Fog of Negotiations: Greece and Germany Make Friendlier Noises, Restart Talks, But Press Reports Diverge

After a collapse of negotiations over whether and how to resolve Syriza’s demands for a new deal with the Eurozone with the insistence of its counterparties that the new government adhere to the terms of its existing deal, technical discussions are set to resume Friday. The drop-dead date is Monday, since any extension or modification of the current so-called bailout needs to happen by February 28, when it expires. The lead time is necessary because the Germany Bundestag and the Finnish Parliament must approve any new or extended deal.

Greece has requested a new bridge facility with different terms in place, to carry it over while it hopefully works out a broader new set of arrangements with the Troika. There were widespread reports of unified opposition of the Eurogroup, which are the Eurozone finance ministers, prior to their emergency meeting Wednesday. English language reports painted a confusing picture of what transpired. On the one hand, they continued to depict the two sides as hopelessly far apart on their basic positions. Yet leaks while the meeting was underway indicated that progress was being made, only to lead to the apparent disagreement over a formal statement that led to an shambles at the end of the meeting and no plan to continue working-level talks prior to the Monday deadline.

Today, various media outlets reported the resumption of the talks for Friday, along with more conciliatory words from both Merkel and Tsipras. But there was considerable disagreement as to how much thawing had actually occurred.

The most optimistic readings appear to come from the Germany. My big hesitation about saying that is this conclusion comes from a long-standing colleague who on the one hand, is a very close and thorough reader of the German press, but on the other hand, has long believed that a deal would get done because the Troika side was always willing to offer some breaks on debt restructuring and relief on the fiscal surplus that Syriza was now required to meet (4.5%). I’ve only been able to read (through Google Translate) the stories in Frankfurt Allgemeine, and I can’t independently confirm all (or even much) of what he states. So I look to other readers of German newspapers to weigh in.

Separately, Syriza appears to be limited in how much it can retreat from its campaign promises, particularly given the forceful stands it has taken since it has been the lead actor in the new government. So the normal American “surely there is a middle ground when so much is at stake” assumption may not hold, particularly when both sides have little time to propagandize their voters into accepting a significant deviation from stances they previously depicted as inviolable.

Another fly in the ointment is Finland, which is more hard-line than Germany. The Guardian quoted Finnish prime minister Alexander Stubbs’ remarks earlier this week on BBC 4 (hat tip Swedish Lex):

“There are basically two options here. Number one is that Greece continues the programme and we give an extension to that programme. The other option, which I don’t like personally, would be a so-called ‘dirty exit’, where Greece would be on its own trying to claw its way back to the markets.”

My German-reading expert, in addition a Washington insider who has some knowledge of the US exchanges with Germany, contend that Finland won’t be able to stand in the way of a deal if Germany wants one. Operationally, that isn’t narrowly true; the other Eurozone countries would need to find a work-around. How that maps onto the evident need for Germany parliamentary approval for any deal is above my pay grade (ie, would the Monday deal need to have sorted out that fix? That introduces another large measure of complexity).

With those substantial caveats, let’s look at the contrast between the German press reports and the rather large span of readings in the English language press.

My German press reader says that the German media explained the apparent mystery of the eleventh-hour collapse of the talks yesterday. The claim that substantial progress was made is allegedly valid; Germany offered concessions on debt levels and on the primary surplus, and apparently on at least some of the infrastructure sales. Mind you, even before the talks started, the consensus view was that the Troika was prepared to offer debt relief, most likely through an extension of maturities beyond the current 30 years, as well as a reduction in the primary surplus required of Greece. So these changes in financial terms are not as significant in the way of concessions as they might appear, unless the Greeks win their sought-after primary surplus of 1% to 1.5% (from a current level of 4.5%).

The big bone of contention has been the Syriza demand that a significant number of terms in the previously-agreed structural reforms be waived or modified; the Germans, Finns, and Dutch in particular have seen that as tantamount to reneging on a deal and therefore not acceptable. It’s also problematic for all the other countries that agreed to austerity, such as Rajoy’s government in Spain, since if itty bitty Greece could get a break, why couldn’t Spain?

The Greek government, which rejected Troika bailout monitors visiting Greece, reportedly did agree to let them talk to Greek experts. However, the outtrade occurred over drafting a memo stating the position of the parties. The Germans and the Greeks were trying to square the circle of the Germans signaling that what was going on was consistent with their “we are not allowing the deal to be changed” with the Greek need to maintain that they were not giving ground either.

The German media has also apparently reported that Portugal is supporting the Greek position; note that this is inconsistent with a Reuters report as of 6:35 PM yesterday.

One development outside the negotiations was that the ECB increased the amount that Greece could use under the ELA by €5 billion to €65 billion. Business Insider read that as a measure to reassure the markets after the Eurogroup talks fell apart.

Now to the spectrum of opinion in the English-language press. Bloomberg, with Greece and Germany Are Working Toward a Compromise, was upbeat:

Greece and Germany are pursuing a deal on the conditions required to continue the Greek bailout as each side signals a willingness to compromise, according to government officials taking part in the talks.

Germany won’t insist that all elements of Greece’s current aid program continue, said two officials in Berlin. As long as the program is prolonged, they said, Germany would be open to talking about the size of Greece’s budget surplus requirement and conditions to sell off government assets.

For its part, Greece is prepared to commit to a primary budget surplus, as long as it’s lower than the current 4 percent of gross domestic product, according to Greek government officials. Prime Minister Alexis Tsipras’s coalition also might be willing to compromise on privatizations, one of the officials said. All the officials asked not to be named because the deliberations are private and ongoing.

The Wall Street Journal, in Greece, EU Strike Friendlier Tone After Hopes of Quick Deal Are Dashed, was more measured:

The friendlier comments came after an unsuccessful meeting of eurozone finance ministers Wednesday night…

At Thursday’s news conference, Mr. Tsipras dodged the question on whether his government could request an extension of the program after all—a move that he has so far ruled out, claiming that the budget cuts and economic overhauls it entails would drive his country’s economy further into crisis…

Germany Chancellor Angela Merkel , who leads Europe’s biggest economy, said that her first meeting with Mr. Tsipras was “very friendly” and that both of them expressed a willingness to work together.

But Ms. Merkel made few concessions, saying Greece either has to request an extension for its bailout or demonstrate that the conditions attached to that program can be implemented by the end of the month.

“Those are the only two possibilities,” she said.

Earlier Thursday, Mr. Tsipras held talks with Dutch Finance Minister Jeroen Dijsselbloem, who presides over the regular meetings of his eurozone counterparts, in an effort to patch over some of Wednesday night’s disagreements. After that talk, the two agreed that technical work would begin to define “common ground” between measures mandated under the existing bailout and the plans of the new government in Athens….

Finnish Prime Minister Alexander Stubb said the agreement between Messrs. Tsipras and Dijsselbloem was a good sign. But he stressed that there was still distance between the two sides. “We’re 18 countries that have commitments—and then there’s Greece, which has demands,” he said.

And the Financial Times, with Merkel keeps up the heat on Greece, emphasized the distance that needs to be covered:

Angela Merkel, German chancellor, reiterated her government’s hardline stance on Greece’s options for a fiscal rescue, saying Athens could either complete all the requirements of its €172bn bailout by the end of the month or request an extension of the programme beyond its February 28 expiry.

Ms Merkel’s stance, her first public comments on the intensifying Greek stand-off after meeting the country’s new prime minister Alexis Tsipras at Thursday’s EU summit in Brussels, continued to shut off Mr Tsipras’ preferred path: a new, revised bailout agreement with less austerity demands than the current programme…

In a sign the two sides were making incremental progress, Mr Tsipras and Jeroen Dijsselbloem, the Dutch finance minister who chairs the committee of his 18 counterparts, agreed to start technical negotiations between Athens and its international creditors on a way forward…

But Mr Dijsselbloem struck a cautious note, saying that, while it may be possible to begin the technical work of determining which parts of the current bailout the Tsipras government would agree to continue and which reforms it seeks to scrap, reaching a political agreement on Monday would be more difficult.

“I am very cautious on the political side,” Mr Dijsselbloem said. “It is going to be very difficult. It is going to take time. Don’t get your hopes up yet.”

Note that I ran the pink paper’s account account by my German press watcher, and he was dismissive, contending that Merkel was setting herself out to be the rescuer of the Eurozone, and was separately also getting pressure from the US. He puts the odds of a deal at 60/40 or even 65/35. Even though he is normally quite cynical, I don’t see him taking seriously enough the possibility that all the leaks to German journalists about how accommodating its government has been is a no-lose proposition for Merkel: it allows Merkel (in fairness, with some justification since Germany is the linchpin) to take credit if a deal gets done by Monday, and to pin blame even more on the Greeks if the two sides fail to come to terms.

Again, between the fluid nature of the situation and the inevitable spin-doctoring by all parties, it is hard to get a reading on the state of play. We will likely get more leaks over the next few days as negotiations progress. Readers in Europe are very much encouraged to provide updates in the form of news reports and germane analyses in the comments section.

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  1. craazyman

    mama take these debts off of me
    I can’t bear them anymore
    slavin my life for the ECB
    feels like I’m knockin on heaven’s door
    knock knock knockin on heaven’ts door
    knock knock knockin on heaven’ts door
    knock knock knockin on heaven’ts door
    knock knock knockin on heaven’ts door

    momma put those bonds in the ground
    Cause we can’t pay them anymore
    that long black cloud is comin down
    feels like we’re knockin on heavens doooaaaah (that’s Axl Rose)
    a knock knock knock on heaven’s doooahhhhh
    hey hey hey hey (that’s also Axl Rose, Bob Dylan didn’t sing it like that)
    a knock knock knockin on heaven’s dooahhh
    knock knock knockin on heaven’s door (back to Bob “Takin it to the billionaires in AARP Magazine” Dylan)
    knock knock knockin on heaven’s door
    knock knock knockin on heaven’s door

    1. Jim Haygood

      You should have heard ol’ Diesel Boom in a Brussels karaoke bar after that 8-hour meeting, delivering his rendition of Sympathy for the Devil:

      I shouted out
      Who killed the Grecians?
      When after all
      It was you and me

      Pleased to meet you
      Hope you guessed my name

      The Germans and Finns were laughing themselves to tears.

      1. craazyman

        I tried to mathematically calculate how much money they could raise if they tore down the Acropolis and sold little pieces as souvenirs, like Moon Rocks.

        I figured if they sold 1 billion pieces at $350 each they could wipe the debt slate clean. The problem was calculating whether the rock volume in the Acropolis could make 1 billion pieces.

        Surprisingly, I determined it could, although I can’t now recall how I did this. I think it was mostly calculating in my head and on a napkin with a felt pen. That seemed optimistic — they could sell the Acropolis and be debt free — until I realized selling something for $350 each to 1 billion people would be challenging.

        Hopefully they’ll work out a deal of some kind. Actually, they could print money at the ECB and buy the Acropolis with that. Then they could sell it maybe at Sotheby’s auctions, in bigger pieces. Somebody just paid $300 million for a Gaugin painting. I bet they could raise $300 billion if they tried. They might even make a profit!

        1. hunkerdown

          The cube root of one billion is one thousand. Assuming you can saw along the minor dimension first with a large-diameter saw, a 1/16″ kerf × 1000 = 62.5″ [1], there’s still 40′ of height to divide into ~1/2″ slices, each to be divided into a million or so chunks. Taking only 32 of the columns at their widest (missing, fallen columns on one hand are at least compensated by the remaining roof and cella on the other), each slice is ~720 ft², which divides into 7mm x 7mm x 12mm cubes (neglecting the thinner kerf now that we’re dealing with a thin sheet).

          But there are two grand problems with that grand plan: first, that’s the Pythagorean way of reckoning, isn’t it? Wouldn’t it be much more festive to do it Archimedean style? Just dunk the thing in a big bathtub and measure the overflow? Second, and possibly more importantly, what happens if one billion people join and put it back together again, like a giant 3-dimensional jigsaw puzzle? Dividing magical objects into a relatively small number of pieces has a checkered folkloric history, you know, and unintended consequences are the rule, not the exception. They might rather pulverize it and sell the powder in vials, at least for the plebes (also that they may tangibly understand their place in the order). In the event there’s unsold inventory, those could then be repacked with blackface and bottle-bottom glasses and sold as Colin Powell Play Sets at gag shops (made with real democracy!).

          The possibilities… gods it almost but not quite makes me want to wear a business suit…

          [1] Yes, yes, isn’t it apropos that I’m calculating this in Imperial units…

  2. WanderingMind

    A couple of notes. In this video Sony Kapoor, who seems to be familiar with both Yanis Varoufakis and German politics, points out (at about 10:00) that there is a Hamburg state election on February 15, in which a far right party seems to have some chance against Merkel’s party. So, according to Kapoor, the Germans are not going to make any truly conciliatory noises until after that election.

    Secondly, as Yves points out, the ECB has raised the ceiling on the ELA for Greece which Kapoor, in the video linked to above, says can serve as the bridge for payments from Greece which are due between the end of February and May. If that is the case, then there are some local elections in Spain before May in which Podemos may put up a strong showing, putting further pressure on the EC to come to terms with Greece, and in any event, there is more time available to reach some kind of compromise.

    Thirdly, although this video of Yanis Varoufakis is a bit dated now (aired on February 5), it contains a couple of interesting statements. Re: the Greek debt, Varoufakis essentially says that he doesn’t care what they call it, any alterations of the term or interest rate or both of the current debt due from Greece is a haircut. This indicates that he is more focused on substance than form and will not stand in the way of which label is put on the settlement of that issue. He also makes the point that Greece is a part of Europe and this is a European problem. Like Tsipras in a different context, he states to the interviewer that there is only such intense interest in what happens to Greece because Greece is part of the Eurozone. This, to me, indicates Syriza’s consistent and deep commitment to remaining in the Eurozone and the EC, both because it is part of their mandate and because stubbornly staying in the Eurozone is the best way to force their “European partners” to come to their senses and act rationally. In that sense, it seems to me that part of Syriza’s strategy is to be the squeaky wheel in Europe until they get something they can live with.

    1. Sibiriak

      Yes, Varoufakis is concerned more about substance than phraseology. I’ve noticed he uses the term “euphemisms” often.


      “Debt will be rendered sustainable, even if we replace haircut with euphemisms and swaps.”

      “If we will need to use euphemisms and financial-credit instruments and mechanisms to take Greece out of debt bondage, we will do it. There is only one meaning. Greek national debt will stabilize, open the growth perspective and Greek people will finally be able to breathe.”

      1. Jeff W

        I tend to view Yanis Varoufakis as saying that, if he and Greece are going to be forced to play games, he at least won’t abide by one of the game’s cardinal rules: that playing the game itself is unmentionable. It probably drives the other leaders of the Eurozone to distraction.

        I don’t view that dynamic as Varoufakis being driven by his own personal penchant to speak honestly and forthrightly (although there is that). It’s more like a therapeutic intervention to compel the parties to deal with the stark reality, rather than continuing on with their comforting, self-serving delusions, while, at the same time, getting the best deal he can for Greece.

  3. Maria

    There will be a deal. There will be no Grexit. Not because of what the German press writes (I can read German), but because European Commission, the ECB, France and Germany have invested to much in the euro. They are too afraid a Grexit will put the whole integration-project in danger, because of contagion to Italy, Spain and so on. The Greeks don’t want to leave the eurozone either. They want to have their cake and eat it too: stay in the euro AND debt relief. And they are gonna get it. The trojka is prepared to extend the loans to eternity en drop the interest rate to zero or close to zero. They said so last year. The only thing Greece has to do in exchange for this ‘debt forgiveness in all but name’ is help the other countries to keep up the pretense for their voters that it quacks like a duck, walks like a duck, looks like a duck, but is nonetheless no ‘debt forgiveness’. Varoufakis and Tsipras almost blew it by telling the truth: i.e. Greece is bankrupt and will never repay its debt. They just have to pretend to fulfill the trojka demands, pay lip service to the adjustment programme now and keep cool till the summer. When the debt forgive… pardon: ‘relief’ is in the bag, Greece can negate all their hated promises to the trojka again, raise salaries, hire people etc. Just play along till the summer and it’s done. And the inevitable collapse of the euro is avoided for another year or two – who knows? But collapse it will sooner or later. Maybe just after the United States of Europe, the main goal of Juncker and Draghi is established. But it will never hold. Their is no European people of culture, it doesn’t exist.

        1. Yves Smith Post author

          The reason I remains skeptical is that a bridge agreement outside the current framework requires negotiating a lot more terms. There are only basically three days and the two sides don’t agree on basic principles. My reservation is the Americans looking at this carry American assumptions about negotiating, plus are treating this as only a two party negotiation, when there are more moving parts.

          Basically, the message remains that the Greeks have to give a lot of ground. They have said so far that they are not willing to do that. Of course, they could at this late juncture, but it would be a big change in their position.

          1. beerdignado

            I understand your reading of the time constraints, and it’s logical. But just like an extra 5 billion could be magically found to prop up the greek banking system, time will be found. The deadline will keep shifting, as will the goals. If it was to break, it would have. But it hasn’t, even though Greece hasn’t compromised. Something they said or did has made the grexit option realistic for the other parties.

            That is assuming my reading (posted below) is accurate. And yes, I will admit it’s also what I hope. I’m just trying to read popular sentiment. Even here in relatively (and no more than that) calm Belgium the Syriza thing is giving people ideas. All my connections are going “twoing” at once. The EU better think twice about all playing ordoliberal.

            You can only maintain ‘there is no alternative’ so long. A bubble once punctured…

            1. Yves Smith Post author

              No, they can’t extend the deadline in the Eurozone framework. This is an Eurozone bailout and the facility expires on the 28th. They could do something different after that, but that would actually be harder since they’d be starting from more of a blank slate (which mechanisms/organizations?) and Greece probably needs the dough by the end of March at the latest. The FT tonight concurs with this reading, that you can’t extend this deal beyond Monday (as in Monday is a hard drop dead date given the need for parliamentary approvals in Finland and Germany), you have to go on to a new structure/lender, most likely the IMF.

          2. Maria

            I agree with Beerdignado that the deadline will keep shifting back. Eurogroup-chairman Dijsselbloem has said the deadline is Monday for practical reasons, but that is just a ploy to put pressure on the Greeks. When there is no deal on Monday, some way or another will be found to give Greece extra time. For example: ELA-credit to the Greek banks can be extended indefinitely. This means that the Greek banks can buy Greek sovereign bonds indefinitely, OR simply give the Greek government loans to keep it afloat indefinitely. The ECB will NEVER pull the plug on Greece. One reason is that Draghi wants to keep the euro alive at all cost. He is the one who has said that the euro is ‘irreversible’. Of course this isn’t true, but it is a sign that the ECB really will do ‘whatever it takes to preserve the euro’. When the crisis hit its peak in 2012, the ECB even flew airplanes with euro bills to Athens, to keep the banks alive. ELA-credit peaked at more than 160 billion euro’s then, that is two thirds of all the governments loans the Troika has given to Greece. ELA is ‘just’ at 65 billion now, so there is some room for more. I think that Varoufakis en Tsipras are serious about not giving in to the Troika demands, BUT their voters want to stay in the eurozone!!! 75 % of the Greeks said in a January poll that they want to keep the euro ‘at all cost’. This means that Tsipras and Varoufakis have to break at least one of their campaign promises: avoiding a Grexit OR breaking with the Troika.

            1. alex morfesis

              Mutti will give Syriza more than they are asking for…more time (9 months) more money(2 billion more euros)…BUT…she will insist that whatever 70% of old agreement Syriza is agreeing to will have to have legislation to HER satisfaction by the end of the month…period end of story…she will agree to “suspend” the other 30% and be willing to allow Syriza to get “traction” BUT…will insist on specific obtainable goals from Syriza within the 9 months and if they hit those agreed goals, THEN she will permanently suspend the last 30% subject to renegotiation within another year…she will give them enough rope to hang themselves, is how she will sell it…this will push out the agreement far enough that the rest of the weaker nations (spain, italy, portugal, ireland) will not know how it will play out and will not be able to ask for much change since there is no official change in place for about a year from now…kicking the can down the road and she then hopes Syriza does a Lula and she looks like a genius…

            2. Yves Smith Post author

              Please see the comment above. You don’t seem to get that there are institutional and procedural rigidities here. This is not like US in the crisis, where you had three like-minded men who among them controlled the central bank and the Treasury in the US, which was all that was needed. To extend the Eurozone facility requires approval by 18 governments by the 28th, all 18, and the Finnish and German governments need a deal in hand by Monday evening (well, by the start of business Tuesday AM at the very latest) to get Parliamentary approvals. Those are required and neither government can finesse them

              Now they could try to get Greece a different funding source if this one fails, but that is a new deal, starting from scratch and probably not done by the Eurogroup at all.

    1. Jim Haygood

      Germany’s DAX stock index reaching a record high today (over 11,000 for the first time) supports your interpretation.

      So does the absence of overt bank runs in Greece. Evidently, both Greeks and Germans think a deal is going to be done.

      Probably the biggest issues in completing ‘Program 2.1’ are semantic, so that it looks the same as Program 2.0 in Germany, but in Greece Program 2.1 can be presented as offering big concessions.

    2. Santi

      They just have to pretend to fulfill the trojka demands, pay lip service to the adjustment programme now and keep cool till the summer.

      This is actually what Varoufakis does not want. If you watch the Varoufakis video, quoted by WanderingMind above, it does not just contain a couple of interesting sentences, he it also telling that he does not want to play this “pretend” game. He is planting a different “meme” in the minds of austerian-bitten Germans and other Europeans. I particularly like his “canary in the mine” metaphor: “we are the first to die” but “we are not responsible for the toxic methane”…

      Beyond a short term agreement, that I’m sure Tsipras and Varoufakis will settle for when they can guarantee less suffering for Greek families for a couple of years, what is needed is a solution to the imbalances that the Euro is bringing. And he knows that keeping this game brings us closer to a bigger collapse. This is why he tries to seed different visions into us.

      How much it will take for messages like Varoufakis ones to pervade Europe? In Spain what they call “antisistemas” (meaning people that questions neoliberal messages from PP and PSOE) are flourishing slowly after the 15-M/Occupy movements as unemployment, evictions and misery extend and the official responses reveal their emptiness. I’m not so sure about Italy, France or Germany. Typically the changes in perception spread slowly but take a hegemonic position quickly after they surface.

      What Europe needs is not so much an extra bit of space to breath for one more year but changes in the policies: the Euro will keep in collapse risk, and the peripheral economies contracting and debts increasing fast while there are no fiscal transfers to offset the commercial balances, i.e. while there are no countercyclical “federal” policies such as unemployment or pubic housing ones.

      I don’t agree with you that Europe has no future. It is neoliberalism and its messages of selfish individual destiny that has no future.

  4. wbgonne

    Despite warm receptions for Syriza officials in Italy and France last week, those governments held the party line and backed the German and Troika officials’ insistence that Greece remain on the program of bailout, austerity, and debt payments. But this too is politically untenable in Greece, where the austerity-crippled population strongly favors ending a program that has seen suicides, homelessness, and poverty skyrocket.

    Syriza sees a way out of this paradox. Consider the statements by the party’s other prominent economist, Costas Lapavitsas in The Guardian: “first, the forces of austerity currently strangling Europe should not be allowed to crush the Syriza experiment, or turn it into a moth-eaten compromise; second, Syriza should make solid and meticulous preparations for all eventualities, a point that is well understood by many within it.”

    Having expected harsh resistance and an onslaught of veiled threats from the financial community, it would be naive to imagine Syriza hasn’t prepared for this exact scenario. If Varoufakis’ proposals, which are are viewed as reasonable by most Greeks, are rejected by EU officials, more Greeks will consider leaving the European Union a necessary evil. At that point, if a Syriza government still exists, Greece can threaten to leave the union. That’s when the German government’s mettle will be tested. Can the European Union afford a “Grexit” and the potential implications for Spain and other austerity-ravaged countries? It should be noted that in his book Crisis in the Eurozone, Lapavitsas has supported a Greek exit from the Eurozone and has argued that austerity throughout Europe has been counterproductive.

    A Syriza government that remains in the union poses a problem for Germany and the United States on another front. Syriza has made it clear that they will veto any attempt to ratify the Trans-Atlantic Trade and Investment Partnership, an international trade agreement that both Germany and the United States want urgently. At that point, does the European Union want Syriza to capitulate on a debt if it means the loss of the TTIP? Perhaps a Greek exit benefits the EU on that front. But can the EU afford to let Greece out if it means destabilizing the currency union further?

    1. beerdignado

      Syriza wants to veto TTIP !? Now that is interesting, I hadn’t seen that though I follow TTIP and Greece quite closely.

      For the record, my reading of the fog:
      Varoufakis has given a dire reading of the current state of affairs (“humanitarian crisis”) to his peers. It seemed to echo. In order to get out of it, he has proposed “modest proposals” which are appelaing to at least half of his peers. he has shown willingness to use euphemisms as needed, but nothing more. Tsipras then added UNwilligness on euphemisms. Both of them are prepared to grexit, even whilst making clear they don’t favor that route. People discussing based on NUMBERS how bad that would be for Greece underestimate what 5 years of racial profiling, stigmatising and a full blown depression have done, EMOTION-wise. Greek people have established local alternatives (like the “potato movement”), have a strong sense of family still, and are ready, I think, to take hardship and be free instead of hardship under oppression. The sympathy demonstrations in Greece AND Brussels AND Madrid AND London have been totally undereported.

      We will not know, but I think Merkel has seen the fist under the velvet. Syriza is not buckling and they will get a substantial renegotiation.

  5. Paul Jonker-Hoffren

    Yesterday the Finnish prime minister Alexander Stubb told Finnish YLE News:
    “I won’t speculate about this question [Grexit or not]. The ball is with Greece now. We have 18 Euro-countries on a united front – North, South, East, West. We are fair towards Greece and we will continue in an atmosphere of fairness, as long as Greece keepts on consolidating.” and in the same interview: “We have very little patience with Greece right now.” ( Similar message here:

  6. fosforos

    One thing not to worry about is the Bundestag. Any agreement acceptable to Syriza will be strongly supported by the Greens and Die Linke, and the Social Democrats would have no choice but to accept it. So there you have a Bundestag majority without a single CDU or CSU vote.

    1. Oregoncharles

      You’re saying the left already controls the Bundestag, if they choose to?
      So why is Merkel PM? And wouldn’t it humiliate her to pass something like this without her own party?
      I know Die Linke and the Greens do control one state – in former East Germany, at that. So Merkel has a lot to worry about – as you’re pointing out, the last election didn’t go well for her.

  7. wbgonne

    Per Business Insider:

    Greece’s finance minister is making headlines again today. He’s comparing Greece’s international bailout conditions to being waterboarded in Der Spiegel, one of Germany’s biggest news magazines. Here’s Varoufakis describing how Greece’s creditors, the European Commission, European Central Bank and IMF (informally known as the Troika) treat the country’s economy:

    “Shortly before the cardiac arrest, we are granted a few breaths of air. Then we are put under water again, and the cycle starts anew.”

    The bailout Greece has been getting allows it to keep its public finances flowing, but also includes severe austerity conditions, as well as structural reforms like the privatisation of government-owned assets. When Spiegel said there were good people working at the Troika, this was Varoufakis’ response:

    “There were also very good people at the CIA when waterboarding was used against their will and therefore were in a terrible moral dilemma.”

      1. BillC

        But the FAZ seems to be all-in with the neoliberal, contracts-are-sacred persuasion — at least judging by what I’ve long understood to be their tilt, as well as the totally moralistic spin of their Web site’s lead opinion column around 8 AM EST this morning (now much less prominent on their home page; maybe they rotate). I think that taking the FAZ’s opinion as the opinion of German decision-makers at large is like treating the WSJ as an accurate Washington weathervane: probably accurate for a significant, but not necessarily decisive, faction of the oligarchy (I hope!).

        1. kathi

          FAZ is ordoliberal, pacta sunt servanda is a popular sentiment in Germany and every other part of the world that has got its sh*t together. Sure, you can renegotiate pacts, but this requires reasonable actors, not poopslingers.

          1. wbgonne

            FAZ is ordoliberal, pacta sunt servanda is a popular sentiment in Germany and every other part of the world that has got its sh*t together. Sure, you can renegotiate pacts, but this requires reasonable actors, not poopslingers.

            I’ll take the “poopslingers” over the purveyors of poverty, misery and death. YMMV. Yes, we know all about the sanctity of contracts, at least when said contracts benefit the neoliberal plutocrats. Then they really are sacred. Otherwise, not so much.

            And just to be clear (because I can’t believe you mean this): are you suggesting that Germany would relent if only the Greeks asked nicely?

            1. kathi

              “Neoliberal Plutocrats” is a often used but empty buzzword, if you look at the structure of the german society the accusation doesnt stick very well.

              “And just to be clear (because I can’t believe you mean this): are you suggesting that Germany would relent if only the Greeks asked nicely?”
              Oh dear, far from that, being not very well liked is kind of german thing, they surely can take it and I do not have the impression anyone is bothered at all. I suggest that insulting caricatures play exactly into the narrative of Greeks as unreliable, shortsighted and overly emotional manchildren.

              1. wbgonne

                An empty buzzword? Neoliberal plutocrats run the world, including Germany. The neoliberal plutocrats are detroying the lives of countless people in Greece, throughout Europe, and around the world. I wish they were empty buzzwords but they are not: they are greedy, manipulative destroyers.

                I am not talking about the German people now. I am talking about the people who rule the German people, those who for their own selfish ends manipulate the German people into considering the Greek people inferior humans deserving of suffering and punishment.

                But returning to the beginning: please explain how the “renegotiation” of “the pact” would proceed if only the Greeks stopped “behaving as unreliable, shortsighted, and overly emotional manchildren.” I suspect what you are actually saying is that the Greeks should accept their miserable fate and shut up but perhaps I am mistaken.

                1. Matt Pappalardo


                  You may be wasting your time since kathi doesn’t appear to understand the nature of the current crisis in Europe. It’s as if she has never read any of the posts or comments at Naked Capitalism. She certainly isn’t backing up her strong opinions with evidence.

              2. skippy

                Ordoliberalism is Hayek’s Faustian bargain between the bi polemic world view some philosophers held as a truism, yet still heavy with Lamarckian undertones hidden in the obtuse verbiage.

                Neoliberal Plutocracy is just the Lysenkoism evolution of that arrangement.

                Skippy… at this rate of progression Darwinian/Mendelian biology will rendered life unacceptably brutal way… Darwinian Awards for the entire species.

          2. gordon

            I don’t see how the German or Brussels attitude can be portrayed as defense of the sanctity of contracts when at the same time they are talking (and acting) to bail out the desperate Ukrainian regime which is up to its neck in debt to Russia. Obviously some debts are more equal than others, and the idea that all debts (or all contracts) should be regarded as “sacred” is therefore undermined by their own actions.

            1. beerdignado

              Glad to see I’m not the only one who though the quick deal on Ukraine and the tough talk on Greece don’t go together.

              Except, of course, if one sees a Ukraine “government” willing to bend over to land grabs, shale mining rights and the usual IMF asset stripping doctrine versus a Greek government that is explicitly halting these practices.

              Big Money rules. Greetings from Victoria Nuland and Yats!

        1. Matt Pappalardo

          Well, that has been the case for as long as I can remember. Iraq War cheerleaders and purveyors of economic nonsense continue to be employed at numerous news/current event publications, and invited onto cable news shows to “enlighten” us. However, it’s far more concerning that politicians still take them seriously…

  8. Santi

    I think we should not forget that the rest of the peripheral countries are still playing “extend and pretend”, and they will suffer a lot internally if they support Greece positions. See how GIlles Moec says, around 4:00 “Spain is actually allowed to drift, on its fiscal targets, year after year”. Earlier he said that the problem for the other countries is how to “sell to their public opinions” that they have not asked for different terms. BTW, this is what everyone accuses now the Greeks, to have done some make up to numbers in the past. Will they say the same of this Spanish “drifting” of the deficit figures in two years, when Spanish debt is 110%, the economy is completely destroyed and all the magic creative accountancy tricks (accounting black market economy, makeup of unemployment…) that Montoro is doing are notorious beyond Spanish “antisistemas” and Social Networks?

    Greece position is very difficult, as the other peripheral economies and the northern ones are still in denial, and the markets are also pretending all is going “according to plan”, while silently “drifting” on the agreements. Greece has been paying more than 7% GDP on interests, with their “deal they could not refuse”. No wonder that they want to walk away from the game, as they cannot “pretend” anymore and keep drifting their numbers with the “men in black” around…

    I think that “within the present framework”, and given the deflation/depression perspectives, Greece will be better off defaulting, even if Europe forces a subsequent Grexit. Spain will be in the same position in a couple of years, except that earlier gains by the anti-neoliberal parties can slightly change the dynamics. I can’t see how the situation will get better “within the present framework”, as Mrs Merkel would put it.

  9. Paul Jonker-Hoffrén

    One reason for the stiff opposition by Finland is the Finns party. Just last week the government survived a vote of confidence in Parliament. The Finns party will not allow to see Finnish “tax payer’s money” to go o Greece or to go up in smoke. Especially the Social-Democrats are in a bind, because abroad they have the reputation of being ultra-tough (through former Finance Minister Jutta Urpilainen) while domestically they have to defend themselves against the Finns saying they throw money in a black hole. The new FM is an ex-labour union leader but there have never been true domestic prospects of stimulative fiscal policy. And in the run-up to elections in April no party will like to be seen as soft towards the Greeks. This means that after April the Finnish stance could change but not before…

    1. alex morfesis

      finland is in bad economic shape…half the economy is government expenditures, the total external debt is 200% of the economy. As to Jutta the Kindergarten teacher daughter of a political hack who was the finance minister, her “hardline” did nothing for the local economy and her party is siting at less than 10%. The Finn Party is not the problem for Stubb and Company, its the Center Party led until recently by Former Prime Minister (Mrs) Mari Kiviniemi, who is currently the Deputy Secty General of the OECD…and in April they will replace Stubb who will lose and explains why he is so insane about not looking weak, in hopes of stealing Finn Party voters…

      but with the OECD openly willing to help Hellas…well…do the math…Finland is ruled by the Center Party after April elections…

      game set and match…
      well done Prime Minister Tsipras…I take back all my concerns about your leadership…very very well done…

      1. Paul Jonker-Hoffrén

        Yes Alex I think you are right. After the debate last week there was a lot of criticism for Mr. Soini for not proposing solutions and just complaining. I am working on an analysis of the debate. The real threat to Stubb is indeed the Center Party. But although more euro critical I don’t know if they’d be more lenient towards Greece. At least they acknowledge the euro doesn’t work.

  10. blub

    To look for hard information in the German press is currently a very futile attempt. To quote from today’s eurobriefing (Wolfgang Münchau):
    “The German papers are currently as hostile towards Greece as we have ever witnessed.”

    I confirm this. Holger Steltzner (Economics editor of FAZ) has just written a comment calling for Grexit arguing the eurozone should not give in to this hooligans and has basically gone completely anti-euro.

    BILD has run several anti-Greek stories the last weeks. One important addition regarding BILD, which is typically overlooked overseas: BILD is not only a useful propaganda tool to promote certain views but it also works as a backwards channel: It is also regarded by many politicians as the paper which represents (and informs them of) the “real” views of “ordinary” Germans, so its editorial position does have a lot of influence on politicians.

    I can only second what has been said above that it is very unlikely that there will be a deal before Sunday’s election in Hamburg. Merkel’s party (the CDU) does not have a chance (polling around 20%) but it would be a small but important political win for Merkel if she could keep the rightwing-populist AfD (currently polling at the 5% threshold) (or even the FDP (economic liberal in the European sense) (polling at 6%)) out of the parliament.
    If the AfD does not enter the parliament, the CDU can claim that it is either an East-German or an already declining phenomena and Merkel then has more political space for concessions in the EU.
    Maybe I do exaggerate the influence of the Hamburg elections but they typically played an important role in Merkel’s decision process in the past.

    The German parliament represents no obstacle what so ever. If Merkel agrees to a deal, it will go through the parliament with CDU (and SPD and maybe the Greens’) votes. A CDU chancellor securing votes with just the centre-left parties will not happen since it would go against 70 years of German parliamentary decision making. But it is also not necessary, the CDU is still a highly top-down organization. There will be some quarrels from conservatives and economic liberals but they will vote along.

    (P.S.: If you want to get an overview of how the parties are currently polling in Germany look at for the federal
    and at for the state level.

  11. PPanter

    To look for real information in the German press is utterly futile, FAZ is currently acting a tame “protest” paper – but not really protesting, rather providing the growing discontent amongst the readers about the numerous bailouts a way to decompress…. Spiegel, Sueddeutsche (Munich), Welt had nothing worth quoting this morning, ZEIT did not have anything on Greece. All these guys are basically trying to square the circle between the German governmernt – Merkel committed to “compromise” yesterday, i.e. Germany will pay – and the part of the readership who understands how detrimental this is to Germany will be up in arms, but this is a minority, an unorganised one into the bargain. Merkel has a 80% majority in parliament – voting will not be an issue. They just have to wait till Monday, as there is a federal vote in Hamburg this sunday, and after that, the wasting of German resources for a futile euro project will continue for the time being.
    And on another note, most parts of Germany are busy celebrating “carnival”, so none of these fancy-dressed and very drunk people will care what is happening before Wednesday (Aschermittwoch), when the party is over…. If you want quality report’s in German, look for the big Swiss newspapers….. they have been candid a while ago, not so much recently. Do not waste your time on the German press – not really worth it at this point in time.

  12. Dirk77

    I was not going to comment about this Greek issue because I think everyone will figure out things, if they haven’t already. The austerity is BS article linked to yesterday is a good example. However, I think I need to say something about one aspect. It is this: this talk of Greece or any country about working out their debts is wrong. This is just working with their enemies economic hit man/neoliberal free market playbook. By the playbook I mean: 1) Get corrupt gov heads to guarantee private debts. Citizens are now on the hook for money they never received in the first place. Or 2) Gov heads get a loan, which they then take for themselves, leaving the debt to the regular citizen who didn’t benefit from the loan in the first place.

    Why are such debts sacrosanct? Why? My finance minister goes berserk and guarantees the loans of everyone in the galaxy till the end of time and I’m on the hook for it? This is insane. Where does a four year elected term, if that, allow you to make such deals? I can see the future coming and I might as well tell you all of it what it is: Gov guarantee of private debts will never be allowed and gov receiving loans will be allowed only if the loan is regarded as one to a relative: it would be nice to get paid back but don’t expect it. So Greece: default, default, default. Spain: default, default, default. Everyone country in the world: default, default, default. If you don’t have the backbone for it, I’ll do it. You can reach me at this blog. I will be mowing the lawn tomorrow morning, but am free after that.

  13. Duarte Guerreiro

    Portugal is not supporting Greece, both the Prime-Minister, the President and other members of government have made statements (mixed with bold lies, such as Portugal having been one of the biggest lenders to Greece) that amount to “contracts are sacred, we ate our portion of shit silently and the Greeks have to do the same”.

    1. kathi

      Poorer Members like Bulgaria, Mazedonia and Albania are equally reluctant to support a populace far richer than themselve in becoming even richer…. or at least the ship-owning and taxevading part of it.

      1. maranzometrico

        None of the countries you quoted belongs to Euro area and a couple of them (Macedonia and Albania) don’t even belong to European Union .

  14. docg

    Look! Look again! Look everywhere, so that the matricide will not escape by secret flight, with his debt unpaid!

    Yes, here he is again with a defense; his arms twisted around the image of the immortal goddess [Athena], he wishes to be tried [negotiate] for his debt.

    But that is not possible; a mother’s blood [Merkel’s “generosity”] upon the earth is hard to recover—alas, the liquid[ity] poured on the ground is gone. But you must allow me in return to suck the red blood [pound of flesh] from your living limbs.

    May I [Merkel the Fury] feed on you—a gruesome drink! I will wither you alive and drag you down, so that you pay atonement for your murdered mother’s [Merkel’s] agony.
    . . .

    We [the Troika] claim to be just and upright. No wrath from us will come stealthily to the one who holds out clean hands [fat checks], and he will go through life unharmed; but whoever sins, as this man has, and hides his blood- [debt-] stained hands, as avengers of bloodshed [default] we appear against him to the end, presenting ourselves as upright witnesses for the dead[beat bankers].

    “The Eumenides” (“kindly ones”)

  15. Alan

    Hey everyone, long time no see. Alan here in Greece. There was a non-paper “leaked” by the Greek government this evening which reports on the negotiations so far. I think it is useful in assessing the Greek side in the negotiations and how they see things up to now. Point 3 in particular is important as a critical bluff was called. Here is a rough google translation which I quickly edited a bit wherever the meaning was either lost or turned upside down (not a clean job but sufficient I hope, apologies):

    “Athens Greece
    In a non-paper of the government published by the Athens News Agency, it was revealed by government officials that “in the Eurogroup Wednesday there were threats that if we would not sign the extension of the Memorandum then there would be no further consultations.”

    In informal note of the Government presents ten points with political and technocratic content with which evaluates positively the negotiations in recent days between government and lenders and identifies broadly and directions of work to be done until the next meeting of the Eurogroup Monday.

    On 8pm meeting the Governing Council to the Prime Minister Alexis Tsipras to inform members of the government on the progress of negotiations.

    According to the Government, the technical committees will immediately begin their work will prepare two documents, one for each side, through which both sides can immediately see what points of disagreement and agreement on what and which to be negotiated.

    The Government states that it has not reached all the way up to an agreement, but there have been serious steps.

    In particular, the valuation of the government is the following:

    1. The Government is fully satisfied and optimistic of the work in Eurogroup and Summit. We continue with sobriety and determination. Within 20 days the new Greek government managed to achieve at European level what could not be done by three governments in five years.

    2. A key conclusion is that the contacts made throughout the previous period, of the Greek government at the level of Heads of State, but also finance ministers, as demonstrated in practice, brought results. This is evidenced by the fact that the attitude of the countries visited by the Greek Prime Minister was supportive of the Greek government at the Summit. In particular, the leaders of France, Italy, Austria, Cyprus and Belgium kept a positive attitude. Therefore, diplomatic contacts preceding Brussels was not of communicative character, but had political substance.

    3. In the Eurogroup on Wednesday there were threats that if we did not sign the extension of the Memorandum then there would not be any further consultations. Many accused us that we chose the rupture, because we refused to sign the joint communication plan. [However], [b]y the next morning, the movement of Greek government proved correct. The same Mr. Ntaiselmploum sought contact with the Greek prime minister and said that talks can begin on a technical level to find common ground with the Greek government positions. We did not sign, [yet] we have already begun discussions on transition from the Memorandum in our program. On Monday, of course, will meet and the Eurogroup, while the technical ranks Greece and the EU, have already begun cooperation on Friday morning, the processing of the positions of both parties.

    4. Technical echelons do not negotiate or criticize positions. Record the points of convergence, identify deviations. On Monday, that is, the Eurogroup will have two, equally and equitably, texts – one of the Greek side and one of the European Commission. Texts through which both sides can immediately see what points of disagreement in which agreement.

    5. The troika has run a monitoring model, surveillance and enforcement policies. Watch for the troika stopped on 25 January. Time is not turning back.

    6. The Greek government will persist, as shown, in complete agreement with our [EU] partners in the fight against corruption, tax evasion and public administration reform.

    7. The Government believes that policies that failed should be abandoned. For this reason there are categories; actions, such as labor, the primary surplus and privatization, which are not placed under negotiation. The property of the Greek State can not be sold out. On the contrary it can be utilized for the benefit of society, for example, the social security system.

    8. Priority for the new Greek government is halting the humanitarian crisis and restarting the economy. Surplus well below 3% of GDP is the 2015 target, exactly that will serve.

    9. The government understands that there are places where there is no common understanding. Such as “reform” health, dismissals of civil servants, the pension system, etc.

    10. We have not covered all the way up to the agreement, but there have been serious steps made.”

    Here the original article in Greek:

  16. dbk

    FWIW, new opinion polls announced in Greece yesterday report public approval of the government’s handling of the crisis at ~80% (up from 70% ten days ago). In a question regarding who people would vote for if elections were held tomorrow, Syriza has risen from its actual 36% to 45%, and the spread between Syriza and ND has risen to 27 percentage points. All other currently-serving parties are below 5%.

    My sense is that this swing represents an awakening by the Greeks that what previous governments had referred to as their “tough negotiations” with the Troika were … something else.

    1. Demeter

      80% approval of the government, eh?

      Where have I seen such public support of government before? Oh, yes, Russia and Putin.

      Increased Demonization of Syriza, Tsipras and Yanis Varoufakis in 5…4…3..

  17. Gerldam

    Whatever the immediate financial deal that will probably be reached, the main point remains that Syriza’s political programme can not be sustained either: increasing the minimmum wage by a huge margin, recruting an army of new civil servants and increasing the welfare state, however sweet to the Greek people ears can not be funded without large outside handouts.
    Paying indefinitely for an artifical Greek average income, way above what the country generates, will never be accepted by any reasonable government in Europe.

  18. Calgacus

    (1 / 3)
    The general editorial trend here at Naked Capitalism has tended to be rather pessimistic about the prospects of a Greece that left the Eurozone, and therefore dismissive of the possibility. This accords mostly with the “good euro” Syriza line, and in particular with most of FM Varoufakis’s statements. But IMHO, the trend here has been significantly more pessimistic, more anti-Grexit, more one-sided, less nuanced than Varoufakis & Syriza. The other side is given short shrift. It may be “romantic” – but it is worth noting that all of the Greeks who have commented here since the election seem to be on the “romantic” side.
    There are good reasons, supported by good economists that Varoufakis respects and knows, to think that predictions of long-term disaster for an independent Greece are exaggerated. Indeed that some of the pessimists’ fears are far-fetched, not focusing enough on the clear, present & growing dangers of remaining in the Euro. There is strong basis to the contention that essentially, the dangers of Grexit are short-term. After a few months of unforeseeable initial effects, it is all good, relative to the current situation.

    Syriza models its policy on the US New Deal – there is no better one. So along with presenting the other side, it is worth comparing those days to now. What pessimists tend to miss, influenced by insanestream economics’ gross exaggeration of the importance of foreign trade and minimization of domestic capacities, is that the primary benefit in all respects, material or political, of your own currency is not devaluation, but the freedom to manage your own society’s economy, your own fate.

    FDR said in his message torpedoing the 1933 London Conference – like the Euro, a misguided attempt to fix exchange rates: “The sound internal economic system of a nation is a greater factor in its well being than the price of its currency in changing terms of the currencies of other nations.” – and Keynes called him “magnificently right”. This is not, as often stated, only a policy for great powers.
    Mark Weisbrot, considering Argentina as a model for Greece:

    “the main thing was that Argentina was freed from an unsustainable debt burden, and perhaps even more importantly, it was freed from the pro-cyclical policies that were making its recovery impossible, and therefore it was able to adopt pro-growth macroeconomic policies. It was these policy changes – which Greece would be able to adopt if it left the eurozone and defaulted on its foreign debt – that made the difference between endless recession/stagnation and a remarkable economic recovery.”

    Varoufakis responded to Weisbrot here, and Warren Mosler responded to that today.

    1. jkiss

      IMO Mosler is absolutely right, drachmas can be brought back immediately, the economy, if properly managed, can get to full employment overnight. Greece critically needs Mosler on the ground to help them optimize strategy as they leave the Euro. Note that Billy Mitchell agrees by commenting that Greece needs 10% of GDP deficit spending for years, which makes sense by simply thinking how much it will take to put 80% of the unemployed back to work, while simultaneously boosting hours/salaries of those currently working part time.

      And, IMO those that think staying in, with government running any surplus instead of deficit, can possibly be preferable to the options available upon regaining sovereign currency, do not accept Keynesian/MMT.

      1. Yves Smith Post author

        They are not leaving the eurozone, since that also implies leaving the EU They lose important transfers from the EU particularly agricultural subsidies, and any advantage of drachma depreciation is considerably offset by no longer being part of the EU (no longer part of an integrated trade block). This is a non-starter. Varoufakis has said so repeatedly. They might default, however.

        1. Sibiriak

          If Greece defaults could it and would it be forced out of the eurozone/EU?

          If Greece defaults and remains within the eurozone/EU, what would be the Greek economic strategy and that point?

        2. Calgacus

          Yves:They are not leaving the eurozone,
          That Greece will remain in the Eurozone is just not that clear. Not so clear to Tsipras & Varoufakis & Lapavitsas etc, based on their statements.

          since that also implies leaving the EU
          It is not clear what status Greece will have in the EU if EZ separation occurs. Those papers about legality do not pretend to be more than useful intellectual exercises; they are not & do not claim to be politically determinative. See my (2/3) & links for Lapavitsas & Flassbeck’s remark on them.

          Concerns about loss of agricultural subsidies, messes of pottage etc are outweighed in the medium & long run by the enormous benefits of not having your economy directed by innumerate Euroblob madmen. See Mosler, Weisbrot etc. Drachma depreciation is NOT the main benefit of restoring the drachma, according to MMT / Functional Finance – in fact it is a minus, everything else being equal, you always want a stronger currency, of course.

          Jkiss: Nobody knows but I think Bill Mitchell substantially overestimates the amount of deficit spending necessary – because good, sane New Deal / JG type spending is so unusual, people do not realize how little goes a very long way. The main thing is the clear & continued committment to real full employment – after that the private sector does a lot of the lifting, as it did in the New Deal. The best outcome would be for Greece to remain in a Eurozone that comes to its senses & decides that waterboarding its members is not making nice to them. Stranger things have happened. The worst would be the ever-worsening status quo of never-ending waterboarding. Grexit would be between the two, IMHO closer to the first than the second.

          1. Lambert Strether

            The New Deal was an unmitigated disaster, after which the elite decided “Never again!” The United States created public assets, instead of auctioning off public assets at fire-sale prices! How insane was that?

          2. Yves Smith Post author

            A reader earlier provided text from the germane treaties. Your assumption is incorrect. A Eurozone exit means an EU exit too.

            Those who keep talking about Greece exiting the EMU (i.e. stop using the euro) should look at a couple of papers written on that topic. No EU country can stop using the euro without voluntarily leaving the EC. Syriza has made it clear that they are not leaving either the euro or the EC.

            Secondly, there is no provision in the treaties establishing either the euro or the EC for throwing a country out of the EC, the prerequisite for forcing them to stop using the euro. When you hear people talking about “Grexit” it is people outside of the eurozone establishment and not public officials making public statements on behalf of their governments. To put it in American terms, what if Utah held a constitutional convention and decided to change its form of government to a theocracy, based on the Book of Mormon and issue its own currency? Is the remedy for the central U.S. government the expulsion of Utah from the United States? I don’t think so.

            Thirdly, as was pointed out in a paper by the counsel for the ECB in 2009, expelling Greece the country impacts both Greek citizens as individuals and Greek companies, all of whom have rights as citizens in the EU today, such as the right to travel, etc. It is unlikely that they would sit on their hands and just accept expulsion as EU citizens without some kind of challenge. The vote of confidence which Syriza received in the Greek parliament on Monday was opposed by Pasok and the other members of Parliament outside of the Syriza coalition. Is expelling Greece from the EU after the (now) dissenters have spent all this time supporting the troika the reward other politicians in other countries can expect?

            Finally, if Greece is no longer using the euro, in what currency will various existing contracts be settled? Can Greece and Greeks begin settling existing contracts in drachmas?


            1. Calgacus

              I am not making any assumptions, but trying to remove ones.
              Those papers about legality do not pretend to be more than useful intellectual exercises; they are not & do not claim to be politically determinative.
              is not an assumption, but what e.g. Phoebus Athanassiou’s paper itself says in essence upon careful reading. They need to be read more closely and with more background knowledge. The situation is in no way legally comparable to the USA & an American state, and making this comparison indicates a need for more background understanding of international law. Again, MP Lapavitsas calls Athanassiou’s paper & others “nonsense”. Too strong, but the idea that such papers & interpretations make Grexit, from the EZ or the EU illegal is nonsense.

              No EU country can stop using the euro without voluntarily leaving the EC.
              This is disputed. IMHO, some of Athanassiou’s arguments actually implies the opposite. Wikipedia: “Jens Dammann [The Right to Leave the Eurozone Texas International Law Journal, 48 – 2 2013] has taken the view that under certain conditions, it is possible for a Member State to end its membership in the Eurozone without leaving the European Union.”
              Dammann is almost certainly right about “irrevocable” just referring to the rates at which the pre-euro currencies were pegged, not the use of the euro itself.

              The Washington insider who you quoted “I’m regularly told things are procedurally impossible until someone wants something badly enough, and then suddenly that impossible thing happens.” is right.

              These euro-lawyers & people who are talking to the insider are using “procedurally/legally impossible” in a way which is not very practical, and apt to mislead. A comic would exaggerate a bit and define the meaning of “impossible” here as “inevitable.”

  19. Calgacus

    (2 / 3)
    Costas Lapavitsas is another economist-turned-politician, a Syriza MP. In Syriza has bold solutions to the forces of austerity that are strangling Europe he says:

    The pressure on Syriza to water down its demands and comply with the core requirements of the bailout programme is likely to be ferocious…. The “good euro” line is coming face to face with reality, and two things are of paramount importance: first, the forces of austerity currently strangling Europe should not be allowed to crush the Syriza experiment, or turn it into a moth-eaten compromise; second, Syriza should make solid and meticulous preparations for all eventualities, a point that is well understood by many within it. The rest is political chitter-chatter.

    Lapavitsas & Flassbeck have a new book advocating a Grexit: Against the Troika: Crisis and Austerity in the Eurozone. Note that in Chapter 7 of his book, freely available at AnalyzeGreece! , Lapavitsas considers the analyses of the legal impossibility of Grexit etc to be “nonsense”. [I would more say “explicitly-admitted academic exercises” – which is not what many here seem to consider them.]

    Frederic Lordon in Le Monde Diplomatique mentions here that when he was about to become Finance Minister, “In an interview that we probably didn’t pay enough attention to, Yanis Varoufakis dropped in a few choice words whose importance ought not be overlooked: ‘We are ready to lead an austere existence, which is something different from austerity’” Nous sommes prêtes à mener une vie austère. Hard to not read this as Varoufakis continuing to oppose austerity, even unto Grexit.

  20. Calgacus

    (3 / 3)
    So I don’t think that Varoufakis & Syriza have departed from the wise strategy outlined here. Where Varoufakis, after noting that the case where Merkel & Schäuble don’t change is the most likely one, says: ” Well, you know what? In that case, the Eurozone is going to bid us farewell.”

    Politicians like FDR, like the Greeks do and must say many contradictory things, so too much selectiveness can be very misleading. For instance FDR campaigned as a balanced budgeteer (parallel to “remain in the Euro”) – enough for Bill Mitchell to call him a “deficit terrorist”. But contrary to the views of such superficial historians, the great majority who say that that FDR did not propose deficit spending to combat unemployment, Philip Harvey’s The New Deal’s Direct Job Creation Strategy points out FDR ended his (deficit-terrorism-filled) main speech on the economy before the election

    “At the same time, let me repeat from now to election day so that every man, woman and child in the United States will know what I mean: If starvation and dire need on the part of any of our citizens make necessary the appropriation of additional funds which would keep the budget out of balance, I shall not hesitate to tell the American people the full truth and ask them to authorize the expenditure of that additional amount.”

    I don’t think that the parallel to Varoufakis: “In that case, the Eurozone is going to bid us farewell” and “We are ready to lead an austere existence, which is something different from austerity” is too strained.

    1. Sibiriak

      Calgacus, good posts, and thanks for the links. I found this statement by Varoufakis to be quite revealing:

      Yanis Varoufakis: [Heiner Flassbeck is] probably right. Where he’s wrong, and where I disagree with Heiner, is in his conclusion that we should simply get out of the Eurozone or, at the very least, threaten to do so. What we should do is veto the present policies. And bring things to a head.

      If I were the Greek prime minister I would declare that I would never going to get out of the Eurozone. “If you want to throw me out, go ahead and do it. Do your worst. Switch off ELA support to the banks and let everything go to hell. But I’m not getting out of the Eurozone. I’m also not going to fire 4,000 public sector workers in December. I’m not going to redeem the ECB for the bonds that it’s holding. And I’m not going to be talking to the Troika until and unless we have a European Union and Council in which we sit down and discuss reasonably and rationally what needs to be done.

      Now if you want to dismantle the Eurozone in the process by unilaterally discontinuing ELA support to my banks go ahead. If you want to get out of the euro yourselves, be my guest.”

      1. Calgacus

        Thanks. Yes, I think that interview, that paragraph is very important to understanding Syriza’s grand strategy. They were prepared. This is not a normal business negotiation, but more like a hostage situation or a military crisis which could lead to war, more like politics between two quite hostile parties. In Greece’s shoes, I think Syriza’s intransigent “absurd reasonableness” is absolutely right. Especially since it is not a military crisis with bombers & armored divisions moving. Here is another Varoufakis quip, from last month – “The Eurozone is at a very advanced stage of decomposition and unless we [do] something quickly, it may be too late.”
        If Greece defaults could it and would it be forced out of the eurozone/EU?

        If Greece defaults and remains within the eurozone/EU, what would be the Greek economic strategy and that point?

        On your questions, there is Greek default does NOT equal Greek exit & Greece should default within the eurozone: On CNBC. IMHO, if & when the Euroblob wants to expel Greece from the EZ, the EU or both, it will.

        The restructuring past & future could be considered as quasi – defaults; At low interest rates & long maturities, Greece’s debt is perhaps not even unpayable now, given sane economic behavior on all sides. A giant “if” though. The main thing is not even Greek exit or not – it is austerity/waterboarding “conditionalities” which make the debt less payable, not more payable. Or not. This – the fact that the Euroblob is more interested in inflicting pain on the periphery than on the sanctity of debts shows that the crisis is not about debt, but degradation.

        1. rheno

          Thanks Yves and Calgacus for creating a clear and comprehensive picture of the situation.
          A couple of naive questions.
          Would you prefer 1.5% surplus of 175 billion GDP or 1.5% of 240 billion GDP and which one would best serve a big debt?
          Markets rose on Friday on commence of technical discussions (nothing tangible by that point). Can this mean all you need is hope?

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