consider the Turkish Stream.

          2. Nathan Tankus

            “Agreed – & what is the difference in the end result between bowing & scraping & at least putting up some sort of fight ? Strikes me that it would eventually end up in much the same place anyway.”

            This is an assumption with no evidence. If a doctor told you “meh we should chop off your leg, we’ll probably end up having to do this anyway” without any evidence you’d rightly sue her for malpractice. It is very irresponsible to suggest that Greeks should fall on their sold because it “strikes you” that they’ll end up in the “same place anyway”.

            We know reasonably well what the results of an exit and default will be in the short term and the catastrophic consequences long term for the Greek people. We don’t know . Yves, myself and many other commentators (and commenters on this site) are rightly dismissive of extend and pretend but in this case I think that’s a reasonable thing to do. Who knows how international politics will develop and what opportunities may present themselves? Additionally, buying time could very concretely give them the resources they need to plan for an exit or non-negotiated default that they don’t have now.

            I think it’s fundamentally wrong for people to suggest they fight the Troika with no planning because people have a psychological need to see power challenged. Power should be challenged when the costs of challenging are low or you have a reasonable chance of success/ a plan to provide basic services in case elites withdraw. the equivalent of drunkenly stumbling up to an officer and spitting in their face may be emotionally satisfying but it doesn’t bode well for long term health.

            1. ennui

              As Varoufakis notes in his recent statement, an agreement now would leave Syriza with a Greek economy in a deep depression, a banking system that has been strangled by the ECB with no commitment to confidence building, a requirement to create a fiscal surplus and monthly reviews by the IMF culminating in a repeat performance of this whole charade in November.

              Surely you can’t believe Syriza is going to come out of that stronger? The banking system has basically collapsed, deal or no deal. Plus. the Troika proposal also contains the poison pill of VAT increases for the islands, which would drive a wedge between Syriza and it’s nationalist allies.

              Whether it was intentional or not, Syriza’s dogged commitment to this “negotiation” has illustrated just the degree to which the Troika are acting in bad faith. There were just two outcomes that were possible from this process: Syriza signing a deal which would be politically suicidal or Greek exit, and this was by design by the powers of Europe. The combination of political cravenness combined with short-sightedness and a recklessness built on arrogance displayed by the Troika should be truly sobering and is the real story, regardless of what now happens in Greece.

              1. P Walker

                It’s too easy to armchair quarterback especially from those who have no knowledge of exactly what’s being said and demanded away from the public eye.

                Part of successful diplomacy is to make the other side of the table look more respectable than they really are. I think that Tsipras was working overtime on that over the last few months.

                I think Tsipras made the right call. He had to make this decision before Tuesday; he just had to wait until everyone could see the Troika were still digging their hole.

              2. Yves Smith Post author

                And Varoufakis himself also has consistently rejected a Grexit as even worse for Greece.

                You make the assumption that a Grexit will make things better. Nathan has documented at some length that they will make things vastly worse, and in a lasting way. Too many economists and commentators are being intellectually lazy about this, and unfortunately that means many people looking at the tradeoffs are operating from incorrect assumptions. They analogize Grexit to a mere rapid and severe currency devaluation, like Argentina had. BTW Argentina still has not fully recovered from that.

                A Grexit is that PLUS: capital controls, a banking holiday due to the failure of all of the Greek banks, needing to resolve those banks, and an emergency introduction of a new currency, something that took ten years of planning and three years of execution when the Euro was introduced to go smoothly. No economy has endured anything approaching that level of dislocation. Greece would almost certainly become a failed state.

                1. kemal erdogan

                  War can create failed states, recent examples of Iraq and Syria is there. But, even there deliberate US intervention after the war was there to ensure that Iraq as a viable state would never emerge again.

                  But I find it hard to believe that a nation would fail by a financial storm. Do you have examples of failed states that did not involve physical destruction of wealth and infrastructure?

                2. bh2

                  Although Argentina may not have fully recovered from its ugly encounter with the IMF, the country has surely recovered sooner and more fully than had it not defaulted.

                  The Greeks, in a similar way, can either accept perpetual servitude to a massive debt their economy cannot possibly satisfy or they can effectively declare bankruptcy and return to being a poor country with a weak currency but no external debt.

                  If Greece suddenly sheds all its external sovereign debt, it becomes more attractive (rather than less) to new “investors”.

                  There is a great lot of sovereign wealth sloshing around inside the pockets of national governments which not aligned with western interests. Who can say those massive funds may not suddenly show up when the collateral is unencumbered and the political timing is right?

                  1. bh2

                    To elaborate on Greek assets which might be of enormous strategic interest to nations not aligned with the west but growing in air and sea power, these are the major seaports of Greece (per Wikipedia):

                    The busiest maritime ports for passenger transport are:

                    Aegina
                    Antirrio
                    Corfu
                    Heraklion
                    Igoumenitsa
                    Keramoti
                    Kyllini
                    Mykonos
                    Paloukia (Salamis)
                    Paros
                    Patras
                    Perama
                    Piraeus
                    Rafina
                    Rio
                    Souda Bay (Crete)
                    Thasos
                    Thira (Santorini)
                    Tinos
                    Zakynthos

                    The busiest maritime ports for goods transport are:

                    Agioi Theodoroi
                    Aliveri (Euboea)
                    Amaliapoli/Almyros
                    Antikyra
                    Antirrio
                    Eleusis
                    Heraklion
                    Igoumenitsa
                    Kavala
                    Larymna
                    Megara
                    Milos
                    Paloukia (Salamis)
                    Patras
                    Perama
                    Piraeus
                    Rio
                    Thessaloniki
                    Volos

                    The Troika regard the Greek “problem” as one of debt repayment. That is because they regard Greece as a captive state. Theirs.

                    It has has evidently never occurred to these bureaucrats in Brussels that Greece might decisively break not only with the EU but with NATO as well, leaving Greece free to merchandise its numerous and excellent port facilities to the highest bidder(s).

                    There are a few countries who might become very generous with Greece in return for a commanding naval presence directly in the center of the Mediterranean “lake”.

                    Just sayin’.

                    1. bh2

                      @Lambert Strether, who asks:

                      “Do any of those countries have a navy that would have to get through the Dardenelles to get to Greece?”

                      You would be speaking of Russia, I assume … and no, they would not have to put ships through the Dardenelles from the Black Sea to access Greece. They could hive off ships from their Northern and Baltic Fleets and sail them in by way of the Atlantic.

                      With permanent warm water fleets stationed on both ends of the Dardenelles, they — not the Turks — would have the final say about which ships (if any) could traverse it. A bit of a problem for Turkey (and thus NATO).

                      And then there’s China — eventually.

                      Both countries are steadily building up modern naval forces.

                    2. Lambert Strether

                      Maybe, as in Tsushima, although I forgot to add Gibralter as a chokepoint. Could be. It seems to be the U.S. plan for the entire Black Sea and Mediterranean littoral to go up in flames, so maybe ratcheting tension up like this will be seen as opportunity, in future. And China did buy Piraeus (sp?) after all. No immmediate impact at all, though.

                      Adding, the other way to look at that big list of ports is as smuggling opportunities. With Europe’s migrant issues, do they really want that border not only unsecured, but with a country with a positive incentive to let as many migrants onto the European continent as it can?

                    3. bh2

                      If the Greek government signed a deal with Russia to provide them permanent harbors and infrastructure for their new Med Fleet, it seems unlikely any western power(s) would dare blockade Russian naval vessels from unhindered passage during “peacetime”.

                      In return, of course, the Greeks would likely negotiate for reliable petroleum imports from Mother Russia along with cash payments. That would overcome a significant weakness of the Greek economy. A “win-win” for both parties.

                      Not to say any of this will happen, of course. But it doesn’t appear the west have even the remotest fear of unintended consequences. The second-rate bureaucrats in charge regard Greece to be a nothing economy of an insignificant nation which they can bully with impunity.

                  2. Yves Smith Post author

                    Varoufakis EXPLICILTY and repeatedly wrote that a Grexit was in no way comparable to Argentina, which was a mere currency depreciation,, and that a Grexit would be a disaster.

                    I am at a loss to understand why you keep denying the fact that a Grexit will be vastly more damaging to Greece. Even a mere 12 day bank holiday in Cyprus and a comparatively small depositor bail-in has done huge damage. And Cyprus, unlike Greece, was prosperous before this financial bomb was dropped on them.

                3. Calgacus

                  And Varoufakis himself also has consistently rejected a Grexit as even worse for Greece.
                  No. He has done so – but not consistently! So YV is perceptibly less opposed and pessimistic about Grexit than Naked Capitalism, as I have documented. To quote him: “We are prepared for an austere existence, which is something different from austerity”. Or in the interview I have posted many times, he says that rather than crossing the red lines, the EZ can throw Greece out and Greece will wave goodbye. And he said this was the most likely outcome! These are hardly statements of someone who assesses the costs of Grexit as high as Naked Capitalism does.

                  Nathan has documented at some length that they [Grexit] will make things vastly worse, and in a lasting way. Documented? Not to insult Nathan, but we’re talking about the future, and I was unaware he has the gift of prophecy. I and many others think and argue that this pessimism is wrong, and usually based on bad economics, exaggerating costs and belittling, ignoring capabilities.

                  They analogize Grexit to a mere rapid and severe currency devaluation, like Argentina had.
                  That reverses the characteristic mode of analysis of the two sides. All Grexit pessimists I know of analogize Grexit to currency devaluation, and ignore the domestic sector, the most important sector of any economy. Some of the optimists do this too. But the better economists do not. They see Greece’s recovery, like Argentina’s as driven by domestic policies, domestic demand, domestic growth. For example: “In this context, it is important to stress that the key to recovery does not lie with exports, as most analysts are keen on suggesting, but rather with a substantial increase in domestic demand.” C. J. Polychroniou- The Greek Crisis: Possible Costs and Likely Outcomes of a Grexit July 2012

                  BTW Argentina still has not fully recovered from that.
                  Not at all true. The debt telenovela is still playing, yes. So what? By all objective measures, GDP, whatever, Argentina recovered from the default episode long ago, soon after the default. Is there anyone who seriously contends now that it was not the best course? The majority of “economists” & “analysts” wrongly predicted doom for Argentina back then too.

            2. steviefinn

              I merely stated that at least Syriza were putting up a fight instead of grovelling like all the others in what I see as treason towards those who they are supposed to represent.
              The Greek people have legitimate grievances which however incompetently Syriza have at least made an effort to represent – the Troika or whatever that bag of shit now calls itself has shown that it doesn’t give a continental f**k about the Greek people – it is simply there to serve the bankers.
              It reminds me of the situation in Northern Ireland when the Catholic community who also had legitimate grievances, in terms of rigged elections, bad housing, job discrimination etc formed civil rights groups which imitated MLK’s version for African Americans. British paratroopers were sent in & killed around 26 in Derry & Belfast which crushed that movement – the next day the provisional IRA was born & that nightmare began.
              The Troika with it’s similar Iron like stance is likely to have created at least the seeds to a similar monster, who would likely do much worse than spit in the face of a policeman.
              Whatever……. nobody will take any notice of either of us……. but I think you are a fool to think that the situation will get any better – they want to crush you & as far as I am concerned if someone wants to crush me, I fight back & my choice would be in the style of Gandhi not a football hooligan.
              What does make me despair is the attitude of other Europeans who in the absence of any cognitive effort, choose to stereotype the Greek people – pity they cannot realise they are also on the menu.

          3. Lambert Strether

            “head to the extreme right” Well, if I knew that I’d been the subject in an experiment in “mass pedagogy” — and without my informed consent — I might do exactly that.

        2. Lambert Strether

          Feelings aren’t facts. If I’m going to war — and I think we agree this is a war — I’d rather go to war with a general who is capable of “cold-blooded weighing of the odds,” as Yves puts it. You wouldn’t. Note the asymmetry if we mutually enlist: Your way is much more likely to get me killed for nothing, and my way is likely not only not to throw away your life, but win.

          A lot of French people died in the early days of World War I because the French generals thought elan was a bigger factor for success in war than it was.

          1. Oregoncharles

            Oh, come on: French people died in WWI because the French generals were grotesquely incompetent (and the British not much better). “Elan” was just one expression of that.

            1. Lambert Strether

              Both aspects of the analogy are directly on point then; both the elan ideology, and the massive incompetence (shared by all sides, too, and possibly having something to do with massive firepower outrunning the ability to communicate on the battlefield, meaning there were few good options; a third aspect of the analogy that is on point)

            2. Yves Smith Post author

              The British and French greatly underestimated their enemy, which is a direct parallel to Syriza versus the creditors. Any history you read of the early days of WWI shows that young men from the aristocratic classes eagerly signed up, thinking the war would last a mere few weeks and they didn’t want to miss being part of a great adventure. As I am sure you know, that war cleaned out a large portion of the young male population of that era, and many of those who survived were crippled.

              1. Oregoncharles

                Several entire classes of the French military academy were killed off.

                Let’s hope the analogy doesn’t go that far.

          2. steviefinn

            I don’t see you going to war Lambert – merely talking about ideals in a world where as you should know – things don’t work like that.

          3. Tinky

            “I remember when I was with Special Forces. Seems a thousand centuries ago. We went into a camp to inoculate the children. We left the camp after we had inoculated the children for polio, and this old man came running after us. He was crying. He couldn’t see. We went back there, and they had come and hacked off every inoculated arm. There they were in a pile. A pile of little arms. And I remember I … I … I cried. I wept like some grandmother. I wanted to tear my teeth out. I didn’t know what I wanted to do. And I want to remember it. I never want to forget it. I never want to forget.
And then I realized, like I was shot! Like I was shot with a diamond … a diamond bullet right through my forehead. And I thought: My God, the genius of that! The genius! The will to do that! Perfect, genuine, complete, crystalline, pure. And then I realized they were stronger than we, because they could stand that these were not monsters. These were men, trained cadres — these men who fought with their hearts, who had families, who had children, who were filled with love — but they had the strength, the strength to do that. If I had ten divisions of those men, then our troubles here would be over very quickly.”

            – Col. Kurtz, Apocalypse Now

        3. Linus Huber

          I do have some sympathy for steviefinn’s position. For me, the whole drama is less about Greece against Germany or the EU but about democracy against the 0,1%.

      3. cirsium

        The situation is bad just now and is going to deteriorate, whatever is decided. Regarding human lives, this is an extract from a blogger from Crete. It was written when the Audit Commission’s report on odious debt was being presented to the Greek parliament-

        Here up in a little Cretan village, my 70-year-old neighbour just came by with a big load of Horta (delicious wild greens) and to ask us what we think. This 70-year old is growing enough food to feed the whole family so they will survive unless there is unexpected illness, or if there is no petrol. We are expecting power cuts, maybe no power at all. His younger son, a carpenter, has been out of work for 4 years, marriage broken up as one result. Another unexpected result is that they are now growing apples as a cash crop, taking advantage of the climate change here – more rain at 2000 feet. However, the sanctions imposed by the EU on Russian exports has really hit them hard as the price per kilo just tumbled last year.
They remain solidly in support of Syriza because they say that this is the only government that has actually tried to fight for the people.


        ‘We are done for anyway, they say. Might as well go down fighting. This is Crete, of course. Where they also say. At the end of WW2, the Germans killed hundreds of young men, they blew up entire villages and they took all our food. We survived all that. Now we have our young men (more or less), we have our houses and we have our food. Of course we are going to survive.

        1. Lambert Strether

          Yes, that’s why some of my Greek friends say, agreeing with a commenter here (who I would hat top if I could find it); the Greeks never paved over the countryside, so a return to the village is possible for a large part of the population. And of course see here.

          Still, though, all of this was known at the very latest in the spring (at least by Syriza’s left faction). The pieces were all on the board then. So none of these really justifies a 1AM referendum speech at the last, or even after the last possible, minute.

          UPDATE Adding, I was given to understand that there were networks of what we would call non-profit collectives or cooperatives, in addition to the Greek orthodox church, that would “pick up the slack” if, say, the Greek financial system completely collapsed. But when I asked for evidence, nobody provided any. So at a guess Greek resiliency is down to village family structures. Sounds like something the Archdruid would appreciate.

  5. Ruben

    It is interesting to note that the right-wing ally of Syriza, the Independent Greeks, strongly support the call to the Referendum and that it is calling the Greek people to vote No. I see great potential for the alliance of the nationalist Right and the Left to overcome the suffocating power of the Extreme Centre (credit to maju for this useful derogatory term), aka the neo-liberals or TPTB.

    On a related note, If I were advising to Europeans centres of power I would suggest accepting the short-term extension of the bailout program that Tsipras is requesting in order to wait for the vote of the Greeks on July/5, because my bet would be that despite the humiliation and misery and despite the calls of Siriza and the Independent Greeks, the electorate would tounr out a predominant Yes by a small majority, thus opening the way to a deal for a formal extension of the bail-out and a return to business as usual.

    1. Barry Fay

      That´s exactly what I thought. Five days after all the stalling for years is nothing unless it is seen as a matter of Principle. The only objection to waiting for the referendum would, I suppose, be the uncertainty. Tune in tomorrow.

      1. Ruben

        The question has to be very honest though, not tendentious, unbiased. A dispassionate description of the Troika’s proposal is fundamental.

    2. ex-PFC Chuck

      re “Extreme Centre”

      I prefer the term “Bought Center.” Or “Centre” if you’re on the other side of the pond.

      1. MaroonBulldog

        I save “Extreme Center” for Fascism, so “Bought Center” works better for me.

  6. pascal

    Nothing better in material terms as yet come out of recent election, nothing worse either, but if the idea is to get better results for the greek people by influencing the debate, I feel a bit unconfortable with this post in which I see a lot of “name and blame” and “I told you so”.

    Now of course, you re not supposed to solve Greece problems, and I thank your for your coverage from which I greatly benefited.

    But what could Stipraz possibly do yesterday – and not last month, or months, or from the start, since going back in time is impossible:
    – sign the creditor s offer and abandon is mandate – even if possibly impossible?
    – resign and let a technocracit coalition takeover ?
    – call for referendum, which might or might no lead to resignation ?
    – come up with something, knowing that all best efforts have rebuked, and that the debate is ideological rather than rational ?

    It seems to me, that from a causal narrative you been developping of Syriza s mistake, you r blaming them for not having managed to make their ideological counterparts to start acting rationnally.

    Your narrative may be right, but do you really believe a “better” (according to your narrative) behaviour of Syrisa would have led the Euro leader to recognize their being wrong since 2008?

    There is also symbolic fight going on, and I find it paradoxical to wish for democracy but blaming the mess on leaders that should have acted better. It s a premise of democracy that leaders may and will fail, and it is *not* a problem. Giving the power back to the people because you can not deliver is OK. Wishing that Syriza s leaders would have acted more as enlightened tyran is more debatable in that regards.

    If only one thing, this referendum will have succeeded in saying this crisis is a political matter, and not rational economic debate.
    And with a bit of luck, th ECB will not date suspend the ELA before 5 july, leaving more greek with some cash in case of a drachma or capital control, or a good indication to the people on who has the control otherwise.

    1. Lambert Strether

      “You r blaming them for not having managed to make their ideological counterparts to start acting rationnally.”

      Do consider actually reading the post. To take but one passage:

      So the only conceivable excuse for waiting this long is for Tsipras to attempt to save himself. If he were to reject the bailout, the decision is unquestionably his and that of his allies. That it precisely the sort of decision that government leaders are expected to make. Or he could just as well accept the bailout, recognizing that as bad as things are, that the country would be plunged into an even deeper economic sinkhole, putting the survival of even more citizens at risk. It would take forming a new coalition with To Potami and New Democracy, and that would mean that his and Syriza’s position would become far more tenuous and he would be fiercely denounced by many if mot most Syriza MPs.

      The word “sham” is in the headline for a reason, although many comments seem willing to address this thesis for Syriza’s motivations.

  7. Alphonse Elric

    I can see two reasons Tsipras would have chosen to not call a referendum in May, neither particularly encouraging:

    (1) The negotiating strategy was to hold out past June 18th and then capitulate if need be. He thought the odds of the creditors rejecting their proposals late Sunday were slim and/or preferred crossing the ‘red lines’ to Grexit if at all possible.

    (2) He didn’t believe a referendum would give the desired result in May – both because Greeks would be less likely to vote for what is probably Grexit when there was still a chance negotiations could succeed, and because he feared Europe would be better situated in May to put pressure on the Greek electorate to vote the “right” way.

    Both options seem to indicate that Tsipras (and thus Varoufakis, et al. – who always have at least the power to resign in protest) decided not to seek popular support for what they thought was the eventual requisite course of action. Or weren’t making strategic plans at all.

    1. Alphonse Elric

      I don’t speak French but I could more or less parse the Google-translated version. It looks like it was written before the referendum was proposed though.

  8. Christer Kamb

    Yves wrote:
    “The creditors are known thugs. They have engaged in harsh austerity, putting it in one of the very worst downturn in an economy not in a state of war , used Greece to launder bailouts to French and German banks, not given Greece credit for having implemented numerous “reforms” and broke the last government.”

    Some european banks(mainly german/french/dutch) should have been nationalized(or eurolized) in full or partly at an early stage before the 1st restruction and bail-out. Others with smaller exposures capitalized mainly by shareholders. All based on restructuring greek debts by implicit state-guarantees. Would it be possible and how would markets react?

    Instead of lending unsecured bail-out loans to Greece by the Troika sovereigns would end up owning future bankprofits. Banks would own restructured loans a la Brady. Also a large bulk of greek debt would be swapped against equity in greek public entities(some with buy-backs). EMU-taxpayers then have an upside while the Troika(EFSF/IMF/World Bank/EIB) could concentrate on bridge-financing reforms and a greek comeback. Sounds simple?

    Non-nationalized bank-shares with exposures to Piigs would probably also crash. A possible response from ECB are FED-like swap-agreements against “hard-currency” GB´s(german etc) to calm markets and reduce interest-rate shocks. Real stress-tests instead of phony ones and stronger rules for higher capitalbases at an earlier point in time. Shareholders beware!

    Do ECB-rules allow ECB to buy GB´s from i.e Bundesbank for swap-arrangements? Maybe it would be better if sovereign banks do the swaps?

    It did work in the US with bad cdo´s so why not with GB´s for bad GB´s!

  9. meme

    Yves:
    Your postings on the Greek saga are fabulous! I look forward to your every posting and links on the subject. A great service in distilling and analyzing. Though this may be an “never ending” story, it is soon coming to a political theater nearer all of us. As an historian, I can only applaud your work.
    Many thanks. Better than TV and coffee!
    me

  10. Reede Stockton

    I’ve felt for some months now that you and I were following different realities regarding Greece, and this post seals the deal.

    Frankly, it reads like an interpretation in search of facts.

    1. Ben Johannson

      You mean you’ll spend your time reading only things that reinforce your preconceptions? That sounds unwise.

  11. -jswift

    Maybe the usual approach to analysis of these negotiations, based on politics of the left vs right is less relevant than another dimension; namely insiders vs outsiders. Historically the left is identified with the outsiders, but since it’s become routine to see socialist parties take power, and to be integrated into the establishment, there really are 2 dimensions here. In fact the outsiders from right and left in Europe have much in common these days, and huge unemployment rates have been feeding the ranks of the outsider’s base of support.

    One of the things that makes this blog interesting is that it gives an insider’s view of the world of banking and finance, but more to the left, which is not easy to find, as leftists typically don’t like to be seen as insiders.

    One of the main goals of the European project had been to avoid these insider vs outsider divisions,
    because they played a big role in leading to the 2 world wars. But another goal is to make the EU into the consummate insider on the world scene, rivalling US influence in foreign affairs, and this is creating huge tensions as it is increasingly in conflict with the first goal of internal harmony.
    In this context, kicking Greece out of the group is clearly a catastrophe.

    Regarding the referendum, it may be true that Syriza plays the role of political nuisance, from the EU
    establishment viewpoint, but this stems from their history of being far from the levers of power, where the only tactics available are to make the establishment suffer for its narrow pursual of its interests.
    Varoufakis did try to bring a deeper analysis of economic fundamentals to the discussion, especially flaws in the Euro’s conception, but there was no interest in looking beyond the hopelessly superficial Eurogroup plan, so its hard to feel sorry for the shocked Eurogroup over Syriza’s latest tactic.

  12. Christer Kamb

    “Key events between now and July 5:”

    Next bail-out package include SMP-profits of 3,3 Billion euro by ECB. These profits consists only of greek-bonds as far as I understand. I hope the ECB will swap(free-of-charge) this money as IMF-payment(1,6 Bn) on tuesday or perhaps better as a ECB-payment on the 20th of July(3,5 bn).

    1. MaroonBulldog

      I could be wrong, of course, but it seems to me that there isn’t going to be a “Next bail-out package.”

  13. simjam

    Enough armchair analysis from Americans! Our track record in fighting corporatism is very poor. We prefer to lie down and whine. The Greeks are rediscovering their heritage of fighting against domination.

    1. Lambert Strether

      Another Juvenile Left Adventurist; fighting is all, no matter who else must suffer, and with an absence of critical thinking that would be cute if it weren’t so dangerous. But thanks for the drive-by!

      Incidentally, #BlackLivesMatter, the capitol occupations, Occupy proper, the movement that just culminated in gay marriage (sparked in great part by the almost entirely forgotten ACT-UP), and a host of other movements like anti-fracking, food sovereignty, and many more too numerous to mention are all cases where Americans are neither lying down nor whining.

      1. OpenThePodBayDoorsHAL

        I’ll take the Juvenile Adventurist Left anytime over the 90+% in America who are so addled by high-fructose corn syrup and the media bombardment of exceptionalism, militarism, and narcissism to form any actual views whatsoever. Doing *anything* is better than “Roll over and play dead”, yes even if it means extending the suffering. This is war, and the Fascist Overlords take the measure of their enemy (the 99%), they know “the consent of the governed” can rupture unexpectedly and when the enemy is utterly and completely supine, reading their script back to them, they know exactly how to roll.

        1. Lambert Strether

          So would I, but is that really the choice? (For myself, I try to have compassion for the victims of the “food-like products” produced by our current political economy. I recommend the same to you.)

          1. OpenThePodBayDoorsHAL

            I think you have to ask “cui bono?” or more precisely, “quod volunt?” (“what do they want?”)
            The Troika want the Greeks to suffer, *pour encourager les autres* (Italy, Spain, etc). They are getting what they want.
            (hey, that’s three languages in one post, muy bueno! oops four…)

  14. TheCatSaid

    Google translate of the french editorial referenced by pascal:

    The resistance of Tsipras

    That much fault to which we want to push Alexis Tsipras: the betrayal of the mandate issued to the people in January.
    Article published in
    Politis No. 1359
    Summary

    While we advance painfully towards a compromise between Greece and its creditors, begins another battle. That of the image. Who won, who lost? It is ultimately the real political battle. There is still time, beyond the reality of an agreement now likely to inflict a symbolic defeat to Alexis Tsipras. Let us trust some of our press to use it. The challenge is clear. We must also deliver a clear message to the European peoples despairing that could not get out of the liberal orthodoxy. It is necessary that the Spanish, for example, have time to think before making the Podemos power. The famous “TINA” (“There is No Alternative”) plays his skin. However, the resistance of Alexis Tsipras, in the worst conditions, suggests that it may be a way.

    This is what has lost his nerves to Christine Lagarde, who probably did not usually be resisted. In any case, not about pensions vulgar stories. In exasperation, the director of the IMF has recently regretted not having in front of her “adult”. ‘Adults’ and not this irresponsible Tsipras, childish point of its election commitments to respect, or what Varoufakis, it is almost as arrogant smirk. Our bourgeois speaks to them of billions of debt, and meet them tens of euros. It’s a matter of culture. Banker, technocrats, or bilious reactionary, as the German finance minister, Wolfgang Schäuble, they have in common is unable to consider “real people.”

    These Greek pensioners that left almost half of their pension in great austerity cure imposed by the EU and the IMF, and already live below the poverty line. It is to them that Ms. Lagarde would remove additional hundred thirty euros in three years. And that is what resists Tsipras. Faced with the blackmail of bankruptcy, the Greek Prime Minister has had to Monday again, significant concessions. He agreed to further increases in VAT on hotel and on luxury islands: Mykonos, Santorini, and some other heaven on earth. But there is what he called its “red lines”. These limits should not be crossed without risk of betraying the mandate issued to the people in January. For this is good fault to which we would push: treason.

    The CIA is no longer what it was – to the regret of the World columnist Arnaud Leparmentier, which must be read Chronic of 17 June bewildering – and colonels who left a bad memory, we would like the people is in charge of closing the “parenthesis” Syriza. We can see where we are no longer in economy or in finance, but in politics. It is important not that Greek government gets away with it. But for now, Tsipras resists. He will not touch the small pensions, or VAT on electricity, because such a measure would penalize either everyone or to taxes on medicines or on the books. We see the symbol. The red line is a class line. That between “those from above” and “those from below”, to use the terminology fond Pablo Iglesias [1]. Lagarde speaks of “Greece,” Tsipras speaks Greek. Human, of flesh and blood. He knows the difference between ordinary people and the rich who give heart to joy in their favorite exercise: tax evasion. This is where the Greek case brings back issues of the day, and perhaps words, the heavy ideological defeat of the European Left for thirty years was erased from public debate.

    The challenge of this crisis is twofold. It’s real first for the Greeks who know so they remain mobilized behind their government. But it is also cultural. This is both the return of a grid of social reading – the same one that “more structure” as the debate is delighted Jean-Marie Le Guen – and of course a democratic question. What has he more legitimate between the Greek vote in January and the “troika” of the IMF, the European Central Bank and the European Union? It is a big question for the future of the peoples of Europe. On this subject, the battle of interpretation begins. And France in all this? She is silenced. Hollande keeps quiet. He has no desire that Syriza gives a bad example of hope left. But it’s a little hard to say.

    1. fosforos

      Google translations are worthless and literally unreadable. “tradutore-traditore” is a gross understatement. If you want to post an article in some language just give us the original. Even if it’s greek to you you’ll still get more of its gist than you will from Google translation!

  15. alex morfesis

    yves is right…

    in typical modern greek fashion there was neither a plan a NOR a plan b…it was more like “systeme D”

    the only thing done right by syriza was to drag it out to the tourist season, with its influx of foreign currency which is probably what allowed the ecb to stop feeding cash to the greek banking system. over a billion dollars a day in capital influx from tourists is quite helpful.
    the greek daily economy processes thru about 800 million dollars per day(about 70 bux per person per day)and petrol imports eat into about $ 50 million per day.

    it is all just guesswork for now…on the one hand syriza thinks the greek economy can handle(survive) the dust up of a fallout from leaving the eu currency…on the other hand it has no faith that it can grow the economy enough to allow yia yia and papou to stop having to help feed the grandchildren…

    greeks today don’t negotiate with a plan…they just throw spaghetti on the wall…
    not going to try to really guess what will happen in the next few days…

    minister varoufakis probably just walks into meetings and asks what is the last best offer of troika….signs it with a side note that says subject to confirmation by the greek people via referendum. syriza passes laws again subject to confirmation by the greek people via referendum…

    but to the victor go the history books…

    will we even remember what happened as it really happened…sun tzu never won any battles. machiavelli failed to keep the medici from regaining power and ponzi was laundering money to the boston police department for the mob…the nonsense about mystery foreign stamps was a cover story…his “investors” got their money back…look it up in nytimes archives

    the truth is hardly ever what it appears to be…

  16. docg

    If the fool would persist in his folly he would become wise. Wm. Blake.

    Tsipras and Varoufakis look sometimes like fools, yes. And they may in fact be fools and incompetent fools at that. By persisting in their folly, however, they do seem to be accomplishing something that no left wing government has accomplished in a long time.

    They have made complete asses of the pompous stuffed shirts who usually seem to have such an easy time ruling the universe. They are literally driving these people crazy, forcing them to travel hither thither and yon to one meeting after another, with no result whatsoever, other than polluting the European skies with huge gobs of CO2. And who is pulling their strings? Not Merkel, that’s for sure.

    This latest proposal is either the height of folly, as Yves seems to think, or a brilliant stroke of genius. Possibly both, as Blake’s proverb implies. And the best part is scheduling the referendum for AFTER the payment is due. Sheer folly, yes. Brilliantly subversive stroke, also. It makes no sense, but nothing about this dispute makes sense, so why bother worrying about it. The powers that be will never permit Greece to default (pace Yves), so it will be THEY who’ll be put on the spot by this “irrational” move, not our Syriza gyros.

    Meanwhile, the Syriza leadership has come up with the perfect solution to their dilemma. Since no decision on their part is likely to please the majority of ordinary Greek people, far better then to leave the decision in the hands of the people. Folly? Wisdom? Doesn’t matter. As I see it, Syriza has won. The stuffed shirts have already lost.

    1. MyLessThanPrimeBeef

      At the minimum, they are like postmodern playwrights.

      People here see the same event, the same tragic drama, and interpret it in various, often completely opposite, ways, all the while as Greeks rush to their ATMs and hospitals run on, or limber on, little or no money.

      Invisible or little talked about are the bankers who got bailed out a few years back and hedge funds that bet, continue to bet, on the status quo.

  17. phichibe

    Big question I haven’t seen addressed yet: CDSs. How much has been written on Greek bank debt and do they have collateral triggers a la AIG’s? Might ISDA call a default and force Gottardamarung sooner than the Troika itself?

    1. juliania

      Natch. Here’s the mantra:

      Slice ’em and dice ’em.
      Tranche ’em, and Trump ’em;
      Set ’em on fire
      (Metaphorically speaking of course)

      And dump ’em.

      * * * * *

      Meanwhile, do a search on Delphi. Some economists have strong ideas on the subject. And wasn’t there an oracle back in the day?

    2. P Walker

      I guess we will see how much exposure other non-favoured banks have with Greek debt unless the ECB tries to put a lid on it all in some fashion. Some innocuous sounding program masking some ill-conceived cash-for-trash nonsense.

      Get out the popcorn?

    3. Yves Smith Post author

      No, there is very little in the way of sovereign CDS. This is not at all a factor in the calculus. The thing the ECB is worried about is spreads on bonds of other periphery countries like Portugal, Spain, and Italy. With QE, they’ve been able to contain the adverse movements so far, but those interest rates have increased. Monday will be a big test.

  18. IsabelPS

    Portuguese newspaper:
    Eurogroup rejects extension. Will continue meeting without Varoufakis to discuss plan B. GR gov fights against capital controls.

  19. Brian

    Odd isn’t it. Greece is the only one not allowed to offer options to parasites seeking to crush them with debt that financed bribery of the former governments and the military, with nothing left for the citizens. Odd how we play gods to dictate what the Greeks should do and when, leaving the lives of the people of Greece as a secondary matter, not worthy of consideration.
    Some people may now be realizing their identity is money, and that their identity may be about to go away from mismanagement perpetrated by their heroes as they try to violate the stone for the remainder of its blood and what pleasure can be derived by the violation itself.
    And now that it comes down to the break, democracy be damned. The hell with what the Greeks want for a future they can mold on their own, when the nazi party of the Euro speaks, which it does with one voice when the demand is money, or really, its identity.
    Ukraine will get its IMF money, because its government is neo nazi and understands that it must give up its sovereignty and its GDP to the bank so their leader profits nicely.
    Greece sees an obvious choice they are being given has not changed. When does Heydrich come to save Greece?

    1. Lambert Strether

      ” Odd how we play gods to dictate what the Greeks should do”

      I couldn’t agree more. Treating the Greeks as the object of an experiment in “mass pedagogy” — without their informed consent — is disgusting. Worse, it would discredit the left generally if — heaven forfend — this line is at all representative.

    2. Yves Smith Post author

      First, as we pointed out, Tsipras had the option all along of calling a referendum. He called it only now knowing that the odds were very high that the Eurozone countries would not agree to extend the bailout. And does not not occur to you that those governments, which are funding any bailout, are democracies too? Tsipras chose, either cynically or out of desperation, to exercise Greek democratic processes in a way that impinged on the democratic processes of other countries. A bailout extension requires Parliamentary votes in several countries. We at our remove could see that it was pretty much certain that it would not pass in Germany. If we could detect that, Tsipras presumably could too.

      Second, please get your targets right. It’s the banks more than anyone, and by a large margin The explosion in debt levels was the direct result of the financial crisis. Tax revenues fell and social safety net spending rose all over Europe (and in the US too). That was basically the driver of the 2010 bailout. The 2012 bailout was almost entirely a rescue of French and German banks that held Greek government debt.

  20. WorldisMorphing

    The Greeks have nothing to pull up a new currency other than tourism, (shipping ?)….and land.
    They have an aging population even more so than other Europeans if I’m not mistaken.
    They are not self sufficient in terms of food production.

    Without oil, they cannot have the means to maintain a semblance of modern industrialized lifestyle.

    The referendum will give Greeks a choice between:
    #1. Becoming a modern fiefdom — a definite end to democracy, and the definite proof for all to see that a capitalist democracy is and always was an absurdity. When push comes to shove, when limits are reached, we always get to see how the machine was programmed–always.

    and

    #2. Regaining democratic control …of a sinking ship. If they go for that one, they will probably require a type of central planning…the likes of which we have never seen — meaning no freaky KGB, no though and speech police…

    Blue pill or red pill.

    1. NotTimothyGeithner

      I wonder how the shipping would work with a grexit. The crews and operators might be patriotic. Greek shipping accounts for over 15% of world shipping, and I imagine a greater percentage in Europe. Between Russian sanctions and a Grexit, the EU could be actively leaving the rest of the world.

      1. Yves Smith Post author

        The commercial shipping industry is essentially stateless. Ships are flagged in the names of states with kangaroo courts. So all those lovely shipping profits aren’t taxed. An internationally respected tax expert said that was still no excuse for not taxing the personal incomes of shipping magnates that are Greek residents or have property in Greece. This is one of the types of oligarchs that gets away with tax evasion in Greece, big time.

      1. WorldisMorphing

        I was implying with #2 more than an absence of a freaky KGB and thought & speech police. I had in mind a hybrid system that accommodates free enterprise. Central planning for critical systems and resources — decentralized, community authority for the rest.
        One could think of it as a transitory system until the country rise from the [almost] dead and becomes a new South Korea, out-competing Germany in design and production of high-end CNC machine tools…but let’s get fµ¢king real here…

        Anyhow, you are right, Cuba’s food self sufficiency has been admirable and if Greeks chose #2 they will have to innovate and lead the way in the post-oil era…

  21. juliania

    It will be up to the Greek people to indicate whether this is a sham or not. As it was up to the Russian people to endure as financial guns blazed in their direction. What a world we live in.

    The fifth is a week from Sunday and will be the fifth Sunday after Pentecost. Perhaps the people will make it a Sunday to remember with joy.

    1. Yves Smith Post author

      Huh? You appear not to have bothered reading even as far as the first three paragraphs of the post.

      The referendum is for July 5. It is to vote on the bailout proposal.

      The proposal expires on June 30 unless extended by agreement of each and every one of the Eurozone nations.

      As the post explains at length, the odds considerably favor that the bailout will indeed expire, making the vote utterly pointless.

      If Tsipras cared about democracy, he would have made sure the vote took place early enough, which could have been announced as late as a week ago, for it to have meaning.

      Update: As we anticipated, the Eurogroup has decided not to extend the bailout.

  22. Mr. G

    Tsiprias knew that the eurozone creditors were coming forward with a deal **he couldn’t refuse***.

    So to preempt it he asks for a referendum on *an old deal*. Not the one that Europe was proposing.

    His game is clear now. He’s lying to the Greek people. He’s lying to the Eurozone. He had no intention of ever striking a deal. He promised a deal…he never got one. He promised to stay in the euro…now he’s pushing them out. He promised to end austerity…he never was going to accomplish that. This was all a big ruse to try and blame Europe for exit.

    His referendum is strictly illegal. He cannot call a referendum on matters that are not related to national security.

    It’s a matter of hours before the military and the opposition parties take matters into their own hands. Syriza’s short but ridiculous reign is over. They will spend the coming years in prison.

    1. James Levy

      If having the power to control your own sovereignty and your own budget and your own laws isn’t a matter of national security, what the hell is?

      1. Mr. G

        Huh? That’s what Greece agreed to when joining the Euro. Some sovereignty is given up. Are you naive to this fact?

    2. alex morfesis

      and what mystery money would you use to pay for your national security…

      suddenly we are worried about the rule of law instead of rule by law that the eu imposed with its bailout of french and german banks holding greek debt…

      as to junta…keep dreaming…no chance in hell that works in europe anymore…last ones who tried ended up with yeltsin and putin…too many cellphone cameras in the world today…

  23. jabre

    I am wondering if Tsipras is holding a much stronger hand than is being credited.
    – If I look at German Bank deposit rates they are similar to U.S. at fractions of a single percent.
    – Greek banks are providing 5% return.
    If Tsipras is giving Greek citizens plenty of forewarning of pending default – who is left in the $100B (?) deposits? Could it be other EU citizens/institutions perhaps unknowingly (blind investors) chasing return?

    Could Tsipras pull off (end game): ??
    – default
    – new currency
    – nationalistic push to realistically re-engage tax collections
    – stay in the EU
    – deflate currency to manage pensions

    1. jabre

      I got bad data on the Greek rates. Those are introductory deposit rates and although the delta is not nearly that high it is still there. [Q] still remains. Who is left as depositors?

  24. Pookah Harvey

    I find it interesting that in all the media articles that report on Varoufakis’ tweet following the referendum announcement it is quoted

    Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide.

    When the full tweet is

    Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!)

    with the reports all leaving off the part in parenthesis

  25. Dimitri Lascaris

    With all due respect Yves, your argument that the other Eurozone member states are democracies too, and that the will of their electorates must also be respected, misses the point that Syriza is trying to make. For five years the Greek people have had no functioning democracy. Economic and social policy has been dictated to them by officials from outside of Greece for whom the Greek people have never voted. The result, as you have so eloquently noted, has been a disaster for the people of Greece. A union of sovereign states requires that reasonable compromises be found between the sometimes disparate wills of their electorates. By any humane measure, the “compromise” that has been imposed upon the Greek people for five years is not reasonable.

    1. Pookah Harvey

      I totally agree. The question is how many other of the EU states are in the same boat. Are the Irish, Spanish, Portuguese or Italians living in truly democratic sovereign states where the will of the people is paramount ?

      1. IsabelPS

        This is a rethorical question that only someone that has always lived in democracy, however formal, can ask, not the Portuguese and, I suspect, the Spaniards…

        1. Oregoncharles

          Isabel: I don’t think it’s rhetorical; there is a very real question whether ANY EU country is still sovereign – indeed, that’s the underlying implication of Yves’ point.

          I get the impression you’re in a position to answer the question, at least for Portugal.

          1. MyLessThanPrimeBeef

            It’s similar to the question some states asked – state sovereignty – in our nation’s formative years.

            1. IsabelPS

              Indeed, as Yves keep pointing out, all EU states have already given up huge chunks of their sovereignty. I have no idea if the EU will go all the way to become United States of Europe but we are certainly in the very incipient stages of the process.
              But I challenge the idea that formal democracy is not real democracy. You can only say that, IMO, when you don’t know what it is to live under an undemocratic regime. That was the point of my comment.
              As to this whole process, I don’t think things are exactly black and white, as usual. For example, in the case of Portugal, twice or three times the Constitutional Court shot down measures that the government wanted to enact: cuts in spending suggested by the Troika (most probably, I can’t remember) as opposed to raising taxes, a bit like this latest row between Greece and the IMF (the problem being, of course, that cuts in spending of the magnitude required by the creditors meant necessarily cuts in salaries and/or pensions in the administration). The “equivalent measures” ended up being a “huge raise in taxes” as the FinMin called it. I’m not saying this is good or bad (most probably bad but very difficult or impossible to avoid, given the circumstances), I’m just saying that a Constitutional Court is a Constitutional Court, even for the Toika. And it is a bit childish to suggest otherwise (as I feel that Syriza has tried to suggest in this whole process).
              Incidentally, at a certain point in time the PT government considered raising the worker’s share of the “social tax” in order to lower the corporate share (presumably to try to put a brake in the skyrocketing unemployment) and the country took to the streets as people perceived it as taking from the poor to give to the rich. There was this humongous, peaceful protest, the next day the government backed down, and that was it. This is only possible in a democratic regime.

          2. Calgacus

            Oregoncharles: there is a very real question whether ANY EU country is still sovereign – indeed, that’s the underlying implication of Yves’ point.

            No, there is not. There is no dispute about it among informed people, outside this blog. No dispute between Greece & the EU. For the intents and purposes at issue here, no actor disputes that Greece and every other country in the EU is essentially, legally “sovereign”. They are all members of the UN. Fundamental international law, above all the UN charter, supersedes EU law, which must be interpreted in light of it, not vice versa. I have cited many authorities including the European Court of Justice to this effect.

            There is nothing, explicit or implicit in the EU treaties to the contrary, and a great deal that supports my statements. Statements which outside this blog are as controversial as “water boils, not freezes when heated.” – or more comparably – “US Federal laws, acting under the authority of the Constitution, are supreme over State law.”

            My repeated requests for any citation to any authority or treaty article saying for instance, “Greece abandoned international law when it signed the EU treaties” have been unanswered – because they cannot be. I haven’t seen such views espoused recently by this blog, as they unfortunately were in the past. So I hope these views have been retracted.

            1. Yves Smith Post author

              No that is absolutely not correct.

              EU member states, and Eurozone states, as is relevant in each case, have surrendered certain specified aspects of national sovereignity to EU/Eurozone level institutions. While this description is bit approximate (for the purpose of brevity), the Bank of Greece is an ECB operation. Its president is a Greek political appointee, but the Greek government does not exercise any control or even influence over the Bank of Greece.

            2. vlade

              Brits seem to think they gave up a lot of their sovereignty by joining EU. In any reasonable partnership you give up some freedoms. Federal states gave up some of their sovereignty to the Union, or do you wish to dispute that?

              But you build a straw man, for sovereignty is not the same as being subject to international law (ignoring at the moment that international law is only as strong as any real punitive action can be, so for a whole host of things really irrelevant).

              If we get to a more reasonable argument, comparing supremacy of law (EU vs. national), you’re clearly wrong. If you really want citation, I’d invite you to read Declaration 17 annexed to Final Act of the Intergovernmental Conference which adopted the Treaty of Lisbon, signed in Dec 2007, which amongst other states that

              “The Conference recalls that, in accordance with well settled case law of the Court of Justice of the European Union, the Treaties and the law adopted by the Union on the basis of the Treaties have primacy over the law of Member States, under the conditions laid down by the said case law.”

    2. MyLessThanPrimeBeef

      One reads about whether Greeks will vote yes or vote no on the upcoming referendum.

      I wonder how many Greeks want or don’t want a referendum at this time? How do they feel? Any polling numbers asking, are you for or against a referendum at this time?

    3. Lambert Strether

      “By any humane measure, the “compromise” that has been imposed upon the Greek people for five years is not reasonable.” But the voters of the other countries disagree, which is the point. Back to square one.

  26. susan the other

    This was a great summary. Irrational rock and a hard place. I wish we knew the politix of the IMF, especially when they just upped and left the table. Because the IMF R us. We also know Jack Lew has been trying to subtly convince the EU to accommodate Greece. Puzzling because a haircut or a time extension is said to be enough to trigger all those CDS that our banksters hold. For lack of a tribunal that could review all the documents and come to the obvious conclusion that the bailout contracts are coercive, usurious, odious and lack all mutuality, Varoufakis came up with a modest proposal, which politely avoided the retributions and went straight to the solutions. Which the Troika was too dumb to understand. I guess it is really hard to understand that you have to stop extorting people when that’s your only business model. Thugs indeed.

    1. MaroonBulldog

      The way I see it, Greece’s own economy can’t support it’s welfare state as it is, and while Greeks may want to be good Europeans and all, they just got sick and tired of being forced to pay an extortionate price and suffering extreme privations for the privilege of serving as a conveyor in the ECB’s autobailout machine Rheinland banks.

  27. John Yard

    For all the faults of the Greek government, they are actually fighting back against neoliberal state capitalism.
    It’s hard to see what their choices were, other than surrender and discrediting themselves.
    I wouldn’t take too seriously the comments of the American left – which has been in a state of retreat for 35 years. We are so used to retreat – tpp ! – that retreat has become second nature.

    The issue is not Greece at all. The entire European Southern and Western Tier – Greece, Italy, Spain, Portugal, France , even the UK – has seen real output stagnant/falling since 2000. The current situation is unacceptable for all of these countries – Greece is only the vanguard. The solution – another and another 6/12/18/24/36 … months of stagnation is increasingly impossible. The EU wants to choke it off –
    not economic contagion , but political contagion – because a splinter EU is a real possibility.

  28. vlade

    For a while, I thought there might have been some rationality entering the process with Syriza. Seems that that was a false dawn, and any sort of reasonable thinking is past both sides. TBH, I’d even say that in the last few months Syriza was the less rational player, and at times looked like a desperate man clutching anything that may even look like a straw.
    How can you hope for any agreement when your partners get told by the hastily called referendum by Twitter, because the Greek rep is out of the room (presumanly tweeting it)? Unless Greece has a well thought secret plan B, they are toast. Grexit on its own is going to be a debacle, but since Syriza has no idea how to govern and operate a country, we’ll have a failed state in Europe shortly.

  29. fosforos

    I hope Yves’s pessimism about Greece’s outlook is as wrong as her version of Wagner. Brunnhilde does not lose her divine status in Götterdammerung but in Die Walküre, and Valhalla is not burned down by her “bonfire” (Siegfried’s funeral pyre) but by the fire-god Loge (Loki) liberated by her sacrifice from his confinement to her rock. But what is most immediately relevant in Wagner’s myth is that the fuel for Loge consists of wood that Wotan (Odin) has piled up around Valhalla for precisely that purpose–the end of the Gods as decreed by Erda (the earth-mother) and explicitly foretold by Loge at the end of Das Rheingold. Certainly it was the Euronomenklatura that has from the outset been heaping up the fuel that is to consume their misbegotten Eurozone–perhaps as an immediate result of their mad drive to immolate the Greeks like Brunnhilde!

  30. MyLessThanPrimeBeef

    The choice of a choice.

    Can a group be forced to make a choice or does the group have a choice not to make a choice?

    “No, Dear Leader Kim. We elected you to make choices. We don’t want to be forced to make choices.”

    “You can starve your sister or your brother. Which choice would you make?” “Can I have a choice not to be confronted with those choices?”

  31. IsabelPS

    The most surrealistic thing was watching V., in his press conference today, justifying the referendum something like “We only had 36% of the votes, about 40% as a coalition, so we can’t decide something as important as this on our own”.

    1. pascal

      are we so far off respecting people , and so much believing in leaders and providential men that here in a mature and well informed forum we have to read that their is not space (representative democracy being so perfect I suppose ) and not time (because urgency matters, u see, and it s not an engineerd one) for a referendum?

      what would it have changed for the euro group to wait another 7 days to let the greek choose where they want to go?

      1. Lambert Strether

        Ponies and rainbows. It’s not a question of fairness. It’s a question of “cold-blooded weighing of the odds.” Something that seems in notably short supply.

      2. IsabelPS

        No, it’s V.’s justification (36% of the votes) that I find surrealistic. Until now, I had only heard of “a democratic elected government”, “mandate of the people”, etc.
        But since you ask, it is true that in my personal experience referendums are often (but not always) used by governments to avoid difficult responsibilities for which they were elected. It could be a specificity of my own country, though.

        1. financial matters

          True enough but it is a big step that would seem to transcend party lines.

          I see Tsipras as somewhat of a bridge between Varoufakis and Lapavitsas and respective of both as well as the Greek general population.

          Trying to stay within the eurozone for these several months was part of the mandate and needed to be played out.

          The anti-austerity options are now focused more into the Lapavitsas camp but this is a big change that would be aided by a strong popular backing.

      3. Mr. G

        All for democracy…unfortunately This government has had 6 months to plan for a referendum, but didn’t. They knew the timeline. The vote they are proposing is so blatantly in contradiction to that timeline that it’s a mockery on the Greek people. “Here…make a decision on something I’ve already decided for you. Ha ha ha ha.” dictator in democratic cloth. Tsiprias = Stalin.

    2. MyLessThanPrimeBeef

      Just curious.

      How do they compare (at 40%) with other European coalition governments?

      1. IsabelPS

        Portugal 2011:
        (PSD) 38.75% + (CDS) 11.70% = (coalition) 50.35%

        If I understood well, in Greece the most voted party has a bonus of 50 seats, which explains the 40%, I guess.

  32. kaj

    Yves’ comments betray a cynicism that for me at least appears gratuitous and unwarranted. Calling Syriza incompetent fools is not the right way to approach the problematique. Tsipras wanted more time and managed to squeeze out 6 months, allowing the Greek people to see for themselves that belonging to the Eurozone is a curse that can only be exorcised by distancing oneself… that they tried hard to get a rational and reasonable outcome from the Eurozone powers that be but, it was not possible to deal with an unfair, if not immoral adversary.

    Now the arithmetic. Syriza got 36% of the votes in the January elections, their coalition partner about 5%, the KKE-Communist party about 5+ per cent. This comes to about 46%. I won’t be surprised that they pick up another 5 to 7% of the disaffected people to make it past 51%. So, the arithmetic is likely on their side. Then what:

    In my daily life, I barely ever use cash. Weeks, if not months go by without a cash transaction. Same logic can apply to Greece.

    Every Greek person over the age of 14 will get a debit card with all wages, salaries, pensions etc. credited to that account. Every business would have to purchase state operated computers to conduct business transactions. All transaction have to take place within the ambit of this setup: violators would be heavily fined, if not expropriated. VAT will automatically be collected in each transaction instead of being self-reported. External transactions will go through regional branches of the Central bank with checks on honesty of the transaction. All Foreigners will have to deposit foreign currencies before entering Greece and their funds will be credited to the debit cards. Minimal amount of cash would need to be in circulation and also in small denominations, making it harder to export out of the country. One new ND should be worth 1 Euro in the beginning to minimize conversion and psychological hangups about inflation and prices.

    The mechanics of this methodology will take about 6 months to settle and there will be chaos in the mean time but things will settle down. The Greek should beg computer makers in China, Taiwan, India, Amazon, etc. for computers and software free of charge

    1. Lambert Strether

      Well, this one certainly builds to a climax:

      The mechanics of this methodology will take about 6 months to settle and there will be chaos in the mean time but things will settle down. The Greek should beg computer makers in China, Taiwan, India, Amazon, etc. for computers and software free of charge

      Stunning. (Last I checked, Amazon was not a country; and somehow I doubt that Jeff Bezos will be sympathetic.)

      In the unlikely event of ponies, distributing and installing the free computers comes down to organizational capacity, as Nathan Tankus has pointed out; so it would be nice to see signs of that vital Greek network of non-profits, co-ops, and collectives that can step in to handle this if (when) the Greek government fails to. So far I’ve seen no evidence of this, though I’d like to very much.

      So, another exercise in creative writing. Do please consider being serious.

      1. Robert Dudek

        When things look bad, remember the old standby – necessity is the mother of invention. Much of my family lived through a grossly inefficient economic system known as Stalinism. They found a way to work within and around the system when push came to shove. The Greeks will find a way through all this.

        1. kemal erdogan

          Yes, indeed. In hard times improvising is the key. And, once a nation is in a fighting mood miracles happen. There are examples of nations re-born after physical destruction of their land with a cause to fight and an inspiring leader.

          The mere idea of a referendum, giving the people a say on their destiny, will move the nation and give a chance to them to stand for their dignity. This is usually regarded as cheap talk but actually what matters in a state of emergency. This is, I think, what Yves misses here. That is also why I think the answer will be a resounding “no” and why Tsipras did not call a referendum earlier, which would let people to tinker and give room for “confusion”: The choice to be made is clear to everyone now: do they surrender or not?

        2. c

          life expectancy deteriorating health care suicides rising youth unemployment more drunks etcetera

          1. tegnost

            exactly, panglossian nonsense everything will be fine after all the poor commit suicide and the sick people die…ugh

        3. Greenbacker

          Stalinism was so inefficient that it was considered a improvement over Bolshevism and Tsarism………huck huck huck. Russia is and always will be, “inefficient”.

      2. MaroonBulldog

        I was wondering who was going to write all that free custom software and get it all done in 6 months? But that seemed like a quibbling objection to make, without addressing so much else that is wrong.

  33. Oregoncharles

    Very interesting: once again we see the Eurocrats reveal their real agenda by announcing, before everybody, that they don’t give a flying fig for democracy.

    That said, I feel a deep, sneaking sympathy for Syriza. This is a brand new party that has never governed before, and they’re dealing with a much bigger country and more convoluted situation than Iceland. I empathize because the Green Party would face the same sort of challenge if heaven descended and we were suddenly in power. We simply don’t have the people or experience to govern (no, I shouldn’t admit this in public.)

    So it’s plausible that Tsipras and the others were naive about their “negotiations” with the Eurothugs. I’ll return to my prior prediction, which is based in large part on Yves’ own point that there is no basis for negotiation: it’s going to go smash, Greece is going to be out of the Euro, like it or not, and very likely out of the EU and NATO as well. No wonder they’ve been spending so much on the military: they may need it.

    The remaining question is how far, and how deeply, the shock will reverberate. Evidently the Eurothugs think they have it under control; certainly they say they do, though the rest of us may be skeptical (Greek word). Truth is, we haven’t been here before and nobody knows. Much is likely to depend on the upcoming elections in Europe. If elections still matter.

  34. Carole

    New “mea culpa” by Dominique Strauss-Kahn, former managing director of the IMF who helped to draft the first Greek bailout:

    http://fr.slideshare.net/DominiqueStraussKahn/150627-tweet-greece

    He states that the IMF “misdiagnosed the Greek problem”. He goes on to state that “the European monetary union was both at the origin of the crisis and should have been an essential element of its resolution”.

    Strauss-Kahn admits that the IMF should have pushed other eurozone countries to do more to help Greece and resist the push for tough austerity demanded by the “conservatism of its monetary authorities”. He also admitted that the IMF miscalculated the impact of the “pro-cyclical adjustment” forced upon Greece.

    He argues for a “nominal debt reduction” by rolling over and extending repayments due to official creditors.

    “Forcing the Greek government to cave in would set a tragic precedent for European democracy and could set in motion an uncontrollable chain reaction. And on the other hand, prolonging the current failed program, extend economic hardship beyond reason and prolong the agony and the divisive tensions between debtors and creditors would be disastrous.

    These are mistakes that Europe has experienced too many times in its history to repeat them.”

    1. Robert Dudek

      It’s funny that these mea culpas always come AFTER someone’s tenure, never during.x

      1. MyLessThanPrimeBeef

        I am also intrigued by the phenomenon that some looters find it easier to be magnanimous after a successful raid.

    2. charles 2

      “nominal debt reduction’ is not achieved by rolling over and extending repayments. The only way to achieve it is to just forget about being repaid. That is what the wording mean.
      And BTW DSK advocates for “significant nominal debt reduction” and “significant” means just that.

      To paraphrase Y. Varoufakis, funny how taking words with their literal meaning sounds radical…

  35. micky9finger

    Of course the issue is defined by the victors; they think.
    There can be only one solution.
    Leave the euro currency. Period.
    More clear discussion of this option can be found by Billy Mitchell. One of many discussions yesterday or whatever it was in Australia. at http://bilbo.economicoutlook.net/blog/?p=31239#more-31239
    Basically it boils down to Greece saying to the “Organs” and the Germs: ” you’re not the boss of me so bite me”

    BTW good luck with Japan today Australia.

  36. myshkin

    Crushing the option of Greek debt forgiveness is a worthy goal of the Troika and elite financial interests elsewhere. For twenty years US elites have been haranguing about the foolhardy European model, the egregious leniency in Germany and France towards workers, 36 hour work weeks, month long vacations, day care, extended maternity leave, health care, welfare, etc. that was bound to implode imminently.

    I’ve been unable to find evidence of EU leftist parties showing meaningful solidarity with Greece despite apparent shared interests in breaking the austerity choke hold on Greece. If this is so the abandonment of the Greeks by the placated left labor movements in Western Europe will be a significant failed opportunity to defy elite global capitalists as they walk back labor’s gains in the social democracies of Western Europe.

  37. juliania

    I am seeing at rt.com the following:

    “At the same time, the head of the International Monetary Fund, Christine Lagarde, said the creditors would continue their work to save Greece, even though Athens had called for a referendum and advised Greeks to reject the creditors’ proposals.

    However, she added Greece needs to carry out “structural reforms, deep ones, to change the Greek economy, to make it more productive, more efficient so that it generates growth and jobs.” Only after that would Greece get financial support.”

    Not sure how to take this, so I will await assessment from better minds than mine.

    1. Robert Dudek

      I would say the IMF pronouncements are approaching North Korean levels of absurdity.

      It should never be forgotten that the troika is the enemy and Greeks are at war.

      1. MyLessThanPrimeBeef

        Greeks at war.

        War time economy is all about efficiency and reforming the non-war-time economy, and may include rationing, reduced benefits, redirecting resources, etc., with the strategic war aim of obtaining more euros or other hard currencies.

        Would it involve the irony that Greece becomes more a more stronger export nation than Germany?

        That would be one war they can fight. The other war is a war of attribution or mutual destruction. That”s a possibility as well.

    1. Lambert Strether

      Maybe it’s because Yves actually has to do a great deal of work to create the “detailed coverage.” And then Yves (and I) need to do additional work to deal with a plethora of “any stick to beat a dog”-style, link-free, low- to no-value-add personal opinions, where the only actual work involved is typing (and the occasional pom-pom waving). Could that be it, do you think? The tax on time?

      NOTE Incidentally, comments stand on their merits, not because they’re couched as “me too”, and could be seen as being “in the same way as” the never-cited sources.

      1. Kathy

        If comments stand on their merits, I’ll note that most of your (Lambert, not Yves) comments are mostly insults, emotional rhetoric, and ridicule. At least to anyone who disagrees with your agenda. You might consider letting low-to-no-value comments stand on their own without response and let your more intelligent readers decide. Then it won’t take so much of your valuable time.

        1. tegnost

          the path to a troll dominated name calling blog. I think generally lambert is pointing out specifically and unfortunately ad nauseum that these comments have no merit. That they get repeatedly made requires repeated counters. I am glad lambert is here to argue these points so that yves can get some sleep. Also, we don’t know what your agenda is, should we assume it’s not the same as lamberts? Feel free to enlighten me…

        2. Lambert Strether

          Yes, that’s why I so consistently employ the clever tactic of actually quoting from the post, in order to show that commenters haven’t read it, or not carefully; scan for blockquotes.

          And thanks for implying that my time — and in consequence, Yves’s time, since my time substitutes for hers — has no value. Smooth use of irony!

          Adding… When comments don’t stand on their merits, they keel over, and it falls to one of us to drag them offstage to avoid clutter.

  38. Mr. G

    The mockery of the Greek people is complete. Tsiprias has told his country unequivocally= I made the decision for you. Your vote, your democracy, is nothing. Through deliberate obtuse pretense of timelines I’ve invalidated your views. It’s not about national interest…..it’s about Tsiprias’ movie deal rights with Oliver Stone. It’s about the vanity of a fool.

    1. TheCatSaid

      The recent change in the FX swap lines are clear from your link–thank you. What are the implications of this development?

      While familiar with the blue eyes/brown eyes experiment, I don’t understand the relevance here. Do you mean blue eyes to be the privileged elites? How does this relate to the recent opening of FX swap lines?

      1. Skippy

        Recently I’ve been told not to burn my life boat ticket…

        GDP is a black hole that consumes everything to create wealth for wealth’s sake without another long term considerations, so yeah, the blue eyes at the core optics are quite myopic and distorted through time distortion.

        Skippy… liquidity tool…

        1. TheCatSaid

          Can you please help me understand the FX swap line development?

          How does it relate to GDP and lack of long-term considerations?

  39. dw

    well i suspect the vote is nothing more than way to judge how the greeks feel now about the EU. do they want to stay knowing that their economy will be trashed, people will die, and chaos will continue. or would they rather leave, knowing that their economy will be trashed, people will die, and chaos will continue. the only real choice between these positions is will they be sovereign or will they be slaves of the other EU countries? cause thats really the only difference in their choices, no matter what the EU politicians say, or their own

    1. Edna M.

      @dw, I agree. This referendum will likely show that the people do not want to remain in the eurozone at any cost, as many questionable polls have suggested. A “no” vote will strengthen the government as it insists on its red lines. The people’s supposed wish to remain in the euro no matter what the cost had been a weak point that was exploited by the creditors as well as opposition parties. This puts the issue to a test.

    2. Yves Smith Post author

      Except thanks to very superficial analysis by economists and financial analysts, Greek citizens are not going to be making an informed choice. A Grexit will lead to more death and much more severe chaos than austerity. Control over one’s destiny sounds and is appealing, but the cost here is very high, much higher than the Greek people are being told. For instance, an economist close to Syriza says it would take a year for Greece to become self-sufficient in food production (and I might point out that plans like this often take longer to achieve than planners estimate). In the meantime, Greece has enough food only to feed everyone at not much above starvation levels, and then only if it is distributed equally throughout the country. Pray tell, how do you get food producing areas, which have enough to eat comfortably, to reduce their intake down to near starvation levels to provide food to the 4 million in the metro Athens area?

      That’s the sort of problem Greece has to wrestle with in a Grexit case that is not in the offing even with austerity. And as the old saying goes, “Civilization is two meals and twenty-four hours away from barbarism.”

  40. Morris Beatty

    I tend to go with Michael Hudson’s opinion:

    What is not recognized is howsuccessful the Syriza negotiating strategy has been. While most voters opposed austerity, they also initially (and still) have a fear from withdrawing from the eurozone. Tsiparas and Varoufakis have walked a fine line and accurately judged unyielding and totalitarian the Institutions’ “hard money” creditor approach would be.

    http://www.counterpunch.org/2015/06/26/the-delphi-declaration/

    1. MyLessThanPrimeBeef

      Interesting how democracy works.

      The parliament can’t decide on a (or some) deal. The people are to decide.

      The parliament does decide on a (or some) referendum*. The people don’t go to a referendum to vote on whether to have a referendum on that deal.

  41. George Phillies

    Missing in this is another possibility. Suppose the Greeks vote to accept the Troika offer. What would then happen?

    1. Mr. G

      They will vote to accept. The polls prove it. However, Tsiprias has rendered their voice powerless by scheduling the vote after the bailout program expires on June 30th. In effect he’s saying: I don’t care what the people say…..we are going back to Drachma.

  42. ewmayer

    Yves: Outstanding summing-up of the sad situational corner which Greece and the creditors (as represented by the EU, IMF and Bundesbank) have painted themselves. Monday is going to be … interesting.

    (My only possible quibble is that it’s ‘Götterdämmerung’ – those umlauts are key to pronouncing it correctly. I keep the 7-character text snippet ‘ÄÖÜäöüß ‘handy at top of the text file I use for offline composition for just such occasions. I have similar key-diacritical snips for e.g. French accents, as well. But I expect your priorities are necessarily different than mine. ;)

  43. Rosario

    Jeez, maybe we should lay off discussing the Greek stuff for a while. I think it was pretty obvious from the beginning this situation was not something that could be methodically analyzed with any amount of accuracy, now that is true more than ever. We are not in the negotiating rooms. We do not know the friends of the high rollers, their obsessions, their intentions. With each post I’m imagining parallels to what Europeans discussed in cafes in the months prior to WWI. Everyone probably knew exactly what would happen, until it did.

    This is late stage Capitalism y’all find a way to enjoy the chaos because no one is in control. That includes the people at the top. The dissatisfaction and anger are justified but we are only seeing the beginning of it. I’m pretty tapped into #blacklivesmatter in America and I know that I don’t know s*** WRT what will happen, but I can say with some certainty that it will not be getting better anytime soon and there is an immense amount of work ahead. We have just started to scratch the surface. All I recommend is that we maintain our focus on the true beasts of our time. Infighting is a perennial problem amongst people of left, radical, progressive (take your pick) inclination. By the way, this is not a shot at the posters, nor the commenters. I’m just noticing obvious derision and anger that is being wasted amongst people who more or less feel the same way. Peace.

    1. TheCatSaid

      It might be even more productive to maintain our focus not on “the true beasts of our time” but on creating and experimenting with new structures and processes, regardless of how insignificant or local their impact may seem.

      We need to develop and experiment with a wider range of options–alternatives to “TINA”.

  44. charles 2

    Re the final quote from N. Tankus

    1) It is “the Greek Government” for you not “Syriza”. I am appalled that the Greek Government is called by the party name all the time by commentators. Do we say the “CDU coalition” for Merkel ? the “Parti Socialiste” for Hollande. This way of stealthily suggesting that they are usurpers of their power is unwarranted.

    2) If all what the EU has against the Greek government taking over its Central Bank and operating the printing presses is a suspension from the EU, that is a weak hand. The only way to prevent the Greeks to print euros is to invade the country and to enforce a blockade. The only two nations barely able to do it operationally are the French and the British, and none of them will do it as they are at the end of the day closer to situation of the Greeks than to the one of Germans. Greek newly minted Euros will easily make their way to the rest of the Eurozone (Southern Italy is not far and not where law enforcement is at its best in the Eurozone to say the least) and pay for essential supplies. All the arguments you developed about the difficultly of introducing a new currency are actually in favour of Greece, because it is the rest of the Eurozone countries which will find itself in a logistical nightmare if it wants to introduce new euro Banknotes for which the Bank of Greece doesn’t have the printing plates. At that time, if the Buba, which has no lost love for the euro, lets it known that it could just as well print banknotes with Goethe’s portrait on it, Germans are going to be tempted…

    The right strategy for the Greeks is to keep the euro for themselves and discourage other countries, especially Germany, from using it. This is how the USSR rouble died, and it would be a fitting fate for the euro.

  45. Sri

    Timing is perfect. Show greek people 5 days without ELA liquidity pump. They will fall in line and vote “yes” .

  46. Mario Medjeral

    I wish other countries/governments would call for referenda on important issues. It is called direct democracy. Greece is doing the right thing and has the support of every progressive European. Ignore the barking of corrupt Euro politicians and the presstitutes.

    1. Yves Smith Post author

      I never said it did not recover. The recovery has been more mixed than aggregate figures suggest. And Argentina had the good luck to be an agricultural exporter during a period when ag prices boomed.

      See here for a more nuanced reading:

      http://www.ft.com/intl/cms/s/0/809d7abe-b174-11e0-9444-00144feab49a.html#axzz3eLNOzJRV

      And although everyone with an ounce of sense, including seasoned bankruptcy pros, regards Judge Griesa’s ruling as batshit, Argentina lost an important court case in New York on its restructuring, and the vultures will now be able to extract more. So Argentina is now facing late-in-game additional, significant, unanticipated costs of that default.

      And much more important, Argentina, as Varoufakis has repeatedly stated, is not comparable to what Greece is facing.

  47. Josephus P. Franks

    I wish Yves Smith were in the Greek government, as much as I’d like to be a Greek-speaking fly on the wall to see how Syriza is operating. Varoufakis is fully vetted, but the others I don’t really know much at all…

    Anyway, seems like the important part of Smith’s argument is that even by exiting the EU – which would be the most sensible thing from a purely economic point of view – politically, they might be crushed anyway by some psychotic European governments. (Oh Latvia and Spain… this is worse than the Stockholm Syndrome. Latvia and Spain are like a character from Game of Thrones, Reek. The guy betrays his family and then gets captured and tortured until he breaks, becoming a willing slave of his torturer. Latvia and Spain get some of the worst needless pain from the banks’ fuckups, and they insist that everyone else experience needless pain too.)

    But worst of all about the situation is that it’s just banks’ capture of government that is doing it. It has nothing to do with any scientific necessity, still less any conflict between peoples, although ingroup bias is surely aggravating things.

    In any case, I’d still say better late than never on the referendum (it doesn’t matter one whit whether one lawyer things it’s illegal, another will say the opposite because this is not merely a financial matter). And better late than never on the Grexodus, if the EU is too captured to rescue. Sure, it may have little economic effect on the other EU bank-states, but the political effects would be hard to predict – but I’d think they would largely depend on how successful an independent Greece would be.

    Hopefully the Greek government has been using all this time to work out deals with China, Russia, and those South American countries that don’t still have European/American arms so far up their asses that they can be played like a hand puppet. Otherwise, they’ll just have to stay in the EU until the banks end up killing the host, and then rebuild out of the wreckage. Only then, fascists will seem a lot more attractive to uninformed people.

  48. hemeantwell

    I’m pleased to see that Golden Dawn supported the referendum. It suggests potential for recruitment of some of their base to the left, which is where many of them should be, and that there may be some erosion going on in GD’s clientelist organizations. It also suggests that, at least for now, those here who have worried about a coup can rest a bit easier.

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