Greece, Eurozone Ministers at Fundamental Loggerheads

Bizarrely, there were leaks and news reports of progress all day on the meeting of Eurogroup ministers on a bailout memorandum. That would amount to a capitulation by Greece, since as we discussed earlier today, “bailout” in this context means an extension of the current deal with the Troika, with Greece continuing to adhere to the existing terms, including labor-squeezing structural reforms when Syriza has promised to raise minimum wages and hire 300,000 unemployed workers.

Here, for instance, was a 5:21 PM story from Bloomberg:

Screen shot 2015-02-11 at 6.28.39 PM

But just before 6:30 PM, the GreeK government announced that any discussion of a bailout memo was off. From the Guardian, quoting the Greek statement:

At this euro group there has been no agreement.

An extension of the memorandum cannot be accepted. Negotiations will continue with the goal [of achieving[ a mutually beneficial agreement.

The Guardian’s take on the press conference following the day of talks:

That’s the shortest, and most disappointing, press conference I can remember covering since this financial crisis began.

The failure to agree a statement, even a holding one, suggests that the two sides have made desperately little progress tonight.

From my vantage, as bad as the terse remarks were, this was the worst sign:

We didn’t agree the common ground that will allow officials to start work now, ready for Monday, Jeroen Dijsselbloem reiterates. We need a political agreement first.

But the two sides had no common ground before the day started. This was Bloomberg’s summary earlier in the day of the two sides’ positions:

Greek Finance Minister Yanis Varoufakis presented his European counterparts with four principles for a new financing deal, according to two euro-area officials, as Greece battles to stave off a cash crunch and stay in the currency bloc.

Greece wants a deal that provides for financial stability, financial sustainability and debt restructuring, while addressing Greece’s humanitarian crisis, Varoufakis said during talks Wednesday in Brussels without offering details…

“I don’t expect an outcome today,” Dijsselbloem told reporters in Brussels before the talks. Extra money “is not on the table right now” and Greece needs to stick to its reform path, he said.

The Dijsselbloem remarks sounded marginally more accommodating than what Eurogroup officials maintained before, but it is more polite code for their unchanged view: “Greece needs to stick to its current bailout, and we aren’t giving it any dough otherwise.” There was no reason for them to change their position, absent massive arm-twisting from the US, and our sense has never been that the US is working all that hard to shift the European position. Any words to Merkel would need to be accompanied by a full court press on other channels. However, given the visible, abject failure of a day of talks, and the fact that the next meeting isn’t until next Monday, the US does have time to swing into full gear if it does appreciate how much pressure it will need to apply to get the Eurogroup side to budge.

Varoufakis has also reiterated that Greece is not contemplating a Grexit:

Asked by a reporter before the meeting whether Greece’s exit from the euro area is on the table, Varoufakis said: “Of course not.”

As various readers have stressed, this isn’t as forceful a statement as it sounds, since there is no mechanism for either a voluntary withdrawal or an expulsion from the Eurozone.

So if Greece is unable to get a deal with the Eurozone on an extension, and the process is leaving them (whether justified or not) that Greece is being unreasonable, the result is no bailout money, and reduced odds of getting a deal to meet the principal payments coming due in June. Greece looks to be on the trajectory to a default.

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  1. ltr

    These posts on the efforts and needs of Greece represented by the Syriza government to extricate itself from depression are superb, just superb.

    1. Bill

      Just tuned in to a PBS newscast that claimed a deal was at hand… but such optimism is not confirmed on any other news source I can find. And let me add to the chorus of praise for Yves immensely fine coverage and analysis. Just breathtaking.

  2. Jim Haygood

    Victor Niederhoffer recalls a one-word statement on 9 Jan 1991:

    Secretary of State James Baker had scheduled a meeting with Iraqi foreign minister Tariq Aziz. The meeting had already lasted eight hours. I figured they must be finalizing an agreement.

    At 2:30 P.M., Secretary of State Baker called a press conference. “Regrettably,” he began—and that one word set off a stampede of reporters for the telephones. No settlement had been reached. Within two minutes, stocks plummeted 80 points, bonds were down 1 points, and oil was up $3.00 a barrel. That one word from Baker was good for a $3 million swing in my equity.

    After the 16 February meeting, perhaps ‘FUBAR’ would suffice as an all-inclusive summary. Or ‘Diesel Boom.’

  3. MartyH

    Extra Credit for Extra Posting! Thanks for the update.

    A thought that’s been rattling around since the comments on Yves’s earlier Greek Tragedy Post: does EU intransigence incent Syriza and Golden Dawn to stand tall as a United Greece against their common enemy? There was speculation somewhere that failure might mean Syriza stepping down and Golden Dawn stepping in (a scare story, one supposes). Are they really so far apart on the most fundamental of issues, the establishment of a national sovereignty in which they can go back to competing for their other agendae? I doubt this is yet in play or rather, if there have been discussions nobody is talking about it. But like Capital Controls, it is something one should consider as an option.

    1. Yves Smith Post author

      1. A failure is what you define to be a failure. Australia and New Zealand celebrate Anzac Day which by all accounts was a massive military disaster (the Battle of Gallipoli), because their soldiers showed remarkable courage in the face of terrible planning and leadership by the generals in charge of the operation.

      2. Reader bob mcmanus provided a link earlier today that indicated that capital controls are a violation of European Union rules. But if the ELA were revoked, Greece would likely be able to get away with it.

      3. You are correct to remember that a media account we quoted suggested that Syriza could quit if the negotiations fail and leave the mess to a new government and the Eurozone. But it seems far-fetched that Syriza would cede power as long as it has public support.

      1. Ben Johannson

        The Treaty on the Function of the European Union, specifically in Article 63, prohibits capital controls between member states, but does make a series of exceptions including “prudential public policy” and “overriding requirements of the general interest”. The Court of Justice has also ruled that “the guarantee of a service of general interest, such as universal postal service, may constitute an overriding reason in the general interest capable of justifying an obstacle to the free movement of capital”, so the Greek government could argue that freezing capital flight is necessary to the continued function of essential services and institutions.

        The bottom line is the government could enact controls and there isn’t much that could be done about it immediately and directly by the troika. A battle through the courts would be required and by then it would probably be too late to make a difference.

        1. Rosario

          “prudential public policy” and “overriding requirements of the general interest”

          I love contract language, of meaning to those who want it, meaningless to those who do not. Most strange is that every single word (beside the sole preposition and article) is completely vague. The first exception is the real blow-out. Prudential – involving or showing care and forethought, typically in business (one of many definitions)/ Public – open to or shared by all the people of an area or country (one of many definitions)/ Policy – a course or principle of action adopted or proposed by a government, party, business, or individual (one of many definitions). There is a common thread in these words.

          The contract must be built on common values and standards (thus the effectiveness of the “handshake” agreement/contract between mutual parties). The EU does not have this, therefore the language is a farce. This is Syriza’s problem, they have a rational argument, following, ironically, similar abstract language used in the EU articles, but they are speaking the articles in a different language (literally and figuratively/philosophically).

        2. Swedish Lex

          No suitable jurisprudence, barring anything on Cyprus, probably exists. No similar situation has ever occured in the past.

          If ELA were revoked, it would be a total state of emergency and no judge would probably ever rule against.

    2. efschumacher

      MartyH: “agendae”??

      Latin may be a dead tongue but we still know how to decline (it):
      It’s ‘agendum’ (s), ‘agenda’ (p).

      Go to the back of the class and put the pointed hat on.

  4. NotTimothyGeithner

    Greece could always try to do a George Coztana and default but keep going to EU meetings while trying not to be too obvious.

  5. wbgonne

    Asked by a reporter before the meeting whether Greece’s exit from the euro area is on the table, Varoufakis said: “Of course not.”

    Indeed. Grexit is not on the negotiating table. Grexit is what falls off the negotiating table if the negotiations fail.

    Outstanding work, Yves. You are making a difference.

  6. jo6pac

    Greece looks to be on the trajectory to a default.

    They are already why not do it now? Think Iceland (Nice Land) the eu is dead just like the system in the New Amerika. Yes the death can be either slow like Amerika wants to do but with those wonderful trade deals coming. Lights Out

    Sad , but walk/run for cover.

    1. NotTimothyGeithner

      Syriza and it’s seated anti-EU allies had under 50% of the vote with 60% turnout. There are mandates, and there are mandates. They may have Athens, but the Rest of the country isn’t necessarily there. This isn’t the U.S. where Kansas and California have two Senators or hideous gerrymandering. Leaving the Euro might not sit well. Being “kicked out” after various attempts at deals looks better.

  7. OculusDrift

    Jump to 3:53 of the interview

    “Take the question about the issue of re-hirings. What we have committed to do, let’s be clear of this, is to re-hire within the next year 1 per cent, just 1 tiny little miserable per cent of those who lost their jobs, the hundreds of thousands that lost their jobs during the last 5 years. And who are these people that we are going to re – hire? School guards and people who were dismissed, by legal means that are highly suspect”

    1. Yves Smith Post author

      Right here, under 3rd Pillar, the details of Syriza’s program, with the elements costed out too.

      In other press reports, Syriza was described as planning to hire the long-term unemployed.

      Also, you seem to be new here. We are always glad to have new readers and members of the commentariat. However, DO NOT EVER repost a comment when a comment has gone into moderation. You are training our software to see you as a spammer and we do not go into the spam queue (thousands of messages a day) to find the very few bona fide comments that wind up in there. Second, it is rude to the admins, mainly me. We waste time fixing the mess double or worse comment attempts creates, and it takes time away from generating new posts. We are astonishingly and chronically times stressed here, so cutting into our already maxed out schedules is a major discourtesy.

      1. dbk

        The plan that looks to be what they aim to employ is described in a paper by Rania Antonopoulos et al, downloadable at (June 2014) The general idea is along the lines of the New Deal as updated/refined by Minsky (iirc), viz. the government as Employer of Last Resort (ELR).

        Antonopoulos has been appointed the new “Deputy Minister for Fighting Unemployment”. From what I’ve read, it looks like the paper’s “Option 2” is slated for implementation.

        1. Yves Smith Post author

          So that would be consistent with the government potentially hiring more people but being fuzzy on how many they actually do hire directly. Thanks for helping reconcile that.

          1. Obereit

            Recent conversation with an economist affiliated with the Levy Institute indicated that financing for such a full-employment plan in Greece would be patterned on an internal currency with no interest – like the Öffa bills of Germany that financed the jobs program/infrastructure modernization starting in the early 30s.

            Imagine that: a public bank that borrows no “money” and charges no interest on IOUs whose worth, consequently, can only be redeemed in labor or product – not capital speculation.

      2. Jim Haygood

        ‘Spam queue’ — so that’s what happens when posts are swallowed without any indication that they’re in moderation.

        1. Yves Smith Post author

          Yes, we have spam software that grabs all sorts of stuff, like comments where the commentor’s name is an amalgam of luxury brands. That’s one pattern for spam.

  8. rjs

    re: This entry was posted in Credit markets, Doomsday scenarios, Economic fundamentals, Politics on February 11, 2015 by Yves Smith.

    so is there a way for me to link to all your coverage on Greece, and exclusively on Greece, should i want to refer people here for your entire play by play?

    1. norm de plume

      I’m interested in that too.

      In fact, I have another perhaps impossible wish – that there is some relatively easy way to access all the links under Big Brother is Watching You Watch since it was instituted, for a project I’m considering. Come to think of it, Class Warfare would come in handy as well.

      1. Lambert Strether

        What would be a good tag? Probably not “grexit?”. “2015 Greek Crisis”? “Diesel Boom vs. The Yanis”?

      2. rjs

        i probably have all the links from Big Brother is Watching You Watch since it was started…problem is, they’re at the end of the weekly emails that i’ve been sending out each sunday for the past 6 years…digging them out would be a major project…

  9. Santi

    I’m not sure if this recount is truthful, but I don’t think the Greeks would or should accept the phrasing:

    explore the possibilities for extending and successfully concluding the present programme

    Assuming that Varoufakis accepted it and then called back to Athens and got disauthorized looks like an insult to Varoufakis intellectual capacities.

    1. MarcoPolo

      Dan Davies thinks so to

      dsquareddigest: ie, that a lawyer saw “unequivocal commitment” in there and choked on it. Or maybe something else. but most likely a lawyer

    2. Yves Smith Post author

      Yanis via Twitter denies the Financial Times Brussels blog report that it was a call to Athens that changed the picture. And an FT reader who commented on that post also called out that that account made no sense:

      Dan Allen 1 hour ago
      Back in Athens, eh? There is no one back in Athens that ranks ahead of the guys at the table. Tsipras isn’t even in Athens. Varoufakis would have never agreed at all to that draft statement extending the austerity program. Spiegel no doubt has some very close friends in the Eurogroup. He’s a good conduit.

      1. Santi

        The interesting part of it is that it highlights who is desperate to show advances towards “successfully concluding the present programme”. While Varoufakis recounts it as (says Reuters) “never been intended to produce an accord”, Dijsselbloem calls the drafting “we simply tried to work next steps over the next couple days. We were unable to do that.”

        Meanwhile, in the USA… I missed last Krugman column, he seems to still believe Draghi will keep Greek Banks running…

  10. Left in Wisconsin

    Another naive question: Do I have this right that markets don’t fear default because the holders of the debt are now primarily governments and/or the ECB (which I think should be the same thing), not European banks? If that’s the case, shouldn’t those governments, and their citizens, fear default? Why would citizens of countries holding such debt instruments be opposed to renegotiating terms with the new Greek government but have no problem with with what are likely to be heavy losses from Greek default?

    1. JustAnObserver

      I’ve been wondering about this as well. Maybe the plan was to dump all the debt onto govs. & the ECB but they are not quite there yet. I’ve read somewhere that of the billions in bailout cache sent to Greece something like 90% ended up in the Eurobanks, non-Greek ones. So we could work out how much of the – unpayable – debt remains with the banks by taking 90% of the remaining unreleased bailout money.

      Maybe its this that’s causing almost anyone on the EuroOfficial or German side (a distinction without a difference) to sound like tantrum throwing 2-year olds since the Syriza government has made it quite clear that, come what may, they won’t be taking the next tranche. IIRC it was supposed to be 1.7 billion so the EuroBanks are – maybe – going to be down ~1.5 billion as of March 1st.

    2. BillC

      … shouldn’t those governments, and their citizens, fear default?

      Yep. And it looks like that fact means that there will be little to no solidarity to meaningfully resist the Troika’s disastrous policies among those EU members with a majority middle-class population.

      I live in Italy, where most folks who have savings put much of them in Italian treasury bonds and bills (BOT). Historically that (and acquiring real estate) is how they fairly successfully defended their nest eggs against Italy’s chronic Euro inflation. First thing my wife says when I advocate Greek default: “What about our BOTs?”

      From what I see in the press (mostly NC) of PM Renzi’s statements during his meetings last week with Tsipris and/or Varoufakis, looks like he’s more concerned about that domestic political concern than tackling the root cause of extensive social and infrastructure damage that austerity provokes in Italy. He’s still talking about “reforms” unchaining the confidence fairy, who will then restore prosperity.

      If this continues without any attempt to publicly explain “We must hang together or we shall all hang separately,” I’m afraid the Greeks will find little substantial support from Italy. Maybe Spaniards will be braver, but I fear that short-term middle-class conservatism — even in the “shiftless” Latin countries — may prevail.

    3. washunate

      We’re not supposed to ask who actually is recieving the Greek debt payments. We’re just supposed to take the Experts at face value that all this money is bailing out the people of Greece (and every other country socializing losses of the banksters).

      But seriously, I’m not sure it really matters in the short term what citizens of other countries are thinking, because decisions are being made in secret, haphazardly, by transnational groups of leaders. The whole point is to bail out the banks without letting pesky things like public opinion get in the way. At this point it’s kind of a race between national political backlash – from parties like Syriza to movements for independence – and the transnational financial fraudsters.

  11. Carlos Fandango

    Concerning opinion in Greece about staying in the Euro/ EU, the so called ‘overwhelming’ support to stay in the Eurozone. I’m wondering how the questions were phrased and under which context they were answered. If the question was phrased ….. Would you like to stay in the Euro, have the sovereignity of your country permanently superseded by unelected Euro elites and receive an unconscionable shafting for the indefinite future? What would the response be?

    If the Greek negotiators have drawn a line in the sand over which reforms/ punishments they are not willing to accept, whilst the Germans have drawn their counter line. I feel the Greek lines and the Euro lines will always be about a mile apart with no possible resolution, other than one side or the other rolling over and playing poodle.

    If Greek capitulation is not an option, under this scenario, the strategy would not even be about negotiating a solution it’s all about managing a default and coming out with the best possible economic and political solution for either side. Germans (Merkel) has to appease her Volks with the strict headmistress/ conservative values stance, whilst maintaining economic stability in the Eurozone for German industry. They really should not care a rats ass what happens to Greece after a default other than in it’s their neo/ordoliberal political interests to see Keynsian/ socialist policies die an ugly death.

    As for Syriza, political survival would be number one on the agenda, as you can’t do anything to save Greece if you’re not in the game. This is why I feel they won’t capitulate as I strongly suspect they can’t even get close to the German baseline without totally alienating their core. I suggest their best strategy should be to try and come out of a default scenario with: 1) Strong support from their core, 2) a reasonable level of understanding from the general public, 3) some ammunition against the reactionary backlash and 4) a curtesy nod from the Greek military. I am nowhere even close to understanding Greek politics so have no idea if that is feasible or not.

    I’d say Syriza (and Greece) are toast unless they have a broad, multiple contiguency plan to manage some kind of default. They may need to have the plan pretty firmed up in the next couple of weeks. Switching to the Drachma in one form or another might be parts of plans E, F and G.

    1. NotTimothyGeithner

      I think the problem isn’t about Syriza as much as 40% of the electorate didn’t vote, half voted for Syriza or a party with a tougher EU line, and the other half voted for more pro EU parties. The problem with the pro-EU votes is many of the smaller parties were calling for new negotiating tactics. There is a very good chance Greece can’t produce a viable relatively pro-EU government if Syriza fails.

  12. WanderingMind

    So, just to add more complexity to the situation which the EU and Greece face, here is a quote from the legal opinion of the counsel to the ECB regarding voluntarily leaving the EU/EMU:

    …a Member State wishing to withdraw from the EU must inform the European
    Council of its intention; the Council is to produce guidelines on the basis of which a withdrawal
    agreement is to be negotiated with that Member State; and the Council, acting by a qualified
    majority and after obtaining the consent of the European Parliament, will conclude the agreement
    on behalf of the EU. The withdrawing Member State would cease to be bound by the treaties
    either from the date provided for in the withdrawal agreement or, failing that, two years after
    notification of its intention to withdraw

    (Emphasis added).

    So, in the unlikely event that Greece decides to voluntarily withdraw from the EU, the procedure which Greece is following right now with the Troika is merely shifted to a Greece/European Council negotiation, which also will need to involve the ECB because Greece is a member state which uses the euro and therefore, if it ceases to be a member state, there is an inference that it will also need to leave the EMU, even though the treaties for monetary union explicitly state that once a country signs up for the euro, the decision is irrevocable.

    As if all of that is not compliated enough, the same author points out the problems raised by the conflict between the explicity irrevocable nature of the monetary union and the default provision for withdrawal from the EU (i.e. after two years without an agreement, a member state wishing to withdraw is free to go). If that procedure (again by inference only) applies to the use of the euro as well, it means that there is a two year window to negotiate the issues involved in the use/non-use of the euro, after which the withdrawing member state can act unilaterally.

    Of course, as Yves has pointed out, there is nothing to prevent those wielding power within the EU from running roughshod over their treaty obligations and excluding Greece just because they can. But if all parties follow the treaties they have signed (as interpreted by the counsel to the ECB), things will be clear as mud for some time to come.

    1. MyLessThanPrimeBeef

      Thanks. It is complex indeed.

      Perhaps some Europeans are thinking to themselves, too bad they don’t have a political union like the US – the ultimate goal for them and tightening the hug is just the right approach.

      1. Sanctuary

        That is a pipedream. If the Europeans already have had more than enough of German economic diktats, they certainly aren’t going to tolerate a political union with German political domination as a central feature.

          1. Sanctuary

            So by “Europeans” you mean Germans or are you saying that some Europeans think that German political and economic domination is the price they must pay for their European dream?

  13. john bougearel

    From the Guardian:

    “Entering and leaving the meeting, [Varoufakis] he was uncharacteristically taciturn.”

    What little I understand about negotiating tactics, the less said, the better. In fact, let you opposition offer up solicitations. Really hard not to be a YV supporter, so very happy to read this one liner.

    Mind you, that one liner contrasts with the diplomacy and statesmanship YV presented to the media: “…We had a very constructive extensive discussion of all facets of the Greek crisis…We heard many interesting opinions and had the opportunity to table our views….I was given a wonderful opportunity and a very warm welcome to present our views, analysis, proposals….”

    Job Very Well done, YV !!

    Goodness knows what YV considers “interesting opinions.”

    1. MyLessThanPrimeBeef

      He’s a game theorist. I think the best way to tackle a game is not to play in the game but play the game, or more precisely, play with the game itself from outside, meaning to change the game being played.

      Right now the game (hat tip to LeftinWisconsin and Justanobserver) is the fight for crumbs left behind by the bankers.

      YV does well to change that game.

      1. Thodoris D

        There are two approaches to the application of game theory: one could be described as neoliberal, justifying agents to always play for the Nash Equilibrium. But a Nash Equilibrium is just a stable state, where agents try to minimise their losses.

        The other views the game as a whole, studies it and the way it leads to Nash Equilibria, and tries to find ways to alter the implementation of a game, so as to lead to outcomes with better Social Optimality. From his writings, Varoufakis seems to follow this second approach to game theory.

      2. Gerard Pierce

        I’m too lazy to look up the reference, but I remember clearly that when you are playing one of the variations of the Prisoner’s Dilemma, one of the defining elements of strategy is whether you intend to keep playing the game.

        If you are going back for more, you have a group of strategies based on “respond as your opponent responds” and these lead to the optimal result for both sides.

        When you have decided to hang it up and get out of the game you make the choice that best benefits you because you no longer have to worry about what is good for your opponent.

        I’m sorry that this is not a good explanation, it’s more of a reminder for those already familiar with that part of game theory.

  14. Sanctuary

    I had a couple of thoughts about Varoufakis’/Greece’s strategy. Something about the words Varoufakis and other Syriza officials keep using makes me consider whether a different strategy is being employed other than for Grexit. When asked about Grexit, they keep saying it is “unthinkable” or “of course not” when asked if they are preparing for one. If, as Yves believes, Syriza is not for Grexit, then why continue their hardball stance against the Troika? This occurs in an environment in which the public is supposedly for staying in the Eurozone by a 75-25 margin while also supporting the new government’s hardline stance by the same margin. This also occurs in an environment in which Syriza has successfully convinced the public that this fight is one about dignity. I do think that causing increasing market volatility is a desired tactic by Syriza to try and scare the Eurozone countries into realistically assessing their position in the Prisoner’s Dilemma. However, it may also be about the Greek public. Perhaps Syriza calculates that by steadily increasing market volatility in the Eurozone they not only possibly wrangle a better deal from Eurocrats, they also scare the Greek public into demanding that they, Syriza, pull back from the brink and accept much less than they are currently demanding. Like a guy making sure that he gets held back from a fight he swears he wants. That way, they don’t get blamed for going back on election promises. They can claim they followed democratic will, which is what they’ve claimed from the outset IS their mandate.

    The only problem is, what happens if the public keeps supporting a hard line no matter the volatility? Then you sleepwalk into the Grexit you didn’t want

    Just a thought. I don’t know if I believe it because I do think that Syriza secretly believes that Grexit is inevitable whether they leave this year or the Eurozone falls apart in the next few years, regardless of what they are saying publicly and regardless of what they may desire.

    1. Paul Tioxon

      The “no exit but we will honor our debts, just not under the terms and conditions dictated to us,” means that a political solution to economic terms is attempting to gain dominance in this instance. The authority of ECB and its demands for reforms are a political impossibility for Greece. To do so would destroy the social order. If bankers insistence on a deal being a deal, even if the deal destroys the civil society by destroying the means to function, not having money to buy food, medicine, keep the lights on, hospitals running, the debt collection would be an act of war with consequences no different than of setting military power loose on destroying the public infrastructure of electricity and water and sewers and highway systems and transit. People would be left with the shirts on their backs and not much else.

      The political question posed by Syriza: is the nation served by the market based economic system or is the market and its deals, no matter how destructive, more important, in terms of power, dominant over the nation and its people? Ask not what your country can do for you, ask what you can do for your country! Does the authority of the Eurozone take precedence over the political European Union? Do the banks have the state as an instrument of debt collection, making sure a deal is a deal, no matter how many pensions are looted, how many public assets are sold off to pay the banks back in full with all interests and fees and penalties?

      The people of Greece in consultation say “NO” at the ballot box. They refuse to be destroyed by austerity in order to receive “financial aid” or “loan extensions” that are still more austerity with its crushing consequences. The Syriza Party does not want to exit the Eurozone or The European Union. It also can not allow the nation it represents to be destroyed. Syriza is forcing an as yet to be fully realized “Europe as a Whole” to consider that it is demanding a political consultation to over rule the Eurozone authority for finances and economics as being the dominant political force not in need of any outside political consideration other than “a deal is a deal”. At this level of scale, a deal is not a deal but a political act requiring consent, which is clearly not present in the Greek population. There are 3 authorities competing to govern the people of Europe and they are at complete odds and not in any constituted relationship with one another, being separate pieces not constituting a whole, a unitary nation-state.

      Syriza is taking an financial problem that is due to its size of scale become a purely political problem and forcing a political solution to what started as money being lent. The problem can not be solved with austerity, the direct solution in terms of finance. It is too big and qualitatively different than a single household that has to be foreclosed upon. A single household over its head in debt may lose its assets and have to work 2 jobs to get back up on its feet. But entire society, Greece, can only lose so much before there is no place for millions of people to go in order to get back on to feet. It has gone from a financial problem with a financial solution to a social problem requiring a political solution with the consent of the Greek people. That is the game Syriza is playing and it is not one which has an off the shelf solution from a ready made institutional arrangement present in Europe. Syriza may force a “NEW European Deal” in order for the entire collection of European nations to work smoothly with 3 currently separate authorities that do not seem to have a systemic relationship with one another, but rather have separate authority beyond the command of each respective agreed upon arrangement. The Euro and the European Union and its military relationship with NATO: There seems to be no balance of power and no recourse to petition against an outrageous claim such as the ECB is making in the form of austerity. That has to change.

      1. aletheia33

        yes and this is why the tsipras/YV statements have been so inspiring. one of their first points after being sworn in was that a europe-wide conference was needed to reconsider the contractual basis of the debt agreement(s). and ever since, they have consistently reiterated that all europe needs to pay attention to the problems greece’s situation lays bare and get to work finding a way to prevent those problems from grinding europe into the ground. they keep repeating that the problems of greece are the problems of europe; that they are simply doing what has to be done to preserve europe, politically and socially. they are behaving and speaking as responsible members of the european project. they even sometimes have phrased this reiteration as an invitation or suggestion, not a demand.

        but as rosario has put it well: “The contract must be built on common values and standards (thus the effectiveness of the “handshake” agreement/contract between mutual parties). The EU does not have this, therefore the language is a farce. This is Syriza’s problem, they have a rational argument, following, ironically, similar abstract language used in the EU articles, but they are speaking the articles in a different language (literally and figuratively/philosophically).”

        so, unfortunately, the intransigent european leaders (and/or the people who elect them, if they’re elected) are incapable of actually hearing what tsipras/YV are saying to them. one can hope that the lower level operatives are hearing it and, if not soon enough to rescue greece immediately, eventually some opinion will take hold throughout europe supporting the europe-wide conference tsipras/VF assert is urgently needed, as well as other sensible measures to address the problem of the current tyrannical rule by banks/”markets”/oligarchs. one can hope…

        i suspect one root problem is ordinary people have such difficulty in understanding finance/economics sufficiently to realize the actual source of their suffering and so are too easily persuaded it is due to some other people’s bad behavior. that is why yves’s work and this blog are so important. in a world being deliberately taken over by the neoliberal financial/economic would-be dictatorship, if the people do not come to understand the terms and realities of the new twist in the ancient exploitation game (including the use of the internet/computer as an instrument of control), they cannot prevail in any way. yves is very good at writing very clear explanations of what people need to learn if we are to survive.

        at this point, for example, very few people even realize how/why the IMF functions as an instrument of exploitation. but there are glimmers and signs of a new type of movement emerging that may become capable of slowing/undoing the relentless march of the neoliberal global project. tsipras/YV are the vanguard.

        whatever the immediate outcome, the seeds are now being planted of a different “new world order” from the one the current oligarchs have in mind. even if those seeds may not fully bear their fruit until after everything lies in ruins. there is much work we can do to nurture those seeds. thank you, yves, for showing us this, as well.

      2. Brooklin Bridge

        Excellent comment!! Very clear summary of the moving parts and the inherent weakness of the EU as it stands.

        Followed by an equally excellent analysis by aletheia33.

        Indeed, it’s very difficult to follow this at the finance level (the media is utterly corrupt), but one thing people do understand is starvation and social collapse and that will trump a deal is a deal every time for a huge number of people. Tsipras/YV, are making real efforts to present and amplify the social catastrophe that is taking place in Greece and the fact that it is being imposed on the backs of those least able to deal with it even though they did nothing to deserve it.

  15. Kurt Sperry

    The following is a repost of something I put from yesterday’s thread, I’ve heard numerous assertions made that the Greek people are solidly pro-Euro and this pretty strongly contradicts that line of argument:

    I saw a graphic of polling results this morning from Gallup asking if people polled “If you were given the choice would you prefer to have the Euro or your own national currency?” It’s broken down by country and Greece has 52% favoring their own currency. So I certainly wouldn’t take it as settled that the Greeks want to remain in the Euro.

    Graphic referred to can be seen here (interesting page too): Polling data for other European countries both within and without the EZ is included as well. I tried for a few minutes finding the original source but came up dry. Attributions can be problematic on twitter stuff, it’s a pretty lazy format.

    1. Kurt Sperry

      OK, found the source. Not impressed really, The polling company’s site homepage is w times 3 dot wingia dot com. Here are the poll results in pdf format:

      Note on page 2, the question, “If there was a referendum tomorrow in your country on whether Afghanistan should remain a part of the European Union, would you vote to stay in the European Union or to leave the European Union?”

      Maybe it’s a simple typo and isn’t as bad as it looks.

    2. Yves Smith Post author

      With all due respect, that is a garbage in, garbage out question. Oh, and I see you made your update while I was composing my reply.

      “Having your own currency” means a probable collapse of the banking system (the ECB would yank the ELA), capital controls, and expulsion from the EU (Varoufakis has explained at some length, and we’ve quoted it in post, how leaving the Eurozone puts one in violation of the EU rules and would lead to an expulsion from the EU). That means the loss of EU subsidies, most important agricultural subsidies, one of Greece’s few export markets. And on a mundane level, the loss of EU subsidies also means loss of revenue for an income-starved government. And it means no more low/no friction movement of people and goods between Greece and the rest of Europe.

      I guarantee if the implication were explained, the percent expressing approval would plunge.

      Moreover, Syriza campaigned promising no default and no Eurozone exit. Syriza got new voters from Pasok, which is a centrist party, and 2/3 of Syriza’s representatives. In other words, the representatives aren’t for leaving the Eurzone, and it’s not clear that Syriza’s voters would even support the naive and misleading question posed by Gallup.

  16. john bougearel

    The Syriza government does not care about volatility in financial markets. It cares about its people and getting out from under the boot of the Troika crushing its windpipe. When a country is fighting for its dignity, and it’s survival, I can’t imagine much thought being given to the financial markets.

    As Yves pointed out – “Australia and New Zealand celebrate Anzac Day which by all accounts was a massive military disaster (the Battle of Gallipoli), because their soldiers showed remarkable courage in the face of terrible planning and leadership by the generals in charge of the operation.”

    Greece is in the middle of an economic disaster. And their foot soldiers YV and AT, are showing remarkable courage. One day, perhaps, Greece will celebrate their courage against their tyrannical creditors. For now, let us all just hope this David meets Goliath crisis passes more in favor of David than Goliath!

  17. Matt Pappalardo

    It’s fairly vague since they don’t provide an outline describing the basic structure of their planned employment program.

    A net increase in jobs by 300000 in all sectors of the economy – private, public, social – is expected to be the effect of our two-year plan to regain employment.

    However, the above statement leads me to believe that they don’t plan to hire/employ hire all 300,000 directly. There does appear to be some conflicting information within the media reports, so we may have to wait for further clarification.

    1. Yves Smith Post author

      Other accounts said it would be by direct hiring, but yes, the platform statement is broader. And regardless of how it comes about, the more important part is that is direct hiring and employment subsidies are contrary to the sort of “structural reforms” that are part of the current bailout deals.

  18. kathi

    “There was no reason for them to change their position, absent massive arm-twisting from the US, and our sense has never been that the US is working all that hard to shift the European position. Any words to Merkel would need to be accompanied by a full court press on other channels. However, given the visible, abject failure of a day of talks, and the fact that the next meeting isn’t until next Monday, the US does have time to swing into full gear if it does appreciate how much pressure it will need to apply to get the Eurogroup side to budge. ”

    I do not have the impression that the US cares at all about Greece since the risks seem to be negligible from their point of view.
    Furthermore, the important negotiation where armtwisting is applied at all are the negotiations about Ukraine, where Merkel and Hollande are pretty desperatly trying to deescalate a situation where the US is fueling a conflict on european doorsteps.

    1. Yves Smith Post author

      No, a Grexit is of concern to the US. Obama brought it up with Merkel, and I know people who know what Treasury is doing, and they’ve both sent someone to Athens and are applying pressure through other channels. They are also a bit miffed that Varoufakis isn’t talking to them so they can coordinate.

      1. kathi

        ” They are also a bit miffed that Varoufakis isn’t talking to them so they can coordinate.”

        Well, seems to be that even IF he is talking, decisions can quit rapidly be reversed:

        I know that YV is well liked in these holy halls, I have the ever increasing impression that he is all smoke and mirrors and the 565 Ultra high Net worth individuals UBS is talking about will not loose a single cent.

        1. john bougearel

          Probably best if Yanis Varoufakis “goes dark” over the weekend and says nothing. A self-imposed blackout period may be a very effective strategy. The FOMC imposes a 7-day communication blackout period prior to FOMC meetings simple to “facilitate the effectiveness …of policy deliberations.”

          From the FOMC Policy on External Communications of Federal Reserve System:

          ” To facilitate the effectiveness of the Committee’s policy deliberations and the clarity
          of its communications, participants will observe a blackout period on monetary policy
          communications in conjunction with each regularly scheduled FOMC meeting. The
          blackout period will begin at midnight Eastern Time seven days before the beginning of the

  19. Sanctuary

    I just believe that Grexit is what is in the cards here because it is inevitable. The Greek political and economic situations are untenable and the strain of holding together a brittle Eurozone with its major differences papered over with inadequate QE and counterproductive austerity is simply not sustainable. Even optimistic projections of growth for Greece show decades of austerity if it stays in the Eurozone. So, Grexit either happens now or in a year or two, but happen it will.Either through proactive measures on the part of the Greeks or by default because the Eurozone falls apart when Marine Le Pen comes to power and extricates France from this disaster. The Eurozone reveals itself to be nothing more than a modern day League of Nations with many of the same weaknesses (need for unanimity in decision making and lack of commitment to collective economic security). It’s just not possible for this thing to work correctly so the ramifications of Grexit are therefore unavoidable.

  20. morgan

    I love reading the posts on NC about Grexit. They’re indepth and insightful.
    However, if you’re really really really strapped for time and want to know what’s going on?

    Look to Merkel’s face and walk – the stiffer it is the more she’s keeping in the Germanic urge to slap the schniznit out of the Hellenic winner of the vote who’s suddenly decided to go all 300 on her when she wants the hunchback who will give up the pass.

  21. rmac39

    Yves, could you explain the reasons behind Finland’s position which apparently is even more adamant than Germany’s austerian position.

    1. Yves Smith Post author

      Generally speaking, it is even more hardline than Germany. However, that appears to be moot as far as the Eurogroup finance ministers’ meeting was concerned, since reports have repeatedly indicated that all the other ministers were insistent that Greece stick with the all the current bailout terms as a condition of getting those funds released, that there would be no “bridge” of the sort that Greece has requested.

  22. Ignacio

    I can give you an example on how governments try to manipulate public opinion against Syriza. The spanish secretary for foreign affairs said today that the spanish contribution to greece bailout prevented a rise in unemployment benefits and retirement pensions in Spain. Of course this is utterly false.

  23. Lambert Strether

    ECB extends €5bn emergency loans to Greek banks FT:

    The ECB made the decision after a call with members of its governing council earlier on Thursday. It comes a day after the ECB removed a waiver that allowed Greek banks to use their country’s bonds to secure loans from the central bank despite the bonds’ junk rating.

    The request for the extension was made by the Bank of Greece, according to one person familiar with the matter, who also said some members of the governing council had on Thursday expressed disappointment at the stance taken by the Greek government at Wednesday’s meeting of eurozone finance ministers in Brussels.

    The extension, which was first reported in the German media, takes the total amount of funding available to Greek banks through emergency loans, known as Emergency Liquidity Assistance, to around €65bn.

  24. Lambert Strether

    Merkel before meeting with Tsipras. Greek Reporter:

    “I would only say that Europe always aims to find a compromise, and that is the success of Europe… Germany is ready for that. However, it must also be said that Europe’s credibility naturally depends on us respecting rules and being reliable with each other,” she said. This was a clear warning for Tsipras, who is trying to end Greece’s bailout program and austerity measures.

    “We will see what proposals the Greeks make. That will be discussed in the framework of the [Eurozone] Finance Ministers who meet again on Monday. So we have a few days’ time,” she told reporters outside the EU leaders summit in Brussels.

    Days, eh?

    1. Santi

      Days for discussion “inside of the framework” (see Moscovici Euro-vogon-babble, quoted here).

      She is truly meaning that Greece should accept the “present programme”. I don’t think Tsipras should.

    1. craazyman


      I can’t believe the peanut gallery trashed the FT for it’s glowing human interest profile of Professor V. All youze guys in the PG said it was a cheap disrespectful shot. Are Your Effing Kidding? You can’t buy that kind of PR for any price. It’s a gift from Gawd.

      don’t youze guys — all youze you peanut gallery “angry men” and “angry women”, you humorless Church Ladies of Charityless and Churlish Cognostications, have any sense of style and savoire faire?

      Well. Evidently, if you do, it’s hiding. However, Professor V. “gets it”. That’s why he’s about to save Europe from itself. I’m predicting Victory. V for Victory and Varoufakis. VV. Vee-Vee Day.

      It’s not my personal opinion. When Dionysus and Pentheus go at it, Dionysus wins. That’s just the way it is. I’m not making this up. You can read about it in Euripedes. He was a Greek by the way.

  25. kristiina

    Merchant of Venice…the rift not between individuals but banks and nation-states. Banks&elites have no incentives to give in because they’re gonna lose anyways. Anything they can extort now is just fine, because everyone knows those debts are never going to be paid. This was common knowledge when loans to Greece were decided upon in parliament. Those funny “guarantees” Finland demanded were just to make the deal go down better. And the guarantees mean nothing when the underlying reality is that the loans will not be paid back. I expect things to get worse before they get better. Fortunately, banks do not have armies.

  26. Cugel

    There seem to be a few points in order:
    #1 – Austerity is a death spiral, with reduced demand creating reduced revenues, which necessitates more loans, etc., so that was never sustainable. They have simply reached the end of the rope, while Portugal, Spain and Italy still have more time for the tragedy to work itself out.

    #2 – The Greek public like any public simply hopes for something better through negotiation. They don’t want Grexit, but they don’t want capitulation either.

    #3 – Troika was never going to moderate their impossible demands. Hence there was never the possibility of a deal.

    Given #1, #2 and #3 there was never the possibility of any deal. Hence default and ultimately Gexit are inevitable regardless of the consequences. As bad as default would be, how is endless waves of austerity any better?

    The complexity comes in when people start casting around for impossible solutions. There are no solutions. The Troika is intent on destroying Greece and inflicting as much pain as possible “pour encourager les autres”. The only question is whether Syriza will surrender. But, they have no incentive to surrender. True, the consequences of default are horrible, but default is inevitable anyway. It’s just a question of how much wealth the Banksters can strip away first that is in question.

    So, they might as well conclude that it is as good to be hung for a sheep as a lamb and stick to their positions. The public will continue to support them, and if ultimately they are forced out of power, the fascists will come in who are crazy enough to exit anyway.

    Reading the financial press I don’t get the impression that the bankers really believe that they are losing control yet. They think they can continue to manage things. Yet the blowback is always going to be worse than they anticipate. I liken them to the Bush Administration blindly refusing to admit that the Iraq war was turning into a fiasco. That stupidity didn’t stop the war from turning into a fiasco though, and the ramifications from this disaster will be equally long term.

  27. susan the other

    This observation just got lost in the ether, so I’ll try again. It is just this – that there are uncanny similarities between EU politics and US politics, thusly: When the economy crashed the Fed moved like blitzkrieg to bail out Wall Street and then followed up with QE as necessary. Congress didn’t lift a finger to help the rest of the country. No jobs program, etc. When Congress had the nerve to accuse Bernanke of “printing money” and inflating the economy Bernanke asked them if they would expand his mandate to include making fiscal decisions – i.e. jobs programs, and they refused. So the Fed was left with its absurd dual mandate that does not resolve political issues ever because one mandate cancels out the other – the mandate for price stability always cancels out the one about full employment. So what real difference is there in our austerity and Europe’s. Greece has as much political power, fiscal power, as the US. Apparently none.

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