ECB to Greece: Drop Dead

Even by the standards of bank thuggishness, the move by the ECB against Greece last night was a stunner. Americans have become used to banks taking houses under dubious pretexts when both the investors and borrowers would do better with a writedown. But to see the ECB try take a country is another matter entirely. As one seasoned pro said, “If anyone had tried something like this against a country with a decent sized military, the tanks would be rolling.”

The ECB’s bombshell was to put Greece at risk of an intensification of its ongoing bank run in order to pressure it to agree to a deal with the Troika under an impossibly tight timetable, even shorter than the February 28 pre-existing deadline that Greece Finance Minister Yanis Varoufakis had planned to extend until June. As we’ve discussed at length previously, a longer negotiation timetable would be necessary to meet Greece’s objective of restructuring of the relationship with the Troika. Greece wanted that to be based on the recognition that Greece could never pay off its debts and that it was in both side’s interest to let Greece implement more growth-oriented policies. But the message from the enforcers at the ECB was unambiguous: Greece has no rights and needs to accept its debtcropper status.

The ECB has thus also effectively said that it would rather have fascists like Golden Dawn running Greece, which is what will eventually occur if it succeeds in breaking Syriza. It also just handed France’s Marine Le Pen, head of the nationalistic, anti-Eurozone Front National fantastic fodder for her campaign.

The February 28 date was the result of Greece presumably needing access to so-called bailout funds to pay off an IMF obligation coming due. Varoufakis said he would refuse those funds, and could get by until June, when more loans came due, by relying on existing tax receipts and getting what he regarded as minor waivers from the central bank. He also had some creative ideas for restructuring Greece’s debts and said that he wanted the OECD rather than the Troika to provide auditors on behalf of the lenders.

Even though we warned that the ECB was likely to use its control over liquidity facilities to stymie Syriza’s plans and force Greece to the negotiating table sooner rather than later, the smackdown was even more brutal than we imagined possible. The press release contains these main elements:

1. The central bank will not allow Greece to pledge Greek government debt as collateral for ECB loans after February 11. The mechanism was the lifting of a waiver that the ECB had in place. This in theory will not have an impact on the banks, since they hold little in the way of Greek sovereign debt* and in any event banks can still pledge Greek government debt for emergency lending purposes (note there has been misreporting on this issue). The immediate impact is to thwart Varoufakis’ plans to issue some additional short-term debt to carry Greece through June. Note that the ECB once briefly removed this waiver in 2012 when negotiations with Greece became fraught.

2. It stated that “it is currently not possible to assume a successful conclusion of the programme review.” This looks to be directed at Greece’s rejection of Troika bailout monitors.

3. It affirmed that Greek banks still have access to the emergency lending assistance, or ELA. But as we pointed out, that access is on a rolling two week basis. And now that Greece is officially on the ECB’s hit list, the renewal now becomes another choke point for Greece.

For the moment, the enforcers at the ECB seem to think they have enough of an upper hand via squeezing Greece via its access to funding markets. From the Wall Street Journal at the time of the ECB press release. Take particular notice of the final paragraph:

“Even with an extension of the current program, there will be challenging months ahead. But without such an extension the situation would become very tough,” one EU official said.

Another EU official confirmed that there was little willingness among eurozone governments and the ECB to allow Greece to issue more short-term debt, so-called Treasury bills, to plug funding holes in the coming days. An informal request to increase treasury-bill issuance to €25 billion from €15 billion currently—made by Mr. Varoufakis at meetings in Brussels earlier this week—is a no-go for Greece’s creditors…

Europe’s reluctance to let Athens borrow more short-term debt raises questions on how the government will meet debt repayments in coming months. In March and June, Greece has to pay almost €4 billion to the International Monetary Fund and smaller creditors. Bigger issues await in July and August, when some €7 billion in bonds held by the ECB mature.

But Greece’s financial situation could become dicey even before then. If the current bailout program expires as scheduled on Feb. 28, Greek banks won’t be able to get liquidity from the ECB anymore, due to the country’s bad credit rating. After that, they could still get funding from the Greek central bank, through so-called Emergency Liquidity Assistance or ELA, but this is also subject to ECB approval.

One of the EU officials said that ELA could continue “for some time,” without giving further details. The ECB has in the past threatened to cut off ELA funding to banks in Ireland and Cyprus to force national governments to agree on a new bailout program with the eurozone

And in an update in the European morning, the Journal describes, not surprisingly, that Greek markets are roiled. That was the point, after all. Key sections:

Athens’ main stock index plummeted 9% in early trade before recouping marginally, while the country’s two-year debt yield soared by more than three percentage points to around 19.30%.

Losses were particularly hefty in the banking sectors, where Piraeus Bank SA, National Bank of Greece SA, Alpha Bank AE and Eurobank Ergasias SA fell between 6% and 15% to the bottom of the Stoxx Europe 600 index, which was down 0.2%….

That heightened perceived risk of default was reflected in the Greek bond curve Thursday too. The yield on its five- and 10-year debt climbed sharply to trade around 14.9% and 10.7%, respectively. Yields rise as bond prices fall.

As we have said before, Greece is in a weak bargaining position. It may be able to go beyond February 28, but probably not very long. Some readers have suggested appealing to Russia, but not only would that unleash even more brutal treatment from the Troika, but the German press has also reported that Russia is not interested.

Varoufakis has ruled out a Grexit as ultimately hugely detrimental to Greece. Even if the Tsipras government were to decide to reverse course (likely leading Varoufakis to resign), he would probably want a referendum to make sure it had popular support. Most governments have procedures that don’t allow for them to be launched on short order. So even with this averse development, a Grexit seems unlikely.

The Greek government can implement emergency measures, like capital controls and restrictions on daily bank withdrawals, to reduce the bank run. Measures like nationalizing all domestic banks and implementing a plan to allow foreign banks to leave the country in an orderly manner works only if the Greek central bank can backstop the domestic banks, and that in turn works only in the event of a Grexit, since the central bank needs to be a currency issuer.

And of course, Greece can default.

In response to an e-mail tonight, Varoufakis wrote, “One thing we will not do is capitulate.” I hope readers will wish him and his fellow citizens good luck. But the Troika seems determined to destroy Greece if that is what it takes to show that their authority remains unchallenged. But the cost of discipling Greece is likely to be far greater than they imagine, not just in financial terms, but to the Eurozone project itself.


* Details courtesy Bloomberg:

The Bank of Greece publishes a monthly balance sheet for Greek banks. Click on the liabilities tab: As of December 2014, the Greek banks owed €56 billion to the Eurosystem, via the Bank of Greece. What assets did they use as collateral to secure these loans? Click on the assets tab: The Greek banks only owned €12 billion in Greek government securities at the end of December, so these could only be securing a relatively small amount of the borrowing from the Eurosystem.

Taking a closer look, it becomes clear that Greek government securities are even less important as collateral than these figures make it seem. €7.4 billion of the Greek government securities owned by the banks were Treasury bills, so less than €5 billion were regular Greek government bonds. And other reporting (such as here and here) tells us the ECB has imposed a maximum limit of €3.5 billion on the use of Greek Treasury bills. (Another “rule” that’s basically just more ad hocery).

This means the Greek banks were using at most €8 billion in Greek government debt in December as collateral for loans from the Eurosystem. Set against the total loans of €56 billion owed to the Eurosystem this is fairly small beer. (Factoring in haircuts, its share in collateral would be even less than this comparison suggests).

So, on its own, the eligibility of Greek government bonds is just not that big a deal.

Print Friendly, PDF & Email


      1. MP

        Yves – but at the end of your article, that’s what I was thinking. This is the spark. The impact will be beyond Eurozone. The system (in an wider sense) is already fraying. Like 1914, we are sleepwalking into hell.

        1. c1ue

          Sorry, but I don’t see how a crushing of Greece by bankster means equals a shooting of an archduke by a terrorist/freedom fighter.

          1. Sanctuary

            How can’t you? If both sides stick to their positions too long, the situation spirals and the Eurozone breaks up in a catastrophically spectacular and all too foreseeable fashion. If Germany and the ECB “win” this battle, the Eurozone will crumble over a longer time horizon, but still implode from rapidly spreading popular discontent and misery. In the meantime their “win” will have strengthened fascistic and nationalistic voices within all European countries, leading to an even worse eventuality than if it just ended today. Also, as I’ve been arguing, a “win” against Greece would serve as a very powerful and ominous cautionary tale to any prospective country that may have wanted to join the EU and/or NATO. You can either join a deflationary Euro denominated/German dominated EU or join NATO, but not both. Even if you choose NATO over the EU, you choose to shoulder a heavier weight of responsibility to ensure the strength of the alliance because it will be filled with economically weak/deflation sapped EU countries unable to meet their treaty obligations.

            This is an unmitigated disaster.

            1. wbgonne

              Very reminiscent of the WWI inception. And with the U.S. gearing up for a serious proxy war with Russia, the tinder is everywhere. Like MP said: sleepwalking into hell (again).

        2. JEHR

          And so now we know what happens when the bank fraud that caused the financial crisis is allowed to play out: either Greece pays until it destroys its own people or the banks will destroy the people for you. What options are those? I have a really heavy hatred of banking and finance right now. There is nothing as heartless as the profit-making banking industry. If I were a Greek, I would be planning some kind of violence in aid of my country. I can’t believe that the Troika is so cold hearted and venomous.

          How right Michael Hudson is!

          1. ErnstThalmann

            The time to get physical has arrived. Frankly it arrived a long time ago. The creation of a few peoples’ tribunals to try and sentence the in-country banking and political scum would make a good beginning. That and the creation of a workers’ state.

            1. Nofreewill

              As Yves implies in the article, financial warfare can only continue for so long before the resort of physical warfare (by leftists or fascists) will become worth the price. I fear for the future of the EU. I might feel better if the fascists weren’t much more ready to resort to force than left groups. In the 20th century left groups did a lot of the fighting and dying to combat it’s rise (USSR WWII deathcount also an example).

              1. john bougearel

                One can not help but gather a sense of how northern EU economies running are collectively behaving and isolating themselves in a manner similar to Germany in the 1930s. That isolation couldn’t come soon enough. Unfortunately,

                Bill Mitchell remarked on their collectively flawed memories (selective amnesia perhaps, or something more nefarious) – inflicting massive and cruel hardship on Greece today as it did during the Nazi era.

  1. Ben Johannson

    A lot of commenters have expressed hopes that Varoufakis and Tsipras have been secretly attempting to get Greece kicked out. Now we get to see if that’s true.

    1. Kemal ERDOGAN

      Yes, I am one of them.

      There is no other way for Syriza to implement so many reforms while keeping the country afloat. Surely, Syriza leaders are also aware of that. They probably want to show for the whole world to see and tell their voters that they genuinely tried.

      And, ECB did not disappoint. Big time

      1. Praedor

        I never hold to such beliefs. Far too often (every time, actually) people support a leader or offer up hope (excuses) for a leader (like Obama, for instance), that they are playing 4 dimensional chess and have some great plan in play that will, in the end, win the day for the good guys. Never happens. They ALWAYS turn out to be just another politician with low politician dreams and lower still greedy economic interests.

        1. Doug Terpstra

          Cynical but all too true. For some of us, Obama was a blaring wake up call with sirens and ear-splitting red-alert klaxons. But for the walking-dead liberal class, especially the Congressional Black Caucus, the countdown to self-destruct is just another snooze alarm. Their dreams of power are too intoxicating.

          1. wbgonne

            I was just thinking about that. If the election actually is Clinton v. Bush, very few will have any illusions to motivate them. Obama cured a lot of people, me included. Only the willfully self-deluded will be interested in a battle of Neoliberal v. Business Conservative, since they are basically interchangeable but for the graft recipients.

  2. generic

    The question is no longer whether capital controls will be imposed but by whom. Will it be Greece or the Eurogroup? What would the next step be? Once capital flight is no longer a concern since the worst case scenario has arrived several options open up. Supposedly the Greek private sector owes something along the line of 70 billion € in taxes so if Greece started issuing scrip valid for payment of taxes the demand should be guaranteed. That might help to stretch the timetable quite a bit.

    1. Moneta

      We could argue that Greece has already long paid its dues. Over decades, its economy had been stifled by the elite and rentiers with the help of all developed countries and their global investment banks.

      Of course, these global bankers love to brainwash the world into thinking that Greeks are deadbeats when they actually contributed to the dysfunction. But brainwash is probably a harsh word because most bankers themselves actually believe in this worldview.

      1. MikeNY

        most bankers themselves actually believe in this worldview

        Yes. And why not? The ideology works splendidly for them.

  3. SteveL

    They’ll go to any lengths to bail out the banks and to extend/pretend so their butts can continue to warm their bureaucratic/political chairs, but they seem perfectly willing to let a COUNTRY go down. Europe (and not only) needs to be totally reformatted, as in wiped clean, and we must rewrite the rules from scratch (with different pens doing the writing).
    It is so hard, being here in Europe, to watch this tragedy unfold, while trying to conduct business and raise kids…

  4. Moneta

    I don’t see how Greece can back off now. Frankly, its situation will not get any better if they do, plus they will completely lose face.

    The ECB just threw oil on the fire and I can’t help wonder if it was an intentional gift… ECB stuck between a rock and a hard place, no way out, so jumping on the opportunity to transfer systemic failure blame onto someone else.

    1. MaroonBulldog

      The Greeks and the ECB both know what’s coming. The urgent need know is to position one’s own side so that when what’s coming comes, it is perceived to be the other side’s fault.

  5. The Peak Oil Poet

    maybe someone caught wind of Greece putting in an order for the printing of drachmas

    and now the squeeze is on to prevent that being possible

    let me guess, Australia is good a printing plastic money, Finance Minister has close ties in Australia


  6. guest

    I don’t see how Greece can back off now. Frankly, its situation will not get any better if they do, plus they will completely lose face.

    It already happened, a couple of years ago. Georges Papandreou was basically given an ultimatum with conditions so onerous that he decided to organize a referendum. He was immediately summoned by the Germans and others, whereupon he recanted, cancelled the referendum and resigned. His successors implemented the “help” programme which of course ruined Greece further. Papandreou indeed lost face forever, and his party has been trounced in the elections last January.

    Do not underestimate the readiness of European politicians to betray everything they publicly stand for, to grovel, and to get irreversibly humiliated.

        1. Rosario

          Good observation, and it makes a difference. The vanguard of the French Revolution was full of young blood. Same with most revolutions before and since. They haven’t a hoard of gold yet to protect and will take greater (necessary) risks as a result.

          1. hunkerdown

            So if we simply prevent the accumulation (vestment) of gold, the “two” generations have less (exogenous) reason to lord it over one another. Does this relationship work out, never mind the direction of causality?

  7. Swedish Lex

    I errouneously believed that the ECB would not do this and instead would prefer to hand over the gun to Merkel, for her to point it to Greece’s head and decide whether to pull the trigger or not.

    Unfortunately, anything but the darkest pessimism is being overly optimistic in EU affairs.

    The Greeks just got another reminder that caving in to the EU Institutions and to Merkel only prolongs the pain.

    I am beginning to wonder whether the German elite as an explicit or implicit death wish for the euro zone. They clearly hate it (while sucking out its benefits) and may just be waiting for the thing to unravel, why not with a beginning in Greece? It would be messy but Germany has managed to integrate the DDR and would also survive a euro zone implosion. Something along those lines.

    Germany’s incapacity to grasp the basic notion that the euro does not , and cannot ever, equal a greater D-mark, run according to the highly subjective and ever changing principles/rules that the German leadership at the moment prefers to remember or prefers to forget. The euro should, if it is to continue to exist, be run as a European currency, that is like the USD is the currency for both Alabama and for California.

    Like the armies in the summer of 1914; it will all be over before Christmas.

    Frau Strangeliebe or how I started to love the eurozone implosion.

    Greece has less to lose from exiting than Germany has.

    Obama could extend a 10 bn euro credit line to Greece, I suppose. Less expensive for the U.S. economy to pay upfront than to watch Europe wreck the global economy completely.

    1. Swedish Lex

      Krugman and others consider the possibility that Draghi by deciding this has passed the buck over the the politicians.
      But still an escalation most probably not worth making since disaster too close for comfort.
      Does anyone in Berlin or Frankfurt ever consider the possibility that Greece – its people and its leaders – might just be the ones pulling the plug first? Rational or not.

    2. bmeisen

      I believe that “The German Elite” can not be refered to as a unified force in German politics. There is an elite and it is composed of diverse personalities and opinions. The automobile industry unites both capital and labor to form a powerful voice which often unites these divergent groups. How it, the automobile industry, responds to this development might be the best indicator of how the German elite are responding. Until their response is known, Merkel and Gabriel are Germany’s political leaders and they clearly support the Euro and the EU. I would expect them to go if the Euro goes.

      Greece should never have been allowed to join the Euro – a catastrophic mistake attributable to the arrogance of Mitterand/Kohl, the dysfunctionality of the EU as a system, and the greed of the banksters. The tragedy is also that the virtues of union and solidarity are trampled on.

      1. MyLessThanPrimeBeef

        I wonder if the people of Greece can go after those banksters for malpractice or on product liability basis that allowed Greece to join in the first place.

      2. Yves Smith Post author

        The position of the automakers is likely to be anti-Greece. As Josh Rosner wrote:

        While German and French taxpayers are justifiably angry, their anger is largely misdirected. Rather than embracing the false narrative blaming only peripheral nations for requiring bailouts, the anger should more rightfully be directed at:

        • Designers of the European Monetary Union who, at the creation of the EMU, ignored regular and repeated warnings, from noted academics, analysts and policy advisors, that structural weaknesses would lead us to the crisis we now face;

        • Banks, in the core, with weak internal controls and excessive leverage, which were profligate lenders in search of yield, to weak private, corporate and sovereign creditors in the peripheral countries;

        • Those officials and technocrats who failed to properly regulate the domestic banking industry and allowed bankers to treat all sovereign debt as equal regardless of the differing debt capacity of the issuer;

        • Rating agencies that failed to offer meaningful analysis of sovereign credit capacities and also assumed that too-big-to-fail financial institutions ratings should reflect an implied or explicit guarantee by their home country;

        • Political leaders who, since the beginning of the crisis, downplayed its ultimate costs and, thus, delayed its resolution and increased the ultimate costs to taxpayers;

        With this as a backdrop, it logically follows that the German government and central bank are seeking to protect the markets for German exporters and the German banking sector. Accordingly, the German government will be forced to choose either a large share of the costs of supporting a further integration of the European Monetary Union or, alternately, the larger economic and social costs of its failure, including the massive costs of recapitalizing German banks and financial support for German industry Either approach will lead to German debts rising markedly while its economy contracts. The costs will be astounding.

        The longer it takes for political leaders to offer their constituents full disclosure and transparency, the more costly any solution will be. For this reason, Eurozone political leaders must act decisively…

        In Germany, where real wage declines early last decade robbed households of consumption and represented a transfer of income to domestic exporters and banks, the news that taxpayers will now be responsible for bailing out these firms, while accepting reductions in national sovereignty will be a particularly bitter pill to swallow.

      3. Me

        No, the EU should never have been created like it has been. The ECB shouldn’t have been created as it has been. Both are thoroughly anti-democratic bodies which leaves all but a few countries to rot once they get into trouble. Their options are fire sale privatizations and/or slow death. Greece is one country and could not alone bring down the EU but it is 100% certain, outside of radical changes, that the EU will eventually implode, that horrible right wing parties will continue to grow and those in power that are causing these societal nightmares will flee being held responsible for what they have caused. Syriza is not cut off from political and economic realities, as the rats that run the EC and the ECB like to claim. It is those running those institutions that are cut off from reality and they won’t be able to entirely escape what is awaiting the citizens in the EU thanks to their policies.

    3. Maju

      Draghi is a (former?) Goldman Sachs fellow, as are many other eurocrats. He serves the Big Banks and that goes well beyond Merkel and Schauble. In another entry, Yves claimed to heaven about the Fed also supporting this move, and then again the Fed is, like the ECB, a fake central bank that serves not the polity it supposedly belongs to but the banksters.

      It’s clear that the banksters are getting very very nervous with all this Syriza (+ Podemos) challenge and they are willing to do ANYTHING to keep their dominance. This clash of our friends Varoufakis and Tsipras with the eurocracy is something really BIG, a game changer. Because one thing is clear to me: they won’t chicken, neither Athens nor the Big Bankster Mafia.

      While nation-states rely on its peoples for legitimacy, banks can only rely on the fear they can instill, so they have to play hard, very hard.

  8. cassiodorus

    “One thing we will not do is capitulate.” So what are the other options? Obama lends Greece money? The US government is a utopian construct of defense corporations, and will not throw money away which can otherwise be spent on pointless weapons systems to enrich corporate patrons. Greece goes after tax cheats? Does anyone here see the Greek government getting the tax cheats to pay up in three weeks?

    Aren’t we looking at default here?

    1. reslez

      The aim here is the utter and abject capitulation of Syriza. They will be brought to heel. They will not be allowed to go after Greek oligarchs. Europe chose fascists once before over milquetoast lefties and they are doing so again.

  9. Carlos Fandango

    Seriously, what could Syriza hope to achieve within the Eurozone?

    There was never a choice.

  10. Ned Ludd

    “German journalist and editor Udo Ulfkotte says he was forced to publish the works of intelligence agents under his own name,” so the German press should be read with an extra dose of salt. That said, Greece voted to extend and expand European sanctions against Russia. How did they expect Russia to respond? With chocolate and roses?

    [Greek foreign minister] Kotzias announced to the meeting: “I am not a Russian puppet.”

    Greece, keep throwing sand in Russia’s face, to show the E.U. how much you love it.

    I was waiting for a cross-town train in the London Underground
    When it struck me
    That I’d been waiting since birth to find a monetary union that would
    Accept me
    So I changed my plans, I rented a campaign van
    And then I called the E.U.
    I need you to pretend that we are in love again
    And the E.U. said, “F.U.”

    1. hunkerdown

      The Times and Reuters have long-standing, fairly well-known associations with the CIA. So, if that turns out to be the Times and Reuters throwing CIA-provided sand from Greece’s general direction, how’s that affect the calculus? There’s been talk recently of a Russian pipeline terminating in Greece — Greece has no reason to poison that well; which players do?

  11. Aussie F

    Isn’t it peculiar, debtors are held to the letter of the law, while creditors (Germany) are able to break European agreements that limit macroeconomic imbalances in the Eurozone, and accumulate vast current account surpluses in the process.
    Mercantilism for the powerful and free markets for the weak? The consequences are all too predictable, with fascist parties taking up the political slack in Europe.
    ‘The strong do as they will and the weak endure what they must.’

    1. Ulysses

      Italy isn’t as weak as Greece. Tied with Brazil as the seventh largest economy in the world, the kleptocrats can ill afford to have the Italians stop playing their game.

      Yet the present abuse of Greece is beginning to awaken Italians to the reality that they may be losing more than they gain through membership in the Eurozone.

      “è così difficile capire cosa significa trovarsi a dipendere da una moneta straniera? Perché l’euro è esattamente questa cosa qui. Il caso greco lo evidenzia che meglio non si potrebbe. Quale democrazia, quale politica può esserci in uno stato la cui liquidità finanziaria è decisa da un’autorità straniera, sulla quale non si ha nessuna possibilità di controllo? E’ ancora così difficile capire di cosa parliamo quando mettiamo al centro il tema della sovranità monetaria?

      Come si vede i nodi stanno venendo al pettine ancor prima del previsto. Gli oligarchi dell’euro non lasciano nessuno spazio reale a Tsipras. ”

      Again, apologies for the hasty translation:

      “Is it so hard to understand the importance of having to depend on a foreign currency? Because that is exactly what the Euro is here. The case of Greece makes this more clear than anything else could possibly do for us. What democracy, what politics even, can there be within a state whose liquidity is determined by a foreign power over which we have not even the possibility of influence? Is it still so difficult to understand why we put front and center the issue of monetary sovereignty?
      We see now the day of reckoning is at hand earlier than we thought. The Euro oligarchs won’t give any real room for maneuver to Tsipras.”

      A commenter on this post, Luca Tonnelli, puts it very openly: “la partita è aperta. dopo tanti anni la piccola Grecia è la prima ad avere le palle.
      Siamo con loro.”

      Despite the wishes of their elites to continue playing on the other side of this game, the people of Italy and Spain are just waiting for the plucky striker Greece to pass the ball back to them in midfield. France is on the sidelines, but I think Herr Schaebule would be very foolish– to count on the unconditional loyalty and support of the French to maintain Germany as Hegemon in the EU.

  12. aletheia33

    i’ve signed this petition, after checking out the organization (on its website), which is founded by philippe legrain, self-described there as “an independent writer and political entrepreneur.”

    this is the whole text:
    “To Angela Merkel, Chancellor of Germany, Jean-Claude Juncker, President of the European Commission, Mario Draghi, President of the European Central Bank, Martin Schulz, President of the European Parliament, and other European leaders,

    “As citizens of Europe and the world, we are deeply concerned by the unbearable debts under which Greeks are suffering, and we call on you to organise a debt conference without delay to negotiate debt relief for the Greek government.”

  13. wbgonne

    Varoufakis has ruled out a Grexit as ultimately hugely detrimental to Greece.

    Perhaps the time has come to reassess which course of action is MORE “hugely detrimental to Greece”. If Syriza capitulates to the neoliberals, the Greek depression will continue indefinitely (if not permanently), and the fascist Right will sweep into power. Then how will history remember the Tsipras government?

    BTW: It appears to me that the neoliberals have concluded that Greece can’t hurt them, no matter what it does. Obviously, the neolibs have had a lot of time to concoct contingency plans for Grexit or default, but the thing about these people is that they are never as smart as they think they are.

      1. wbgonne

        Well, I am not an economist and I don’t claim any such expertise. But from my vantage point, which encompasses a laymen’s view of the global scourge of neoliberalism, I wish Greece would defy the neoliberals, default and quit the EU. Neoliberalism is a house of cards which depends upon every single card maintaining its place. The entire horrid edifice might well collapse even from the defiance of a relatively puny country like Greece. I have heard Yves suggest many times that this would be catastrophic for Greece but, frankly, I think a fresh start is required or Greece will be stuck like Sisyphus forever rolling the debt stone. Which fate is worse?

        Further, at some point — and probably very soon — the Leftists will be rejected unless they make significant improvements for the Greek people, likely ushering in Right Wing Nationalists. Perhaps I am mistaken but I suspect the Greek people would be more forgiving and patient with Syriza if the future showed some hope, and that won’t happen by bowing to the neoliberals. Undoubtedly, Greece and the Greek leaders are faced with fraught choices but it seems clear to me that the time for bold action has come.

        On a related note, it surely would have been far better for Greece, the world, and the American people, too, had Obama not been a neoliberal in progressive clothing. The optimal time for dramatic restructuring was when the banks were on their knees. But Obama is a neoliberal ideologue and he chose to restore the rotten system that had just collapsed with only cosmetic changes, making neoliberalism even more deadly and dangerous than before. If and when the next collapse occurs, it will be largely on Obama’s head. Perhaps Grexit and Greek default might be the most benign unravelling imaginable under the awful circumstances.

        1. Rosario

          I’m pretty certain the debt will be perpetual, at least under the current system. This model being implemented on Greece and used by international finance was perfected in Sub-Saharan Africa and those being honest will acknowledge that it has been a catastrophe. Ebola rampaging through West Africa was a result of years of crumbling infrastructure from unserviceable debt burdens and a sell off of the commons not some mutation of the virus or an inability for doctors to understand how to deal with it (this is a grating point for me, African doctors are some of the best infectious disease doctors in the world). Same goes for the countless civil wars. The forensic evidence of Neoliberalism can be found anywhere its bankers go to do business using the language of “restructuring” and “austerity”. The Greeks should run, and become closer friends with the BRICS countries. It will be of far greater benefit to their future.

        2. Doug Terpstra

          wbgonne: I’m not an economist… Establishing your credentials up front lends credibility to your POV.

        3. JerseyJeffersonian


          While I hate Obama’s warlike nature, realistically assessed, this is but a consequence of the American NeoLiberal construct. Our economy has been hollowed out in service of the Smartest Guys in the Room, and in order to now stay on top, since our once almost unchallengeable industrial might is no more, and in its absence we can no longer pretend that our national power is based on anything real, Finance Capitalism has been indissolubly yoked to militarism. Discretionary warfare, regime change, sanctions regimes, are all part of the toolkit designed to enforce this thuggish economic construct. So there you have Obama in a nutshell, happy to play ball with this system, because he seems to be comfortable with this. But then, he was always only a grifter, so any imputation of any statesmanlike thoughts to this empty suit, even if they were fundamentally wrong-headed and delusional thoughts, is giving the man way too much credit. He’s been marking time since day one for the forthcoming Big Payout.

          1. wbgonne

            That is far better analysis than I could provide, on each level. It certainly appears that our place at the top of the neoliberal pyramid scheme is more and more dependent upon military power and threats of financial ruination. This is clearly unsustainable but those at the lead in the political trough simply don’t care because greed and power have erased their humanity.

  14. charles 2

    Yves, if you have the privilege to interact with Varoufakis, please explain to him that he needs to ditch his smartphone and use military grade gear for communication. I am 100% that everything he says and write on his smartphone (as in here : goes straight to Obama, Merkel, Juncker, Draghi and Schauble office. If indeed he doesn’t want to capitulate and therefore play hardball, he must play like a pro.

    1. Clive

      While what you say may very well be quite correct, unfortunately there is simply no “cunning plan” which could be being discussed here; between the self-imposed constraints and the constraints imposed externally, the whole of the Eurozone — and Geeece too — are fresh out of better options.

    2. Moneta

      It’s all a game. You can’t believe anything they are saying on the media. What is important is what is not being said, what is being said behind closed doors or their actions…

  15. Vince in MN

    “The ECB has thus also effectively said that it would rather have fascists like Golden Dawn running Greece, which is what will eventually occur if it succeeds in breaking Syriza.”

    Capitalists are much more comfortable dealing with fascists/dictators. The neoliberal variety even more so. The problem with real democracy is that it can be messy and unpredictable – bad for business.

      1. EmilianoZ

        Yep. Think of the German firms you know. They all existed before Hitler, they all collaborated with him, they all survived him.

        I dont need to talk about IG Farben (Bayer, BASF, Agfa, Hoechst, …) famous for manufacturing Zyklon B.

        BMW made aircraft engines for the Nazis.

        Siemens. From wikipedia: Siemens (at the time: Siemens-Schuckert) employed some skilled labor among deported people in extermination camps. The company owned a plant in Auschwitz concentration camp.

        Mercedes. From wikipedia: Pendant la Seconde Guerre mondiale, sous la pression et l’obligation de Hitler, Mercedes-Benz exploite des travailleurs soviétiques et des travailleurs français à partir de 1941. Cette force de travail devient rapidement indispensable au fonctionnement de l’entreprise, qui équipe la Luftwaffe et la machine de guerre allemande. Les conditions de travail étant très dures, des grèves ont lieu et les protestataires sont envoyés en camps de concentration. (the English wikipedia seems to have a sanitized version)

        Hugo Boss. Russell Brand covered this one.

        Capitalists make a rational choice by siding with the fascists. All those firms would probably not have survived communism. Capitalists and fascists are natural allies. They understand each other. They speak the same language.

        1. Lexington

          Capitalists make a rational choice by siding with the fascists.

          As opposed to what? Make an irrational choice to wind down the company because you don’t approve of the government of the day?

          1. Rosario

            Yeah. I don’t see how taking part in funding/manufacturing for a war that takes the lives of millions is rational.

            1. Lexington

              When is funding / manufacturing for war ever rational?

              And I’m not even going to point out that your argument presupposes that German industrialists should have known in the 1930s what you know in 2015.

            2. hunkerdown

              It’s perfectly rational, if you count yourself as of a different class from *them* and/or believe that other people are better served by misery (quoth Arthur Young). The exact same conceit that makes partisan rivalry possible makes class war inevitable.

        2. Ulysses

          Today’s elites are fascists, as Mussolini, the inventor of the concept, understood fascism– “the merger of corporate and state power.” When D.C. politicians, Brussels politicians, London politicians, etc., wax ecstatic about more “public/private partnerships” they are really calling for a more fascist approach.

          The only reason today’s elites aren’t typically recognized as fascist is because they are not always nationalist bigots. Most of today’s kleptocrats don’t blather on about Aryan supremacy, or recovering the martial vigor of the Ancient Romans– they are perfectly content to allow billionaires– of all ethnic and religious backgrounds– to collude together to subjugate the rest of us.

          1. jsn

            What we have today that defies the traditional definition of fascism is the Fascist International which is the globalized brand for the various nationalist Communisms of the Rich the bailouts conjured into being back in 08/09.

        3. Tiercelet

          “Pendant la Seconde Guerre mondiale, sous la pression et l’obligation de Hitler, Mercedes-Benz exploite des travailleurs soviétiques et des travailleurs français à partir de 1941. Cette force de travail devient rapidement indispensable au fonctionnement de l’entreprise, qui équipe la Luftwaffe et la machine de guerre allemande. Les conditions de travail étant très dures, des grèves ont lieu et les protestataires sont envoyés en camps de concentration.”

          Quick translation:
          During the Second World War, under pressure from and obligation to Hitler, Mercedes-Benz took advantage of French and Soviet labor from 1941 on. This work force quickly became indispensable to the business, which supplied the Luftwaffe and the German war machine. Working conditions being very hard, strikes took place; those who protested were sent to concentration camps.

          1. MyLessThanPrimeBeef

            The Second German Economic Miracle will likely need Greek workers like the first German Economic Miracle depended, not like the forced Nazi way, on voluntary Turkish laborers.

        4. Cirsium

          Emiliano – it goes further back. Bayer was instrumental insetting up the deportation of Belgian males to work as slave labour in German factories in 1916. This was cancelled due to international criticism so the Imperial German government went East and young Polish males were deported instead.

          1. MyLessThanPrimeBeef

            The perfidious Albion has always been more savvy. No slave labor for them. Only indentured coolies.

            The Brits imported/exported Chinese coolies to the Americas and Africa (that’s how one can get Chinese food almost anywhere in the world…and Indian food too).

            During WWI, the French sent a few from China to help with their cause, some returned home later to become proletarian revolutionaries.

    1. hunkerdown

      Of course they are more comfortable. They’re all in the same business of exploiting others for private gain, aren’t they?

  16. SPenfield

    I certainly wish Dr Varoufakis all the luck I can bring. He seems to have been forced into a corner. The choice seems to be the ‘nuclear option’ or become the next Papendreou.

    If the Greek people are behind him he can manage an exit from the Euro. I’m not religious but the story of Moses is an interesting parallel: Leading the Israelite slave rebellion against the Egyptians Moses realised that only a set of shared values would bind the people together. He goes up the mountain and comes back with the Ten Commandments. More than a set of rules, the Ten Commandments defined the values of a Nation, restored dignity, gave hope and restored their sense of humanity. The Greeks have to clearly set out their values, and if these aren’t compatible with the Euro then Tsipras must lead them to the promised land.

  17. Jim Haygood

    From the Telegraph’s blog [Greenwich time]:

    13.15 Some breaking news from the ECB. German newspaper Die Welt is reporting that the central bank has granted Greek lenders access to €60bn in emergency lending assistance.

    Even after yesterday’s ban on the taking of Greek bonds as collateral, the country’s banks still had access to ELA. Our International Finance Editor [Ambrose E-P], doesn’t think it is sufficient:

    ‘If so, it won’t be enough.. try €100bn and soon…’

    Meanwhile, regardless of rhetoric on all sides, 19% yield on Greek 2-year notes indicates a very high probability of default (69% probability, derived from credit default swaps).

    Greek default would shatter euro zone credibility. Nobody screws up that big and gets away with it.

    1. Jim Haygood

      Bloomberg specifies the particulars of ELA:

      Two Eurosystem officials said that Greek banks will have to convert well over 30 billion euros ($34 billion) of their ECB financing into more expensive ELA funds. A Greek official said today that ELA access for Greek banks increased “by 10 billion euros.”

      ELA liquidity carries an interest rate of 1.55 percent, versus 0.05 percent for regular ECB financing.

      In the mind of ECB overseers wielding the whip hand against a recalcitrant debtcropper, this is just a wrist slap: your interest rate at the plantation store done gone up.

      But to depositors who aren’t conversant with the subtleties of ECB waiver financing vs. ELA financing, it’s a bright neon sign reading GET OUT WHILE YOU STILL CAN.

      1. Yves Smith Post author

        Yes, and there has even been misreporting at Reuters and at some financial blogs, so its isn’t just depositors who might be confused. It’s hard to imagine that this won’t make the bank run worse.

          1. MyLessThanPrimeBeef

            That reminds me of Maxwell Smart, his secured shoe phone (tip for Varoufakis), KAOS and Control.

  18. Jim Haygood

    Bloomberg states what I’ve been saying since last Friday:

    By shutting off Greek lenders’ ability to borrow against the government’s junk-rated notes, the ECB raises the likelihood of withdrawals from bank deposits accelerating.

    Uh huh. It ain’t that hard to provoke a bank run. But one don’t normally expect the central bank to be the knucklehead yelling ‘Fire’ in a crowded theater.

    The ECB has gone full retard.

  19. EmilianoZ

    The ECB is preparing a very bad karma for itself. In the next life it’s gonna be reincarnated as the IMF.

    1. Jim Haygood

      OMG, that’s funny.

      Given a choice, any rational actor would prefer to be reincarnated as a dung beetle, rather than as Christine Lagarde.

  20. c1ue

    Looks like we’re getting closer to the point where the rubber meets the road: either Greece capitulates (Syriza goes down) and the same methods are used serially until the next compliant government comes in, or Grexit.
    What other alternative is there?

  21. pietro gori

    Have a look at this, if you havent already

    The deal Germany wants was signalled in a leaked negotiating paper: the total reversal of the elected Greek government’s policy of cancelling austerity, even down to detail about ending reforms to the structure of ministries. – See more at:

    1. SPenfield

      Mason asks who at the ECB is making these decisions? This seems to me a fundamentally important question.

  22. Tuolumne

    Interesting this morning that the EC has improved the growth outlook for Greece if it remains within bailout conditions. Kind of like the IMF growth forecasts with the “incorrect multipliers”? It is very important to maintain the fiction that the Greek economy will improve under Troika control, because the Varoufakis position that the policy was never intended to bring recovery to Greece questions the legitimacy of the whole Euro project. Is it fundamentally a mutually beneficial project, or is it a slave market? While people like readers of this blog have formed their opinions on this question, there is a longer, slower-burning process of popular opinion formation going on in European countries.

    I don’t have enough information to understand what the process might be in Greece, but friends in Ireland have seen most of their kids leave the country, seen their taxes go up and services decline, been assessed with septic tank charges, post offices closed, turf cutting restricted, fishing subject to arbitrary rules, and now are being assessed with special water use charges prior to water privatization — and these are all now perceived as coming from the EU and Troika. It has been a massive headache for the local elite to manage politically, and it appears a major political realignment will occur. Varoufakis is under no illusions about who he is negotiating with, but he is playing to a very large constituency that is questioning the benefits of the Euro project. Will there be mutual benefit, or more fiscal waterboarding? People will be making practical political decisions based on the answer.

    1. James Levy

      Well, if you decrease pay, working conditions, and safety standards far enough some capitalists are going to take advantage and the economy will “grow.” But of course that growth exists only because of the misery of millions. The biggest problem we face is that the overwhelming might of the “free world’s” intellectual and ideological apparatus is designed to pump out one clear message: if you are fucked, it is your own fault. If the Greeks were just as smart, ruthless, and hard-working as the Germans, the story goes, they’d be doing the fucking and living high on the hog. Since living high on the hog is the only value we have left as a culture, fucking over people to live that way is just swell. We are meant to admire and emulate the rapist and disdain the victim. And that, as Banger has said many times, is the ethical void that makes all these policy questions moot.

    2. Tuolumne

      My error: EC in fact decreased Greek growth projection a few points — but still showing bogus positive growth, though. Optimism!

  23. craazyman

    It’s like they hate us. Making us read about this stuff every day. Why do they act like this? Why can’t they just get a life and move on? This is all they think about. Getting their money back from Greece. It’s probly all they talk about. And we’re the ones who suffer. We have to read, every day, interminable analysis of who said what to who when and where and what that means. It means the same thing every day — it gives you a headache, that’s what it means.

    Why can’t they just print the money themselves and give it to themselves? When food spoils in your fridge you don’t tell the fridge to make it fresh and then hit the fridge with a sledgehammer. You throw it away and replace it with with new food. It has the same calories and vitamins as the old food, but it’s fresh and you can eat it.

    They can give themselves new euros for the ones Greece lost, just like a cow produces milk, and they’ll have the same calories and vitamins as the euros Greece can’t pay back. It’s like two cartons of milk. One is spoiled, the other is fresh and they have their own cow! But instead they hit the fridge with a sledgehammer to make the spoiled milk fresh. Every day they hit the fridge with a sledgehammer. Some people might say that is insane, but nobody would believe them. They would say the person saying that it’s insane is insane! How ridiculous is that?

    Nobody understands how this stuff works in real life. They think their theories are true but they’re only theories somebody reads in a book. Somebody — usually one person in fact! one person! — makes them up and writes them down and for some reason everybody believes them. If this was a fairy tale people would laugh, but if it’s in a textbook people think it’s true! How nutty is that? It’s almost too nutty to believe. But you can believe your headache. OK, let’s say Greece pays half back now and half back later. That’s only half a carton of new milk. It doesn’t have to be all at once.

    1. MyLessThanPrimeBeef

      Getting their money back from Greece?

      I thought they wanted to give Greece more money (so the Greeks will do what they will be told to do)?

    2. craazyboy

      I’m tiring of this too, craazyman. The ECB pretends like it has a monopoly on money or something. Watta bunch of horsecrap. The only important thing is that all Euros look the same, so people don’t worry about where they came from.

      I think you really need to get your “K-I-L-L The Troika” poem published to drum up some support for Greece. Greece should chisel it in a big rock at the Parthenon – could be good for the tourist biz. They should give you a modest royalty too, I think. Then maybe some new statues would be good.(jobs!) Perhaps Yanis holding his bow – and an arrow thru the head of the Draghi statue. You can do anything you want to Germans that way too! Stuff like that.

      1. craazyman

        I’d rather talk about peace, love and understanding, that was just a goofball parody of Eddie Murphy’s Tyrone Greene skit, which is hilarious & how some northern Europeans might stereotype somebody like Professor V. It’s not my personal point of view. This stuff bores the hell out of me. I don’t know why I follow it, because the real story is probably so elusive nobody knows and you just read strident opinions all over the place, but the deep reality is hidden in clouds of fog and dust. I don’t see this as Manichean as some do. There’s enough blame to go around — Greece, the banks, the north, the south, everybody. That’s why they should just say “OK, we all screwed up. All of us. We’ll just replace all the bad money with new fresh money from the ECB and be done with it. But from now on, no more screwing up by any of us, because we’re not gonna do this twice. The Money Cow is only good for one big squirt. hahahahahah. Not two!” QED

        I defy any economist to argue why you can’t just print new money to replace the money Greece can’t pay back and have everything be fine. They think it’s obvious you can’t do that, but it’s very far from being obvious.

        1. craazyboy

          I think economists couldn’t figure out how much is the safe level to print. Quantity(M) times Velocity(V) is the inflationary impact – which varies over the eons. Then “liquidity” is mostly conserved – like energy – but when it crosses over into the “asset” dimension sometimes it works like a perpetual motion machine and sometimes it implodes into a black hole.

          Sure the ECB could try MMT – print it till the Eurozone gets inflation – then level taxes on Greece to get MV back under control. hahaha. But then there are the asset parts that go into a black hole because you just quenched an overheated economy with a bunch of overpriced assets. Economists should probably just shut up and get a new profession.

      2. john bougearel

        Perhaps it is time for Yanis to channel his inner “Quentin Tarentino” his “Django Unchained” or his “Uma Thurman”

    1. hunkerdown

      Maybe they’ll raze the Parthenon instead of selling it.

      Good — I for one won’t mind the end of 2600 years of arrogance and self-entitlement, and a final end to the culture which invented female veiling well before Islam was even a thing.

      1. MyLessThanPrimeBeef

        Something about covering one’s face instead of upper body provokes people.

        True equality is when women can go topless at the beach, just like men.

        We are quite barbaric compared to other, more ‘progressive’ societies.

      2. Doug Terpstra

        Raze the Parthenon? Yikes. The Ottomans nearly did that in the 18th century(?) when they used it as an ammo dump that blew up, causing significant damage (brilliant). But I still think a German tekno-diskotek in the Parthenon is the way to go, with colored strobe searchlights and really big Physiks subwoofers to bounce the rubble. In fact, the entire Athenian Acropolis could then become a giant Greco-Disney theme park on the quaint archaic myth of democracy, where all the neoliberal glitterati could dance on its sepulchre. As a UNESCO World Heritage Site it’s just a boring relic.

  24. readerOfTeaLeaves

    I don’t want to be the skunk at the garden party, and I don’t really understand how all these things work, so if my comment is out of line, please: (1) overlook my clumsiness and/or (2) explain what I’m missing.

    As I peruse these posts about Greece, I find myself thinking about Paul Singer and the Vulture Funds – making money specifically off sovereign debt, and particularly off bankruptcy.

    Is there any resource that enables us to determine whether there are swaps outstanding in which some (highly leveraged) parties stand to make a killing if — and only if — Greece: (1) defaults, or else (2) leaves the Eurozone. Or (3) both.
    Do these swaps exist?
    What is their approximate value?
    Who stands to gain? And by how much?

    IOW, what invisible parties are lurking in the wings, pushing for strong measures by the ECB, on the premise that they will only make a ‘killing’ if the Greeks are economically eviscerated?

    Given what we’ve read about Greek suicide rates, increased infant mortality rates, and other health impacts of economic distress, the term ‘making a killing’ takes on a whole new ominous meaning.

    1. norm de plume

      Good question, pity I’m not equipped to answer, but someone or rather several people here would be.

      Such bets if identified could be publicised and the Greeks could subtract that amount from the debt they would be prepared to consider paying.

      Commercial-in-confidence probably.

    1. Yves Smith Post author

      With all due respect, Coppola is really wrong, and she has been really wrong some other times too (her posts on what caused the crisis treat it as if it was all about retail banking!!!). She fixates on the ELA and completely misses the object of the exercise, which is to restrict the Greek government’s ability to finance, which means Varoufakis can’t execute his “no bailout funds” strategy through June, which he needed to try to negotiate a broader, different deal with the Troika (as in he also needed tim to find an enlist allies). This is mean to deny the government cash and force them to the negotiating table even sooner (Feb 28 was the former deadline to get a deal on bailout funds). This move was meant not as a “no” but a “hell no” to Varoufakis’ “no bailout funds” idea.

      1. mpr

        I agree that Coppola and Krugman are probably overthinking it. This is just to ECB trying to act tough with one of the few – not terribly effective – moves it actually has. But following the link the Coppola one finds a fascinating tweet by Varoufakis from six months ago, to the effect that he thinks any threat to pull ELA funding would be an empty threat – he says the response would be ‘go ahead’.

        This is exactly in line with my reading of his strategy. Yes, he is against leaving the Euro, but he believes that as a rational actor the ECB et al will not force Greece from the Euro when faced with the negotiating demands he is presenting. Those demands have been carefully calibrated to have that property. That’s why he is simultaneously (with Tsipras) able to claim that Greece will not leave the Euro, but at the same time implicitly threaten default if there is not a renegotiation. (Thats if you really need a fancy game theory explanation of why a politician can hold two apparently contradictory positions at the same time).

  25. Rosario

    Maybe Germany (via the ECB) is trying to sabotage the Euro with the Greek’s debt and place the blame on Greece? It would certainly make things better for them in the long run (along with everyone else I might add). Though that would require politicians to make decisions for all their citizenry and not the interests of international finance, so maybe not likely.

  26. Roman Ceano

    This is the decisive battle between Hayekan doctrinarism and democracy.

    The problem in Greece is that nobody pays taxes. The Troika people do not see this, they only see too much money spend in old people, teachers and hospitals. They are not economists, they are just monks of the Hayekan religion. Economy as medecine is to help people and people has voted Syriza to vote against Hayekanism.

    Hayekanism was a solution for the stanflation in the 70s but has become just an excuse for the 1% not paying taxes.

    Varoufakis must show that he is ready for a big default and let BCE choose between Hayekan madness or reality of life.

    Time is ripe for a decisive battle and the heart of the whole world (except the 1%) is with Varoufakis.

  27. Me

    I know that the leaders of Syriza have talked about not wanting to leave the EU, they have gone through how much it would hurt the country. However, is the EC, the IMF and the ECB not making it so bad that those costs are now on equal footing? It isn’t as if there is a snowballs chance in hell that things will get better if Greece stays in the EU, chances are Greece will start to resemble countries in Central America in a decade or so if things don’t radically change. How much has Syriza publically analyzed the costs of STAYING IN the EU? Might be time to start doing a cost/benefit analysis.

  28. Sanctuary


    I know you don’t believe the Greeks have a strong negotiating position to work from, but can you imagine any possible route for them to follow based on where they and the ECB are today? What would be the absolute minimum they would need to get out of the box the ECB just put them in? I know you don’t think any Russian gambits are plausible, but someone mentioned in a comment somewhere I read that despite what Varoufakis said yesterday, if the Russians “offered” money to the Greeks, it would not be the same thing as Greece soliciting the Russians for financial aid. Would a proactive Russian “offer” of $5-6 billion in financial aid be enough for the Greeks to get through to June? I ask because I just saw this article a few minutes ago with Tsipras announcing closer bilateral ties with Russia:

    1. Yves Smith Post author

      The Russians are not offering anything. That was reaffirmed today in

      “Sources rebuffed rumors about financial support for Greece from Russia, noting that the government was looking toward its European partners for support. ”

      There have been reports elsewhere that the Russians do not want to support Greece. First, they are in financial stress. Their own people come way ahead. Second, anything more than minor “poke in the eye” gestures runs the risk of turning the US instigated cold war with Russia into a hot war. Third, what the hell good is Greece to Russia? Turkey is an important ally, the Greeks and the Turks despise each other, and even if there were something to be gained from getting friendly with Greece, it is very likely to lose more on the Turkey side. And Greece is not just a member of NATO, the US has a base in Greece, one it regards as very important:

      It took 9/11 to get the US to leave its base in Saudi Arabia, and that was despite years of pleading by Riyadh and visible signs of domestic opposition. No way would we stand pat and let the Greeks give the only thing that the Russians might conceivably want, a Mediterranean base.

      There is a reason I never link to ZH. Even though it does some very good work, an unacceptably high percentage of what it writes is just plain wrong, or so oversensationalized as to be the functional equivalent. And you have to already be pretty knowledgeable to determine which is which. Most of the serious finance people I know who used to read it in its early days have dropped it for that very reason. I don’t want to encourage readers to view it as reliable.

        1. john bougearel


          The main strength of ZH is its ability to scoop a lot of stories. More than half, maybe 80% of their stories are germane only to “noise factors.” Since, as Yves points out, the majority of what ZH posts is functionally wrong via grossly amplified distortions that makes a mountain out of every molehill it sees, the website has morphed into a tabloid-like persona such as the Enquirer.

      1. John Jones


        Why is Turkey an important ally to Russia?

        Is it because of:
        The pipeline that will run through it from Russia?
        That Turkey buys a lot of its oil and gas from Russia?
        Turkey’s large internal market that Russia may have access to?

        Is it all or any of these? Is it anything else?

        1. John Jones

          Sorry I also forgot another possible reason.
          That Turkey controls the strait which Russia has to go through to reach the Mediterranean?

      2. Sanctuary

        As for what good is Greece to Russia, I would say it is useful as a means to divide and distract Europe as Russia ramps up the crisis in Ukraine. If Russia gave Greece a few billion dollars or euros to get through the next few months, the Greek government could drive a harder line in its negotiations with Europe simply by having the means to drag out the crisis longer. It’s an investment. As you have pointed out before, the ECB’s incentive is to make the negotiating space as short as possible so that pressure on Greece is highest and that the eventual deal is on ECB terms. If financial markets begin to think that Greece can plausibly get through the next 3 – 4 months while demanding better terms, market volatility will increase. As you also point out, that space in time would help other anti-austerity parties in other EU countries to gain greater popularity especially if it looks like Syriza is winning concessions. That combined with the increased volatility would bring even greater pressure on the ECB to move much closer to Syriza’s position than they are now willing. Consequently, a new and better deal would open up the can of worms of other peripheral countries demanding better terms. For those 3-4 months and beyond, Europe would be far too consumed with its own serious existential problems to be concerned with reauthorizing sanctions or in “meddling” in Ukraine any further.

  29. Min

    Here is a thought that seems farfetched, but who knows? Is Greece being scapegoated? That is a dynamic in human groups, but does it apply to nations? If so, then whether Greece stays in the Eurozone or not, “Don’t be like Greece,” and “In danger of becoming Greece,” will become established memes.

  30. Konstantin

    Why so serious? (c)
    Greece has a primary budget surplus, hence doesn’t need further support if it defaults. Pretty strong negotiating position if you ask me. ECB sees the imminent restructuring and is shielding itself from further losses in its already sizeable portfolio of GGBs
    All the best to Greeks, they have suffered enough already

Comments are closed.