Greece’s Fate in ECB’s Hands if Eurogroup Talks Fail

As most readers know well, Greece made concessions yesterday to the Eurogroup that, although contested as to how far they went, were seen as big enough concessions to win the support of Eurogroup head Jeroen Dijsselbloem and Italy. But Germany’s Wolfgang Schauble almost immediately rejected them, setting the stage for a showdown today. As we’ve discussed from the outset, the biggest bone of contention continues to be “conditionality,” otherwise known as structural reforms. Greece wants to be able to revise some measures as long as it can still meet its primary surplus target. Germany insists a deal is a deal and Greece must reaffirm all the terms of its existing agreement.

The meeting is set to start in Brussels at 3 PM local time, so we’ll know soon enough how things turn out. Many observers think that German opposition alone is enough to scupper a deal, while others like Ambrose Evans-Pritchard view the outcome as less certain. Moreover, there is the possibility that Merkel will seek to moderate Schauble, although she runs the risk that Schauble could resign, having been overruled by her before on Greece in 2012 and on QE. If so, that would be a seismic event in Germany. So it isn’t clear that Merkel can or will do much to pressure Schauble.

The US was also trying to get things back on track, but this report from Bloomberg was not terribly encouraging:

Treasury Secretary Jacob J. Lew talked Thursday with Varoufakis, French Finance Minister Michel Sapin and Jeroen Dijsselbloem, who chairs meetings of the 19 euro-area finance ministers. Lew has also spoken to his German counterparts and officials at the European Commission and the International Monetary Fund.

Notice who is not mentioned? The key actor, Schauble. However, the Guardian live blog shows Reuters snap updates showing the German government trying to look more reasonable, which either suggests that Merkel has had a talking to with Schauble or the spokesman is messaging out of line with Schauble’s plans (which would be very unusual but not impossible):





In America, when the President says he has confidence in someone, that means his days are numbered. Is this also a sign of an inevitable breach in Germany?

Yesterday, the Greeks loudly signaled they have gone as far as they can. That is in no small measure due to the fact that they are boxed in domestically; Syriza’s leadership is already under fierce attack for giving as much ground as they did in the Thursday offer. Today, they are calling for a Plan B of sorts:

Media sources have speculated that one possible source of short-term relief for the Greek government would be if the IMF payment due in March were suspended as long as debt talks are still under way. But if anything, the big reason to keep talks going, aside from the desire to reach a deal of some sort, is to keep the ECB from terminating or putting restrictions on the ELA.

We can’t stress enough how abominably the ECB has behaved so far, and the press and pundits have not called them out on it sufficiently. Der Spiegel is now reporting that the ECB is planning for a Grexit. Note that is consistent with a FAZ story we reported on yesterday. Note that the ECB issued a denial, but only of one rumor in the story, that they were considering recommending that Greece implement capital controls.* The central bank did not dispute the FAZ claim that the ECB was considering a Grexit.

Economist and former IMF staffer Peter Doyle has argued that the brinksmanship all parties have played is almost inherent, since (as the Eurozone’s designers anticipated) it will take a crisis to force the difficult political and economic integration to move forward. From Doyle, emphasis ours:

On the one hand, in an incredible reversal of practice during the global financial crisis—when central banks were at pains to conceal which institutions were receiving their emergency assistance for fear of compounding the adverse signals and therefore the crisis—the ECB has brazenly publicized exactly which Greek banks depend on its help and how much. And it has overtly warned it would withdraw that help. In this way, the central bank is overtly threatening to blow up the Greek banking system, in order to make the euro work. Walter Bagehot, the nineteenth-century father of lenders of last resorts, would be dumbfounded.

The wee problem with this strategy of putting the Greek banking system at risk is that financial time moves faster than political time. The ECB’s skimpy €3.3 billion increase in the ELA as the last board meeting looked intended to accelerate the ongoing bank run by almost guaranteeing that the Greek central bank will come close to bumping into the limits if the talks continue to be fractious, which was virtually guaranteed. Reader Jim Haygood estimatedt that the increase was likely to be used up by the end of the week. And as Fortune pointed out:

The ECB knows very well that money buys the Greek banks a week, two weeks tops. The Greek banks won’t need the money if the panic stops, but that won’t happen unless Germany relents and agrees to Greece’s demand for leniency. With Germany saying Nein today just to extend talks without granting any concessions, it is now clear that the whole situation may actually blow up this time.

Ambrose Evans-Pritchard was more pointed:

Greece is now prostrate. Tax arrears have reached €76bn and are rising by €1.1bn a month. “Greece is totally bankrupt. The ECB’s constant talk against us is causing a self-fulfilling deposit flight in the banks. It is so bad that anything could happen,” said one Greek official.

What is even more troubling is that the ECB’s thinking isn’t known and its actions are not predictable given that the composition of who gets to vote changes every two weeks (governing council members always do and the others rotate). France’s Noyer took a hardline position against Greece when the talks with Syriza began and yesterday, Bundesbank chief Jens Weidmann not surprisingly fell in with Schauble’s views. And when Doyle polled three banker experts who he thought would be representative of central banker thinking, one called on terminating the ELA if the current talks failed, a second said that if any talks were in progress to keep it going, and the third said to continue it no matter what. There is no way of knowing whether this thinking represents how board members would act, but this mother-in-law research suggests that the odds of the ELA being terminated are troublingly high.

FT Alphaville points out that this does not necessarily mean a disorderly Grexit, with the Greeks nationalizing the banks and scrambling to reintroduce the drachma. They quote a Nomura research note (emphasis theirs):

If ELA for Greek banks is halted, a bank holiday is almost certain to be needed, as the Greek banking system’s day-to-day liquidity management depends on such access with ECB liquidity currently close to 20% of the balance sheet size. Following such a bank holiday, there would be two basic paths.

1) Temporary and reversible stage: This path could be one similar to that of Cyprus in 2013. To prevent continuous deposit outflows bank holidays are temporarily declared and a new backstop arrangement is negotiated with official sector creditors (led by the Eurogroup). In the interim, to create further pressure to sign a bailout deal, the ECB could impose a deadline on the ELA provision. When banks are reopened, some limited capital controls may be needed to restrict capital outflows. But cross-border convertibility of the currency would largely be preserved, and a parallel currency would not develop in earnest. Furthermore, given the looming state financing constraints in March, a failure by the government to pay some of its liabilities is also possible although this could quickly be remedied after a bailout deal.

2) Full-blown EMU exit: – outright currency separation: If no political agreement can be reached during the bank holiday, banks would eventually open with liquidity provided directly by the Greek central bank. The Greek central bank would no longer be part of the ESCB (Euro System of Central Banks), and commercial banks in Greece would no longer have access to cross-border clearing of banking transactions within the TARGET2 system. In addition, severe capital controls would likely need to be put in place to avoid large-scale capital flight. This would be a scenario where the convertibility of the currency is fully broken, and an exchange rate between Greek deposit balances (and eventually cash) would develop relative to euro deposit balances. This scenario would likely involve the government defaulting on some of its upcoming liabilities as well. At some point, a new currency law would formalise the currency split and provide guidance on re-denomination of contracts.

The key point is that there are various degrees of currency separation, from temporary restrictions on bank transactions to full-blown breakdown in currency convertibility. Since there is no political desire in Greece currently to actively adopt an independent currency, euro exit would likely be a two-stage process. The risk of reaching stage 1 is fairly elevated. But the risk of reaching stage 2 is lower.

Readers need to bear in mind that the Cyprus solution was ugly, since Cyprus was made to revoke its deposit guarantee and imposed a “bail-in” that forced losses on depositors. As Ed Harrison summarized the deal in 2013:

Europe has hammered out a 10bn euro “bailout” of Cyprus. I put the term bailout in quotes because the key feature of this deal is the bail-in of Cypriot depositors to the tune of 5.8bn euros, about a third of Cyprus’ GDP. This means that depositors went to sleep on Friday night and woke up Saturday to find that their money, deposited safely in Cypriot banks, had been seized and used to “bail out” the country….I see this as an extreme measure which, if the European banking crisis continues elsewhere, will have very negative implications for bank depositor confidence in other European periphery countries.

The deal terms as reported by Reuters are as follows:

1. A 9.9% levy on deposits over 100,000 euros and the 6.75% tax on deposits under 100,000 euros.
2. The IMF will contribute to a bailout. The size, maturity length, and interest rate have not been determined. And it is not clear yet what, if any, guarantees are associated with this as opposed to loans.
3. Russia will re-finance a loan which is ostensibly to the sovereign for 2.5 billion euros. The 5-year loan will be extended to 8 years and the interest rate will drop.
4. Telecoms, ports and utilities privatization may be a pre-condition of loans/guarantees.
5. The banking sector, now 8 times the size of Cyprus’ GDP, will be downsized. The average banking sector size in the EU is 3.5 times GDP. Outliers in Europe of this type include Ireland and the UK. (see here for a 2009 calculation of outsized individual European institutions and here for the largest banks by assets as of 2010). Iceland was also an outlier in this regard.

Cyprus was widely seen as one-off, in part because the media paid little attention, it was widely depicted as a money-laundering venue (that charge was greatly exaggerated as we explained at the time), and the parties most badly hurt, aside from the Cypriots themselves, were Russian and British property owners and retirees who’d chosen Cyprus as a cheap and pleasant spot. But having depositors whacked by virtue of living in a country that was unable to meet predictably unrealistic austerity targets is another kettle of fish entirely. While depositors in other periphery countries are unlikely to wake up to the risks immediately, if they vote in an anti-austerity government, the message is meant to be that they would get the Cyprus/Greek money waterboarding. In other words, pulling the ELA would be consistent with the hardliner line of thought that Greece needs to be made a demonstration project pour decourager les autres. We’ll know in the next week or so whether they get their way.

*Before readers point out that having the ECB plan for a Grexit is rational, the issue is not the planning but the leaks. Central banks are hermetic, and thus the odds favor that these leaks were planted.

Update 8:10 AM: This does not look good at all for Greece. It is being muscled into pretty close to total capitulation. From Paul Mason:

Yesterday finance minister Yanis Varoufakis (former professor at the University of Texas) climbed down on his previous refusal to ask for an extension of the old deal – but he still wants leeway to set his own budget targets, and to implement new laws giving workers back their job contract rights..

Last night I was told that, in the working group that prepares the Eurogroup meetings, the Greek compromise was the draft basis of agreement. That keeps Greece around the table. But overnight it looks like Germany has got words into the draft the Greeks can’t accept, and the pre-meeting ended without result.

In the next few hours, something decisive has to happen. Either the Greeks cave in completely. Or they trip the crisis into a new phase.

The meeting start has been delayed to 4:30 PM Brussels time. There is now a pre-meeting set with Varoufakis, Schauble, Dijsselbloem, and Lagarde.

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  1. craazyman

    this is worse than spawts talk radio when the hometown football team is on a mid-season losing streak. my oh my the rumors fly. coach ain’t worth squat. QB’s arm is toast, running game is dead, wide receivers can’t catch a cold . . . oh the radio waves shimmer dialectically in increasing amplitudes . . . and then they win a game and it’s like PLAYOFFS . . . HERE . . . WE . . . COME!!!!!

    This is worse than high school. High school euro-style. We all thought Europeans were smarter, better mannered and more sophisticated than we are in Amurrrica. Well, at least after WW2 ended. We thought that changed everything. We thought they got it out of their system. No more messing around for them. Then they went back to all their ancient cities and statues and paintings and erudite philosophies and manicured cultures and they said “See, we’re better than youze”.

    We thought they were! We had an inferiorty complex. We tried to speak French with a French accent because we thought it was sophisticated, but when the French came over they didn’t try to speak with an American accent! Why is that?

    Of course they’ll do a deal. It might even be today. Of course, it might be later. It’s all just words at this point, not numbers. The words make the numbers. The numbers are just words anyway. So it’s all words. People can think in their heads whatever they want about the words. It doesn’t count. No pun intended. They’ll come up with some words that keep it all slouching forward. There really is no alternative. People can relax and go back to Youtube! Wake us up when it’s over.

  2. vidimi

    can greece issue any international arrest warrants for any banksters that led it into this mess?

    the options seem to be default, and get kicked out of the euro have your economy sent back to the post-thira eruption dark ages for decades with tens of thousands dying and hundreds of thousands emigrating or forced into sex work, or comply with the terms and accepting decades of crushing austerity, ending greece as a sovereign entity with thousands dying and tens of thousands emigrating or forced into sex work and hope for things to eventually improve for it as a province.

    i’m glad i’m not the one who has to make that choice but i think i know which one future greek history books would judge more favourably.

    1. ErnstThalmann

      “can greece issue any international arrest warrants for any banksters that led it into this mess?”

      As I have long advocated, the first step toward Greek emancipation is the creation of a workers state – to be called the Democratic Peoples’ Republic of Greece – and the confiscation of private assets. Only then would the arrest of these banksters make sense. After all, of necessity there would be a requirement for their public trial, perhaps in a large football stadium environment. There is an order to these things, you know.

    2. hunkerdown

      I think Interpol has a dual criminality requirement, which would necessitate that the act in question be a felony in both the state seeking extradition and the state in which the arrest would occur.

      And history is written by the victors anyway, so why would they be concerned?

  3. Jim Haygood

    When you lack facts about Greece, just make sh*t up:

    ‘Nobody is claiming—as they might of a bankrupt company—that Greece doesn’t have the wherewithal to pay back all its €320 billion-plus ($365 billion) of foreign debt in full: The assets of the country dwarf that figure.’

    Excuse me, I will make that claim, and argue it by analogy. Let’s take the rich United States. Its 2013 annual report shows (Summary, page viii) assets of $3 trillion, liabilities of nearly $20 trillion, and negative net worth of minus $17 trillion — excluding social insurance (Soc Sec, Medicare, Medicaid).

    So in terms of assets, the US government could not pay down even one penny of its $18 trillion debt. But tiny Greece is such a financial titan, according to the WSJ, that its assets ‘dwarf’ $365 billion of foreign debt? Preposterous.

    Good journalism starts with not paying for bad journalism. Googling the lede of a WSJ article usually produces a free Yahoo link to the full text. Don’t feed Murdoch’s trolls. And don’t believe a word they say either.

    1. craazyman

      They’re probably thinking of TANs — Total Acropolis Notes. If you broke the Acropolis with a sledgehammer into 1 billion little chunks and sold them for $350 each you could pay back every euro.

      You could also use bigger chunks and sell them at Sotheby’s. Somebody just paid $350 million for a Paul Gaugin painting! Imagine what they could get for chunks of the Acropolis.

      They could also sell the top of Mount Olympus. That would be unimaginably lucrative, provided a knowledgable buyer realizes they get Apollo, Zeus, Dionysus and all the Gawds..

      1. MyLessThanPrimeBeef

        We need preserve our heritage sites.

        Why not offer the Germans Acropolis next to their Pergamon Museum?

        And the legal claim to the Elgin Marbles.

    2. Yves Smith Post author

      Thank you. That article was vile.

      As Randy Wray said via e-mail:

      Of course households really could always repay the debts if they’d just sell the kids and spouses into slavery; firms could always pay if you put all owners and their kin into debt bondage forever.

      1. Jim Haygood

        With European sovereign debt approaching 90% of GDP, the de facto policy is simply to service the debt. No developed country is currently proposing to run large enough fiscal surpluses to pay off its debt.

        Moreover, on a balance sheet basis, most sovereigns have relatively small and illiquid assets compared to the size of their economies. The US government’s assets (including land, buildings and such) are a skinny 18% of GDP.

        Most of the value of a government (if you were looking at buying one) is in its revenue generating power (cash flow), not its assets. Liabilities are high, but are assumed to be serviced from cash flow, not paid off.

        Not only is the premise of the WSJ article — that Greece’s debt could simply be paid off — wrong, but also the author has no inkling of what developed country balance sheets look like, nor any interest in researching the question. The WSJ should declare intellectual bankruptcy.

        1. Ben Johannson

          The wording of the WSJ piece, despite its lack of specifics, seems to suggest the total assets of Greece and everything in it dwarf the public debt. It sounds like a call for the Greek people to be forced into selling their possessions at bargain-basement prices. Note there’s no discussion in the article regarding to whom the Greeks should sell to obtain the necessary liquidity. I would assume international speculators.

          1. lolcar

            A quick google search finds an acre of Greek land with sea views for around 130,000 euros. So by my calculations they only need to sell 2.5 million acres or 7.5% of the total land area of Greece to pay off the full 320 billion.

        2. MyLessThanPrimeBeef

          Jim is right about the value of a government being revenue generation.

          I would pass legislation to tax the wealthy of Greece and sell the collection rights to the highest biddders

      2. craazyman

        they could try paying their taxes before selling their children. but somebody has to lead by example.

        what if you’re a tax-paying obedient Northern European and you see this spectacle? some dude with a hairy chest, sunglasses and open shirt in an Athens café at 11 am drinking ouzo and espresso with his Porsche parked on the curb? Thank you Hans and Franz! You PUMPED . . ME . . UP! he says, raising his lemon rind and pointing at you.

        Hans and Franz are not amused anymore. It was funny at first, but now it’s sweat-time in the gym.
        Mr. Weidmann is Hans and Mr. Schaeuble is Frans. They want to Pump Greece Up on a crash diet. Oh man, that’s like kind of nutty, but the problem is the fat folks can dodge the workout and the thin folks have to pump the iron. Who is a Greek anyway? That’s a question nobody asks or answers. The ones who don’t pay taxes. Who are they in their own minds? Who are they in your mind? Is there a difference? Why is that? Deep thawts

      3. hunkerdown

        It gets viler:

        Welcome to Stephen Fidler & Co. Solicitors
        Sometimes, we all need a little help.

        Stephen Fidler & Co can help redress the balance.

        The Eskimos woulda pushed this guy off the ice in minutes.

    3. OIFVet

      Oh come on Jim, think of all the sunny Greek isles just begging to be sold to billionaires at firesale prices. Also too, “with enough pain and suffering, a determined debtor country can usually repay foreign creditors,” Reinhart and Rogoff say. After all Ceausescu did it… What good is keeping little people around if the elites can’t make them cry?

      1. Jim Haygood

        I know, brother. But seriously, here’s a quote from page 56 of the US government’s Notes to Financial Statements:

        For financial reporting purposes, other than multi-use heritage assets, stewardship assets are not recorded as part of PP&E [Property, Plant and Equipment, valued at about $900 billion].

        Stewardship Assets consist of public domain land (Stewardship Land) and Heritage Assets. Examples of stewardship land include national parks, wildlife refuges, national forests, and other lands of national and historical significance. Heritage assets include national monuments, and historical sites that among other characteristics are of historical, natural, cultural, educational or artistic significance.

        Stewardship land and most heritage assets are considered priceless and irreplaceable, and as such they are measured in physical units with no financial value assigned to them.

          1. OIFVet

            It is, indeed. I am guessing though that the good folks at WSJ and the transnational financial, corporate, and political elites are not huge fans of Teddy Roosevelt and democracy:

            “Defenders of the short-sighted men who in their greed and selfishness will, if permitted, rob our country of half its charm by their reckless extermination of all useful and beautiful wild things sometimes seek to champion them by saying the ‘the game belongs to the people.’ So it does; and not merely to the people now alive, but to the unborn people. The ‘greatest good for the greatest number’ applies to the number within the womb of time, compared to which those now alive form but an insignificant fraction. Our duty to the whole, including the unborn generations, bids us restrain an unprincipled present-day minority from wasting the heritage of these unborn generations. The movement for the conservation of wild life and the larger movement for the conservation of all our natural resources are essentially democratic in spirit, purpose, and method.”

    4. Glenn

      The comparison with Romania in the 1980s apt. That is actually what they want to do to Greece. Anyone knows what the primary surplus was during those years? There are a lot of picture and stories of the effects of that policy.

      1. dnm

        According to World Bank data, between 1976 and 1981 Romania’s foreign debt went from 0.5 billion dollars (or 3 perent of GDP) to 10.4 billion dollars (or 28 percent of GDP and 30 percent of exports). In 1981 interest rate payments reached 3 billion dollars, up from barely 8 million six years before. Over the period 1980-1982 the country had to pay 6 billion dollars to foreign creditors, and by 1982 Romania needed 80 percent of its hard currency exports to finance foreign debt.

        Cited here:

        The primary surplus was around 4-8% in the years 1985-1988. Source (p.51). I couldn’t quickly find information on the earlier years.

    5. Rosario

      Considering the WSJs firm commitment to current economic operating procedures I believe it would be best for everyone to stop reading it. Even their “truthful” stories have a clear agenda. They will say anything to maintain the rentier class.

    6. davidgmills

      Really? Do you believe those asset figures? Keep in mind the government owns about half of the western US and huge parts of Alaska and all of the National Parks and Monuments and etc., etc. . Priceless, unless of course you are a Republican.

      1. Jim Haygood

        Yes, I believe the asset figures. As always in financial reports, one has to read the footnotes. This one is on page 56:

        For financial reporting purposes, other than multi-use heritage assets, stewardship assets are not recorded as part of PP&E.

        Stewardship Assets consist of public domain land (Stewardship Land) and Heritage Assets. Examples of stewardship land include national parks, wildlife refuges, national forests, and other lands of national and historical significance. Heritage assets include national monuments, and historical sites that among other characteristics are of historical, natural, cultural, educational or artistic significance.

        Stewardship land and most heritage assets are considered priceless and irreplaceable, and as such they are measured in physical units with no financial value assigned to them.

            1. MyLessThanPrimeBeef

              As a conservative estimate, I would venture the value at no less than the sum of the combined wealth of all the billionaires of the world – that’s the lower bound number.

  4. generic

    In America, when the President says he has confidence in someone, that means his days are numbered. Is this also a sign of an inevitable breach in Germany?

    Very much so. Merkel’s confidence is usually career ending.

  5. Cassiodorus

    So the Greeks capitulate, the Greek government collapses (presumably because a fair portion of SYRIZA resigns, or refuses to ratify), and new elections are scheduled. What then?

    1. Glenn

      There are a lot of possible permutations, none of them with certain outcomes: A few, off the top of my head, are:
      1) If the Europeans throw Greece out of the Euro, Tsipras could argue that he didn’t break any election commitments and institute TANs or similar Plan B.
      2) Tsipras calls a referendum to release his party from his no Grexit policy.
      3) above with a “Plan B”
      4) A general election with or without 1&2.
      Another general election would be very volatile. Presumably New Democracy would say put us “Grown Ups” back in charge. Golden Dawn would say, OK you tried New Democracy and austerity; the Syriza programme didn’t work; try us, it is the immigrants and coloured peoples fault. Truly frightening.

      1. Cassiodorus

        Number two of your list sounds like the best option. Oh, who knows what they’ll do? SYRIZA appears to understand a few of the basics of resistance, but have yet to show that their plan is any good. Do they really want to be held responsible for continuing austerity after all they’ve promised so far?

        1. Glenn

          It is not just continuing austerity but increased austerity over the next few years as per the 2012 agreements with the Troika

            1. hunkerdown

              Perhaps they were hoping for more support. Think of that scene in Jerry Maguire… “Who’s coming with me?”

  6. Arthur Williams

    If I were the Greeks at this point, I’d just walk in to the nearest bank, tell the teller to step away from the terminal and record a deposit of 500 billion Euros to my account. Cut the Germans a certified cheque and send them on their way. All done!

    If that makes the Germans unhappy, well they could always return the cheque.

    1. NotTimothyGeithner

      Greece is responsible for printing 10€ notes, so I think there might be a solution.

      I await this response from Yaris:

      “Every Greek citizen must now mail (wink) 10 euros every (how much does Greece owe) to our new collection center across the street from the mint.”

      1. Oregoncharles

        Minus, of course, the 93 Billion (including interest) Germany still owes them from the war.

        Ingenuity is certainly called for. Sometimes there’s such a thing as too serious.

  7. kristiina

    I am already seeing more positive signs about Greece, Varoufakis and Syriza in my FB feed. People (as in the human beings) are starting to wake up. Not so the media, that keeps spouting the eurocrat hardline here in FInland. Strangely, the hardlining is really bringing up the absurdity of the situation: sovereign states being made serfs by the loan conditions. The question is starting to take form: if democratic elections cannot make a difference in policy, what is actually going on? Syriza would sorely need more time to get the message through.

    If Syriza decides to resign, there will be new elections, and their support is now something like 80% so from that perspective they’d come back with even stronger mandate than they have now. What would Germany do with that? New elections would maybe buy more time, too.

    It seems as if the ECB policy is to suck all money out of Greece and especially Greek banks with gaming the ELA and leaks. This is nasty. I still am not really getting why all seem to be so flippant about default. The only thing that would hit eurocrats where it hurts.

    1. Santi

      A default not just hurts the eurocrats: the associated bank runs and capital controls hurts a lot the economy. For instance, importers have trouble to get and pay products, tourists are uncertain about money and thus cancel trips, etc. This relative to Greece. After a bank run and a capital controls, people will think twice about lending cheaply to Spain, which has a big primary deficit and just a nominal 0.7% GDP growth right now (real 1.4% due to big deflation). So, is Spain next? is it Portugal? (I doubt it) Is it Italy?… This is the financial damage for the rest of the Eurozone, reducing investment and increasing deflation and depression in the South… Nothing pretty. The “whatever it takes” of Mario Draghi with regards to the euro stability looks increasingly like “whatever it takes if you are not under Schauble fire”. This will make all risk assessment in the Eurozone be reevaluated.

      So unless the default is very carefully organized, it is better to avoid going there to the maximum possible extent, while keeping Greek population dignity, of course. I understand that Varoufakis must walk a very thin line.

    2. ex-PFC Chuck

      “I am already seeing more positive signs about Greece, Varoufakis and Syriza in my FB feed. People (as in the human beings) are starting to wake up.”

      Interesting especially if, as your screen name suggests to me, you’re from northern Europe. If you feel comfortable providing more information regarding what parts of the world you’re seeing these signs of awakening please do so.

      1. kristiina

        Of course this is anecdotal, but people who never post about politics on FB have been linking to Varoufakis articles. Even one Finnish economy professor is blogging with a header Greece is right (Pertti Haaparanta). All in finnish so I am not including a link. Some people are waking up.

        The official line seems to be moving into slander towards the Greek elected officials, so some balloons must be feeling punched.

    1. Jackrabbit

      …Finance Minister Yanis Varoufakis, an outspoken Marxist economist and blogger…

      Can anyone imagine that neolibs hate anything/anyone more than a “marxist blogger”?

      When will we see neolibs and neocons labeled in a similar fashion? Secretive, anti-humanist Mr. Bigshot, a staunch neolibcon, could not be reached for comment.

      1. hunkerdown

        You won’t. Insiders don’t criticize other insiders.

        We need to be the ones taking their context away from them, exactly as they seek to do to us. We need to be the ones casually referring to the executive class as long pigs, not executives. We need to be calling the entire British ruling class pederasts, not MPs.

        Remember Hypatia!

  8. William C

    I would happily bet some money that the ‘ECB leak’ is from a German official either at the ECB or the Bundesbank. Possibly the Finance Ministry, but less likely.

    Think back to 1992 when the Buba sank sterling and wrecked the exchange rate mechanism.

  9. Petey

    Fabrizio Goria:

    German gov’t spox says would call Greek bailout extension request a letter not a ‘trojan horse’

    Well, that’s a massive concession, no? Turns out the letter was actually “a letter”, perhaps made out of “paper”, and not “a huge wooden structure”. Who knew? Guess the Germans are turning reasonable after all.

    Next up, maybe the Germans will declare the Greeks are less of a threat than the Russians. Or maybe they’ll declare the sky is blue, rather than the sky being a nefarious Greek plot…

  10. EmilianoZ

    Le Monde says Varoufakis is part of the problem:

    « S’il avait eu une attitude plus conciliante, moins arrogante, il aurait peut-être déjà décroché, son feu vert à une extension du plan d’aide », glisse une source européenne haut placée…

    Had he been less arrogant, an extension might have been granted already.

    The list of his faults is endless:

    His treatment of Dieselbloom:

    Mais la conférence de presse finale fut calamiteuse. Devant les caméras grecques, M. Varoufakis avait annoncé, sans prévenir, « la fin de la troïka », l’instance qui représente les créanciers du pays (Banque centrale européenne, Commission européenne, Fonds monétaire international). Il avait même pris la liberté de moquer le Néerlandais, en direct. Un affront, très mal vécu à Bruxelles et aux Pays-Bas.

    His European tour finishing in Germany instead of starting there:

    Le fait que M. Varoufakis termine cette folle semaine par Berlin, au lieu d’avoir commencé par là, alors que l’Allemagne est de loin le premier créancier de la Grèce, a aussi fait grincer des dents.

    His professorial manners as if he were teaching the Eurocrats a lesson:

    Ses homologues européens, rompus à cet exercice très codifié des réunions ministérielles, ont du mal à accepter l’intrus et ses propos jugés trop « professoraux ». « Il fait la leçon à ses homologues au lieu de donner des chiffres, des choses concrètes », dénoncent plusieurs sources européennes.

    Conclusion: if you are supplicant, you need to act like one.

      1. hemeantwell

        They enact that thin-skinnedness, trying to induce regression. At a behavioral level they start to evoke recollections of increasingly irritated parents, frighteningly seething. The trick is to make it seem to be their due, a natural response to the impertinence of a child. The lackey press can then rush in to reinforce the move by taking it seriously, like Miss Manners cataloging universal courtesies and corresponding violation penalties.

  11. pebird

    At some point Greece has to point out that forcing Greece to sell assets and adhere to an austere budget looks and smells a lot like bankruptcy, so why not do it the right way and write down the debt.

    The EU, IMF and ECB created such a mess that a bad bank wasn’t big enough to contain the financial crisis, they needed a bad country to park the mess.

    Despite was Yanis has said in the past, he is being forced to show which of his earlier commitments will stand and which will he will set aside.

    I hope his commitment to the Greek people takes precedence over maintaining a relationship to an abstract monetary symbol.

    1. Mattsk

      Notably absent here is any sense of what’s happening on the street. That comes with the territory staked out by this site–and with the consolidation of capital in the advanced, sclerotic stage of spectacular banksterism (etcetera), but the massive vote for Syriza continues to mean something. And changes are pending in Spain and elsewhere that may shift power further. Podemos has been notably silent, frustratingly so, possibly because its leadership has too little financial wherewithal in this regard, possibly out of pragmatism. . .

  12. Petey

    Alex Pigman:

    “Sources say Schauble and Varoufakis in separate rooms with shuttle diplomacy by Lagarde, Moscovici, Dijsselbloem btwn them”

    Apparently, after intense deliberation with his Government, and having come to the conclusion that the Greek letter wasn’t a Trojan Horse, Schauble became terrified that Varoufakis himself was a Trojan Horse, and that being in the same room with him would enable hundreds of Greek soldiers to leap out of Varoufakis’ body and attack Schauble…

  13. Doug Terpstra

    Does anyone know what role Wall Street banking firm Lazard is doing as Greece’s consultant? Why are they so silent, especially given the critical political PR gamesmanship involved? And isn’t it troubling that Syriza hired the same firm that advised Greece on the disastrous 2012 bailout?

    1. blowncue

      Based upon prior articles about Lazard one might see them as a go to advisor given they represent exclusively debtor countries. One of their team did go to Rothschild, but one article described Lazard’s strategy as uncovering which creditors are…amenable to compromise…and getting them to lean on the more aggressive creditors. If the shuttle diplomacy is true then we have only a weaker, partial achievement at a higher cost. The Fiscal Times had comments from Bill Rhodes, such that I wonder if he would have been good to have on the team. My wild assed guess is that Moscovici will turn out to have been a significant player whose advice to Creeks to get an extension was taken seriously. Using Lazard again doesn’t trouble me as much given what Greece is pursuing now rather than 2012 is anti austerity. What’s missing is that the other debtors aren’t also at the table now represented by Podemos, Five Star, etc. Also I wonder why not early on an international pass the hat junket to recap the Greek banks instead of limiting to euro zone.

      1. clinical wasteman

        Thanks Yves and others for all the above (or below, if that’s the word for earlier posts). Actual, serious commentary in a ‘comments’ section! — the contrast with the ignorant bile under more politely ignorant Guardian (etc.) articles is striking, and the fine detail beats the a-priori writeoff of Syriza by my ultraleft friends. (There will be plenty of time for an a-posteriori writeoff if the horrible probable happens.)
        A bit more detail on the involvement of Lazard, with apologies to French or other European readers who have heard this countless times before. The French franchise (hired by Papandreou jr. — who also hired Varoufakis for five minutes — then kept on by Samaras) is not quite the same as the ex-Wasserstein Wall Street branch, though obviously no more to be trusted. Local CEO Matthieu Pigasse — part owner of Le Monde, whose reporting on this, among other things, has been predictably atrocious throughout — brazenly claims to be a ‘left-wing banker’, which seems to mean a former advisor to Strauss-Kahn and Fabius. (More brazenly still, he claims to be a ‘punk rocker’, something media in the country of Plastic Bertrand* lap up, but that’s another story.) He also went out of his way to ridicule Syriza ‘demagogy’ in his latest silly book, to the point of using superannuated ‘far left-far right’ analogies. Having said that, his sovereign restructuring (both senses) unit seems to have had a hand in Ecuador’s relatively successful pre-emptive default and in keeping Argentina’s settlement intact until the recent vulture flashmob struck. So if ‘brinksmanship’ really is the name of the ‘game’ (theorized or otherwise), it’s not wholly surprising that Lazard is kept on. Not good or politically appealing or even strategically wise, just unsurprising if Syriza politicians really imagine they can win on an institutional plane sown with supra-sovereign land mines.

        [*Pigasse, his newspapers and those he doesn’t own yet in France seem to think ‘punk’ means The Clash. Conspicuously little mention of, say, the great Lizzie Mercier Descloux.]

        1. Mattsk

          You don’t step out on a 40-story beam as Syriza has done without some good intentions. But I don’t find Varoufakis’s Guardian piece on Marx offers much consolation. It’s a recipe for vaccilation, with capitulation telegraphed down the line. At what point do we say that international finance brings us nothing and saw it off like a rotten limb? Get down to the work of learning how to make what we really need? Far far from this site people like the Via Campesina are doing just that.

          1. financial matters

            I’m not sure how erratic of a ‘Marxist’ Varoufakis is but Marx had the assumption of the primacy of economic class interests. I like Polanyi’s view better in that ‘But the social unit of the nation proved, in the long run, even more cohesive than the economic unit of class.’

            Both are methods of protection from unbridled capitalism/exploitation of labor and land/use of unemployment as a weapon rather than a problem to be solved. And of course this ‘protection’ can take more destructive courses.

    2. good point

      Syriza is just another puppet of big finance. It’s like De Blasio putting in a Goldman guy in charge of housing, Obama putting a Citi guy into Treasury, and Athens hiring the same vulture firm that helped it get into this mess to begin with.

      Remember, Obama had to scuttle his Treasury nomination because the guy was too connected and slavish to Wall Street. He was from Lazard too, so Syriza jumped into the warm embrace of Wall Street and sold out the people from the get go.

      If they don’t redeem themselves, they won’t last long and will be discarded like the rest of the useless “moderates” that preceded them.

      1. Doug Terpstra

        That’s right, Obama’s nominee for UnderSec of Treasury, Antonio Weiss, was from Lazard, did tax evasion inversion deals. The man never fails to appoint foxes to public henhouses. It’s a cozy world at the commanding heights.

        I want to believe Syriza is the real deal, (I do believe Yanis is), but a lot of the optics seem suspect, including upfront concessions, the election of president from the former ruling party and the hiring of Lazard and its eerie silence thriughout the process. I’d expect a more activist role, especially given the critical political PR involved in something inclined toward bankruptcy. Obviously over my head.

        1. Kyle

          @Doug Terpstra on Lazard
          “Why are they so silent, especially given the critical political PR gamesmanship involved?”

          Matthieu Pigasse is the head of Lazard and the Lazard Frères team advising Greece. He’s also a deal maker for the French government. That and, suprisingly, given the negative commentary, co-owner of Le Monde. See @Petey and @EmilianoZ below.

          Other than this from I’ve found little.

          “Any impasse risks leaving Greece without funding as of the end of this month, when its current bailout expires, and puts Europe’s most-indebted state’s euro membership in danger.

          Greece’s public debt currently stands at more than 320 billion euros, or about 175% of gross domestic product.

          About 100 billion euros of that debt needs to be canceled for it to be manageable, Matthieu Pigasse, head of Lazard Financial Advisory, hired by the Greek government as adviser on issues related to public debt and fiscal management, said today in an interview on France Inter radio in Paris.
          Such a reduction would bring the country’s ratio of debt to GDP to 120% in 2020 and would make Greece’s debt burden more “sustainable,” he said.

          “Everyone knows, each European government knows, that the debt is today unsustainable or untenable,” he said.

          Other wise I’d be very surprised at any ‘public relations’ leaks arising from an investment house. They play very close to the vest.

      2. blowncue

        Lazard is not Big Finance, and Syriza is not a puppet. Lazard represents debtor nations exclusively.

        Syriza hasn’t jumped into the lap of Wall Street simply because they hired a team who has experience with the players in this particular negotiation. Lazard isn’t defining Syriza’s bargaining position. They are likely providing intel on the players that Syriza would not have nor would have time to gather given their election literally into a crisis.

  14. C

    If the ECB was a doctor and someone came to them with a weak heartbeat and thready pulse they would bleed them, bleed them some more, put the leeches on, and then beat them with a cane when they fainted.

    1. OIFVet

      Comparing the ECB to a doctor, what an interesting idea. Given the neoliberal move toward outcome-based payments for medical services, why not apply the same toward finance as well? If a financial firm or institution fails to perform for its client, then the client should owe no payment. In this case, the ECB shouldn’t be owed a single euro penny given their spectacular failure to “cure” Greece. Of course, one needs to be aware what metrics are used to determine outcome and also of funny accounting, but these details can be hammered out. Taking this further: if a university graduate fails to get employment over a certain compensation level within 2 years of graduating, the university must then pay off the graduate’s student loan debt.

      1. Gee

        Doctors sign the Hippocratic Oath (or the oath of Lasagna)

        Bankers, and the Troika, sign the Hypocritic Oath (or the oath of Pildetogna)

  15. Petey

    “I hope (Varoufakis’) commitment to the Greek people takes precedence over maintaining a relationship to an abstract monetary symbol.”

    I think Varoufakis has excellent reasons for not preferring a bankruptcy/Grexit. The bank runs and capital controls, being shut out of the international credit markets, being theoretically forced to get out of the EU as well, and on and on, would cause immense short (and probably medium) duration pain well beyond what Greece is currently experiencing.

    All that said, I don’t think Varoufakis will sign onto an agreement that ties Greece’s hands past the current bridging loan, (however you want to call it). So I don’t think Varoufakis’ stance is about ‘Euro at any cost’. And I agree with him that very modest Euro reforms at first is best solution for Greece, not to mention the rest of the EZ.

    However, if the Most Reasonable and Patient Man In Room strategy eventually fails, and Greece gets its hand irrevocable forced into choosing between abject permanent surrender and taking a different course than Varoufakis’ preferred one, I don’t think he’ll choose abject permanent surrender…

  16. Petey

    “Le Monde says Varoufakis is part of the problem”

    All about style, not substance, no? Gets back to the recent Varoufakis interview where he said that discussing macroeconomics in any way among FinMin’s was considered bad manners.

    1. MyLessThanPrimeBeef


      The opponent will always try to throw you off.

      Sometimes, you are able to put a stop to that.

      Sometimes, you end up fighting the fight they want you to fight.

  17. Deloss

    Yves, meine Liebe, you are very well-informed about this horrible mess, and your reporting is amazing. Thank you.

    Since you ARE so knowledgeable, do you have a solution to suggest? Is there anybody in sight who has a good solution? Does Varoufakis have no choice but to hold course for the rocks? You, Paul Krugman, and everybody else seems appalled by German stupidity, but if they are determined to be intransigent (and stupid), is there anything else anybody can do? Do you agree with Paul Krugman’s “stop the clock” suggestion? Would there be any way to get it implemented?

    I was appalled to read that one of the measures being forced on the Greeks was to sell the Piraeus to the Chinese. Readers make jokes about breaking up the Parthenon, or selling Mount Olympus, but selling Piraeus is exactly in that line. No wonder the Greeks are finally getting tough.

    The horrid details are here:

  18. Petey

    Well, after Germany’s SPD spent the last 24 hours doing a full turnaround from their initial support of the Varoufakis letter, now we get this, via the Telegraph live-blog:

    “Germany’s Council of Economic Experts, or ‘Five Wise Men’ as they are know, have said the eurozone would be better off without Greece.

    “In a letter published in Germany’s FAZ, the Council say a Grexit could actually increase the institutional credibility of the euro area.

    “They also accuse the Greek government of a “flawed analysis of economic policy alternatives and an incorrect assessment of the international negotiation situation.”

    So, seems fair to say that the entire German consensus is ready to let loose the dogs of war. Hard to see how Merkel puts the brakes on that, even if she wants to. Over to the ECB battlezone…

    1. MyLessThanPrimeBeef

      ‘How could ordinary German citizens not know, as they round up all these little peon debt-ridden vermin nations?’

      The banality of greed.

      ‘No active resistance inside to the master plan of the super German bankers?’

      Most Germans have bought into the Austerity Party line of the ‘kampf’ of the hard-working Germans. That’s how you unite a nation, I guess.

  19. Petey

    “You, Paul Krugman, and everybody else seems appalled by German stupidity, but if they are determined to be intransigent (and stupid), is there anything else anybody can do?”

    Sure. The various European institutions can decide to stand up to Germany and say, “no”.

    It’s not unprecedented, as we saw with the ECB on OMT and QE. This will be a much harder lift, and may well not succeed. But there are clear signs that there are strong doubts on the German position coming from various quarters. Whether the doubters are willing to do anything about it, and whether or not they have the numbers to do anything about it is something that seems more and more likely that we’ll get to find out.

    Yves always likes to (correctly) remind us that Varoufakis in on record as being strongly opposed to Grexit. But Draghi is also on record as being strongly opposed to exit of any EZ nation.

    1. Deloss

      Other European institutions show no signs of resisting Germany. Le Monde isn’t France, but Hollande doesn’t seem to be resisting. I’m asking for a solution that could be applied by SOMEBODY with more brains than earwax. Varoufakis hasn’t figured one out–although his publicity is good (see Lambert’s post above, “Greek PM ‘certain’ euro zone will accept loan deal, Germans soften”). So I was asking the smart Ms. Smith, who has brains and can read, if she had any ideas.

      I’m on the verge of actually quoting Winston Churchill’s egregious remark. You know which one. (“Which Hun?” “No, which one.“)

  20. Yoko Sushida

    Reading all those opinions and comments all seems clear: the Greek are the innocent victims of the Germans. But I do wonder why really. To accuse the lender that they were actually lending money (too much even) to the ‘innocent’ borrowers is somewhat ass-backward, is it not?
    One could also see that as a very bad joke that essentially continues what the Greek government did for many many many of the last years/decades: milking the system endlessly. Politicians giving out ever more sugar cubes to get re-elected so they can milk it even more.
    Now comes the ‘new government’ saying, hold on, those were the ‘old’ generations and that doesn’t count anymore, we’re different now. But is that good enough? In my mind it’s not. The recent opinion article in the NYT by the Greek finance minister, which I can only applaud for it’s brinkmanship, but to which I can only say, you gotta be kidding, respectively, stop the BS and wake up to reality.

    1. John Jones

      Yeah Greek governments milked the system for 300 billion.
      Greek governments over decades couldn’t possibly have any other reasons for getting loans other than milking the system could they.

      Milking the system endlessly? Were did the money go? And show me proof.
      What sugar cubes? Did Greeks get please tell me.

      Provide concrete proof were this money went. Or take your own advice and stop the BS and wake up to reality.

  21. susan the other

    Yves’ phrase “Financial time runs faster than political time” is making me crazy. Just-in-time time. Pay-the-bills time. Real-time. Get-in-get-out time. IBGYBG-time. Why does politics play by the financial clock? When there is a sea change in the world economy, running on the old financial clock is so illogical it should be criminal. In case the Euroburo hasn’t noticed, nothing will ever be the same again. And not just in Europe. So why should old credit agreements be honored when they are based on an economy that no longer exists anywhere? And what chance is there that world growth will ever achieve debt-servicing lift off for all those old contracts? There isn’t enough time left in eternity for that.

    1. susan the other

      Plus, how illogical can Wolfgang get? Schaeuble recently (last year) made the comment that “we are overbanked” meaning there are too many banks all chasing the same debt payments. As if closing down and consolidating the banks is the answer. The answer is renegotiating all the debt, but he didn’t get anywhere near that point. Then he said, maybe a month ago, that he didn’t understand why anybody needs to stimulate growth (aka demand), by which he meant that it would be just as good to use austerity and be patient. Now he is visibly freaked out by Varoufakis who has pointed out all the contradictions in his thinking and he won’t even be in the same room with him but must have shuttle diplomats delivering questions and answers from the hated Varoufakis. Schaeuble is a piece of living comedy.

  22. Matt Pappalardo


    Over in Athens, Mega TV on its flagship news programme is reporting the following, says Helena Smith:

    -A four-month extension of Greece’s bailout programme is in the works

    -The interim programme will not include [heard it’s ‘no further’] austerity measures

    -Greece commits to not making any unilateral moves – such as raising the minimum wage or protecting primary homes from foreclosures

    1. Lambert Strether

      Thanks! (Though see below on the side letter… I wonder if the austerity stuff is supposed to go in there….)

  23. Santi

    I don’t think Syriza will refrain from protecting first housings from foreclosures, and it is a very cheap measure, so I don’t think this information can be trusted, probably a troika leak and negotiable. I think the first pillar of the Thesaloniki program is a red line if Syriza does not want to suicide themselves.

  24. Matt Pappalardo

    From The Guardian:

    Up to €1bn withdrawn from Greek banks today – Greek TV

    Mega TV is now reporting that up to €1bn has been withdrawn by worried investors from local banks in Greece today, says Helena Smith in Athens. It is citing central Bank officials as saying that if the outflows keep at this pace, local lenders will need emergency funding from the European Central Bank “within the next week” to avoid financial collapse.

    The Greek government has apparently agreed to present “a list of reforms” to creditors by Monday, according to reporters outside the prime minister’s office. “The reforms will not include any measures that will worsen the country’s humanitarian crisis” Christos Tsigouris, Mega’s reporter, has been told by aides in the PM’s office.

    1. Jim Haygood

      There goes the €3 billion ELA increase, used up this week.

      Even if a 4-month extension slows the bleeding, Greek banks appear to have lost about 10% of their deposit base so far in 2015, and part of it won’t be coming back.

      Serious damage has been done, both to the banks and to recovery prospects. How can anyone get a loan, if Greek banks are hunkered down in Greek Treasuries and EFSF bonds, fighting for survival? Lending Club don’t go there …

  25. Lambert Strether


    Lest we get carried away…

    Aides in Greek prime minister Alexis Tsipras office are suggesting that while progress is being made a deal may well be some way off yet, says Helena Smith.

    “Lets wait to see the final result because the devil is in the details,” one insider has just told the news portal

  26. Lambert Strether

    Current word is a side letter from Greece by Monday. Guardian live blog:

    News flash on Reuters: the draft agreement includes a requirement for Greece to submit a letter to the Eurogroup by Monday outlining all the measures it plans to take during the remainder of the bailout period, to ensure Athens complies with the conditions.

  27. Petey

    “Current word is a side letter from Greece by Monday.”

    Clever! Greece capitulates! Germany capitulates! Cuz the details don’t come until Monday…

  28. Lambert Strether

    Here are the requirements for the letter. Guardian summarizes TV reports, mentioned above,

    In Athens, SKAI TV’s flaghsip news programme has confirmed that Greece must produce a list of reforms by Monday – and that it will be a labour-intensive weekend for the government.
    The reforms will include Greece detailing how:
    * it will crack down on tax evasion and corruption – both endemic in Greek life
    * it will reform the country’s dysfunctional public administration
    * it will tackle Greece’s humanitarian crisis, the result of six years of recession and relentless EU-IMF-dictated austerity, the price of emergency rescue funds

    Bullet three does not translate precisely into “no austerity”…. but it doesn’t translate into “austerity” either. Modified rapture?

    NOTE Not sure if Mega TV is SKAI.

    Livin’ for the weekend. Peter Spiegel:

    1. Santi

      Syriza Program 1st Pillar: Confronting the humanitarian crisis:

      Total estimated cost €1,882 billion
      Our program to immediately confront the humanitarian crisis, with an estimated cost around €2 billion, amounts to a comprehensive grid of emergency interventions, so as to raise a shield of protection for the most vulnerable social strata.
      Free electricity to 300.000 households currently under the poverty line up to 300 kWh per month per family; that is, 3.600 kWh per year. Total cost: €59,4 million.
      Programme of meal subsidies to 300.000 families without income. The implementation will take place via a public agency of coordination, in cooperation with the local authorities, the Church and solidarity organizations. Total cost: €756 million.
      Programme of housing guarantee. The target is the provision of initially 30.000 apartments (30, 50, and 70 m²), by subsidizing rent at €3 per m². Total cost: €54 million.
      Restitution of the Christmas bonus, as 13th pension, to 1.262.920 pensioners with a pension up to €700. Total cost: €543,06 million.
      Free medical and pharmaceutical care for the uninsured unemployed. Total cost: €350 million.
      Special public transport card for the long-term unemployed and those who are under the poverty line. Total cost: €120 million.
      Repeal of the leveling of the special consumption tax on heating and automotive diesel. Bringing the starting price of heating fuel for households back to €0,90 per lt, instead of the current €1,20 per lt. Benefit is expected.

      I think the stated cost is yearly, the 4 months proportion should be around 500M€. This would greatly increase confidence and “morale” of the nation, which is important. They will surely implement measures from this set…

      1. Lambert Strether

        Here’s the statement from the Telegraph, which summarizes the Q&A from the presser:

        20.14 Although the statement says Greece must abide by the 2012 fiscal targets, it also states the surplus targets will have to take in to account the “economic circumstances” in 2015.

        That could suggest the 3pc target is not as rigid as initially thought. The details are likely to be avaiable on Monday.

        But this looks ugly, though I don’t know if the source is authoritative:

    2. dbk

      Lambert – re: MEGA and SKAI, no, they are two (very) different tv stations. I watched SKAI’s coverage; the commenters were extraordinarily negative about the communique – one might as well have been in Germany.

      Varoufakis’ Greek introduction was very compelling.

      I’ll wait for Yves’ post-analysis of the “win-loss” on each side, but it doesn’t at first hearing sound like total defeat, viz. “capitulation”. Actually, many of the measures Syriza has proposed will not affect the country’s balance sheet, and will be of enormous value in building citizens’ morale. Some commenters in the financial twittersphere have already pronounced these measures “cosmetic”. Believe me, they’re not.

      A couple of other observations from “on the ground”:
      -the new government has not been idle during the past week. Syriza proposed a candidate for President of the Republic from New Democracy and he was elected, easily. The original candidate, who is Greece’s Commissioner to the EC, was withdrawn, apparently because Juncker likes him and they have a good rapport. That his candidacy was withdrawn by Tsipras was a clear show of good will to Juncker personally. Plus, this move co-opted the right in Greece.
      -let’s not forget that the new Speaker of the Hellenic Parliament, who is a top-ranked international human rights and international criminal (read: money-laundering/tax-evasion specialist) lawyer, has considerable control over what legislation is put before the Greek Parliament, and in what order. She’s determined to pursue through Parliamentary channels those with large deposits abroad, pronto.
      -for commenters imagining the far right as coming to power in the near future: honestly, I doubt it. In the latest polls, this party has fallen behind the KKE, and we need to remember that their leaders are, um, in prison at the moment. It is anticipated that they will be tried on criminal charges pretty quickly.
      -for commenters envisioning a military coup in the wake of this agreement, well, no. Syriza placed a “patriot” (a word with a special connotation in Greece) as Minister of Defense, and the military are pleased with him. He’s a rich man who is considered incorruptible – read, “no more kickbacks/bribes from foreign [read: German] military hardware providers”. Good news for Greece, not-so-good news for military hardware providers.
      =In other news: the Chinese fleet arrived in Piraeus and were welcomed by Tsipras, who has been invited to visit China in early May. Commenters are invited to make of this what they will. [By the way, this privatization was already a done deal before the election, and the new government vowed to respect privatizations carried out before they came to power.]

  29. Petey

    Efthimia Efthimiou:

    “Skai tv reports Spain and Portugal tried to block the deal btwn Greece-Eurozone and had strong objections”

    Reasons should be obvious, if one has been following along.

    Also, strongly implies Greece won something

    1. MyLessThanPrimeBeef

      Judging by how stocks are reacting, the money people are celebrating…hopefully, prematurely.

  30. Lambert Strether


    More from our Athens correspondent Helena Smith:

    Brussels-based Greek correspondents are reporting that the euro group is about to end. “They came here determined to have a political solution otherwise on Tuesday it would have been necessary to enforce capital controls [on Greek banks],” Eleni Varvitsiotis, SKAI’s reporter has just told the Athens-based TV station. Reports that a press conference will start in Brussels around 8pm GMT.

    Greek prime minister Alexis Tsipras is “in constant contact” with finance ministry officials attending the euro group. Aides close to the Greek leader have let drop that both the Spanish and Portugese finance ministers attempted to disrupt the euro group meeting but were overuled.

    “It is obvious that a very clear threat was levelled re [the possible closure] of Greek banks,” the leading political commentator Alexis Papahelas has just told SKAI news adding that a compromise appeared to be in the offing.

    Precisely because Tsipras had made been forced to make concessions, he will face uproar on the domestic front, not least from militants in his radical left Syriza party and disappointed voters.

  31. Lambert Strether

    But here is the Telegraph’s take, quite different:

    19.37 The Eurogroup is over. Greece has agreed a four-month extension of its bail-out. We’ll have a press conference at 8pm with the details of the deal.

    Bruno Waterfield is calling it a “Greek surrender.”

    The presser is supposed to start “soon” (for some definition of soon. Maybe everything will unravel at the last moment!)

    UPDATE Feed for the presser (which IIRC was problematic).

  32. BillC

    Interesting revalation: the EU Council Webstream of the 20:50 CET Eurogroup meeting press conference requires proprietary Microsoft Silverlight software. And I thought the EU actively promoted open source. Should have been able to tell PR from substance …

    1. craazyman

      what a shocker!

      I hope everybody is sitting down comfortably in their computer chairs and not hyperventilating with excitement.

      The Acropolis is safe for now! Put the sledgehammers back in the shed. and no cutting the top off Mount Olympus and moving it to Dubai. It’ll be worth more next year!

      Now comes Part II.
      Part II is a new Eurozone Marshall Plan. All the acronyms who Greece owes money to put equity money in to something that isn’t a bailout facility because there’s no more bailouts, then they borrow more, the money gets invested in places like . . um. . . Greece. then the profits roll in, then the money goes back to the acronyms. its like the circulation of blood in a body, but when the blood gets back where it started nobody remembers where it came from. You can’t call that a bailout. You call it “groaf”.

  33. El Guapo

    An agreement has been reached but analysts in Athens are already describing the concessions made by the Greek government as “politically poisonous,” Helena Smith reports.

    Prime minister Alexis Tsipras’ government will almost certainly face fierce reaction from militants in his radical left Syriza party and from the populist right-wing Anel, his junior partner in the governing coalition. “Very heavy concessions have been made, politically poisonous concessions for the government,” Pavlos Tzimas, the veteran political commentator, has just told SKAI news. “It’s going to be a crash test on the domestic front for the government,” the television channels says. “The big question now is what reforms the government is going to agree to,” Takis Hadzis, another commentator, has also told Skai news.

    Sounds wonderful. Here comes Golden Dawn?

    1. MyLessThanPrimeBeef

      Maybe it’s already here.

      Witness the following:

      1. All the inmates currently at Camp Austere Fist.
      2. the Final Financial Solution
      3. The plan to impose orders on European nations
      4. The Quislings of other Mediterranean lining up against resistance
      5. The current attempt at non-aggression against Russia (actually good if it lasts)

  34. voxhumana

    One aspect of all this that I’d find hilarious if it weren’t so tragic is the hyper-ventilating about Greek ‘tax evasion and corruption.” Not that these issues do not exist, they do, or that they should be rectified, they should, but that any body politic, whether the EU, USA, Russia, China etc would have the gall to point their needle fingers at any group other then themselves first. It’s particularly underscored by the recent HSBC revelations, including Loretta Lynch’s prior knowledge of and refusal to “crack down” on the criminals. I guess only Greece should have to “fix” its tax collection problems, not the big boys. We know full well that US corporations dodge every tax they can get away with, to the tune of hundreds of billions (trillions?) of lost tax revenues over the decades. Do they secretly envy the clever tax-avoiding Greeks? Isn’t it the US tax code (through regulatory capture) that is perhaps most responsible for the obscene disparity between wealth and poverty… and hasn’t the IRS recently been on a tear in closing offices and firing staff to the point that they themselves acknowledge 50% of tax payer phone calls will go unanswered this year?

    How is it that Greek tax evasion – which seems to be just a different word for the tax reductions to which the neo-liberal philosophy aspires – is regarded by the 1%’s as a dire crime when the 1% are the people who evade taxes the most? And what part of the IRS not going after wealthy tax evaders is essentially different than the Greek govt.’s failure to do so?

    My comment is not terribly informed, as I do not know (nor care to know) the exact numbers, in Euro’s or percentage of population, which are used to define Greece’s failure/profligacy. And I’m pretty sure that Europeans do not evade taxes as easily as other populations. But the demands from the monied class (i.e. world leaders) for Greece to address “tax collection and corruption” sure looks like throwing stones in glass houses to me…

    1. Glenn

      I don’t view that language as a negative. It gives the Greek gov’t an EU mandate to go after the oligarchs who have been fiddle their taxes for years. Remember the “Lagarde list” from a few years ago in which, if I remember correctly, others NC readers may remember better, prominent Greeks were stashing money in European banks and that the New Democracy/PASOK gov’t did nothing about and pretending they never knew.

    2. hunkerdown

      It’s a deliberate strategy, relying on the tendency of Weimarvolker to address a decoy false conclusion by providing a substitute, while accepting the false framing and leaving the false premises largely intact.

      Too bad Moon of Alabama is borderline illegal in Germany, eh?

  35. Jim Haygood

    From the Eurogroup statement:

    ‘The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement.

    The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.’


    1. MyLessThanPrimeBeef

      To be successful in this world, you have to be very good with fudge words, weasel words and Janus words.

      ‘But one day, humans will be so smart (at fudging, among many other things), that all words become meaningless.’

    2. susan the other

      So this is great because primary surpluses are now a bargaining chip. If the government makes the case that primary surpluses are killing the economy then this little clause in the agreement is up for grabs.

      1. MyLessThanPrimeBeef

        This nebulous phrasing is the key to the wiggle room everyone needs.

        From the get-go, it has always been about finding the right words, not unlike some Socratic dialogues.

  36. MaroonBulldog

    The outcome looks not so much like capitulation as an awakening to reality.
    Syriza stood for an election on a promise it could not keep: Syriza promised to negotiate with creditors when they were only in a position to beg. A 36% plurality of active voters put them in office on the strength of such a promise.
    Does it signify anything when 75% of Greeks now express support for Syriza to opinion pollsters? They’re not putting money where their mouths are when the tax payments come due. If any of them even have money to pay to tax collectors, that is.
    A government so ineffectual that it can’t collect taxes is in no position to make credible promises to creditors.
    What they’re taking is all they could have reasonably expected to get.

  37. mpr

    This is a big defeat for Germany. On Monday the list of reforms will be the “70%” Varoufakis said they can live with, and some substitutes for the other 30% as he wanted. One thing I haven’t seen remarked on is that the ‘institutions’ assessing the reforms will be the EC, IMF and ECB. Two of those have already come out explicitly in favor of the approach in Varoufakis letter (aka the Moscovici proposal), and the ECB is not going to get in the way.

    Its going to be hard for Germany to object when the list of reforms has been ratified by their own enforcers. Varoufakis has again shown (as with his change on write downs) that he’s willing to sacrifice appearances, as long as he gets what he wants on substance.

    The result seems to be that he gets lots of headlines about concessions, with no actual concessions on substance.

  38. Paul Tioxon

    20 February 2015

    Today, Friday February the 20th, the II Mediterranean Conference, organized by the Party of the European Left (EL), along with five other parties of the southern Mediterranean, has begun in Istanbul bringing together more than twenty political parties of the left from the countries bounded by this great sea. The purpose of this conference, as noted by the vice-president of the EL, Maite Mola, is not only to analyse and discuss the situation the region and the different countries are living in, but also to reach a statement containing specific objectives to fulfill on Sunday.

  39. Greg T

    I don’t know what they decided today. The Eurogroup statement is as nebulous as it’s possible to be. It’s a masterpiece of bankerspeak. Even Varoufakis’ statement says nothing clear. It appears that Germany is giving some ground while not appearing to give ground. They’ve agreed to continue funding for four months without new austerity ( a win for Syriza ), but Greece has to comply with the existing memoranda and come up with a plan of its own on Monday. Yves is right, this is contrary to Tsipras’ campaign promise, so the Government is going to have to explain this to Greek voters.

    I think this has bought Syriza some time which it needs to formulate a variety of contingency plans.

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