Greece Capitulates On Bailout, Reaches Four Month Deal

Syriza folded on its position of not taking bailout funds. From the Wall Street Journal:

Greece’s new left-wing government backed down from its plans to throw out the bailout program the country signed with its international creditors, striking a tenuous deal with the rest of the eurozone to extend the program by four months.

But now the two sides will launch what may be even tougher negotiations over how to keep the Greek government financed in the years to come, while at the same time reviving the depressed Greek economy. Those discussions could break down at any time, pushing the ministers back into high-stakes talks on what to do about Greece.

After weeks of fraught negotiations, the eurozone on Friday evening agreed to a request by the new left-wing government of Prime Minister Alexis Tsipras to extend the country’s bailout program. The extension lasts for four months until the end of June, just weeks before Athens must make several large debt repayments to its creditors….

Officials have much more work to do. Under the agreement struck on Friday, the Greek government has until close of business on Monday to propose a list of fiscal reforms and overhauls, based on those laid out in the current bailout program. Greek officials have said they want to replace many existing measures with new ones.

If the Greek proposal is deemed insufficient by the eurozone creditors, the finance ministers will likely convene again to decide their next move, an EU official said.

From the Financial Times:

The decision to request an extension of the current programme is a significant U-turn for Alexis Tsipras, the Greece prime minister, who had promised in his election campaign to kill the existing bailout.

In addition, it includes no reduction of Greece’s sovereign debt levels, another campaign promise. Discussions on debt restructuring are likely as part of follow-on talks ahead of another bailout programme, which must now be agreed before June…

Critically, the agreement commits Athens to the “successful completion” of the current bailout review, although it allows for Greece to negotiate its economic reform agenda. The reforms must be approved by bailout monitors, and the final agreement on the measures is to be completed by April.

The deal also unexpectedly requires the eurozone’s bailout fund to take back €10.9bn in funds currently sitting in Greece’s bank rescue facility, an unusual move that reflects the lack of trust between Athens and its eurozone lenders. The money would still be available for bank recapitalisation, but it would be disbursed by eurozone authorities rather than Athens, as was previously the case.

Reuters has this ominous quote from German finance minister Wolfgang Schuable:

The Greeks certainly will have a difficult time to explain the deal to their voters. As long as the programme isn’t successfully completed, there will be no payout.

And this remark from Yanis Varoufakis in the press conference, per the Guardian:

Our big anxiety now is whether we can enforce these reforms. That is the big national bet,” rel=”nofollow”>Our big anxiety now is whether we can enforce these reforms. That is the big national bet

The Open Europe blog (hat tip Stephen M) has a good summary of the deal terms. Key items:

What points has Greece capitulated on?
Completion of the current review – Greece has basically agreed to conclude the current bailout. Any funding is conditional on such a process…

Remaining bank recapitalisation funds – Greece wanted this money to be held by the Hellenic Financial Stabilisation Fund (HFSF) over the extension period, and possibly be open for use outside the banking sector. However, this has been denied and the bonds will return to the EFSF, although they will remain available for any bank recapitalisation needs.

Role of the IMF – The Eurogroup statement says, “We also agreed that the IMF would continue to play its role”…

No unilateral action – According to the statement,+

The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.

In light of this, a large number of promises that SYRIZA made in its election campaign will now be hard to fulfil. In the press conference given by Eurogroup Chairman Jeroen Dijsselbloem and EU Economics Commissioner Pierre Moscovici, it was suggested that this pledge also applied to the measures which were announced by Greek Prime Minister Alexis Tsipras in his speech to the Greek parliament earlier this week – when he announced plans to roll back some labour market reforms passed by the previous Greek government.

Four months rather than six months – Greece requested a six-month extension, but the Eurogroup only agreed to four months. This is a crucial point: it means the extension expires at the end of June. As the graph below shows, Greece faces two crucial bond repayments to the ECB in July and August which total €6.7bn. This is a very tough hard deadline. There is limited time for the longer term negotiations which will take place – provided that a final agreement on the extension is reached. It is very likely we will be back in a similar situation at the end of June….

As we said yesterday, Greece has folded this hand but the game of poker continues. Greece is now short stack and living hand to hand (day to day). It continues to be in a very tough position and how the evaporation of the vision which SYRIZA sold at the election is a crucial and potentially explosive unknown.

The press release from the Eurogroup:

Update 6:30 PM: As reader Jim Haygood indicates in comments, the Greek government hit the limits of the ELA today as a result of more deposit flight. I am told, and will hopefully add some detail later, that the Greek government said it would need to impose capital controls if there was no agreement reached.

One issue is that given how overwhelmed the new government has been with negotiating the crisis and now long it takes to assume effective control of operations, they may not have been able to impose capital controls. Varoufakis’ “There is no Plan B” may have in part been a reflection of the inability at this juncture to take even basic steps to deal with a forced Grexit.

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  1. Kim Kaufman

    From Reuters: Greece Reaches Deal With Creditors
    Posted: 02/20/2015 1:42 pm EST

    “Euro zone officials said Greece’s track record and the combative behavior of its new leaders had undermined their confidence in whether Athens would deliver what it agrees to in talks with the other countries sharing the euro.

    “That drove ministers to make Greece hand over custody of nearly 11 billion euros in aid earmarked for stabilizing its banks to the euro zone’s rescue fund.

    “We wanted to make sure that the … money for Greek bank recapitalisation is for that purpose, not for recapitalisation of the government,” Dijsselbloem said.”

    1. Ned Ludd

      If E.U. officials were afraid that Syriza might get creative with those 11 billion euros; why wasn’t Syriza thinking of getting creative with those 11 billion euros?

      What was the E.U. worried about, and why didn’t Syriza threaten to do that?

  2. plantman

    OMG. What a disaster. Complete defeat.
    And on top of it all, the troika will monitor every slight policy adjustment…a financial dictatorship.

    In Varoufakis defense, all that can be said is that the Greek voters wanted two mutually exclusive things: An end to austerity and to stay in the Eurozone.
    Germany has clearly shown that those two things are incompatible. It’s one or the other.

    But what now?
    A weekend referendum to see if the Greek public wants this lousy deal or if they’re finally ready to quit the Eurozone and move on?

    1. NotTimothyGeithner

      Depending on the situation on the street, a referendum might not be possible. Greek youth unemployment is 50%. They may no longer tolerate 2/3 of a Friedman Unit chain jerking.

      1. norm de plume

        ‘a referendum might not be possible’

        Perhaps not, but it is necessary. That or fresh elections.

        Referendum and/or Syriza platform to ask for approval to:

        exit Euro
        nationalise banks
        reverse post-crisis privatisations
        introduce TANs while new drachma arranged
        make a commitment to full employment
        seek extra-European lenders of last resort
        formalise suing Germany for WW2 debt/reparations

        The increasing global awareness of, and disgust about what is occurring here should not be wasted. The problem with concessions and can-kicking is the loss of the animating popular sentiment (and not just in Greece) necessary to effect change. When you have Nigel Farage and Bernie Sanders expressing virtually the same outraged sentiment in the same news cycle you have a ‘moment’, an iron that’s hot.

        The unbelievable arrogance and hypocrisy of statements by Schauble and other Germans and the contempt they evince for the concepts of nation and democracy, were not necessary, and so their existence is a fair index of the power of finance capital, and the confidence its representatives feel about the solidity of that power. Capitulation to this, real or perceived, tarnishes the ‘brand’ of change – in general, but Syriza in particular, and lets the air out of the possibility for improvement in the lot of the majority. People will go back to apathy and resignation. Like Clinton, like Blair, like Obama, like Hollande… Syriza will be seen as fatally weak, or worse, cynically part of the neoliberal charade our politics has become. Good cops, but still cops.

        Myself, I think this lot were and are genuine in their desire for the radical change that’s necessary. But I agree also that they shot both feet off by ruling out ‘last resort’ options like default and Grexit at the start.

        If the institutions win, it is the beginning of the end for the nation-state, or rather for the non-dominant among them, a vast majority. Global money begins to clear the last obstacle to global dominion.

        Surely a spade must be called a spade at some stage?

        1. barutanseijin

          Or, in trying to stave off the neo-fascist right, Syriza sets them up to take over. Total failure.

          Varoufakis’ Guardian article talks about Marx, but doesn’t mention Rosa Luxemburg. No two ways about it. It’s socialism or barbarism.

        2. M.Black

          Great comment. I particularly like this recognition of how fatal “pragmatism” can be to the ideas that actually motivate us:

          “The problem with concessions and can-kicking is the loss of the animating popular sentiment (and not just in Greece) necessary to effect change.”

        3. chris m

          you’re right
          unfortunately, a referendum would be totally out of the question.
          (they’ve had their election in lieu of the referendum===voters mandate,
          besides 79% of voters agreed to stance of new government, although thats beside the point)
          banks would collapse even before they got the time to arrange such a referendum.

          in my opinion, the Greeks may have already made a deal privately (under the radar)
          to leave the euro on such and such a date in near future.
          they just needed time to make arrangements for the forthcoming bank holiday, and currency and exchange controls.

    2. NotSoSure

      “An end to austerity and to stay in the Eurozone.”, that’s exactly it. I am not a fan of Germany, but the Greeks are complicit in their own suffering as well. This thing has been going on for too long and it’s like a bad movie now.

    3. Linus Huber

      “What a disaster. Complete defeat.”

      It depends what your game plan is. If one tries to attain “the moral high ground” for Grexit, it may be exactly the way to play and let the population decide. – Just a thought.

    4. Edna M.

      Although the Greek voters do (or did) want two mutually exclusive things, I think Syriza was not simply following the people’s will by promising those two mutually exclusive things. Syriza helped to promote the idea that remaining in the euro zone was absolutely necessary. The more radical members of Syriza, who had favored exit from the euro, were silenced by the party leadership.

      1. Carlos Fandango

        Bang…. Hit the nail on head.

        They promised the impossible to get power, now they pay the piper.

        1. diptherio

          Yanis and others have made a pretty convincing case that leaving the EU could be incredibly painful for Greece. The way I see it, YV et al were either hoping against hope that the Troika could be made to see reason, or that they are indeed trying to gain the “high ground” for an exit–afterwards being able to claim (rightly) that they were forced into it against their will. Blame for the resulting fallout can be aimed at the intransigent Troika, who left Syriza no choice but to leave the union. At least that’s what I’m hoping their game plan is. Goddess help them all.

          1. Ned Ludd

            Evidence that Varoufakis is a horrible negotiator:

            Yanis and others have made a pretty convincing case that leaving the EU could be incredibly painful for Greece.

            If his goal was to undermine his own negotiating position, he did a wonderful job of it. Merkel, in contrast, convinced everyone that she was unconcerned about how a Grexit would affect Germany and the E.U.. Either Merkel is a fool, or you would have to be a fool to believe her pretense.

      2. ohmyheck

        There is a term for that— “leftist gatekeeping”. Not sure it applies here, but it is food for thought.

    5. praedor

      Time for the cowards of Syriza, an absolute failure right out of the gates, to get kicked out and for Europe to get what it deserves: the Golden Dawn. Greece needs to now go full-on right-wing anti-EU and put paid to Germany, the ECB, and the EU itself. Austerity is an abject failure, it doesn’t work, can NEVER work, must be kicked to the curb by any means necessary, including violence. You can only stomp people’s face into the road so much before they get REALLY pissed.

      1. Sibiriak

        praedor: “Time for the cowards of Syriza, an absolute failure right out of the gates, to get kicked out and for Europe to get what it deserves: the Golden Dawn. Greece needs to now go full-on right-wing anti-EU…”

        Won’t happen: neither the Greek Left nor the Center-right neoliberals will ever support Golden Dawn.

        1. The Mouth of Sauron

          The bourgeois German parties didn’t support Hitler either. And the Japanese bourgeois parties were more than a little ambivalent about military rule. A lot of people had their careful calculations upset in those days.

          1. Sibiriak

            The Mouth of Sauron: “The bourgeois German parties didn’t support Hitler either..”.

            Many conservatives supported Hitler (“bulwark against Communism”); Golden Dawn has no Hitler; Greece is not Germany; 2015 is not 1933.


            How thick is the hair in your argument that because the German middle-class parties looked down on the ‘leader’ because of his low class roots, but still supported him, they didn’t ‘support’ him? No middle class parties, no cash for the big H.

      2. Oregoncharles

        There are harder-left parties both within and outside of Syriza.

        Syriza’s next step is to run a referendum: “Did the best we could. Get out, or remain a German colony?” That should get their attention.

        Arguably, this result is a direct expression of Syriza’s electoral mandate. I wish they’d pushed it a little harder – but they really need to ask the people.

        Podemos, the National Front, the 5-star Movement, and even Die Linke wait in the wings.

    6. No one in particular

      Beg to differ; yes a complete defeat, but for the creditors. Greece got her brigde financing, in exchange for a “negotiotion on reforms”, to be mutally agreed between the Greek government and the “institutions”. So no firm conditions on new money. The more cruial issue, IMHO, is the romoval of the 4.5 budget surplus requirement. Yep, never resonable, but a necessary window dressing to pretend “Greece will repay her debt in a timely manner”. The removal is akin to further debt relief in everything but name. So who was defeated here – I rather think it was not Varoufakis.
      Secondly, I would like you to consider Ambrose’s view –
      “The interim accord gives Greece breathing room to flesh out its economic agenda and reform plans, and effectively scraps the draconian fiscal targets imposed by the EU-IMF Troika. ” and

      “The rhetoric is intended to assuage German public opinion and smooth the passage of the legislation through the Bundestag. The Eurogroup text is drafted in such a way that both Germany and Greece can spin it differently at home. ”

      Basically, Varoufakis 1 Schaeuble nil. I just wonder why everybody tries to spin it the other way round – so to delay the news for the German populace who is fleeced – time and again?

      1. Sibiriak

        No one in particular: Basically, Varoufakis 1 Schaeuble nil. I just wonder why everybody tries to spin it the other way round

        Perhaps because a lot of people are itching to see an explosive default/Grexit, i.e., a definitive break with neoliberalism, not a protracted struggle within the system premised on major compromises from the beginning.

      2. Tsigantes

        Speaking from Athens, as a Greek SYRIZA voter, your comments are in line with how we see it. Knowing full well what we are up against in Europe, we see Friday’s meeting as having won the first set. Greece got Europe to back down to this point, ie to accept that there IS a basis for negotiation – that in itself is absolutely HUGE. (Minimal as it seems abroad.) Name even one other example!

        There is some confusion on this blog: Greece needs the coming tranche of (long delayed) money or goes broke. Ergo, the fight has not been about receiving these [bailout] funds : it is about refusing new ‘loans’. Another red line are the ridiculous primary surpluses (4.5% this year, rising to 7% by 2020 onward. Germany itself has never achieved anything larger than 3.6%, and only for 2 months). A third red line is debt haircut…somewhere off in a distant future / may never happen (events concerning the euro may intervene before)….though this was promised to Greece back in 2012 by Troika.

        Greeks want SYRIZA to achieve as much as it can – no one here EVER thought they could achieve everything they are aiming for. As Greece is no longer a fully sovereign state, this is not within SYRIZA’s gift.

        As for the supposedly incompatible aims of no austerity AND being in the euro: while the first needs no explanation, the second – i.e. “wanting” the euro – is certainly not a question of loving the euro /zone. As if! Greeks understand full well that being pushed alone out of the euro, whether in an orderly or disorderly Grexit, will only entail further punishment for the country from mal-intentioned ‘partners’. Therefore our optimum position is to escape in a crowd with everyone else and share in any euro-dismantling on an equal basis, including debt write downs or forgiveness.

        From the Greek point of view the disappointment at SYRIZA’s performance shown in this comment thread, and the prevailing interpretation of SYRIZA’s failure is rather naive. The majority of Greeks and SYRIZA voters did not expect SYRIZA to get this far – after all, we know with whom we are dealing and we KNOW what we are up against – and we are consequently thrilled. It is a first positive step.

        1. diptherio

          Thanks for your comment! I’m so glad that NC attracts a diverse enough audience that we get to hear from people on the ground. Best of luck to you all!

        2. Matt

          Double thanks. Does anyone else see another crisis on Monday when allegedly the “investors” need to bless the Greek “reforms”?

  3. MarcoPolo

    No. It is done. Germany has given up its veto over reform and given it over to the much more accommodating EC & IMF (imagine IMF being more accommodating). Greece will have 4 months to show us something. But it doesn’t depend on that anymore. Austerity is over. And Greece will have more support as time goes along. Spain and Portugal have been especially disappointing. That will change.

    1. Yves Smith Post author

      No one, and I mean no one, in the media or on Twitter, agrees with your interpretation. Varoufakis in the press conference sounded almost desperate in trying to put a positive spin on this.

      1. efschumacher

        Ambrose is in the Media and on Twitter:

        A Evans-Pritchard ‏@AmbroseEP 50m50 minutes ago

        Only fig-leaf for Schauble was “2012” reference on fiscal policy, but per Dijsselbloem now based on economics. Fiscal waterboarding over

        What I heard from Dijsselbloem in the Q&A was that the Greek Government has flexibility ‘within the fiscal limits’ to arrange its own budget, which is the normal policy space for an elected government. Which seems to be diifferent, and better, than having internal budget policies dictated.

        1. Yves Smith Post author

          No that is subject to review and approval Monday. This deal is only an agreement in principle and the Greeks are to submit what their reform proposals are in detail and have them approved, and that approval also has to be made by the Eurogroup. It’s in the agreement itself and I don’t see how you can read this otherwise. The fact that Schauble is not negotiating is not a win since he and the other Eurogroup members have the final say. See the text:

          The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday February 23. The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institutions by the end of April.

          Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits. Both are again subject to approval by the Eurogroup.

          Now the part re Monday is terse. It appears the Eurogroup does not formally approve that. But later release of funds clearly is subject to Eurozone approval. Given the need for eventual Eurozone approval, they almost have to be looped in on an informal basis regarding the interim approvals.

          The Eurogroup is the Eurozone finance ministers. They were never going to be involved in the weeds of the details. I don’t see any meaningful procedural change here.

          The government most assuredly does not have freedom. The Troika monitors are back in, without the Troika name, and they operated in a quasi administrative capacity before. And the commitment to reach the higher primary surplus targets is still in place formally, although there is ameliorating language later that the circumstances in 2015 will be taken into consideration in determining the primary surplus target. So they probably do get a break on that, but the language makes that dependent on meeting the structural reform targets. And most observers had thought that TPTB had to concede on that, the higher targets this year were clearly insane.

          I also don’t get AEP’s “not negotiating with Schauble” claim. The negotiation of any longer-term deal (if Germany is to get maturity extensions) has to involve the Eurogroup members since many (not all but most) hold >60% of Greece’s debt. About 10% is held by the IMF and ~3% by the ECB, the rest by private holders. So there is no way to exclude them from the negotiations regarding the June rollover. This deal was simply about the extension of the bailout, and has no implication for the other negotiations.

          1. Linus Huber

            @ Yves

            The fact is that for the first time the conditions are allowed to be a subjected for discussion. The change in attitude is a gradual matter.

            1. Yves Smith Post author

              We’ll see if anything has actually changed based on what Greece gets. Giving them a right to propose is not at all the same as an actual negotiation.

          2. Cugel

            I would say this is the best possible outcome for Greece — given the horrible circumstances.

            Just ask yourselves one question: IF the Troika had capitulated entirely to Greek demands, would that have solved the problem? Hell, no, given how modest their demands really were! What intelligent commentators have said is that Greece probably needs to run about a 10% public deficit for several years – something equivalent to the New Deal in size and scope. Possibly even more government intervention than that. In short, it was flat impossible for Greece to turn the situation around without total repudiation of Austerity and a massive government hiring and investment program – one much larger in scope than anything Syriza proposed and massively greater than anything the Eurozone would ever accept. And this was never possible without having control over their own currency – unless the Eurozone would agree and they were NEVER going to agree.

            It’s been clear for weeks now that: 1) the Troika was never going to agree to any realistic modifications of the Austerity program.

            2) The only chance for Greece was going to be political support from other countries and the U.S. that did not materialize. That left them with no options but to try and gain time for political pressure in Europe to build against the Austerity program. That will now happen. The key thing they needed was more time.

            3) Troika wanted to crush Syriza IMMEDIATELY before any political charm offensive could have a chance to build support. Well, by agreeing to the blackmail, the free fall in the Greek economy will continue for another 4 months, and everyone, but the Germans, can now can see that the “reforms” are unsustainable and the credit crash will only get worse. What happens in 4 months? There’s probably going to be a massive bank failure quicker than that.

            Syriza will now have to enter into negotiations regarding the long-term stability of the program. But, that will be in the context of continuing collapse and ever mounting problems. Only now that’s a Eurozone problem and not a Greek problem.

            It seems like Germany decided that Greece was a hopeless case and wanted to force Grexit, so they could wash their hands of the mess and avoid any blame – because the collapse would be as a result of Gexit, not a result of their imposed Austerity program. Now they bear the political responsibility of forcing disaster on Greece in the face of repeated warnings. That won’t go over well in France let alone Spain, Portugal or Italy.

            The part that reporters ignore is that this is all POLITICAL theater. It all comes down to a question of “who’s to blame.” Germany now owns this mess entirely. And the problems will only be worse in 4 months. Meanwhile Syriza can try and build consensus among the Greek people for Grexit and make some preparations for the long term future.

            In short this agreement gives them a breathing space. The downside risk is that they may now be discredited to a degree among their own people for surrendering, who may decide not to wait and turn massively towards Golden Dawn and pure Nazism. But, they can make the case that they needed a breathing space to get better organized. They will get that now.

            1. M.Black

              Troika wanted to crush Syriza IMMEDIATELY…

              Well, I’d say under a month is pretty close to immediately in the world of international politics.

              Now they bear the political responsibility of forcing disaster on Greece in the face of repeated warnings.”

              It doesn’t appear to have cost them anything so far. Least of all with Greek politicians.

              Meanwhile Syriza can try and build…

              I fear you overestimate Syriza’s relevance after today.

              The downside risk is that they may now be discredited…

              A pity, huh? Certainly discredited politicians will be the first to tell you that only good can come from keeping discredited politicians in power.

              1. diptherio

                See Tsigantes’ comment above for a first person perspective from a real live Syriza voter. I don’t understand most people’s politics in my own country, let alone someone elses, so maybe this isn’t as bad as it looks from half-a-world away.

            2. Yves Smith Post author

              The Germans believe a Grexit would be a contained event. Others in the Eurozone did not, worrying that it would pave the way for future exits. The Germans don’t care an iota whether Greece falls apart or not. The fact that it is in the midst of a humanitarian crisis has cut no ice with them. Their view is that if austerity fails, it is because the victim did not try hard enough.

            3. bruno marr


              I generally agree with your assessment. Sometimes it’s good to look for the “inside straight” in poker. Given some time the Greek leaders just might get themselves better prepared to Grexit. Austerity is not something that Syriza can overcome. Time to plan for a better future. June could be interesting but painful.

          3. Santi

            From the beginning Tsipras and specially Varoufakis were asking for 100 days to design a long term plan. Now they got 120. I guess they will implement right now the “emergency” part of their program, which is fairly cheap and makes political sense, and on the while prepare themselves for the liquidity problems when they default and don’t sign a further bailout (if negotiations fail, which looks quite possible). Next time, and this is in just 4 months, there will be a plan B.

            We all knew the situation was difficult and the enemy very tight. If all goes as it should be Spain is going to give one good news after another… Europe is moving, I guess they will be having more support in a few months.

            1. Fiver

              Valid point. An extension is better than a hanging in the morning. After all, Syriza itself had no expectations of forming a Government until very recently, so no more than anyone else had seriously undertaken any of the activities necessary to implement a “Plan B”.

          4. Sibiriak

            “Varoufakis made clear that the agreement will cease to exist if Greece’s creditor institutions don’t accept the reforms Athens proposes. “ (The Guardian)

            So, a lot hinges on what exactly Athens proposes.

      2. mpr

        Yes, Evans-Pritchard, and also Paul Mason agree with this interpretation.
        Its a strategic victory for Greece as well, since they now get to negotiate with the EC and IMF, and bypass Germany.

          1. Yves Smith Post author

            Formally, yes. but don’t kid yourself. The Eurogroup has veto power over whether any funds get released. That means the interim steps have to be acceptable to them. So even if they aren’t the parties formally negotiating the structural reform package, that group will almost certainly need to be keenly aware of what the Eurogroup will and won’t approve. I’d expect them to be in contact with all the key Eurogroup players.

      3. bleargh

        Frances Coppola( seems to be arguing that’s what this means also.

        no that is because the bailout extension requires member state parliamentary approval.

        but they’ve handed over responsibility for approving Greece’s proposed reforms to the EC/ECB/IMF. No veto.

        1. Yves Smith Post author

          That is not what the memo says. The Wall Street Journal read it that way too:

          If the Greek proposal is deemed insufficient by the eurozone creditors, the finance ministers will likely convene again to decide their next move, an EU official said.

          The “Greek proposal” means the one for Monday.

          This is a form versus substance issue. Getting the Eurogroup out of the front line of the negotiations does not mean that they are out of the picture.. The more detailed working up of the reforms and the oversight is out of their hands, but they approve the final release of funds. That means the changes, including the reforms, need to be acceptable to them. I expect there to be a lot of informal consultation between the negotiating group and the key Eurogroup ministries.

        2. Ben Johannson

          The Eurogroup stepping back suggests they no longer consider the matter worthy of occupying their time. That says nothing good about the collective attitude toward Greece and any future negotiations.

  4. hope and change

    Syriza’s slogan was “Hope is on the way”… I see many political parties as of late have emulated the success of bait and switch politics, even borrowing each other’s slogans in the process.

    They also perfected the art of “compromise” by throwing away all their leverage before negotiations begin. “There is no plan B.”

    1. jrs

      But but … the Republicans, you don’t want the Republicans to win do you? Oh wait I mean Golden Dawn … you don’t want Golden Dawn to win, do you?

      Yes I very well realize the differences, but the thing is if a fascist party is to gain power in Greece because economic conditions are bad (*IF* though it could happen), austerity with bailout is bad economic conditions as well.

      1. Tsigantes

        Golden Dawn has 7% of the vote with its leadership in jail. Voter intention polls since SYRIZA’s victory show this has dropped to 4%. Even if it rises again to 7% GD is nothing more than a repulsive protest party with no allies.

  5. docg

    It isn’t over yet, because Syriza will desperately try to squeeze as much of its agenda as possible into Monday’s proposals, and the Germans will resist. Since the Greeks always wanted some sort of bailout, but under their terms, there hasn’t really been a capitulation (technically at least), nor has anything really been settled. It’s just more extend and pretend. A “final decision” was supposed to take place last Monday, then today, and then the “real” final, final decision will supposedly be made on Monday. But no one has really given in on the most crucial issues and it’s likely no one will. So what will happen is an indefinite period of extending and pretending over the issue of whether extend and pretend can continue as a meaningful policy and as long as no final decision is made then both sides can still try to make themselves look good. But nothing good will come out of this for the Greek people.

    As I’ve said before, this is a revolutionary situation — but no one really wants a revolution, it’s too much trouble, too risky, etc. Curious to learn what Zizek will make of this farce.

    1. Yves Smith Post author

      Look at the comment from Kim at the top of the thread, which elaborates on the bank stabilization fund issue. The Eurogroup is largely hostile to Greece. They won’t be cut any slack. Various Eurogroup officials intimated that Tsipras would have to renege on promises he made about labor market improvements in his parliamentary speech earlier this week.

      It’s an open question as to whether Syriza remains in charge of government. Pasok was all over them last week over the retreat in the Wednesday memo, which was less than the final virtually total climbdown. And I don’t harbor much hope that they’ll get to substitute much if any of their structural reforms, particularly the government-subsidized hiring and the increase in the minimum wage, for the existing reforms.

      1. M.Black

        Yeah, they can spin this till the cows come home, but it’s hard to see how SYRIZA survives the public humiliation in any meaningful sense. As you note, PASOK and New Democracy are already licking their chops over the puncturing of their rival’s big talk. SYRIZA’s extravagantly trumpeted new direction for the electorate turns out to be… more extra-democratically-imposed austerity. Varoufakis spoke today of the Greeks’ finally “co-authoring” their destiny. I guess he meant in the sense that some illiterate big-time celebrity “co-authors” his autobiography with a ghostwriter. Nobody who voted for what SYRIZA said has reason to ever trust them again, and their Eurozone partners will trust them for only so long, and to the degree, that they demonstrate what a subjugated people they have become. I expect that in Greece, as in American politics, nobody will vote for the equivalent of Republican-Lite Democrats when you can get the real thing without quite so much phony blather.

        When I think of what labor movements around the world and throughout history have had to brave and endure to advance the working-class’s lot in life, and how unimaginatively and frightened SYRIZA has ended up acting before their bosses. As others have suggested, it appears there really never ever was anything like a Plan B. Or maybe even a Plan A.

        1. Linus Huber

          It is like in a chess game, one better does not make judgement until there is some kind of check mate. I do not see yet that the Greece government has been put into a “check mate” position but that they remain in the game, as negotiations continue and they may attain the moral high ground for a possible Grexit.

          1. M.Black

            See my note below about eleventy-dimensional strategizing. I am highly skeptical that there is anything like chess-playing genius on display here, and holding moral high ground requires genuine, death-defying courage. Low ground power politics rule the day. And those will not work for SYRIZA the way SYRIZA has cravenly played them. Who is left to pick up the pieces? And after what depth of suffering? We will see, we will see.

    2. docg

      As much as I admire Varoufakis as a thinker and writer, he has failed miserably as a negotiator. Someone said recently that he’s placed a gun to his own head and dared the opposition to allow him to shoot. Right from the start there should have been a plan B and there never was. There’s no evidence that even any Greek labor organization was behind Syriza, that any sort of strike was threatened.

      If it were me I’d have threatened them with a massive march on Germany by all those unemployed Greek youths. They could all flock to the employment centers, and if they couldn’t get jobs, apply for welfare. That’s how I would handle Ms. Merkel. (Could still happen, but it would take a bit of nerve, Yanis.)

      1. Linus Huber

        “should have been a plan B and there never was”

        Strategically, it would be a major error to even hint at a possible plan B.

      2. Ned Ludd

        Tsipras, Varoufakis, and the rest of the government made it clear that they had no leverage, would not turn to Russia for aid or port leases, and would not take any actions disruptive to the E.U. Syriza did not leave all options on the table, even as negotiating leverage. They cleared the table, handed over their proposal, and thought that all they needed was the right pitch.

        In contrast, we were left guessing as to how far Germany, Finland, the E.C.B., and the other E.U. finance ministers were willing to go because they are better negotiators. It appeared they were willing to force a Grexit, but would they? They seemed not worry about the E.U. coming undone if Greece was forced out. A good negotiator, though, does not start sweating when they discuss their greatest weakness; instead, they pretend that it is not a weakness, at all.

        1. Edna M.

          Well said. It makes me wonder, though, can they really be such bad negotiators? I’ve never negotiated anything but even I could see from the get-go that they were laying down their negotiating weapons before the battle. Very curious.

          1. Seamus Padraig

            Curious indeed. I am starting to wonder if Syriza is actually not a controlled opposition, sort of like the old ‘antifascist block’ parties of East Germany. In principle, they were independent of the SED (the ruling party) and could even campaign against it to some extent. However, once the election was over and they’d taken their seats in the Volkstag, they couldn’t actually vote against it. Sad.

    3. Cassiodorus

      At some point Greece’s creditors will demand their pound of flesh, and Greece will not be able to pay up. I’d like to know what possibility exists for the Greek government to “end corruption” and chase down tax cheats when the tax cheats can threaten capital flight and when the government is hamstrung by austerity provisions.

      1. Yves Smith Post author

        And you may know of another element, which was news to me. When I raised the “Oh the oligarchs have moved their money out already” issue, he said, “They can always tax their businesses and land.”

        Well, those businesses won’t be worth much given the state of the economy. And I gather from reader alex morfies (sp?) that the property records are such a mess that it is hard to know who owns what.

        1. Cassiodorus

          What I’d like to know is – what’s going to be different about Greece in four months? My suggestion that the Greek government join the organization Via Campesina and invite the Zapatistas into Athens for a confab was only partially in jest. If SYRIZA wants to avoid being the next New Democracy, it’s really going to have to change the economic culture of Greece in root and branch, toward a direction of economic self-sufficiency oriented toward the meeting of basic needs. Four months is maybe enough time to get started on such a process. Maybe they could make the first move by putting a bunch of women in office and sending the men out to dig French Intensive garden beds or install solar panels or something like that.

          You have, I trust, read John Holloway’s book “How To Change The World Without Taking Power.” In one chapter of that short volume, Holloway lays out an argument, not entirely correct but still meaningful, for why revolutionary movements which “take power” by taking control of national governments get sucked into the culture of power, and in so doing tend to reproduce the same injustices they once claimed to be fighting. I have to wonder if Varoufakis ever read Holloway’s book, or if he’s even got a counter-argument to what Holloway said in it.

          And if Varoufakis ends up agreeing with Holloway, then why does SYRIZA bother with state power? Wouldn’t they be better off as an opposition party, radicalizing Greek society in preparation for a more socialist outcome?

          And to what extent are the members of SYRIZA conscious of the little rituals of micro-power going on in their own society? Are they planning to do anything like what Venezuela did under Chavez, by creating small-scale community organizations to fight for the rights of ordinary people?

          As for the mass movements which supposedly still accompany SYRIZA — well, it’s hard to see how they could be enthusiastic about this agreement, seeing that in four months there will still not be enough money to please the oligarchs while at the same time ending austerity. So what will they do? Marching around and carrying signs will accomplish little. They need a thorough micro-radicalism — what do they have now that fits that bill?

              1. financial matters

                Now she is one of Syriza’s deputy ministers.


                “Interestingly, the task for the implementation of the employment program has been assigned to a colleague of mine at the Levy Institute, Rania Antonopoulos, who has been appointed deputy minister of Labor and Social Solidarity under a Syriza-led government.”

                Yes, Senior Scholar Rania Antonopoulos is director of the Gender Equality and the Economy program at the Levy Institute, specializing in macro-micro linkages of gender and economics, international competition, and globalization; job guarantee policies and their macroeconomic and employment impacts; social protection and poverty reduction; and the implications of paid and unpaid work on poverty indicators.”

        2. alex morfesis

          That’s my cue…

          Yes I did say that about the property records…BUT….

          My talking out loud had more to do with suggesting neither Germany nor the former Political Class (Pasok and ND) had any real interest in seeing Hellas get up off the mat by dealing with the most basic item in a capitalistic world, property rights…

          Just because it is broken does not mean it can not be easily fixed…remember, me be OptiMistic cynic, stuff stinks but it will be made better…

          Tens of millions if not hundreds of millions of funds were earmarked by the EU (at least that was the official story at the time) to clean up the mess in respect to property records. The best that was done was with the KEP system to ask folks to just “swing on by” (no proof required) and fill out a form to any properties you might claim you have ownership in…and one can imagine how well that went…

          The records in the urbanized areas are better than the islands or rural areas. Hellas has the least number of people per square kilometer in Europe (excluding the ice palace countries) outside of its three main cities. Over the last 70 years, the rural and island areas have lost about 5 million people who either moved to the big city or moved out of the country. Athens had a little over 1 million people in the metro area in 1940 representing only about 15% of the population. Today at over 4 million people it represents about 37.5%, so 3 million of the missing 5 million moved to Athens. Many of the older homes in Athens and Thessaloniki turned into apartment condos were done via joint ventures where funding was provided by buyers and banks, and the former owner would get a nice condo unit in return for giving up their plot. So in the big cities, the property records are fairly up to date.

          In the USA we basically have 4 title companies that are the Main Underwriters of Title Insurance, Fidelity (the Linda Green Company and the biggest of the bunch), First American, Stewart Title and Old Republic, which basically took over Attorneys Title(Attorneys Title Florida would rather imagine that never happened…but financially, that is what happened)

          Hellas has no such industry. There are SuperNotaries who handle property records, and they are Lawyers with advanced certifications and training. Each Municipality has its own Recorder of Deeds who is also at times a private attorney and not paid enough to overlook their own convenient mistakes, such as tearing out a page from municipal records when an ownership issue might be in question.

          Since ww2, there have been problems with the records with the Civil War, the Junta and the oh so magical “adverse possession” obtained by having three drunken clowns affirm and swear they saw you walking with that donkey of yours on that property by that mountain over the bend and a judge in the State Court would just approve the adverse possession claim. A large number of years is required to make such a claim but since these professional Linda Green type “robo” Affirmers were not required to post a notice on the property nor have American style continued and obvious adverse use and possession…

          well…there is some basis for Dr. Stangluvauble to cry for sanity from his wheelchair…

          BUT, before he was accidented, our General George C. Scott…I mean Patton, was given by Ike the job to copy/photograph/microfilm the records of the Reich and Il Duce. So the records for Greece up to the end of ww2 are in the National Archives and obtainable. Those goosestepping Germans kept fairly good records…

          The court records showing the questionable adverse possession claims can be audited for the last 70 years, the Greek Orthodox Church officials (Metropolitans) have birth and marriage records, the Post Office has old mailing records, the military has all types of maps and household records as the Greek government has always required a couple of years of military service from its young men and with such a large communist party in Greece, the Gladio types kept very vivid records, and good ole internet has plenty of public satellite images to work around. There are hundreds of groups in America, Australia, Germany, South Africa and the UK where one could track down where the family members who left Hellas ended up.

          With high resolution cameras and software, one could fix the problems in 80% of the records within a year if one really wanted to see progress. The rest would take maybe another year and would probably clean up another 5 to 10 % of the property records. There will probably be attempts by those who have “Tooken” property to say they “stole it fair and square,” but if Syriza is going to build a better, stronger, faster bionic Hellas, it probably needs to set up some type of equitable property arbitration process. The Greek Orthodox Church has also stuck its nose into questionable titles on properties and could probably give up 25% of its claims into a pool which the government could use to settle up intra-familial squabbles that finally cleaning up the mess will force up out of the muck…But in many instances, there are those who will not care who have long left and can not be bothered arm wrestling over an old stone home with no roof on it that no one has live in for over 75 years.

          It is quite fixable…

        3. John Jones

          that the property records are such a mess that it is hard to know who owns what.

          That is a load of rubish.

          1. alex morfesis

            the records are a disaster and titles are clouded because there is much room for growth and those with existing tourism infrastructure and ties to the former political power structure in Hellas (pasok/nd) wanted it that way…you can’t build a resort to compete with mine if I can insure there are questions on title issues which will insure you can’t put a deal together.

            But Spain and Cyprus have also had these types of problems…
            Cyprus much like the existing problems in Hellas.

            Spain more so with the crazy announcement that apartment/homes/condos were sold on land that should not have been built on and therefore need to revert back and be demolished


            1. John Jones

              This here Alex

              “Since ww2, there have been problems with the records with the Civil War, the Junta and the oh so magical “adverse possession” obtained by having three drunken clowns affirm and swear they saw you walking with that donkey of yours on that property by that mountain over the bend and a judge in the State Court would just approve the adverse possession claim.”

              Even if this has happened it is by no means any were near the norm. This is typical diaspora speak. So was calling Greece something between Lebanon and Zimbabwe. Though I have no doubt it is heading that way until it grows some balls or the current government has something up its sleeve. And so was saying Greeks were rounding up Turks in Cypriot stadiums.

              Do I mean that there are no problems? No. There are obviously plenty of things to be improved and no doubt in property records too. But if I or some other Greek owns something in Greece I know I own it and it can’t be taken away. It is not hard to know who owns what. It is not a clouded issue. And fixing anything there is not addressing Greece’s main problem. All these other problems that may exist need to be fixed when the crisis has been dealt with so they can put their money towards improvements instead of debt payments to banks.

              I think Greeks have had about enough of falsehoods been spread of what their history is who they are and how their country is.

              1. Robert dudek

                Why not start a brand new registry, inviting everyone to submit claims of ownership.i f there is a dispute, set up a tribunal to figure out who has legal claim. If no one makes a claim or the dispute is inresolvable, then the state steps in and confiscates it. Either way , either back taxes are collected or the state confiscated the property.

  6. Ned Ludd

    Stathis Kouvelakis, a member of Syriza’s central committee, warned back in January: “There is no plan B.

    If you are not ready to break with the eurozone, if that turns out as the only option left in the case of a Cypriot-type blackmail, then your hands are tied in advance.

    The majority of Syriza strongly objected to that approach… […]

    The test of reality will come very soon. We’ll know whether it is possible to break with austerity and remain within the eurozone. Everything so far suggests that this is not possible. […]

    The concrete outcome is that Syriza is unprepared. There is no plan B.

    Now the social democrats get to carry out the program of PASOK and New Democracy – neoliberal structural reforms, along with “improving the efficiency of the public sector.”

    Centre-left Pasok leader Evangelos Venizelos, whose party helped implement the bailout, said Tsipras had wasted time for little gain.

    “After losing precious time in supposedly tough negotiation for internal consumption, the government has … asked for an extension of the loan agreement that is identical to the memorandum and the bailout programme,” he said.

    Giorgos Kyrtsos, a member of the European Parliament for the conservative New Democracy party, mocked the government for its proposal that was then rejected by Germany.

    “They got crafty with their spin at the expense of the Germans and Berlin is now asking them for a record adjustment without a fig leaf,” he tweeted.

  7. Petey

    “No. It is done. Germany has given up its veto over reform and given it over to the much more accommodating EC & IMF (imagine IMF being more accommodating).”

    Yeah. That’s my initial take too.

    They did manage to kill the Troika status quo, even if they had to give ground on a lot of other fronts.

    (And yes, Merkel and Schuable manage to make Lagarde look like John Maynard Keynes…)

    1. Yves Smith Post author

      No, they did not kill the Troika. Per the Open Europe website:

      The Eurogroup statement says, “We also agreed that the IMF would continue to play its role”. Again, Greece has given in on this point and the Troika continues to exist and be strongly involved in all but name….

      Moving forward from this agreement, which is still largely in principle, will be conditional on these measures being judged as sufficient by the EU/IMF/ECB as a step towards completing the current bailout.

      At some point, the ECB will have to get out of the monitoring businesses because it was ruled (I believe by the German Constitutional Court, but it may be the European courts) to be in a conflict of interest position. That has nothing to do with Greece.

    2. mpr

      Completely agree. The EC and IMF (and ECB) are going to approve the list of reforms Varoufakis wants on Monday, because *they have already indicated they would approve them this week*. For those, like Yves, who are not seeing it, I encourage you to do the following exercise: what specific reforms which Syriza had previously (as in within the last couple of weeks) intended to carry out will they now *not* be able to carry out ?

        1. James Levy

          Yves, time will tell and I believe you will be shown to be correct in your interpretation. The other factor being ignored by your detractors is the political damage this will do to Tsipras at home. This is not what was promised to the voters and no amount of damage control or wishful thinking can make it so. Greece is in for structural reforms and without nearly enough money to remotely do a Keynesian refloating of the economy. Greece’s creditors want a constant slice of a shrinking pie, and they are in a position to get it and no one in Greece is in a position to make their economy improve for the average Greek. These 11 dimensional chess players around here are reminding me a lot of the Obamabots who swore up and down that every defeat was an incipient victory and every betrayal just a tactical move towards a glorious end.

          1. Doug Terpstra

            This was premature capitulation with very little foreplay. Syriza may now want to hire our own emperor’s very talented tailors to mask its own nakedness. Fig leaves won’t do it.

      1. Yves Smith Post author

        The memo clearly states that the “institutions” will review the proposals and deem whether they are adequate. They are not rubber stamping them. And the boundary condition is whether Greece can meet its primary surplus targets. Neoliberals are not Keynesians. Moreover, tax revenues are down, which makes meeting the targets harder in light of current conditions. This is not a good background for proposing things like not cutting pensions or things that neoliberals simply don’t believe in like raising minimum wages. Their view is that labor markets need to be made more flexible, not that labor bargaining rights should be increased. That has been a part of structural reforms in all other countries and I don’t see any basis for thinking that Syriza will get any ground on that front. That idea has not been welcome heretofore in the Troika.

        You also miss that the Finish and German parliaments have to approve the memo.

        I doubt that vote happens Monday. Everyone said with a Friday meeting it would be tough to get parliamentary approval by the 28th.

        The German media is not happy with what went down. If Greece asks for too much, there is a risk of not getting the parliamentary approvals. That is low odds, maybe 15%, but that is uncomfortably high for something of this importance.

      2. Yves Smith Post author

        I suggest you refrain from your fantasies and read what the Greek press and Varoufakis himself are saying. He and they say that they will focus on the reforms that both sides already agree on, the tax collections, government reforms, and humanitarian efforts. So what is on is the 70% he said they agreed to and of the rest, only the humanitarian reforms. No mention of any of the stuff regarding boosting wages. Not clear he’ll even ask for a rollback of privatizations. He stressed to Paul Mason that if their proposals Monday were rejected, they were toast, which means they will likely be cautious.

  8. jo6pac

    Well that was fun and can a golden dawn govt. be the near future after this rollover? It would be to the liking of their puppet masters. Sad

    MarcoPolo, I like what you’re saying but after this I have my doubts.

    1. Linus Huber

      That is an appropriate position. We should all maintain a degree of doubt and not reach any conclusion yet.

  9. Petey

    “Varoufakis in the press conference sounded almost desperate in trying to put a positive spin on this.”

    Live to fight another day. Which doesn’t seem too insane to me, considering the alternatives.

    If Syriza is able to stay in power, this could well be the lowest point they face.

      1. Fiver

        Syriza’s previously ‘unthinkable’ election victory is less than a month old. They survived their first encounter with some exceptionally powerful and arrogant technocrats, and learned a great deal in the process. Four months can be a life-time in a political world operating at modern media speed – I cannot see the point of embarking on this strategy (exit ruled out) at all unless they’d already privately agreed exit could be ruled back in later, depending on their own assessment as to substantive gains, not all of which would necessarily be made public.

    1. MyLessThanPrimeBeef

      But, what is the fight now?

      Listening to Scheauble, he seems to imply new fight is to be on the domestic front, with Greeks against Greeks.

      Why ask for more time so they can have a new fight?

      1. p78

        They want to force Syriza out. The govts in Eurozone are from right-wing parties (Spain, Portugal y compris), with a few exceptions which are Tony Blair style “social-democrats” (Fr, It).

      2. Linus Huber

        It is an attempt to try to transfer any form of blame for a failed outcome to the Greece government and population. In how far it will succeed, we will see.

  10. JohnB

    Yannis was right to stay optimistic, and right to give this a try – and it’s not over yet, they’ve now bought some more time to try a better deal once again; after this though, I’m not sure if there is justification in remaining optimistic, about a potential EU-sourced resolution to the crisis.

    If going the route of sticking with an EU-led resolution to the overall crisis, it seems as if that will involve waiting many years for enough anti-austerity parties to get into power throughout Europe, to tilt the balance of power in negotiations (which there may not even be a chance of waiting for, before deflation hits again after QE fails, and eventually brings an end to the Euro) – doesn’t seem like a good path to take, but then I’m not an expert on any of this so my assumptions may be wrong.

    Going the route of an EU exit would be an incredibly destructive event, but seems like it might be inevitable given the level of political dysfunction in Europe – in either case, seems like they should buy some time to prepare for such an exit, and get on with tax reforms and the introduction of TAN’s (which can function as a de-facto alternate currency, which I guess could buffer against the highly damaging transitionary period during an exit).

    Problem then is, if any country takes exception to TAN’s, it looks like it’s going to be incredibly easy to drop Greece into immediate economic turmoil, whenever any of the critical dates come up where they need to source more money – such that making preparations for a possible exit using TAN’s, may be usable by other countries, as an excuse for indirect actions which precipitate that exit.

    Again, not an expert on any of this so maybe way off in my line of thought there – but things are looking a lot less hopeful now than before, with little possibility of any EU-sourced resolution to the crisis, and with me considering that biting-the-bullet with an exit (after some initial reforms are put in place to try and prepare for that) may be the only real option.

    1. William C

      Commentators on BBC newsnight (including former Chancellor Lamont) are saying this is only the beginning. The real negotiations begin now.

      We shall see.

    2. Calgacus

      Going the route of an EU exit would be an incredibly destructive event.

      On the scale of events of the first half of the 20th century in Europe, hardly noticeable. But people who witnessed those events directly and could provide that needed perspective are almost all dead of old age. Well, except for Manolis Glezos. Would like to see his opinion.
      Again, there are many in and out of Syriza who disagree with Varoufakis’s bad arguments & NC’s even more extreme position that EU exit would necessarily be incredibly destructive to Greece & the Eurozone. (Relative to other options like remaining in the EZ, defaulting within EZ etc) & explain why. Could be, would be if people did nothing. But most people, unlike the incredibly destructive Eurocrats, try to do something once in a while. For Greece, Grexit = fairly short term pain, long term gain. No whopping difference from the Argentine situation, say.

      Greece has one thing going for it now (& Argentina did too a decade+ ago) that Germany didn’t in 1914 & 1939 – it can feed itself. This is not an unimportant fact.

      1. p78

        Greece […] can feed itself. This is not an unimportant fact.

        Yes, but the European Union agricultural subsidies for Greece are non-negligible, – a value between that for France 8,000 E/ ha and for, say, Romania, 170 E/ ha. From what I understand, the subsidies to the producer help lower the price of the product. For example, milk farms in less subsidized countries are threatened to go out of business by cheaper milk imported inside EU from those more subsidized. Can Greece do without agric. subsidies?

        1. Calgacus

          Whether a nation can feed itself is not a monetary, financial fact, least of all having to do with international finance, but a real one about land and climate, vegetables and animals. Greece’s farmers say yes, Greece can feed itself, and that people should stop being alarmist about it – I posted a link here a couple times quoting the head of the Greek farmer’s union saying that. Greece might lose some Euros or commerce, which are nice to have of course.

          1. financial matters

            This gets into an interesting point. When Polanyi talked about land he was also talking about raw materials and staple foods. Essentially that none of these should be treated as commodities but more in the sense of a social resource. Subsidies would be used to the extent that these items would not be freely traded which could lead to hunger, pollution, short term misuse but would be used in a socially responsible and sustainable manner.

        2. Jkiss

          Mmt says u can have immediate full employment, subsidies just allow Greeks to compete against low cost imports… But obviously not an issue if nobody wants to export to Greece anyway.
          The real problem is just stuff Greeks cannot produce themselves, and there are lots of possible solutions.
          E.g. Oil:
          Gift from Russia
          Swap future gas for present oil.
          Swap naval base for Russian oil (yves thinks this would start wwiii, I doubt it, and so would Russia)
          China wants a port, they produce pharma… And note hospitals are already out, how could this get worse.
          Those thinking staying in is best option don’t believe things will get worse with growing primary surplus, and/or don’t accept mmt can produce full employment.
          Granted, yanis is not the right guy, so far wrong in every particular… Hope on this site is he’s playing a very deep game, if so he’s got me fooled.

      2. Fiver

        I agree. The EU is a geo-administrative structure originally conceived by the US to enable the entire corporate globalization/American Empire project, with Germany as the ‘natural’ core. This arrangement, conceived long before being seized upon fully following the fall of the Soviet Union, evolved as a top-down enterprise from the get-go. As such, its management seeks to organize and integrate in a manner most conducive to the operations of global corporations, finance, etc. Greece and many, many other countries, regions, regions within countries, etc., are rendered global ‘losers’. Were I a Greek I’d ask seriously as to whether there’s any reason to believe Greece can ‘win’ in this global game at all. My answer would be for Greece to create the way in which we know most of the world is going to be living not too long down the road if we’re smart – far less materially consumptive, but nice and comfortable, creative, hard-working, respectful of others, diverse, well-educated, arts and culture, green and happy and off all of the toxics. An altogether better life, really.

  11. Pelham

    Greece needed time more than anything else and they got it. It’s tempting to say Syriza caved, but let’s be a little patient wait and see what happens in four months.

    At that point, though, I should think that Greeks would be utterly fair rendering a final and definitive judgment on whatever transpires. It’s their country. However, the so-called democratic model is one that’s common to Western nations. So if Syriza does give in, it will be yet another blow against a pretty battered and discredited ideal.

  12. Max

    Calculated Risk had a good take. This is kick-the-can:

    My first reaction is that there seem to be two possible outcomes in four months:

    1) The technocrats at the ECB / EU / IMF agree to change the target for the primary budget surplus. The current plan is for Greece to run a primary surplus of 3.0% in 2015 and 4.5% in 2016, however that assumed that the unemployment rate would peak at 14.8% (instead the unemployment rate increased to close to 28%), and that GDP would start increasing in 2012 – instead GDP kept falling – and Greece is now in a Great Depression size contraction.

    Contractionary policy has been very contractionary!

    It is amazing that Greece is even running a primary budget surplus with a collapsing economy. If the primary target isn’t change, the depression will continue. A little growth would help everyone, so easing the primary budget target is critical.

    2) The Greeks will take the four months and ready the drachma printing presses.

    Point 1 is possible, but the technocrats are the only hope for Greece, not the politicians. See the following quote from German Finance minister Wolfgang Schauble in 2013:
    “Nobody in Europe sees this contradiction between fiscal policy consolidation and growth,” Schauble said. “We have a growth-friendly process of consolidation, and we have sustainable growth, however you want to word it.”
    Not everyone is blind to the obvious – some people in Europe see the obvious contradiction (just look at the data for Europe as a whole and Greece in particular). Too many politicians can’t (or won’t) look at the data and change their minds.

    1. Jim Haygood

      ‘The current plan is for Greece to run a primary surplus of 3.0% in 2015 and 4.5% in 2016.’

      This is the lynchpin issue. Germany would like to see a 4% surplus in 2015; Greece wanted 1.49%. It was left fudged in tonight’s memo.

      Adding 2-3% of fiscal stimulus (even within the context of the existing program) would be material, if it is well spent. That is the limit of what’s possible within the euro/Troika framework.

      To go beyond that, Greece has to jettison the euro and go it alone.

    2. Yves Smith Post author

      The longer-term negotiations were never just with the Eurogroup, and as we indicated in earlier posts, there was always expected to be a reduction in the primary surplus target.

  13. ambrit

    Someone, maybe Syriza, can now go to the Greek public and say; “We tried our best to stay in the Eurozone and make Greece a better place to live. We failed. What do you want us to do now?”
    Make this a Plebiscite.

    1. Jim Haygood

      The Greek public loved the euro, because it gave them purchasing power (and low inflation) they didn’t have in pre-euro days. Those are the benefits of a strong currency, and the positive perception lingers on.

      But the dark side of a strong currency is that it’s highly contractionary when you’re a small, not very competitive economy stuck in a debt deflation trap. Even experts debate currency policy. Only a small portion of the voting public is likely to fully grasp the grim macroeconomic aspects of continued euro membership.

      If Grexit is not on the table, then Greece will dutifully swallow the medicine ‘Dr. Death’ Schaeuble prescribes. Doing otherwise requires ripping out the IV drips, busting out the emergency exit door in your hospital gown, and running for your life. Explaining this to the populace is no easy task.

      The public is never inclined to radical solutions such as secession. But sometimes it’s the only option. I’m not just talkin’ about Greece.

      1. ambrit

        You’re right about it being not just about Greece. No matter what happens in Greece, other political groups in various E.U. member states will be watching this like hawks. It is the first big economic crisis in a list of crises. The smart ones will be taking notes and brainstorming the entire process.
        As for secession, it usually starts out as a minority position and gains traction as events are spun to make it look like “There Is No Alternative.” Maybe this is the Greek “cunning plan.” (The history of the Russian Revolution comes to mind. The history of the development of the terms ‘Menshevik” and ‘Bolshevik’ is a perfect example.) However, as has been pointed out here, Syriza has never been a revolutionary movement. I do feel sorry for them. They have tried their best to be rational and reasonable and have foundered on the rocks of the authoritarian philosophy of their counterparties. Reason and compromise have ‘shot their bolt.’
        If the ministers try to ‘rub Greece’s nose in it’ next week, Varoufakis will have no choice but to resign.

        1. kemerd

          yes, indeed. It appears the Germans genuinely believe they can contain a Grexit which Varoufakis thought Germans could not risk.
          I think Varoufakis is operating under the belief that Germans also understand how an economy works and that what they say is merely posturing to extract more concessions. This is a typical Marxist sickness i.e. the belief that the evil actually knows fully how it really operates. He certainly underestimated the counterparts’ of lack of wisdom and statesmanship, and amazing economic illiteracy.

  14. ltr

    Thank you so much, Yves. I carefully read every post by you on this matter and though I am ever so saddened I am grateful for your fine, fine analysis.

      1. steviefinn

        + 2. – More Greek tragedy & you are right Yves, Germany giving up the power of a veto is a sick joke. Welcome to greater Germania & it’s flunkey led provinces.

  15. Sandwichman

    Somebody once said “bargaining is naturally indeterminate.” This thing is not over until it is over.

  16. lawyercat

    Not surprising that Golden Dawn is quick to point out that they’re the only anti-austerity party left. From their website:

    Soon, when the Greek society begins to feel the consequences of SYRIZA’s grotesque policies, the Public Relations stunts of Tsipras and Varoufakis will be forgotten. It is then that the Greek people will turn to the only national option, which is the greatest fear of the international system and anti-Hellenic powers. The oligarchs of global financial power are right to sound the alarm. The Golden Dawn of Hellenism is just around the corner…

    It’s painful to watch this slow-motion train wreck.

    1. Edna M.

      There is KKE, the Communist party that got just one percent below Golden Dawn (KKE was at 5%, I believe) vs. Golden Dawn (about 6%). There are also smaller, better, progressive parties outside Parliament to whom the people did not listen, unfortunately, and who advocated exit from the euro and default. Perhaps now (assuming Syriza will not be able to implement its program) people will listen to them.

      1. steviefinn

        Does it now matter who is anti – austerity in any EU state ? The baby has now been firmly thrown out of the cradle of Democracy, & as with the Roman empire, your provincial governors are best served by serving themselves & screwing everybody else.

  17. Sanctuary

    So did Syriza gain anything? The only thing I’ve seen them gain is an acknowledgement of the bad economic situation as pertains to the primary surplus and that it must be taken into account when assessing how much it should be.

    The only way I can see this being spun to Syriza’s advantage is for them to put it to the public like this:”We are hamstrung by your demand to stay in the eurozone. This is the best we can do if that is still what you want.” Only by making the public take ownership of this nonsensical demand and reconsider whether it is really worth it can Syriza bounce back from this.

  18. Jose

    Greece faces two crucial bond repayments to the ECB in July and August which total €6.7bn. This is a very tough hard deadline.

    Oh, no!

    In 2012, Greece got a much better deal in this regard.

    The ECB accepted being paid with the proceeds of new short term government debt (€5 bn) sold directly to the Greek commercial banks. The deposits created by this operation (loans create deposits, remember?) were then transferred to the ECB´s account in order to pay old Greek bonds held on the ECB´s balance sheet.

    As for the commercial banks, they borrowed the necessary funds to make the transfers…from the Greek Central Bank, under the ELA.

    All done by initiative of the ECB itself.

    Greece got a much better treatment from the ECB in 2012 than now. It´s simply frightening to watch this slide of Greece into the abyss.

  19. Chris in Paris

    Grèce could put currency controls in place Sunday morning and prepare for a kind of revolution but nobody has the guts to leave the Euro at this point. Maybe we will get there in a few years. Sad for Yanis a good guy.

  20. 6th-generation Texan

    I wonder whatever happened on the Greeks’ visit to Russia? And then China invited them to come for a visit when they were done in Moscow. And then….nothing. Nada. Zip. Has anyone here seen a word *anywhere* about the purpose and results of those trips?? Talk about down the memory hole….

    It seems that with all the trillions of dollars China is sitting on, they would have been willing to throw a few billion to Greece for a quid pro quo. And Russia would certainly love to meddle in the Eurozone for some sweet payback for its meddling in Ukraine. What an opportunity for a little geopolitical gamesmanship — and nothing happened.

    Anybody heard anything about why the possibilities of Russian/Chinese intervention in Greece went nowhere?

    1. MyLessThanPrimeBeef

      Maybe some hidden thing about ‘my sphere of influence and your sphere?’

      Kind of like the Treaty of Tordesillas.

    2. Jim Haygood

      Both Russia and China have domestic crises of their own. Intervening in a euro/NATO country where their influence is not welcome has no possible upside for them.

      1. 6th-generation Texan

        Well, certainly their influence is not welcome by the US and NATO. However, given the old truism “the enemy of my enemy is my friend,” and how badly the Greeks have been raped by the EU, I fail to see why the Greeks would care what the EU/NATO thinks.

        And given the US/Euro/NATO meddling in Ukraine and the US “pivot to Asia”, I also fail to see why Russia and China wouldn’t want to kick over a beehive in the EU/NATO back yard. Even if nothing serious came of (or was even intended to come of) these visits, it would at least give the Greeks some *appearance* of leverage and possibly help Russia by distracting the EU from further meddling in Ukaine.

        All in all, I see a win-win for the appearance of Russian/Chinese aid to the Greeks, with a lot of upside for everyone and no downside at all. I just find it strange that after the initial hoopla about the visits absolutely nothing further was heard about them….

      2. Yves Smith Post author

        Agreed completely. If they were to intervene, it would be after a Grexit, not before. Cheaper and less fraught geopolitically. And they can’t be seen to be meddling to push that along.

        I believe a Chinese company is a big party, if not the party, in the proposed Pireaus (sp?) port privatization, which Syriza wants to undo. That would not earn them brownie points with China.

        1. dbk

          Actually, despite initial conflicting reports and doubts about whether the Chinese (COSCO) purchase of rights to the Port of Piraeus would go through following election, it now looks like the new government will honor the agreement.

          The Chinese 18th escort fleet sailed into Piraeus this week, and were welcomed by Tsipras. The fleet’s commander also paid a visit to the President of the Hellenic Republic. The Chinese premier has invited the new PM to visit China, and a team is being sent to Athens to begin preparations for the visit.

          1. financial matters

            I remember Tsipas saying they were going to review this in terms of whether it would benefit the Greek people. China seems to be making some smart mutually beneficial foreign investments.

    3. Ned Ludd

      The majority of Syriza are Europhiles. They believe that all change must come from within the E.U. They reject any “unilateral move at the national level”.

      Now, concerning political strategies: the currents within Syriza, and more particularly the currents coming from a certain Eurocommunist background (and, to a lesser extent, the currents coming from a more movementist background), display a strong sense of support of the European project as such. […]

      And behind this is the idea that we have to change the balance of forces directly at the level of the EU, avoiding any kind of unilateral move at the national level.

  21. Alan

    I am afraid Yves jumped the gun too early here:

    1) Crazy surpluses: negotiable

    2) Spending cuts: averted

    3) Reforms versus “reforms”: the Eurogroup and Germany have given up the power of veto over Greece’s reforms to the IMF and EC who are a lot friendlier (and were especially so in today’s negotiations).

    Also, let’s not forget:

    The Greek government had to deal with a slow bank run that would have them impose capital controls next week. It’s averted. They needed time. They got it. They had to break through the wall of “nothing can change”. They did. They needed a chance to prove they are serious about real reforms. They got it. They had to cave in only in comparison with their starting positions. They did, and that’s acceptable since they don’t have a mandate (yet) to negotiate a Grexit and as long as the majority of Greeks want to stay in the EZ “at any cost”. This will change however.

    In reality, this is the start of the actual negotiation. And this is the significance of today’s agreement, there will be negotiations on pretty much everything now. And the real crunch time will be in late June.

    In light of the above, they got a lot and time will only work in their favour. Let’s all keep calm and wait. This is not a sprint.

    1. Yves Smith Post author

      I do not know what you are smoking.

      The primary surplus targets remain in place. They were always expected to be negotiated, we reported on that early on. Whether and how much in the way of reductions remains to be seen, since any deal is subject to Eurogroup approval.

      The reforms are also EXPLICITLY subject to Eurogroup approval too, and we will see how much in the way of changes they get when the Greeks table their detailed proposals on Monday. Do you forget that Varoufakis tried negotiating with the EC before (the Moscovici memo) and that was still nixed by the Eurogroup? Having a more friendly group take a first pass before did not soften the Eurogroup position. Why should things be any different now?

      See this comment for further detail:

      1. mpr

        Why should things be any different now?

        Because the first group, which was previously not part of the formal negotiation has now been accepted as the initial arbiter of the agreement. Everyone in the Eurogroup already knows the position of this first group. Do you think they installed them as the initial arbiter, so they could then throw out their decision ? No. Its a face saving measure for Scheuble et al.

        1. Ben Johannson

          The troika in on the front line because the Eurogroup which holds real power expects future negotiations to fail. They’re washing their hands of the matter beyond yes/no.

      2. Alan


        The primary surplus targets remain in place. They were always expected to be negotiated, we reported on that early on.

        This is why one shouldn’t just read documents or the occasional statements but follow things closely. “They were always expected to be negotiated” just as there would be a negotiation on the debt once Greece achieved a primary surplus (not just expected but an actual agreed commitment). The previous government made a few hints on both those points when they were delivering the “success story” line and they got nothing, just as they expected. If Syriza does get the 1.5% it will be huge and PASOK and ND are terrified about this. This alone will mean something like 20+ bn in the next 4 years.

    2. M.Black

      As a seasoned observer of our own president’s much vaunted eleventy-dimensional strategizing, let me just say, I don’t buy it. SYRIZA will have a hard enough time surviving politically for four months. At least Obama has die-hard Democrats. I don’t think there are likely to be any “yellow dog” SYRIZA-ites.

  22. mpr

    Again, for those who think this is a capitulation, I ask what policy reforms did Greece give up on ? They can still do everything they planned consistent with a 1-1.5% of GDP surplus. Of course its possible that they will capitulate in the list of reforms on Monday, but why would they do that when he EC and IMF have already shown a willingness to work with the framework previously advocated by Varoufakis ?

    Its Syriza that will be implementing the reforms, so in practice any vagueness has to be interpreted in their favor, as the Germans knew very well. This is close to a German surrender, but with Scheuble not actually required to turn up to the formal surrender ceremony.

    Put another way, the Eurogroup has endorsed a renegotiation of the bailout, which will happen when they present the list of reforms to the troika on Monday. This is more or less what Syriza wanted. Strategically getting to negotiate with the troika (as opposed to just having the troika monitored a pre agreed list of reforms) is a victory because the EC and ECB are European institutions, which are more susceptible to threats against European cohesion, and less susceptible to domestic political pressure.

    1. Yves Smith Post author

      No they can’t. Go read the memo and the press. Greece is to submit a list of what it intends to do in they way of structural reforms, by Monday, and that is subject to approval. It effectively has to be ratified by the German and Finnish parliaments, since their votes come after the Monday list is submitted. They are on a short leash and we’ll see soon enough what if any changes are allowed.

      1. mpr

        Er no. The key paragraph is this

        The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday February 23. The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institutions by the end of April.

        So the way it will work is that the troika (‘institutions’) will certify that the reform measure are ‘sufficient’, and they’ve already more or less said Varoufakis’ proposals are sufficient. Then the national parliaments will vote, but that will be in the context of troika approval. I think its highly unlikely that having been through all this, Merkel would put herself in the position of opposing a troika certified agreement.

        Similarly, Eurogroup approval is in the form of confirming approval by the troika.

        Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits. Both are again subject to approval by the Eurogroup.

        BTW, I’m more accustomed to seeing you (rightfully) excoriate the press for poor analysis rather than citing them as authority, but for what its worth the analysis by Paul Mason is more or less on the money.

        1. Yves Smith Post author

          Varoufakis has yet to submit any proposals. And you forget that this means ALL the proposals, including what Greece intends to do to increase tax collections.

          Go read the memo. It makes clear that “the institutions” are not rubber stamping what Greece submits Monday. There is no immediate next deadline, just a final deadline of the end of April. “The institutions” will make their views known soon enough. They have time to reject proposals and send Greece back to the drawing board.

          1. ambrit

            This then is explicitly a sovereignty issue, eh?
            As I wrote above, Syriza have tried being the reasonable people at the table and been slapped down by the ideologues. The take away in political terms is clear; “You belong to us.” I suspect that Greek politics is now going to enter a period of extreme “Class War.”
            Much as commenters have remarked that Greece shot itself in the foot by taking Grexit off of the table, I suggest that the Eurocrats, through their dogmatic intransigence, are in the process of shooting themselves in the head.

        2. Sibiriak

          Yves Smith: ” … Greece is to submit a list of what it intends to do in they way of structural reforms, by Monday, and that is subject to approval. It effectively has to be ratified by the German and Finnish parliaments, since their votes come after the Monday list is submitted. They are on a short leash and we’ll see soon enough what if any changes are allowed.”

          So, until we see Syriza’s proposals, and see what changes are rejected, and see how Syriza reacts to any rejection–until then, we cannot say whether or not Syriza has “capitulated”.

          I expect some tactical retreats, not capitulation– a strategy of protracted, stubborn, point-by-point resistance to austerity, within a basically Keynesian-capitalist/pro-EU framework.

          1. Yves Smith Post author

            Despite having until end of April in theory, no funds are released until the Troika has approved and the Eurogroup has ratified it. The government runs out of money next week. It can’t play a game of trying to wear the people on the other side of the table out.

            You don’t seem to understand that Greece is in no position to negotiate. It is a supplicant. It has yet to earn credibility with the Troika.

            And the Troika does not use Keynesian models. They’d not be on their austerity kick if they did. They’ll use their own methods to score whatever Syriza serves up. I sincerely doubt they will entertain modeling different than what they routinely use.

      2. Fair Economist

        They have a very good option for the reform proposals. SYRIZA can propose a strong set of useful reforms (mostly directed at tax-dodging and corruption) along with an extensive set of humanitarian proposals. This then becomes an ultimatum for the German and Finnish parliaments. Parliaments can’t really negotiate and the timing doesn’t allow a redo. So the Germans either assent to a package of socialist reforms or the headlines are “Germany Votes to Force Greek Default” which is a political win for SYRIZA.

        1. mpr

          Precisely. And this is what they have been suggesting all along when they talk about replacing 30% of the reforms.

        2. Yves Smith Post author

          The German press is already unhappy about the memo and the view of most Germans is that Greece can pound said. The Finns are even more hard line. While I do not deem a rejection in either parliament to be likely , note that either one ALONE can scupper the deal. If Greece overreaches on Monday, this could still come undone.

          1. ambrit

            The problem with the entire idea of “overreach” here is that one side is unilaterally setting the parameters without consideration of the other sides’ domestic needs. It looks like Syriza loses no matter what they do. I know it sounds extreme, but doesn’t anyone in Brussels even imagine what it will be like to deal with an extreme government in Greece?

  23. Alan

    Btw, allow me to point out a misunderstanding in regards to this Varoufakis quote:

    “And this remark from Yanis Varoufakis in the press conference, per the Guardian:

    Our big anxiety now is whether we can enforce these reforms. That is the big national bet.”

    I watched the interview live and he was talking about the real reforms (not unpopular austerity “reforms”) that Syriza wants to implement, reforms not done by the previous governments due to the influence of special interests, reforms that the EZ would also welcome. He wasn’t talking about austerity and spending cuts, but the hard work they have to do now to prove they are competent.

  24. plantman

    The most positive thing to come out of all of this is that the Greek people now understand that the eurogroup will NOT budge on austerity no matter what. That makes the decision to “go or stay” that much easier.
    And, if the majority of the people feel that there is no future for themselves or their kids under the present regime, they will probably get out despite the terrible consequences. (But I could be wrong)

  25. mrtmbrnmn

    Would that Tsipras (or Varoufakis) had been less like Obama and more like…oh…Samson. Default on the debt thievery. Leave the euro to its inevitable collapse. Smack down the dumpling Merkel and the european financial storm troopers. Bring down the corrupt temple. So what if it falls on your head as long as the axis of evil bankster cabal is buried in the rubble. Mission accomplished! It is lunacy to even argue the merits of an economic “philosophy” that has no merit except to loot and rob entire countries blind and steal all their valuable national assets for 2 cents on the dollar. This is nothing less than global loan-sharking with the object to bury the borrower in deepest crippling debt, then kneecap him and take his “nice little restaurant ya got there.” Who will rid us of these troubling priests peddling this false religion of austerity for you and every last penny on the planet for them?

  26. gordon

    A lot of people find it hard to interpret exactly what happened, including Prof. Krugman:

    “…So we’re in a weird place: this looks like a defeat for Greece, but since nothing substantive was resolved, it’s only a defeat if the Greeks accept it as one; which means that nothing at all is clearly resolved. And that’s arguably a good outcome — time for Greece to get its act together.

    “I do find myself remembering an old joke, which slightly modified works for this situation: what do you get if you cross a godfather with a group of finance ministers? Someone who makes you an offer you can’t understand”.

    1. Yves Smith Post author

      Oh a lot was resolved, at least relative to the bailout, which was what was on the table. We’ll learn how complete a loss this was when we see how much if anything Greece gets in the way of substitution of structural reforms on Monday. I’m not optimistic but I would be delighted to be proven wrong.

    2. Santi

      That confusing result is typical euroconsensus by committee. I have seen plenty of this in European research projects. Quite often you get documents you can’t understand, by hammering together parts with different timings, authors, purposes…

      It gets time for Greece and solves the immediate liquidity problems, in a very difficult moment due to the energy crisis in winter plus the low touristic season and the absence of mechanisms for TAN-like alternative currency. The deadline (I wrote deafline, which looks appropriate given how the negotiations went) has been pushed forward 120 days. I agree with Krugman that this is only a defeat if the Greeks want to accept it as one. The “no more extend and pretend” meme is already corroding the structures. It will take some time for it to act.

  27. George Phillies

    Now the interesting part. Tsipris goes to the Greek Parliament.

    What does he say?

    “I promise you, this is the best deal we could get and stay within the Eurozone. Is this what we want? I ask for a parliamentary vote. This is not a party vote, it is a vote that will determine the future of Greece. I plan to vote…


    1. Carlos Fandango

      Tsipris has no good choices, IMO his best option is to tell the truth and leave the rest to the Greek people. Yanis achieved great support from the general public when he was well….just honest. That gives him slightly more credibility now than he would have otherwise. The speech could go along these lines….

      “The current bailout programme has been an abject failure, leading to catastrophic hardship for ordinary Greeks. I promised to negotiate a reversal of austerity policies and stay within the Eurozone, we have done everything in our power to negotiate with our Eurozone partners in good faith. Despite great compromise on our part, our most modest proposals have been roundly rebutted.

      Because of political opposition to our growth proposals and the stubborn intransigence of key Eurozone partners, I am unable to deliver on my earlier promises; now or in the foreseeable future. To effect a reversal of austerity polices within the Eurozone, Syriza (or any other party) needs greater political support from like minded Euro partners. Whilst we hope this will be forthcoming, we can offer no reassurance or timeline for increasing support. Greece is in a position where we are forced to cede our sovereign status, beyond all reasonable limits. We are asked to bow to the political will of malaevolent partners, who are not acting in good faith. They are acting against the interests of the majority of Greek citizens and the majority of their own citizens. Their sole motivation is to further the power of elite European political institutions and financiers.

      We have a four month breathing space where I ask the Greek people to consider all the options available and enter a national debate on the future of Greece…..”

      Over the next four months Tspiris should try and maintain economic stability as far as possible. He could go on to lay out the pro’s and con’s of staying in the Euro. Facilitate a real grown up, factual, national debate, propose a solution and renegotiate on that platform. Hopefully with the bargaining chip of being prepared for Grexit this time. If the debate goes against them they will just have to resign, no democratic party with any integrity could do otherwise.

      The insurmountable problem being that the Euro partners and opposition will be doing the damnedest to make them fail. Unfortunately (unlike the KKE) Syriza were too naive to understand the force of the powers arrayed against them and the revolutionary methods needed to effect real change.

  28. john c. halasz

    I haven’t been able to find Varoufakios’ press briefing or read anything of Greek commentary as yet. But I would disagree with Yves’ dour pessimism here on two points. 1) this buys time until June, at which point elections will be held elsewhere in the EU and political pressures might change in Syriza’s favor. 2) It allows the new Greek government to more fully take hold of the institutional reins of power and more fully assess their options and strategies.

    1. MaroonBulldog

      The results are only disappointing if one has reason to believe that a different negotiating strategy could have procured a better deal for Greece. Since I don’t believe a better deal was ever in the cards, I think it’s too harsh to say that Y. V. has been a failure as a negotiator.
      A lifetime of experience in negotiation taught me that nothing ever gets resolved until it needs to be, so I have no trouble understanding why more was not resolved here. Greece asked for a six month extension, and got four. If they really needed six months, they would have asked for eight or ten. If they couldn’t live with four months, they wouldn’t have agreed to four, they’d still be at.
      I can no longer understand people who look at negotiation as though it was a zero sum game that one side wins and the other loses. I agreed with Y.V.’s press conference explanation that Greece has been pursuing a positive sum outcome. If I were in his position, I would be saying the same thing.

    2. Yves Smith Post author

      My assessment is relative to what Syriza loudly and repeatedly promised. This is a capitulation on one promise, and perhaps two. One is not taking the bailout money. The second is not having the Troika monitors back in. I am pretty sure the language in the memo about “continued use of technical assistance” is code for Troika monitors, but I’d like to confirm that.

      I separately said their options were terrible. The best they can get is austerity lite and recognition of the loss of national sovereignity.

      I also said repeatedly that a non-Grexit was less bad among their bad options.

      So I don’t see how what you are saying differs from what I have been saying.

      1. none

        I thought technical assistance meant help finding and taxing the oligarchy’s hidden assets. Varoufakis referred to that several times since the beginning.

  29. Bill Frank

    I think it’s quite possible that there’s still another twist coming in this process. Syriza may be down to the “short stack” Yves mentioned, but it’s a lot easier to go all in if you’re down to that short stack. It wouldn’t take much for Syriza to whip the population into a frenzy if they so desired. If Syriza tries to “sell” this deal, they’ll get crucified. If Syriza tells the populace, “we tried our best, but they will not negotiate away their desire to keep you in economic slavery. If that is acceptable to you, we will resign our posts. If it is not acceptable to you, we have only one remaining option, leave the Euro. The choice is yours.”

    1. Alan

      People here in Greece trust this government and will support them as long as they don’t capitulate completely and there is still some hope. This deal will be accepted without significant problems for Syriza because as many have recognised and Greeks understand, this is not at all a return to the status quo but just the start of very hard negotiations with things to come to a head in June, meaning real crunch time and probable moment for the all-in scenario. By that time, and assuming the government proves competent in solving pressing and everyday life problems in spite of the straitjacket it is forced to operate in, Greek public opinion might have changed enough to give Syriza the nuclear option as a true negotiating tactic to get what really needs to be given or part ways, for real (maybe through a referendum, as you describe). This is not that moment (Greek public opinion still overwhelmingly pro-EZ).

      We’ll see. Four months is an eternity in politics.

  30. Kim Kaufman

    Something else to chew on from Center for Economic and Policy Research:

    Greek Bailout Extension Deal Represents a “Significant Retreat” by the European Authorities, CEPR Co-Director Says “Their austerity program, which has failed miserably, is no longer politically enforceable.”

  31. trinity river

    hope and change February 20, 2015 at 5:25 pm

    “I see many political parties as of late have emulated the success of bait and switch politics, even borrowing each other’s slogans in the process. “

    It is annoying to see some commenters say things about Varoufakis w/o taking the time to learn more about his position. Boy, the commenters come out of the woodwork when things heat up. Yves is truly tolerant to these people.
    M.Black February 20, 2015 at 6:28 pm

    “Yeah, they can spin this till the cows come home, but it’s hard to see how SYRIZA survives the public humiliation in any meaningful sense.”

    Humiliation? What is disgraceful in trying to take a rational position and being ignored by the much more powerful party in the discussions?

    Easy for you to second guess Varaufakis. What we are talking about hear is patience. Most of us did not ever assume this would be easy or fast. Many commenting today talk game theory strategy. Varaufakis discussed why he didn’t think game theory applied here. Arm chair commenters assume their strategy would have worked better. Arrogance and easy answers to difficult positions NEVER work.

    “Would that Tsipras (or Varoufakis) had been less like Obama and more like…oh…Samson.”

    Anyone who can compare Obama and Varaufakis is ignorant and a fool in my book.

    1. M.Black

      I would be delighted to be proved wrong and see Greece once more free and prosperous at the hands of SYRIZA. But you seem to suggest that being clever and well intentioned is enough. It is not. And it is humiliating when one’s cleverness and good intentions turn out to be no match for one’s lack of credibility and courage. This is especially so when those are precisely the virtues you have advertised.

      You want to make excuses for Varoufakis and Tsipras. I see no reason to. Like a lot of politicians, they did not do what they said they would do. With the populace in Greece in such dire straits, I don’t think that sort of duplicity — or unrealistic bombast, if you want to take that side — is to be any way encouraged. And, curiously enough, there are lot of others who also don’t like to be forcefully reminded that talk is cheap. Hence my suggestion that SYRIZA’s days are numbered.

      1. MaroonBulldog

        “They did not do what they said they would do?” What did they say they would do? Did they say they would negotiate creditors? They did what they could. Did they promise they would get a better deal from the crieditoors? No one could promise that. No one can guarantee results from a negotiation to be conducted in the future.

        1. M.Black

          This is just silly. DuckDuckGo any number of terms. Tsipras declared that the “Troika is over” (see link at bottom), that there would be no more memoranda, no more taking orders, no more austerity. Politicians count on people never taking their lies seriously. Well, this time around, the Eurogroup certainly didn’t take them seriously (while some here dream on). There will be more austerity, less freedom, less dignity. Lies cost lives in desperate times.

          The point of negotiations is to negotiate FOR something worthwhile. The lame defense “Did we promise you we would get a better deal from the creditors?” sounds like a cruel joke. Or a third-rate politician talking. We’ll see how it plays in Greece. Though of course Varoufakis is not spinning a tale of how SYRIZA never promised that they would get a better deal, but that Greeks are now “co-authoring” their future with ruthless financiers in Brussels and Berlin.

          Honestly, I’m not sure why some commenters here are so desperate to vouch for the nobility and wisdom of Tsipras and Varoufakis. It reminds me a bit of 2009/2010 when it was just starting to dawn on a lot of us that there was the hope Obama had offered — false hope, but hope — and then there was reality. Some still cling to that false hope. I don’t know how things will develop in Greece, but I have no interest in preserving some particular image of these two men or their political party, and, again, it’s not clear to me why others are so vested in them. Yes, you can make all kinds of arguments about what bright, special people they are — but under the circumstances isn’t it simply much more reasonable to accept that one never went broke underestimating the integrity of a politician. Indeed, I dare say more than a few people have made their fortunes on just such an estimation.

  32. Petey

    Look, we’ll all know a lot more on Monday, and in the days following. But while I greatly respect Yves, I do think her analysis is off here. And a whole lot of other smart people seem to disagree as well.

    But, as stated, things are fluid, and terms are not finalized, so Yves could well be correct once all the facts are in and digested.

    I’ll conclude with KKK’s (Greek Communist Party) highly amusing put-down of Syriza in voting against the formation of the current coalition government: “Keynesian capitalists!” And while I entirely agree with KKK’s analysis, it’s praise, not a put-down in my book. And today, as best as I can tell, Syriza actually delivered on the first installment of KKK’s analysis!

    (When Schuable is reduced to praying for regime change, you know things might be actually looking up…)

    1. alex morfesis

      its KKE not KKK

      Kanenas Klepsi (san) Emas

      and as an equal opportunity hater…


      Paleo Arithmitiko Systimatiko Organemeno Klepsimo

      (spoken in the accented amerikogreek of georgaki)


      Neo Diplo-klepsimo

      (spoken in a churchill style Karamanlis voice… ” Pedia, to paleo klepsimo den mas volevi, apo edo kai pera that xriastoume ena neo diploklepsmo…”)

  33. The Polemicist

    Negotiations with the Troika are going exactly as one could expect. And the Syriza leadership is, unfortunately, choosing capitulation over the confrontation that’s necessary. Varoufalis has made clear that he thinks it’s the moral duty of leftists to save European capitalism from itself. He is opposed in principle to even attempting to build an alternative.. I don’t trust this guy as far as I can throw his “muscular” motorcycle, and if the Greek people are going to get what they need, and Western leftists are hoping for, there’s going to have be a fight with the Syriza leadership itself. See detailed analysis at The SYRIZA Moment: A Skeptical Argument .

  34. Sibiriak

    The Polemicist: “And the Syriza leadership is, unfortunately, choosing capitulation over the confrontation that’s necessary.

    I don’t see capitulation, but rather a patient strategy of protracted resistance to austerity within the parameters of Syriza’s Keynesian capitalist/ pro-EU ideology.

    1. The Polemicist

      Well, the limits of that “Keynesian capitalist/ pro-EU ideology” amounts to this, according to Stathis Kouvelakis, a member of Syriza’s Central Committee:
      “Essentially, the implementation of the fundamental measures of Syriza’s Thessaloniki election program is made subject to the prior approval of the lenders, effectively amounting to the program’s annulment.”
      In other words, capitulation, whether anyone wants to call it that or not,
      Is Syriza Retreating? | Jacobin

  35. Bart Fargo

    It seems silly to try and call this as a victory or defeat for Syriza at this point in time. We still don’t know just what’s in the (semi-)new package of reforms that will be submitted on Monday. Varoufakis seems upbeat (with quotes like “Our commitments are commitments we would want to make anyway”), yet given how the Eurogroup and the Germans have seemed determined to utterly humiliate Syriza and Varoufakis throughout the negotiations (the belittling confiscation of 11 billion euros of bank stabilization funds just the latest example), it’s hard to believe they would allow them to enact any substantial part of their fiscal platform. Yet the language in today’s agreement/press release (i.e. “the economic circumstances in 2015” being worse than any of the austerians could’ve imagined) does leave open the possibility of reducing the primary surpluses the Germans demanded just days earlier. Maybe this will prove to be one of the rare cases in 21st century politics where a measure of sanity and realism prevail, but we have to wait until at least Monday to know more.

  36. Rosario

    Bets on the first month of major street riots/demonstrations in Greece? I’d say February. This is the beginning of a long fall for all of Europe, and this is the worst possible outcome. At least with a Grexit there would be potential for Greek stability in the future (5-10 years) and even more importantly, they would have sovereignty. Now every Greek knows the future will be bad indefinitely and it will not be on their terms. Then they will want an enemy (if they don’t already have one). Then Spain is on deck, how will they react? After seeing the German’s spit in the collective Greek’s face how will they approach the problem? Spain is already having demonstrations with tens of thousands of people in the streets. What will happen when they know they have no viable political outlet? This outcome has destroyed any facade of European democracy. Reactionaries blossom when there is no other option.

    1. Lambert Strether

      It’s not clear that there was a victory to be had. Or indeed, that this was indeed a negotiation, as opposed to a supplication. “Power concedes nothing without a demand,” but “I can call spirits from the vasty deep!” “Aye but will they come when you call them?”

  37. charles 2

    For all of you who read :
    “The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.”
    and think :
    “Oh they have lost, they completely tied their hands !”
    let me just reprint for you what the SNB vice Chairman said on the 12th of January this year :
    “We took stock of the situation less than a month ago, we looked again at all the parameters and we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy”. Right…

    This is a chess game until someone kicks the board and turns into a MMA match.

    and BTW Yves, you are too public and too credible for Varoufakis to give you a hint on if, how and when such a mutation happens.

    If I were Greece, I would launch the hostilities right when Putin launches his push to get his land link to Crimea and announces that new NG delivery capacity will go through Greece…

    1. Yves Smith Post author

      The SNB is a monetary sovereign in a wealthy country.

      The Greeks have a banking system that is on life support from the ECB and a government that runs out of money next week.

      Not exactly comparable.

  38. dannyc

    I think what Varoufakis says outside the negotiating room is just as important as what he says behind closed doors.
    True, Germany and the Eurogroup ministers hold the dominant hand, but Varoufakis’ biggest bargaining chip is that austerity, abjectly, does not work! And he seems uniquely capable of getting that reality across to the Eurozone; that will leave the Eurogroup Finance Ministers the shameful task of explaining back home why they elected to disregard the truth and instead force heavier doses of this same failed policy on a people that have already been suffering its brutal consequences for the last five years. (On the front pages of all the Eurozone newspapers, no doubt.) Plus, there’s zero chance that more austerity will reverse the downward spiral or that the entire continent won’t be worse off five years from now. NC readers know this for sure, but Varoufakis’ genius is that he can reach those who don’t — all those years in the class room have prepared him well to be the weakest Finance Minister in the Eurozone.
    The english part begins around 14 minutes. At 52 minutes Varoufakis gives a straightforward (and firm, I think) take on Syriza’s primary surplus position and what he thinks the word appropriate will mean (at least for the weekend and perhaps 4 months.)
    He pledges to tell the truth. So whatever the Eurozone ministers decide…

    1. Seamus Padraig

      “…austerity, abjectly, does not work!”

      If it didn’t work for somebody, somewhere, it wouldn’t have happened at all. Lenin: “Follow the money and see who benefits.”

      1. dannyc

        The converse of austerity does not work, is that Keynsian economics does. Varoufakis is operating ( on some level at least) that the truth will out. Will that win out? Were there any winners of the Great Depression? The Academy Awards are this weekend. Why hasn’t there ever been a film about john Maynard Keynes ? It could be called The Consequences of High Unemployment, a biography of everyone.

  39. tiebie66

    Frankly, beggars can’t be choosers. The real problems are that Greeks work long hours, but unproductively; that the instruments of State are bloated, wasteful, and ineffective; that tax evasion and corruption are rampant; that structural impediments hinder progress (you may own the land, but not the olive tree on it). You name them.

    Throwing money at these problems have made them worse, not better. Greece has not used access to easy money after joining the EMU productively. Borrowing and spending on consumption and unproductive endeavors is not the fault of others.

    Granted, there is a debt problem. Had German and French banks not lent to Greece, they would have been condemned for being insensitive, unfeeling, and uncaring, unwilling to help Greece finance its ‘needs’ – just as they are being now condemned for having made bad loans.

    I do not keep banks in high regard, their level of fraudulent and unethical behavior disgusts me. But I do despair at the failure to recognize the real problem at the heart of the tragedy. If Greece gets the debt written off, it will still be there. If Greece exits EMU, it will still be there. Yet 99% of attention is being devoted to a superficial issue – the debt. It has short term real consequences, we’ve heard about them, we’ve seen them. But an unproductive populace, an ineffective state, and a corrupt society have long term consequences and we hear comparatively little about how to address them.

    So what can we expect? More of the same. Until Greeks themselves make a change: a change that they don’t need more money for. A more constructive attitude to deal effectively with their core problems. Austerity, it seems to me, offers the only hope to get them there.

    1. jgordon

      There’s a lot of cultural baggage tied up in that word “productive”. We should pray that everyone becomes as unproductive as the Greeks. Industrialism is we currently practice it is ruining the planet and making the possibility of human extinction a lot more likely. So obviously there is something wrong with you belief that Greeks should be more “productive”.

    2. ambrit

      My problem with that take on Greece’s internal economy and corruption is that at least there, the corruption gets spread around. Here, the corruption, or at least it’s proceeds, is concentrated at the top. Imagine the capital flight that would happen here if the government had Greece’s problems. (Oh, wait, I just remembered Ireland, and the Channel Islands, and the Cayman Islands, and…..)

    3. lolcar

      If any of that was in the slightest bit a true explanation of the crisis then Spain, Portugal, Italy, Ireland, the Baltics and France wouldn’t be on the slow slide to the exact same position that Greece is in. Fixed exchange rate systems fail when one ignores the imbalances that build up. If Greece’s fairy godmother waved a magic wand and Greece became a “productive” export surplus country overnight it would only be a matter of time until the next country reached crack-up point as long as Germany continues to run record trade surpluses.

      1. tiebie66

        Imbalances do not happen by themselves. Money is a unit of account. Units of accounts do not pick olives or program machine tools. Plenty of evidence indicate that corruption is strongly associated with low economic growth (see the presence of Greece and Italy in the high corruption cluster and Spain and Portugal in the moderate corruption cluster: Corruption as cause evidence ( To achieve high growth, institutional and policy quality need to be strengthened (; But the attention is on game theory, debt restructuring, and economic imbalances when it should be on quality of governmental institutions and quality of policy. Cart before horse IMO.

    4. Sibiriak

      tiebie66: “Had German and French banks not lent to Greece, they would have been condemned for being insensitive, unfeeling, and uncaring…”

      Since when do banks worry about be called “uncaring”?

      “Yet 99% of attention is being devoted to a superficial issue – the debt.”

      Not so much the debt per se, but the disastrous conditions attached to the “bailouts.”

  40. mpr

    Thanks to dannyc for the link which I couldn’t find. My previous read was based off the statement, but having listened to the Varoufakis press conference, I am really dumbstruck how anyone can think this is a capitulation. He says explicitly what their interpretation of the statement is, what they will and won’t do, and that the old memorandum is no longer operational.

    It is inconceivable to me that he and Tsipras would then turn around and offer major concessions on Monday relative to what he said today, especially given their domestic position.

    What is conceivable (but in my view unlikely) is that their proposal on Monday will be rejected either at the troika or national/Eurogroup level. In that case we will be back in crisis mode, but that is not a capitulation scenario either.
    The reason I think its unlikely is, as I’ve written before, that the Eurogroup members were perfectly aware of the EC/IMF position. Installing them as the arbiter is a compromise move.

    Incidentally the fact that this is so widely reported as a Greek capitulation only strengthens the Greek hand. The Germans were already perceived as unreasonable after the Thursday letter ‘capitulation’. Now that they have ‘capitulated’ completely it would look very unreasonable to say no.

    How Varoufakis manages to have the press report it this way, while spinning it in the opposite direction is a mystery to me. Maybe its some kind of Jedi mind trick – ‘these are not the conditionalities you’re looking for’

  41. Jordan from Croatia

    Nobody discus what Eurogroup gave in on.
    First draft they offered to YV was asking them to accept 2012 agreement to stay on indefinetly. They wanted to quickly force new government just to sign on previous government deal without any possibility of further negotiations and change to previous deal.
    They gave away that part and received only 4 months of continuation of previous agreement, in turn they took HFSF away and put it in EFSF. This enables possibility of negotiation and change of original agreement giving time for Syriza to take hold of government institutions and make a plan on how to continue wheather or not Grexit. These 4 months could be a sufficient time to make such plans and create mechanisms for enacting it. Just imagine how Grexit would happen today when Syriza did not take proper hold of institutions yet. Swearing in is not the only thing that puts new people in power over institutions. It takes some time, usually 100 days before any change is made. That is why 100 day grace period for new governments.
    4 months could be suficient time to prepare plans A,B, C….

      1. Jordan from Croatia

        Obvious problem for Syriza is to put some order in property records before it can even do any tax enforcement. Puting order to property records is a several year job. Judging by Croatian property ordering that is supposed to take over 6 years. The time limit to apply for clearing the properties was 2 years ago and by now only about 20% was resolved, so 6 more years. Sure, the war consequences added more difficulties to Croatia but judging from this experience it will take Greece at least 4 years to put in order property records and then to expect some results on budget issues. So, Syriza needs at least 4 years, what can 4 months do then give time to make plans on how to proceed.

        1. lolcar

          That’s beside the point. The troika demand to increase the primary budget surplus to 4.5% is not going to be any less devastating to the economy just because it’s achieved by cracking down on tax avoidance rather than straight up introducing new taxes.

          1. ambrit

            The property tax issue is an internal problem, and, as Jordan points out, a long term one. Due to the short time thinking inherent in the neo-liberal playbook, something on the order of a Greek fire sale of assets seems to be the underlying motivation for the Eurocrat Rentiers actions. The privatization of formerly public institutions will be a de facto tax increase upon the Greek public. Only, this time, the revenue stream will be diverted to foreign shores, thus further exacerbating the impoverishment of the Greek society.
            If one treats this as a criminal enterprise and follows the money trail, all becomes clear.
            You have to hand it to the Germans. They couldn’t take over and hold Greece with the Wehrmacht, so they learned from that and this time are accomplishing it with the Bundesbank.

          2. Jordan from Croatia

            Jugding by present accounts, Greece will not have any surplus left due to promises by Syriza that there will be tax cut and greeks stoped pying taxes. This produced a huge shortfall to budget and then no cash flow surpluses for Greece this year.
            Austerity cuts budget income, forcing more cuts if surplus is to be achieved. Falling incomes and budgets chasing each other to the bottom.

            And Eurogroup efectively gave up on further surplus then at present, for 4 months. Review about surplus might be finished by then. But that is when new negotiations should be over.

            1. Yves Smith Post author

              No they did not give up on the primary surplus. The 3% target for this year is still officially in place. The Troika can waive it if they are in a charitable mood. So if Greece gets uppity (which I suspect includes Varoufakis and Tsipras rabble-rousing in the rest of Europe) or aren’t cracking down on the Greek debt slaves enough, no breaks. That means big demerits in the next round of negotiations.

              More detail here:


    1. Fiver

      There’s a lot of merit to that view, Jordan From Croatia. An ‘exit’ happens the day Greece says it does, but if they have effectively no time to undertake any serious planning of any kind, they’re done.

  42. Jordan from Croatia

    But why is nobody talking about the only possible solution that can be done under surplus enforecement agreement. One solution that is considering saving banks and saving budgets and saving private debtors all at the same time. It is debt forgivness, but a debt forgivness that is not asked from international lenders but inside lenders and is hiden from budget accounting.
    a) overindebted banks
    b) overindebted private subjects
    c) deleverage(defaults) is destroying funds for government debts from interior

    Personal and corporate bankrupcy in USA uses the fact that banks create money by issuing credits and destroy money by credits being payed off. Bankrupcies allows banks to erase liability side without receiving payments (destroying record of debt without destroying money). Banks loose projected income which they lost already, they only have to accept it trough books. And owners get to keep properties. It benefits banks.

    How to achieve mass bankrupcy through the system without going to bankrupcy court? Specifically that there is no such court in Greece and Greece can not print euro? But Greece could print something very close to money that would not be the subject to Troika review. Especially if it is very short duration money.

    Print euro denominated value of certificates that is accepted only by banks in lieu of credit payments and with duration of 45-60 days, to every Greek every month in amount of €100. This can be used to distinguish debts of greeks and corporations instead of real euros. Real euros will stay with people instead of being destroyed by banks. Those that do not have debts in banks could open line of credit payable by these certificates and then pay off utility and tax bills with euros from credits.
    In short, banks would destroy certificates instead of euros and people and corporations will have more left. this is in fact and effective increase of incomes which will improve agregat demand. This will lower defaults of old debts, reduce foreclosures, and increase euros in economy without printing them. It will stop delevraging process that is decimating banks and government debts. Credits that bank issue are the source fund for government debt. Stoping credit defaults will stop needs to recapitalize banks by government money and produce additional funds for greek government debt.

    The danger is that this will increase demand for imports and that is another set of problems, much easier to handle.

  43. viscaelpaviscaelvi

    I haven’t read all the comments. My apologies if the question has already been asked, but: what if Greece starts printing drachmas like mad from Tuesday next week?
    Just printing them.

    1. Yves Smith Post author

      No way. Greece is up against its limits with the ELA (the ECB backstop to the Greek banks). Printing drachma will lead everyone with an operating brain cell to pull whatever money they have left in Greek banks out. That craters the banking system and forces a disorderly Grexit (as in nobody gave Greece permission to print drachma and it’s against the Eurozone treaties, so the ECB won’t increase the ELA to save the Greek banks).

  44. dr frank

    The Greeks have succeeded in bringing attention and clarity to the unyielding German position. There was no point in continuing talks. The new agreement represents a statement of the status quo. Bottom line, as I read it in large print: Every new advance, especially any advance of new funds, to Greece will be subject to review. So, yes, there is flexibility and the Greeks can come with their ideas and proposals, and then the Germans will decide. I have trouble characterising this as a climb down for the Greeks. I don’t think it was unreasonable for the Greeks to say: we want to stay in the Euro and we want to pay back our debts, and the best way to achieve that is to craft a pro-growth, stimulative program. And I can understand how the Germans can say: we want you to stay in the Euro and we want our money back, so keep squeezing. I interpret the posture of the Germans as one of a creditor who is aware that its existing loans will not likely be repaid, or perhaps more precisely, that the risk adjusted present value of the repayment stream over a lengthy period is less than the nominal amount owed. Now this unpleasant situation is more or less obvious and the Greeks have been clear about it, but it is not yet possible to state it out loud in Germany, much less take the haircut. For a creditor that holds an impaired position, any new disbursement of funds is an additional loss. Under these circumstances, the only remaining rationale for new advances is to pay the costs of liquidation of assets, even at fire-sale prices. I am not writing in support of the German position, only trying to shed some light on it. Grexit or no, recognition of debt write-downs will be unpalatable and politically fraught.

  45. casino implosion

    This whole subject is so often discussed in the technical jargon and wizard’s cant of financial professionalism and management.

    What is austerity, really?

    It is an attempt to change the human spirit, to force people to get along with less, to force them to accept and want less.

    This will not end until not one stone of Davos is left standing and the fields sown with depleted uranium.

  46. DME

    This headline should read: “Greeks Successfully Play for Time” – which is precisely what Tsipras has been saying for the past year would be the first order of business for a Syriza government.

    Reporting is a political activity; a headline like “Greece Capitulates” is a service to the far right.

    1. Yves Smith Post author

      They capitulates on two promised they made clearly, loudly, and repeatedly: no bailout funds and no Troika monitors. The headline is accurate as written.

      We’ll see on Monday, but they may have been forced to substantially capitulate on a third front: their “reforms”. 7) like improving tax collections and reducing corruption were things the Troika want too, so those will be in. It’s what happens to the 30% where they were at loggerhead, where the Troika wanted more labor market “flexibilty” which means crushing labor,while Syriza promised they’d raise the minimum wage, increase the rights of unions, and either directly or via private sector subsidies get 300,000 people hired. Syriza also promised not to cut pensions and to halt and review all privatizations.

      All Varoufakis talked about at the press conference Friday was focusing on reforms where both sides agree. He did say humanitarian aid was on the list. We’ll see if he asks for and is allowed to discuss anything I listed above.

      Buying for time is no win if to buy that time, you’ve already traded away everything you wanted to negotiate over. All that might be left are the areas where everyone expected the Troika would be willing to bargain: lowering the economic value of the debt, say by extending maturities, and reducing the primary surplus targets, which even the Germans were willing to do but only an itty bit.

  47. JEHR

    I’ve read a great number of these comments on what is really going on regarding negotiations with Greece and my conclusion is that there is enough ambiguity in everything being said so far that you could choke a horse with it. The winners are: The Banks!!! Is anyone surprised at that? If everyone pretends that the banks didn’t cause the financial crisis, then you can talk and blab and burgle until the cows come home and there will be no conclusion to any negotiation. Greece will continue with its austerity under a different name perhaps and the banks will be even more engorged by money it earned through fraudulent means! End of story.

  48. Fiver

    If neither an ‘exit’ nor any real threat to inflict instability or ‘pain’ to the larger ‘system’ were/are on the table from the Greek side, as noted a number of times in comments, what was other than the opportunity to make effective political theatre in front of the entire EU and world?

    It’s evident a wave of CB liquidity more than tamped down any sense of ‘panic’ in markets over the whole course of this ‘showdown’ with a nice big goosing. I’ll bet far more money has been made over the last couple of weeks among big players to provide a ‘cushion’ to this crisis than what Greece needs to meet its obligations for several years.

    I think Greece is symptomatic of the core problem with neoliberal corporate globalization and associated free capital flows, trade flows, job flows determining ‘winners’ and ‘losers’ rather than the historic peoples of national States’ making such determinations for themselves. Absent a global democracy the US and a good many others would not tolerate in any event, there is no way for smaller, weaker, disadvantaged, etc., regions to thrive. I don’t see Greece making it out from under this mess until it has adequate debt relief, and another global debt debacle is merrily coming down the pike. I say again, if I were in Greece I’d by thinking ‘exit’ with a mind towards creating a new and truly sustainable economy they can then teach the rest of us.

  49. financial matters

    “effective political theatre in front of the entire EU and world?” I think effective is the key word here.

    “I think Greece is symptomatic of the core problem with neoliberal corporate globalization” I agree.

    I think Yanis has been seasoned by what he saw happen with Thatcher and wants this to proceed as smoothly as possible. Society has to be well prepared for this sort of change.


    “The lesson Thatcher taught me about the capacity of a long‑lasting recession to undermine progressive politics, is one that I carry with me into today’s European crisis. It is, indeed, the most important determinant of my stance in relation to the crisis. It is the reason I am happy to confess to the sin I am accused of by some of my critics on the left: the sin of choosing not to propose radical political programs that seek to exploit the crisis as an opportunity to overthrow European capitalism, to dismantle the awful eurozone, and to undermine the European Union of the cartels and the bankrupt bankers.

    Yes, I would love to put forward such a radical agenda. But, no, I am not prepared to commit the same error twice. What good did we achieve in Britain in the early 1980s by promoting an agenda of socialist change that British society scorned while falling headlong into Thatcher’s neoliberal trap? Precisely none. What good will it do today to call for a dismantling of the eurozone, of the European Union itself, when European capitalism is doing its utmost to undermine the eurozone, the European Union, indeed itself?”

    1. Fiver

      Thanks for the response. I quite understand and appreciate your view.

      I watched the entire Reagan/Thatcher (or as some would have it, vice versa) counter-‘revolution’ in something close to horror as it was evident to any serious observer that corporate/Wall Street/London ‘greed unleashed’ wedded to an ideological fantasy of Anglo-American righteousness overlaying purely imperial motives on a global scale would be calamitous for all concerned – it is abundantly clear that analysis has proved correct in spades, and it takes very great effort to even imagine a good outcome for humanity at this juncture.

      I have no problem with the notion that the ‘left’ (meaning Democrats and Labour), at that time far more beholden to old industrial union power and the attendant conceptual framework, roundly failed to even see the scope of the threat, let alone crafted any strategy to counter. In the case of Greece today, no strategy can deliver a life-style comparable to the temporary one that existed pre-2008, with unlimited credit supported by a global underclass of workers elsewhere and a lunatic infinite derivative leverage theory – a theory that was premised on equally infinite ‘growth’ no matter what the real world was telling us was actually possible.

      I fully agree the people of Greece need to be prepared for what is surely coming for the great majority of us – a world of less, but with courage and creativity, a better world at that.

      1. Santi

        The only way that has been found out of the neoliberalism is, I think, that adopted by the different Latin American countries: Argentina, Ecuador, Bolivia, Venezuela, all with different flavors of “national populist revolutions”, that use some of Gramsci concepts (I’m no expert in politics) but depart greatly from the “classical” left. I think Syriza is there, and I know for sure about Podemos (their ideologists have all been involved in work around Ecuador, Venezuela, Bolivia or other South American countries)

  50. Calgacus

    Varoufakis has a point regarding Thatcher & the UK. Eric Hobsbawm said the same, more precisely though. It was more tragic than that, for British society did not scorn the agenda of socialist change. The Left managed to repeatedly snatch defeat out of the jaws of victory:

    What made the triumph of Thatcherism so bitter was that, after 1979, it was not based on any massive conversion of opinion in the country, but primarily, though not exclusively, on the deep division of its opponents. There was no wave of Thatcherite voting in the 1980s like that which lifted Ronald Reagan in the USA. It consistently remained a minority of the electorate.

    (Interesting Times: A 20th Century Life, p.343)

    I hope Varoufakis is not making the opposite error. It is still too early to say; the main worry is whether his & others clear exaggeration of the difficulty and consequences of separation from the Eurozone or the EU has and will affect their actions.

    Santi is of course right. See Andre Vltchek’s The Anti-Socialist Western Left: Do Western Leftists Hate Socialist Countries? for a similar but stronger view. Win or lose, Syriza & Podemos are not the kind of Western Leftists Vltchek excoriates, which is why their existence is a hopeful sign. There is the danger of succumbing to inherited behavior and facile thinking though.

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