Syriza Walks Back Initial Defiance

Victims of austerity and their allies around the world may be placing too much hope in Syriza. Despite the demonization of the Greek party as “radical left” in the mainstream press, and the blistering reaction from the German government to its economically sound observations about the need to rethink bailouts, Syriza is no revolution-in-the-making. But because the frustration with and the human costs of the Troika’s destructive policies only continue to mount, the opposition is desperate for a champion, or at least a focal point. Syriza has thus increasingly become an object of projection of both its allies and its opponents. And that seems to be leading to some misreadings of the state of play.

Mind you, the situation is fluid, and Syriza is trying to renegotiate the shape of the table, that is the very framework under which the bailouts are conducted. Needless to say, its Eurozone paymasters aren’t prepared to go back to first principles despite the abject failure of the bailouts (save in rescuing European banks and shifting the costs onto citizens).

Moreover as we’ve outlined before, Syriza is operating against numerous constraints. First is an overly short timeframe for achieving a major shift in the foundations for negotiating. Greece has only until the end of February to secure additional bailout funds. It was conceivable that that drop dead date could have been pushed back (the rest of the Northern bloc had been inclined to go a full four months longer, which would have made that deadline roughly coincide with when Greece had a chunk of its debt due in June. Failure to secure a deal by then would produce a default on the maturing debt obligation). There have been cases where negotiators have managed to get the upper hand despite the odds; one of the most famous historical examples was the so-called father of diplomacy, Talleyrand at the Congress of Vienna in 1814, where he singlehandly outmaneuvered the rest of the Great Powers and among other things enabled France to retain her pre-Napoleonic war borders. But this was one exceptional individual pitted against the same negotiators over a protracted period of time, where personal talent, a past history with some of his interlocutors, particularly Metternich, and a keen eye for national interests enabled Talleyrand to overcome the considerable disadvantages of his position. Greece is in a vastly worse position than even a defeated France in 1814, and the gameboard is so diffuse and complex that even if Greece could manage similar negotiation ju-jitsu in narrower confines, the forces arrayed against it have long-standing relations with each other and are less susceptible to being played off against each other. And the initial Greek show of spine has stiffened German and Finnish resistance, leaving Greece with reduced odds of pushing out the critical end-of-February drop dead date.

Second is that the Germans believe that contagion risk is lower than in 2012. Thus while they continue to say they’d prefer to have Greece stay in the Eurozone, they are not prepared to brook what looks to them like defiance. Finance Minister Yanis Varoufakis said that Troika bailout monitors were not welcome, but the Greeks fully expected to continue to negotiate with the Troika:

Frances Coppola provide a fine analysis of the exchange. But the pushback was fierce. Notice the focus on the biggest bone of contention, the matter of reducing hte principal amount of debt. From the Financial Times:

Patience for Greece is running particularly thin in Germany. Chancellor Angela Merkel on Saturday ruled out the possibility of debt forgiveness for Greece’s new government, insisting that the indebted country should abide by the terms of its bailout arrangement. Speaking to the Hamburger Abendblatt newspaper, Ms Merkel said she did “not envisage fresh debt cancellation” for Greece.

Wolfgang Schäuble, Germany’s finance minister, also warned Athens on Friday against trying to “blackmail” Germany with its financial demands…

Without an extension of its EU bailout, which expires at the end of February, Greece’s banks could be cut off from ECB funding…

Erkki Liikanen, an ECB governing council member, said that the ECB would cut any further lending to Greek banks if a deal was not reached by the deadline, adding: “Some kind of solution must be found, otherwise we can’t continue lending.”…

Jeroen Dijsselbloem, chairman of the eurogroup of eurozone finance ministers, rejected the call by Athens for an international conference that would consider writing off part of Greece’s €315bn of debt, which last year amounted to 175 per cent of national output.

Tsipras beat a retreat, effectively walking back Varoufakis’ position and making conciliatory phone calls. As Ilargi put it:

Greek Finance Minister Varoufakis declares in front of a camera that Greece ever paying back its full debt is akin to the Santa Claus story. Less than 24 hours later, PM Tsipras says of course Greece will pay back its debt. Varoufakis lashed out about Syriza not being consulted on EU sanctions against Russia, but shortly after their own Foreign Minister was reported to have said he reached a satisfactory compromise on the sanctions with his EU peers.

Greece also hired Lazard to renegotiate its debt, another conservative, authority-reassuring move.

The reality is that Syriza was never as radical as many hoped. Our Ned Ludd has repeatedly pointed out that Syriza is dominated by moderates; even the feisty Varoufakis goes to great lengths to temper his acute observations about how disastrous and unworkable austerity is with emphasis of his sincere belief of the importance of the Eurozone project and the viability of getting it on track. Jacobin points out that Syriza does not have as free a hand as foreign boosters might believe, and its gains in the election came in the more conservative towns and smaller cities, and much less so in the more liberal cities of Athens and Thessaloniki.

The stealth advantage that Syriza has is that the opposition to austerity doesn’t sit just with its victims in periphery countries; quite a few Eurozone officials are deeply frustrated with the German/Northern bloc intransigence, and are deeply concerned about widening political fractures. As Ambrose Evans-Pritchard writes:

Giles Merritt, head of the Brussels think-tank Friends of Europe…said the Syriza revolt has exposed the political failure of EMU crisis strategy with refreshing clarity. “People in Brussels are losing patience with Germany. The real issue at hand is how we are going to rescue the eurozone from economic depression caused by five years of misguided austerity. Tspiras may find that he has more friends in this city than he thinks,” he said.

“We cannot possibly risk Grexit at this stage and trigger a fresh eurozone crisis, so the Commission will soon waiver. Jyrki Katainen is toeing the line for now but he is not a fool. It is Greece that really has the whip hand, and the task is to find a face-saving formula for Germany,” he said.

Prof Ashoka Mody, a former IMF bail-out chief in Europe and now at Princeton University, said hints by ECB members that they may pull the plug on Greek banks are “extremely irresponsible” and beyond the proper authority of these officials.

“They are supposed to be the guardians of financial stability. I have never heard of such outlandish threats before. The EU authorities have no idea what the consequences of Grexit might be, or what unknown tremors might hit the global payments system. They are playing with fire,” he saidThe media focused on a large anti-auserity rally in Spain that drew an estimated 100,000. The only problem is that similar large-scale protests in Spain and Portugal in 2012, when conditions were more fraught, failed to move the German officialdom. What might change their posture, say a big uptick in the anti-Eurozone parties in the Spanish regional elections, won’t come until April, too late to provide relief to the besieged Greeks.

An estimated 100,000 joined an anti-austerity rally in Spain, but large and widespread protests in Spain and Portugal in 2012 failed to move the Germans. If the regional elections in Spain in April show a big shift towards anti-Eurozone parties, that could be a wake-up call to the northern bloc, but that will likely come too late to provide relief to Syriza.

The big problem is that German leadership has come to believe deeply and viscerally that Greece and other borrowers need to be punished for their sins, when the rescues of the periphery countries were stealth bailouts of French and German banks, who have never paid for their considerable misdeeds. It’s particularly perverse since Germany has managed to forget the disastrous consequences of trying to make them meet utterly unrealistic World War I reparations. The Germans also see these negotiations in strictly economic terms. They are convince that they can dictate to Greece because its failure to comply means they can cut off ECB support to its banks, assuring a banking system collapse. But the Germans ignore at their considerable peril that the potential for contagion has moved out of the economic realm into the political, and that risk is elevated. From the Financial Times:

Until last week European leaders thought their worst nightmare was that Syriza should triumph in the Greek general elections. Now that the leftwing populist party is in government, they worry instead about what will happen if it fails…

Syriza’s victory stood not for a repudiation of Europe, but for a redefinition of it. The moral reasoning that lay behind the Greek result began from a simple insight: economic trauma of the severity that Greece has suffered is destroying society. With youth unemployment above 50 per cent, an entire generation is being consigned to the scrap heap. At the same time, the notion of the common good is being sacrificed through forced sell-offs of state-owned lands as well as businesses, with the prospect of ecological destruction as a result. This view of austerity and its impact united classes and ages, town and country.

You can understand why people would take such a stance across debtor Europe — although this is apparently beyond the comprehension of much of the creditor north. Yet the lenders should take note, because this may be the last roll of the dice. It is tempting to write the Greeks off as irresponsible whingers and show them the door. Except that others may then follow them out of the euro, or even out of the EU itself, leaving Europe somewhere close to where it was when the entire integration project began more than half a century ago.

This time, things will be worse. Worse in part because institutionalised co-operation is needed more than ever, now that globalisation has forced peoples together and the room for going it alone has vanished. Worse, too, because half a century ago people had a vivid memory of what fascism can lead to, whereas now we seem to have forgotten.

If the Greek vote was for solidarity, it displayed a virtue that too much of the continent has lost sight of. German or Finnish voters may feel they have shown enough solidarity with the Greeks. But strictly speaking they have mostly shown solidarity with their own financial institutions — which would have been among the biggest losers if Greece had not been bailed out — and that is another thing entirely.

What is the moral vision the creditor nations propose? Frugality is not a policy. And if finance is to serve Europe rather than run it, a notion of the common good needs to be restored. The alternative is an increasingly fractious continent. What Europe risks if it does not change course is the further erosion of the political centre and the rise of rightwing extremism — and perhaps the disintegration of the union itself.

Comparisons to 1914 are troublingly apt. As Karl Polanyi stressed, a century of stability and relative peace ended because the institutional framework was unable to accommodate the underlying contradiction of making a market economy the underlying organizing force of society:

Our thesis is that the idea of a self-regulating market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society. It would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it.

The devastation visited upon Greece provides vivid proof of Polanyi’s views. In 1944, he regarded the idea that the market economy had failed as so obvious that new social and political structures would be put in place once the war was over. Instead, the old order was largely reconstituted, with better social safety nets to take the hard edge off the merciless operation of a “free market”. But as Polyani depicted for the century that ended in 1914, the underlying social stresses produced a traumatic political rupture. And yet again, market logic dominated, stripping away the provisions meant to insulate citizens and communities from the brutalizing effects of an untrammeled market. Germany and its northern allies are locked in their belief in commercial logic over broader social concerns. They may be about to reap a whirlwind.

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    1. Ned Ludd

      Greece can create havoc for the E.U. and NATO, all justified by its own survival, while framing its actions as a necessary response to German injustice. For starters, Germany owes Greece a lot of money.

      Under the Nazi occupation, a hefty monthly payment was extracted from the Greek central bank to cover the Wehrmacht’s expenses; in March 1942 an additional forced loan of 476 million Reichsmarks was levied by the Axis powers. Greek partisans put up some of the toughest military resistance to the Nazis in Europe; the damage wreaked by the occupiers’ revenge was commensurate. Reprisals were exacted on the civilian population at a rate of fifty Greeks for every German killed. Much of the country’s infrastructure was destroyed; forced exports and economic collapse helped bring about one of the worst famines in modern European history. […]

      Legally, however, the rm476 million loan should count as credit, rather than war damage, and Greece is entitled to be repaid. Without interest, it would amount to $14 billion in today’s money; with interest at 3 per cent over 66 years, over $95 billion.

      Germany is not going to pay; but it is unjust and abominable that Germany never paid for the destruction and looting of Greece. Fomenting anger around unpaid reparations would unite Greece against a common adversary. This would allow the government to plausibly threaten that, if Germany does not make significant concessions, Greece will take drastic actions.

      • Give long-term leases, at one or more Greek ports, to the Russian Navy.
      • Allow immigrants from outside of Greece to flow through Greece and into the rest of Europe, unimpeded.
      • Legalize and tax marijuana, which would bring tourism (and euros and dollars) to Greece while opening up a source of smuggling into the rest of Europe.
      • And, if its position in the E.U. and NATO becomes untenable, align with Russia, for stability and military security,

      Creating disruption, or threatening to create disruption, is how a weaker party asserts leverage in a negotiation with an adversary. As Martin Luther King, Jr. wrote, from jail: “The purpose of our direct action program is to create a situation so crisis packed that it will inevitably open the door to negotiation.”

      1. norm de plume


        emphasise not only the amnesiac historical unjustness, but also the hypocrisy (they were themselves relieved of debt burdens, and escaped breaking Maastricht debt rules scot-free, plus the bailouts were self-serving rather than Greek relieving and often tied I believe to commitments to purchase German armaments) and most especially, emphasise the danger.

        PIvot to Russia and the BRICS as a last resort, but make it crystal clear that it’s an option.

      2. Doug Terpstra

        Excellent critique and very creative strategy here, especially the pivot to Russia (though fragrant and pungent marijuana concessions on white sunny beaches are even more appealing). I like the historical context, putting Germany’s rather hypocritical indictment of Greece’s punishable “sins” into very stark perspective. Thus the compelling moral arguments for debt forgiveness become invincible when joined by the pure pragmatism of priming the demand pump with something on the scale of the post-WWII Marshal Plan.

        It’s a crying shame that Syriza seems to be snubbing the generous lifeline offered b Russia. Whether or not it intended to commit to embrace an alliance with Putin, it is simply foolish not to use the prospect as leverage. It ‘s perplexing that Tsipras would be so stunningly naive. Conceding all your leverage before you sit down has to be intensely frustrating for Yanis Varoufakis.

        This feels like bad deja vu. I recall a similar sense of incredulity when Obama began conceding everything to Wall Street, the surveillance state, and the GOP almost immediately after his inauguration (later repeated so conspicuously with single payer in Obamneycare). Incredulity was shortly replaced by contempt when it became clear that Obama had pulled an epic bait-and-switch. Though I sincerely hope not, it’s beginning to look like the World Socialist Web Site has nailed Syriza correctly as another Democratic Party farce. If so, I wonder if the Greeks will be as meek and sheepish as the American left.

        In its origin, social composition and politics, Syriza is a bourgeois party—one of many, including the Democrats under US President Barack Obama—that come to power making promises of “hope” and “change” and then impose policies of austerity and war. It will inevitably betray, sooner rather than later, the aspirations for an end to social hardship and suffering that it has cynically exploited.

        1. vidimi

          i’m willing to give syriza the benefit of the doubt for now as they are likely buying time. i still see their election as the most optimistic thing that has happened in world politics since tunisia kicked off the arab spring. while that didn’t turn out as hoped, i’ll wait until syriza makes its first betrayal before writing them off.

          as for obama’s betrayal, the main difference there was that wall street made record contributions to his campaign so it was no surprise at all to anyone who paid any attention.

      3. Rosario

        Much agreed, and imagine the precedent that would set for the entire world. The entire African continent would be most deserving of reparations for over 125 years of colonization (either direct or via financial and corporate proxy). Add to the list, Vietnam, India, most countries in Latin America, most Caribbean Islands (particularly Haiti, deforested by the French with the assistance of US marines because its black population committed the sin of breaking its chains of bondage). The nasty political reasons for a nation’s wealth and power are always conveniently shaded in economic discussions. That is why modern, international debt relationships are so wrongheaded and insidious.

      4. John Jones

        Thanks for the reply and information Ned.

        If you are interested in the Greek war debt French economist Jacques Delpla and German professor of economic history Albrecht Ritschl have some interesting things to say about it.

        I found this link today and was reading the comments. If you want to see how people react when Greece brings this topic up have a look.

    2. Jake Dickens

      I have negotiated a lot of deals and think Syriza are doing a good job. Rejection of the Troika and desire to review the entire bailout is a smack in the face to Merkel, as was the visit to the place where Germans slaughtered Greeks. The coziness with Russian shows the Greeks have an alternative to Europe, even if awful. Walking back on various Syriza statements shows a reasonable side that Europe can deal with. Possibly Syriza is disorganized and confused, or BRILLIANT. They appear to be crazy which is an incredibly strong negotiating position if the other side believes it.

      The periphery can now apply pressure and Brussels can question where the Germans are leading the EU, apply pressure to soften the program. France and others should be in favor helping Greece. The great threat is that Greece quits the euro and blows up the whole EU project. These are wonderful cards for Syriz to hold. And just how much posturing is the German view that Europe will survive a Grexit. My guess is that Germany / North countries will gradually see that Greece might destroy everything and be much more willing to deal than it now appears.

      I can’t reconcile the polar opposite positions and statements by Greece and mostly Germany, and none of the politicians will be able to backtrack on the positions so vigorously stated on all sides. It is hard to see what compromise is possible. But there will be a face saving way somewhere. Finally, what Greece is going thru is intolerable and Syriza cannot agree to more of the same. Their back is to the wall and Germany / Brussels know it. Even the meek can be ferocious when cornered. I think Syriza has a good chance to win more than many believe possible.

      1. Yves Smith Post author

        With all due respect, it is hardly a sign that negotiations are going well when you see the first tangible position a government minister has taken walked back within 24 hours by the head of government. And how does it help the negotiations to poke a stick in Merkel’s eye over something non-substantive? The very best negotiators I have seen are extremely gracious, even non-threatening in their personal demeanor and are typically able to get points conceded (via staking our carefully thought out general principles or other devices) before the other side realize it has lost ground. Now playing aggressive does have an upside in that it can rally PUBLIC opinion in Greece and in the rest of Europe, but it is a big negative in terms of the negotiating dynamic with Germany and the northern bloc.

        You are missing that Germany thinks, and has repeatedly said, it thinks Greece can leave the euro and not do much damage. Officials have consistently stated that there is no real contagion risk. Mr. Market agrees, since only Greece bond yields have risen so far.

        In fact, they may want to set up the circumstances for Greece to get kicked out or suffer horrific consequences (not getting its bailout dough at the end of February, which means it loses its ECB backstop for its banking system and its banking system collapses) so as to make Greece a demonstration case to the rest of Europe.

        Moreover, you seem to miss that Germany’s and the Trokia’s leverage does not come from the threat of kicking Greece out of the Eurozone. Oh, and you also miss that Greece is not allowed to exit unilaterally. How a country exits is not specified, but I am sure a way could be figured out if the Germans really wanted them out.

        The more immediate leverage, and this is what is in play with the Feb 28 deadline, is that if Greece does not get bailout funds released, it will go out of compliance with its arrangements and the ECB can (and is supposed to) pull its backstop of the banking system. That means a Greek banking system collapse with Greece still in the Eurozone.

        And Varoufakis’ refusal to allow Troika administrators in, and the reversal of the privatization, is also a violation of bailout terms. The threat is basically that if Greece does not come to heel by the 28th that the funds will not be released and the economy will tank from its already low level. There’s no Grexit here, just a horrific punishment for defiance in the offing.

        The Germans have set up very difficult boundary positions and will not budge. They would agree to more extend and pretend, like a further extension of maturities and a reduction of interest rates. That amounts to a lowering of the amount owed in economic terms. But they will not write down the debt, which is a key Syriza demand. And observers thought more extend and pretend was what would happen regardless, so if that is what Syriza gets, it is not as a result of the negotiating strategy.

        Moreover, Merkel and Schauble have so poisoned German voters against Greeks that they have no wriggle room. Offering meaningful concessions would be political suicide.

        You don’t appear to understand the boundary conditions. Yes, a ton of pressure is already coming from Brussels. And you can see how well that is working. The Germans and the Finns over the weekend stuck to their existing positions.

      2. Ned Ludd

        Syriza’s strategy is one part wishful thinking, zero parts foresight or adequate planning.

        There is thus a position, on the one hand, that “we should stick to the euro,” and, on the other, “we should prepare ourselves for all kinds of initiatives and objectives.” The concrete outcome is that Syriza is unprepared. There is no plan B. There has been no political preparation of the party, of Greek society, of the people. And this fact is still used as a way to blackmail the Greek population and will undoubtedly be used in the future to blackmail a Syriza-led government.

        The majority of Syriza are also Europhiles, who are committed to “avoiding any kind of unilateral move at the national level.” Consequently, Syriza shows no interest in leveraging their relationship with Russia:

        Greece Steps Back Into Line With European Union Policy on Russia Sanctions

        The Greeks “deleted a few words, but that is not a big deal,” Linas A. Linkevicius, the foreign minister of Lithuania, said in an interview. He said the gathering of foreign ministers had been far less contentious than expected, as the Greeks had been “forced to change their stubborn position”… […]

        All decisions on sanctions require unanimous approval, meaning that Athens could torpedo any efforts to expand the list and block any move to impose wider economic restrictions, as some governments advocate.

        When forced to choose between confrontation and capitulation, Syriza capitulated. They look weak – a party that settles for changing or deleting a few meaningless words.

        1. burnside

          It was my understanding Greece’s objection was to a failure to consult the present government before declaring sanctions. Is this incorrect?

          1. Ned Ludd

            You are correct. but things looked different on Wednesday:

            On Wednesday, Greece’s newly appointed energy minister, Panagiotis Lafazanis, said, “Greece has no interest in imposing sanctions on Russia,” according to the semiofficial Athens News Agency. “We have no differences with Russia and the Russian people,” he added.

            Diplomats and analysts speculated that Greece’s tough words against sanctions could be a bargaining ploy aimed at winning concessions from Brussels on a bailout package whose terms the new government wants to renegotiate.

            As The New York Times observes, Greece has now stepped back into line. Their acquiescence signals “that, despite the tough words issued from Greek officials in recent days, Athens would continue to work with its European Union partners, including, perhaps, on its debt obligations.”

  1. Jim Haygood

    ‘Prof Ashoka Mody, a former IMF bail-out chief in Europe and now at Princeton University, said hints by ECB members that they may pull the plug on Greek banks are “extremely irresponsible” and beyond the proper authority of these officials.’

    I’m with Mody. ECB Vice President Vitor Constancio’s threat on Saturday that the ECB might stop accepting junk-rated Greek collateral was shocking — the equivalent of joking about a bomb in a TSA security line. Instead of a scrum of armored cops taking him down to the floor, the reaction likely will be seen in a dire acceleration of Greek deposit withdrawals next week.

    It’s not the ATMs that are of concern: daily limits apply to them. But if you’ve got thousands or millions on deposit in a Greek bank, why take a risk that the ECB may ‘liquidate banks to purge the rottenness out of the system’ (as ol’ Andrew Mellon used to say) just four weeks from now? The best thing you can do is run … to the SWIFT wire transfer counter.

    Say buddy … can you spare me a 10-dollar ELA for a cuppa joe?

    1. MyLessThanPrimeBeef

      Where is the global financial policeman in all of this?

      Don’t we need some kind of financial police action (no financial war here, thus no need to congressional consultation)?

      Is the global financial hegemon abdicating its responsibility?

      1. Demeter

        To which global financial policemen are you referring?

        There isn’t any such thing. Unless you count the standing armies of NATO and the USA.

        Read your Economic Hitman book.

  2. jgordon

    If Syriza proves to be too spineless to do what’s necessary, there are others waiting in the wings. I hear that Golden Dawn has an extremely bold set of policy initiatives that they’re salivating to put into practice for example. Another year or two of Euro-bootlicking by the Greek politicians and the Greek people just might be willing to give Golden Dawn carte blanche.

    1. Jimbo

      Thanks for making this point – I’ve been thinking the same thing myself and believe it’s very much worth emphasizing. If the Germans/creditor nations refuse to deal with Syriza, an eminently rational, moderate, and pro-European movement, and Syriza ends up caving, what do both parties see as the likely result? Given the Greek political landscape, I think it’s quite reasonable to expect that Golden Dawn would swoop in to pick up the pieces. Does anyone in Frankfurt, Berlin, or Brussels really want that? Do they realize the fire they’re playing with? I suppose they don’t, which is the point of this piece: the creditors are not taking into account the potential political fallout of their actions. It’ll be an interesting few weeks.

      1. susan the other

        The reason the German Nazis were able to “swoop in” and take over the Reichstag was because we in the US saw great potential in German fascists. Because 1917, obviously. We hosed them down with money and we even made them drink some. Interestingly today Russia is still the big red threat – but only for US free and hideous marketeering; Russat is in fact a possible ally for Greece. What Varoufakis has asked for for 5 years is investment in Greece. He has always avoided even alluding to a Grexit. So Varoufakis wants EU – euro – investment. Maybe US investment. Merkel doesn’t have to do any more fresh haircuts, all she has to do is extend the debt over a longer, much longer, period of time. And one way for Germany to be able to do this is to have good trade relations with Russia. So maybe that’s why Germany just made those hostile Finns the goat. And everybody else is trying to hide their smiles.

        1. Roland

          Why do so many Americans think that America is the reason for everything?

          I guess it’s not surprising that in a period of American hegemony, the past gets re-told in a way that reflects recent conditions more accurately than past conditions.

          I also guess I shouldn’t be surprised that in a society dominated by a bourgeois elite, all questions are answered in a way that makes most sense to a bourgeois. Bourgeoisie think that money is everything, so in a bourgeois-dominated society, that’s the first answer that people look for–or rather the answer they retrospectively assign to every question.

          The Americans did not make any sort of major contribution to the rise of the Nazis. Right-wing nationalist parties were already strong before the rise of the Nazis. The Weimar Republic depended from the start upon the activity of right-wing militias, and the Republic was deeply despised by the people upon whom it depended.

          The Nazis got most of their funding from within Germany. It’s a myth that large business concerns were essential donors–very helpful yes, but not essential. The business concerns merely riding the tide, and their support came after the demonstrated fact of Nazi support in the streets. The plain truth is that the Nazis gained power because a very large number of Germans agreed with them, and were willing to support the party both at the ballot box, and away from it.

          The Nazis received a lot of voluntary labour from millions of German men and women. The Nazis made a lot of their biggest political gains in the course of months of street fighting. They beat the KPD down, literally, especially in the red stronghold of Berlin. That wasn’t done by anybody’s else’s money. It happened because thousands of angry arch-nationalist youth and many battle-hardened war veterans really wanted to get together and kick the living crap out of people. So they joined the SA, and did exactly that.

          1. jgordon

            “Bourgeoisie think that money is everything, so in a bourgeois-dominated society, that’s the first answer that people look for..”.

            That is incredibly insightful. “Money” is simply a modern artifact of the political games being played by the elites. All this obsessing over monetary theories as a cure-all for society’s ills is frankly delusion. These guys have confused a minor byproduct of political maneuverings for cause, developed a theory of everything out of it, and then congratulated themselves for figuring everything out.

            1. susan the other

              yeah, right…. and we are not funding IS – they are just a bunch of indigenous suicidal fanatics…

      2. Jack

        Still, it does the inventors of democracy great credit that, for now at least, they’re giving their invention another chance to prove itself. Sooner or later even their patience will run out though, and very unpleasant forces will take control based on the promise to actually do something meaningful.

    2. Edna M.

      I don’t think that the Golden Dawn would ever be supported by a majority of people. But unfortunately I could see them coming to power by coup. I believe 1/2 of the police force at some point supported them. I don’t remember what percent of the military supports them but it is at a higher number than in the general population. Ruling out a coup, which hopefully won’t happen, I think that there are a number of smaller parties that have been advocating for exit from the euro, that could take the place of Syriza. Most of them were too small to enter Parliament. One movement/ party I am impressed with is EPAM (United People’s Front). They definitely have spine.

    3. Edna M.

      I meant to add this to my previous response. Although I don’t see Golden Dawn ever winning elections in Greece, your point is well taken in that if Syriza is crushed by Germany, this will give far-right parties in other countries that have a good chance of winning, like Le Pen’s party in France, an even better chance because it will show how futile it is to hope for change within the eurozone.

  3. washunate

    Greece has only until the end of February to secure additional bailout funds.

    I’m curious about that framing of the problem? The language that Syriza used internationally pre-election was not about securing additional bailout funds. Rather, it was about recognizing that the bailouts themselves simply were not payable.

    It’s not a cash flow issue. It’s a matter of solvency. The clearest writing I think on this is the letter posted to German readers a couple weeks ago (and helpfully translated to English, because of course the intended audience was more than just Germany).

    Whether words turn into actions is another matter, but I don’t think Syriza ever (publicly) approached the issue as ‘how to secure additional bailouts’.

    1. Yves Smith Post author

      The Troika so far, and Germany most of all, is not on board with this effort to reframe the negotiations entirely. While this notion is completely sensible from an economic perspective, it is basically telling the Troika to tear up everything and start all over from a nearly clean slate. That is a monster ask in a negotiation and the Greek position is not strong.

      As we have said from the beginning, Syriza’s success will rest entirely upon their ability to get political support from the left in other periphery countries, and from the saner bureaucrats in Brussels. Whether the cavalry rides in over the hill is an open question.

      1. washunate

        Thanks for explaining your thinking a bit more.

        I guess I’ve felt for about 5 or 6 years now that Greece’s only option is to tear up everything and start over. And of course things get even more fun in a country with much larger debt like Italy.

      2. docg

        I’m with you on this point, Yves. Syriza’s only strength is its support among working people throughout the length and breadth of Europe, and as I see it this is the opportunity, finally, for them to organize. Imo a Europe-wise general strike should be called, which would serve as a shot across the bow. As far as money is concerned, a popular rally in the Greek ports should be called in conjunction with a nationalization of the Greek shipping industry, a collection of all back taxes (with severe penalties) and criminal oligarchs brought to justice. If Syriza doesn’t evolve into a revolutionary movement then all will be lost, not only for Greece but Europe as well.

  4. daniel

    Although i serious disagree with the notion of credit that “have never paid for their considerable misdeeds” – see for example:
    May I thank you for your informative and fair report on this complex situation?

    It definitely shows that the new Greek finance minister is no politician by trade, let us just hope this may not become a problem since his reasonable argumentation certainly makes sense.

  5. tgs

    One promising avenue not just for Greece, but also for Spain, Ireland and others is a debt audit.

    Pressure grows for independent audit of Greek debt

    A group of some 200 academics, economists, MEPs and other notables have issued a call for an audit of Greek debt, a demand that may be raised in the Greek parliament in the coming days and which has also been quickly embraced by Irish trade unions and development NGOs regarding Dublin’s public borrowing.

    An audit commission, composed of public auditors, economists, lawyers and other specialists, as well as representatives of civil society and organised labour, would look into why public debt was incurred, the terms under which it was contracted, what the borrowed money was spent on and seek to establish who was responsible for problematic debt agreements.

    Needless to say there would be an enormous push back against that idea since it is likely that a large percentage of the debt is odious.

    1. susan the other

      And that is another interesting point, speaking of things that do not get said, Greece barely touched on the O word. They quickly stopped that argument. If they include derivatives as part of the definition of odiousness then every syndicated loan in the world is very odious. Because derivatives, for starters, are insurance policies. Not just odious but comingled, obfuscated odiousness.

    2. Ned Ludd

      Jacobin asked Stathis Kouvelakis about a “citizens’ audit of the debt, which was very popular around Attac and the Ecuadorean process…”

      Kouvelakis: Auditing of the debt was one of the demands approved at the Syriza congress and is stated as such in the final document. But this was one of the decisions that has been silenced since by the majority.

      In the interview, Kouvelakis uses “majority” to refer to the pro-E.U. members of Syriza, who account for the majority of the party. The majority seeks “an internal reform of the EU”.

      Kouvelakis: And behind this is the idea that we have to change the balance of forces directly at the level of the EU, avoiding any kind of unilateral move at the national level. Any other strategy is said to amount to a regression because it demonstrates nostalgia for the old nation state and so on.

    3. Yves Smith Post author

      No one outside Greece will care. Argentina’s debt overdose was incurred by a junta (not elected, therefore arguably not legitimate) that looted the overwhelming majority for themselves and their cronies. That fact, which is pretty easy to prove, has not bought Argentina one iota of debt relief.

  6. timbers

    This isn’t hard. The only solution is for Greece and others to exit the EU.

    That has always been the correct course.

  7. craazyboy

    Syriza definitely needs help. They seem out powered, if not out numbered.

    The big problem is this 350 billion in debt, but the money from it seems to be “lost” somewhere – kinda like when you mysteriously lose a sock in the dryer when doing laundry. Being older and increasingly cynical, I don’t believe the sock explanation, and believe the money went somewhere.

    Now I have heard how the EU is adamant that fraud and corruption must be eliminated from Greek government as a condition for “aid”. (ok, lending a euro to pay a euro in debt) But we also know the previous corrupt Greek governments were aided and abetted by the global financial institutions, while everyone knew tax collections were inadequate. (Greek rich people are MMTers) (see my money creation idea below)

    So it just occurred to me that there have been 5 Billionaire conventions at Davos since the “PIGS Crisis” began. Shouldn’t they keep an eye out for the $350 billion somewhere in Davos?

    **money creation idea
    I think American high school history books still talk about Greece as the birthplace of democracy. We should add a chapter showing how democracy fails, using present Greece as a case study. Special emphasis should be placed on the fact that no one(almost) voted for the corruption and looting of Greece. This would be instructive for America, and I propose that $1 for each book be donated to Greece as payment for valuable intellectual property. Unless of course our Educational-Industrial Complex now charges our school systems $200 for textbooks, in which case I would say we donate $2.

    1. susan the other

      +100. But the idea behind MMT is that it can be used for social purposes – things that have been voted on, albeit it indirectly. No system will ever be perfect – but MMT at least prevents the good projects of a government from being hijacked. Unless you think social spending is a waste of money. That’s the question. What is not a waste of money?

      1. craazyboy

        Yes, well MMT may be 5000 years ahead of it’s time. Maybe in 11,000 years and 6 days after creation, one more Noah’s Flood, and then we’ll be ready for it. :)

        I think social spending is good. Hope to add to aggregate demand myself someday with my social security money.

        A waste of money is like porn – you know it when you see it.

        1. flora

          “5000 years ahead of its time…” reminds me that the very wealthy think in longer time frames than the middle class, who think in longer time frame than the poor, partly because their immediate needs are not at issue. (Think how working class and poor people often work 2 jobs per person and are raising children at the same time. The “poor decision making” of the poor is less a function of some supposed “culture of poverty” than a function of not having enough time and sleep to make carefully considered choices.) Anyway, back to the point; the troika, the banks and the very rich will no doubt be thinking in longer time frames than the non-wealthy Greek voters who elected Syriza. The troika will no doubt use a strategy based on a long time frame and try to corner Syriza into making their choices based on shorter term thinking. Classic tactic.

          1. norm de plume

            ‘The “poor decision making” of the poor is less a function of some supposed “culture of poverty” than a function of not having enough time and sleep to make carefully considered choices’

            And as Linda Tirado makes clear, it’s often simply a desire to purchase, whatever the cost, some happiness or relief in the context of not knowing when or if you will ever have any again.

      2. jgordon

        “…but MMT at least prevents the good projects of a government from being hijacked.”

        That statement is logically impossible. First, the word good is open to interpretation. For example I personally believe that infrastructure spending on roads and bridges for personal passenger vehicles is a complete, idiotic waste of resources–while in contrast most Americans, especially “educated” ones, being caught up in the mass cultural delusion, would likely consider such a worthless waste of resources to be a good idea. Ergo MMT does not guarantee the existence of useful/helpful projects to a society. In fact, it almost certainly guarantees the worst sort profligate waste–all with the veneer of good intentions of course.

        Considering the above reality, there is plenty of room for oligarchs and their political toadies to claim to the moon that they have the best interests of society at heart–while draining society of (already dwindling) scarce resources, which is exactly what’s already happening today anyway. Believing that MMT is a solution to our dire predicaments (environmental collapse, resource exhaustion, and political corruption) is like believing that Santa Claus will deliver gifts on Christmas if only you’re good enough and believe.

        1. Jack

          Actually if we would recognize that money is an entirely artificial resource, that we can make as much as we want of at will, then the only supposed barrier to thoroughly overhauling America’s infrastructure disappears. If we had people in charge who a. understood how our monetary system actually works and b. weren’t utter evil bastards, we could invest trillions into a massive coast to coast overhaul, creating a huge number of jobs in the process. We could replace many of the highways with bullet trains and the like.

          That’s really the core point of MMT: money isn’t a limited resource. It could in fact go a long way towards really addressing both environmental collapse and resource exhaustion since public investment with fiat money would mean the entire issue of whether alternative energy is economical or not would disappear

          1. Saddam Smith

            jgordon’s valid point is that resources themselves are not artificial. I.e., if you were to take all money wealth on the planet with you to the moon, how wealthy would you be in that resource-poor environment? What work could you get done with all that money at your immediate disposal? Printing money is only a solution if almost everything else that powers civilization down the perpetual economic growth path has been radically altered such that steady-state economics becomes possible.

            Syriza appears not to want to confront any of this. But then the vast majority of ‘civilised’ people don’t either, so it’s hardly surprising. ‘Oh when will normal return!?’

          2. vidimi

            yes, but money is a claim on limited resources. you can print as much money as you want, but you’re not going to create more water, land,…

      3. Carla

        I think the idea that was really behind MMT was that taxes wouldn’t have to be paid, and I suspect the guarantee of an $8 per hour job for anyone who wanted one was added later, my cynical side says to make MMT more palatable to the great unwashed. IIRC, MMT-er Warren Mosler really hates taxes a lot. Do correct me if I’m mistaken.

    2. norm de plume

      ‘Being older and increasingly cynical, I don’t believe the sock explanation, and believe the money went somewhere’

      Well, given the news from Oxfam that by 2016 the 1% will own 50% of the earth’s wealth and bounty, and that this trend has been exponentially increasing, plus the earlier bulletin from Nick Shaxson that there is well over $30 trillion (that we know about) stowed away in tax havens, I don’t think it’s a mystery… re Greece, Switzerland would be a good place to start.

  8. Linda Amick

    While Yanis V seems highly idealist in his beliefs that reasonable solutions can be had for win wins on all sides, this view represents a future state of affairs when the public absolutely revolts against the status quo.

    The new government will find itself with few choices for improving the situation for Greek citizens as the EU rulers will never consider any real break from the current trajectory. The rich oligarchs have it all. Why would they negotiate?

    The Greek public will either have to continue applying hard pressure to the new government otherwise nothing will materially change.

    1. Lambert Strether

      Agreed on the Greek public, so but and I would like to know a good deal more about “the base” that Syriza has in the electorate. A quote is only a quote, but the one I remember is that people voted for Syriza “because we’ve tried everything else.” So the willingness of the Greek public to undergo a different kind of suffering for different goals — assuming that the creditor North continues to carve out its pound of flesh — is a big issue in the game, and I don’t think I know anything about Syriza’s base.

      1. Strategist

        About Syriza’s base – I’m no expert, but if the new voters are just ordinary folks in towns & villages across the country who have had enough of corruption and the old guard, then there may be an amazing revolution in output and productivity about to happen. Syriza seems clear that its battle with the domestic oligarchs is as important as its battle with the troika.

        1. Lambert Strether

          That’s interesting, thanks. On the Syriza electorate:

          This is a working-class vote, but also a vote from educated employees — a vote from people active in the labor market. Syriza’s score among eighteen- to twenty-four-year-olds and twenty-four- to thirty-year-olds was close to its overall national average, but among the layers that make up the core of the working population (thirty-plus) it did better than its average.

          Its weakest scores were among the economically inactive, the rural population (including the peasantry), pensioners, housewives, the self-employed, and independent professionals. So the dynamic of Syriza support is based on a wage-earning class vote — including its upper strata — popular layers, and unemployed people in Greece’s main urban centers.

          Could be a pretty determined bunch. I mean, anybody’s who’s been making it in the Greek labor market has stones, and to spare.

          1. flora

            And it sounds like they’re determined to free themselves from the payday loan companies’ troika’s schemes.

  9. MartyH

    Negotiating is a lingering toothache on top of a miserable headcold. It isn’t the third pitch to the second batter of the seond inning (in US Baseball or Cricket). In classic negotiating 101 style, each side took “relatively” well-divided postures. Germany seems to feel like they can bully Greece and win. Greece, like must weaker victims of bullying, is concerned about wading into such a “fist fight” on the bully’s terms. As Yanis V and friends know, there are other players in the game and other forces at work. Frau Merkel and Herr Schaubel might like to think they ARE the EU but with Madame LePen and Podemos visible above the horizon, we will see how the next moves play out. One can only hope Lazard’s fees depend on the depth of the hair-cut.

  10. Strategist

    I think Varoufakis is playing an absolute blinder. (A shame about Emily Maitlis’s stupid and useless interview questions, but all BBC Newsnight presenters still live in the shadow of the thankfully demised Jeremy Paxman.)

    He is explaining with great clarity to Northern European citizens that austerity is failing them as much as it is failing Greece and Southern Europe. That’s a win-win message that can resonate across the whole Eurozone.

    The rich oligarchs have it all – well, they don’t have the government of Greece anymore, and this reveals that ultimately they are mere paper tigers.

    EU rulers will never consider any real break from the current trajectory – well maybe, but Eurozone citizens might elect themselves some new rulers. Until Syriza, it looked like they would be from a clueless, incoherent half-fascist half-nostalgic right. But now Syriza has reignited hope for a resurgent euro-left all across the continent.

    I just hope Varoufakis is printing a lot of drachmas at a secret location, because, if he has that option at his disposal, then he surely has a very strong negotiating hand.

    1. bh2

      It is received wisdom that if you owe the bank a thousand dollars you cannot pay, you have a problem; but if you owe the bank ten million dollars you cannot pay, the bank has a problem.

      1. Jim Haygood

        “It isn’t that we don’t need the money, we are desperate,” Varoufakis told reporters.

        “For the last five years, Greece has been living for the next loan tranche. We have resembled drug addicts craving the next dose. What this government is all about is ending the addiction,” he said, noting it was time to go “cold turkey.”


        All well and good, if you’re running a surplus. But the article goes on to note that ‘Syriza says cash reserves are enough to meet obligations of 3.5 billion euros over the February-March period, but a further total of 1.5 billion in principal and interest fall due in June with further payments of 4.7 billion in July and 3.6 billion in August.’

        How to go cold turkey, when you owe your dealers nearly 10 billion that you don’t have? Either steal it, or find lawyers, guns and money (dad, get me out of this!).

  11. steviefinn

    It’s hardly surprising that Merkel from her cognitive bunker is acting this way She cannot allow hope to blossom in the other European ghetto states. The one thing I am sure of is that something eventually has to give & there are many potential tipping points for this – which as with the Franz Ferdinand incident – which it seems occurred against a similar background, could at first seem relatively trivial.

    If all hope is lost & the continued grinding down of whole populations continues under the ever stronger perception of a German jackboot, things will inevitably turn very ugly. One thing I always agreed with Beppe Grillo, was that something has to be done before it gets to that point.

    1. Strategist

      The Germans will do it themselves. They are a very sane and well educated lot, they want to believe in European solidarity, and they don’t do jackboots anymore.
      Of course they don’t want to chuck their own retirement savings at a load of crooked Greek oligarchs. But if someone like Varoufakis offers them a common sense proposition, they may take it. If Syriza can show how a debt writedown can be used to benefit ordinary people in both countries, and that the oligarchs have been run out of town, they will put the necessary pressure on Merkel.

      1. steviefinn

        I was talking about the perception where it matters, not what I personally believe & I hope you are right, but unfortunately the historical precedents are not good. As for oligarchs & corrupt leaders – Merkel seems quite happy that Rajoy is running things ( who along with many others who support him ) should be in jail. And as for the German people, which as is the case with most other nations, they have very little to do with it & like everybody else do not know the full story – due to being fed media bullshit.

        It is a financial jackboot & it does exist.

        1. Strategist

          We both have hope that Syriza can do it. And we both have doubts that it is possible.

          I’m sure we have both felt that there’s no alternative to the 1%’s jackboot stamping on the 99%’s faces for evermore.

          All I’m trying to say is that Syriza is awakening hope – and this can spread across Northern Europe as well as Southern. There was a full house at the Trades Union Congress in London on Wednesday evening for the Syriza victory rally organised by the Greece Solidarity Campaign. If that can happen in Wall Street’s Airstrip One, then it can sure happen bigger & better in Paris and Berlin. The million on the streets in Madrid was of course important. But I believe we will soon see big numbers out in Paris and the great German cities. What happens next in little ol’ Dublin could be very powerful too. And the Scots are on fire politically and looking for a cause to follow. A lot could happen next.

          1. steviefinn

            Agreed again – I have become very wary of false dawns I suppose. The Patrick Schmidt comment below seems to contain some hope in it’s details of the German TV show & the fact is I am a big admirer of the Germans in how they run their industries in terms of efficiency & high quality production which is something us Brits should have learnt a lot from.

            I have a theory in regard to Merkel, which is probably incorrect, but I do think she is being held, & has been held hostage by the state of German banks. Deutsche bank in particular with it’s mega derivative pile must be akin to living next to Vesuvious. I remember not so long ago that there was some talk of a possible trade deal between Russia & the Germans & then read soon after, that US regulators were going to look into irregularities with the aforementioned behemoth. This was about the time that the French were fined for something similar. Anyhow, nothing came of either as far as I know, but it is a fact that Merkel has had to make hard decisions in order to keep those financial bloodsuckers solvent.

            Wheels within wheels within a banker created vicious circle.

          2. lambert strether

            Millions marching hasn’t done it and won’t do it. The equivalent of US capitol occupations might. A million people could surround a parliament building, for example.

            1. norm de plume

              ‘people could surround a parliament building, for example’

              The Icelanders could run workshops on that.

            2. Ned Ludd

              When I helped organize a series of environmental protests, at meetings I repeatedly asked: “What is our strategy? Do we expect executives to look out their windows, see us marching, and just throw their hands up in defeat?”

              At each meeting, my quest for a “long-term strategy” was placed last on the agenda, which was never reached due to time constraints.

      2. Jack

        ‘Solidarity’ doesn’t mean mewling subservience to Germanic economic ubermensch, which is what is actually happening. As for the Germans being well educated, they may be, but they certainly aren’t well informed. Not only are they continuing to insist on austerity despite its record of utter failure (which is also the definition of insanity), they apparently still love Merkel. Well excuse me, pardon my Deutsch, but Merkel is an utter bitch who is trading Greek suffering for domestic power. And she’s able to do that because the majority of her populace refuses to investigate the effects of German lead policies on Greece. The most they can muster is vague racist drivel about ‘lazy Greeks’ and asinine moralizing about the sacred obligation to pay ones debts.

        1. Seamus Padraig

          I have lived in Germany for eight years, and sadly, I can vouch for what Jack is saying. Almost no one here really wants to contemplate what the EU has actually become, or what Germany’s real role in it is, so most of the people here are perfectly willing to go along with the media cover story about those ‘lazy, whining Greeks’. Unfortunately, in today’s world, well-educated and completely disinformed are not mutually exclusive states.

  12. Kevin Egan

    On the other hand, the Yanis/Tsipras back-and-forth has all the earmarks of a classic good cop/bad cop strategy…and it seems to be getting some results, at least in terms of more conciliatory comments from some in the officialdom than we heard before the election–or ever, in the matter of the Greek situation. It might be the best they can do in advance of negotiations in which they have to play a very weak hand.

    1. Brooklin Bridge

      I think the first round has caught Yanis and Tsipras somewhat off guard and somewhat successfully divided them. Yanis is trying to pursue a strategy where being forthright and proposing very reasonable solutions casts the Troika – and particularly their assumptions that austerity has the same unquestionable legitimacy as the sun rising – in a bad light and enables Greece to benefit from popular opinion and movements such as Podemos in Spain and the general populations of the southern periphery states. Tsipras wants the same thing, but has less confidence and wants a more diplomatically conciliatory tone for the opening moves.

      The notion that Germany under Merkel or any part of the Troika will accept reason in any form whatsoever from Greece can easily be dispelled by Merkel’s willingness to impose such insanely self destructive sanctions on Russia at the mere finger waggling of the Obama administration. Her response to Greece will be equally unhinged from anything that isn’t a virtually suicidal degree of subservient capitulation. Therefore, what’s going to win this war is not Merkel or the Troika accepting some version of sanity; the golden ring is public opinion in the periphery and the immense power that it can bring to bear on the EU as a structural entity.

      1. aletheia33

        if so, could it be that the economist has a greater sensitivity to the nature of the clock that is ticking and believes there is no time to be spared for careful diplomatic maneuvering.
        at the same time, one would hope the two men have had some substantive strategic conversations to agree on their plan of joint action should syriza win.

        1. norm de plume

          ‘at the same time, one would hope the two men have had some substantive strategic conversations to agree on their plan of joint action should syriza win’

          There are no doubt some people at Fort Meade who could give you, or Frau Merkel, the contents of those conversations unless they were conducted in parks or via carrier pigeon.

        2. Brooklin Bridge

          They are certainly both on the same page with each other meaning yes they discussed their goals and strategy though I suspect they did not each discuss the inner workings of their characters and how they would react to certain events. This sort of thing happens over and over; when the election becomes a reality, many things have simply been left unsaid.

          Very good point about the economist having a greater sense of urgency though in this case I suspect he also has a little more sang froid.

          The jousting is hardly over and it’s even likely they synchronize their game plan a little better. Also, there may well be some truth to the good cop bad cop theory. Such a strategy can certainly coexist with the possibility of their having been slightly caught off guard.

  13. Brooklin Bridge

    It’s amazing how Varoufakis can control his temper with an interview like that, where virtually every question was dripping with aggressive manipulation, posed in such a way as to outright accuse him of contradicting himself or trying to singlehandedly wage all out war with the Troika. Every time he started to gain his stride and reply in such a way as to show the bias (not to mention underhanded meanness) of the question, she would sense it and barrage him with interruptions.

    Let it not be said that main stream media have forgotten how to be abusive or confrontational; what they have forgotten is how to do it on behalf of anyone, anything or any idea other than the powers that be and their dystopian fantacies.

  14. Patrick Schmidt

    Your thoughts seem to be heavily influenced by the the Anglo-American press. Please consider the two following points:

    1. I saw the following on German TV six days ago. A highly popular program ‘Hart, aber fair’ debates current issues with prominent German personalities taking either pro and contra sides. Last Monday evening, the topic was ’Should Greece pay back its debt’. When the TV moderator presented the fact that Germany was forgiven 90% of its debt in 1953, Bavaria’s finance minister Markus Soder, who was demanding Greece pay back ever cent, suddenly went into denial and then in panic stated that the international lenders had continually given Greece many opportunities to lighten its burden with new loans and extended payback periods.

    Whether he was right or not was not important. Far more important was the perceptual change in the general German public mind. At the beginning of the broadcast, the majority of Germans felt that Greece should pay back its debt, but upon learning about their own history, found themselves without any more valid arguments. A classic case of cognitive dissonance.

    2. One French economist predicted on the major TV news program ‘Le Journal de 20 H’ last week, there will be a lot of threats and theatre-like posturing from both the Greek finance minister Varoufakis and German finance minister Schauble, but when all is said and done, both parties will agree on refinancing the Greek debt and extend repayments to say 99 years with 1% interest. This would be a de facto default, but both sides would be allowed to save face and claim victory to their respective electorates.

    I think he may be right. And here’s why, based on some of the finance blogs I’ve been following. ECB Mario Draghi can’t allow any sovereign nation’s debt, i.e. bonds, in the Euro zone to go bust. Why? Because he, like all other Central Bankers in the world, is concerned about the bond bubble. Sovereign bonds are used as the senior most collateral backstopping the big Eurozone bank’s derivatives portfolios. It is said that €12 trillion in collected EU nation sovereign debt is backstopping over €100 trillion in derivatives trades on the banks’ balance sheets.

    So, if Greece were to renege on its debt, then foreign investors would see Spain, Italy, Ireland, Portugal following suit and thus would instinctively and instantaneously pull their money out of the Euro zone, i.e. Euro bonds. The entire EU banking system would implode because you’re talking about tens of trillions of Euro’s worth of trades having and requiring margin calls / new collateral arrangements. This is exactly what happened in 2008 when Lehman Brothers went bust and the whole international finance system found itself on its knees.

    It’s a course of events that, I believe, has a good chance of playing out.

    1. Tuolumne

      Varoufakis has, some years back, modeled exactly how contagion would spread to the next most risky countries in turn in the event of forced Grexit or a Greek default (He has a nice colored chart of it on his blog!). From this point of view, it doesn’t matter if debt holders are protected against Greek collapse — they would also have to be insulated against Portuguese, Spanish, and Italian collapse. In an interview a few years back, apropos of the revelations in the unedited Geithner tapes, Varoufakis said the point of the Troika policies was to make an example of Greece to Spain and Italy, and that the Troika knew their policies would not lead to an economic recovery for Greece.

      It is worth considering how little Syriza’s constituency may fear default or Greek bank collapse — they are already in penury, already “facing economic reality”, and have been for years. Should the Greek banks go under at the end of February, the blow will fall on everyone in the country, including banking an financial classes. The latter are the very groups that supported the PASOK and New Democracy governments ( which Vaoufakis has called “Quisling governments”) that generated the crisis and arranged the bailout for the banks, and submitted the country to conditionality. Another bank crisis, as bad as it may be, will give Syriza the chance to reorganize the bank sector and clean out the criminals.

      The pieces are all lined up.

      1. Yves Smith Post author

        Syriza promised no exit to the Eurozone, and most of the Syriza representatives themselves are moderates. Readers keep wanting Syriza to be something that it is not. It is a bourgeois, pro-Eurozone party that wants better social safety nets and a plan based on the recognition that Greece is insolvent, as opposed to having a mere liquidity problem.

        1. generic

          While this is true the independent Greeks aren’t moderate and the only thing those parties have in common is opposition to the Memorandum.
          Also let me point you to this write up of a Plan B based on deputy labour minister Rania Antonopoulos previous proposal.
          Short version: An employer of last resort program funded by tax-anticipation notes. That should make the MMT crowd happy.

        2. Tuolumne

          Varoufakis has many times written and said that he believes in the EU project and Eurozone, and that Greece should not leave. As I have seen in Ireland, many of the people most critical of the Troika policies also favor staying in the EU because it often provides them with legal means (like human rights treaties and court decisions) to drag corrupt, backward and incompetent national elites into adopting new policies, often in ways humiliating to national elites. When Varoufakis affirms that Syriza, too, wants restructuring, he likely means they want new anti-corruption laws and tax enforcement to be understood as economic measures. You are right on target when you write they are moderate: read Varoufakis’ “Modest Proposal” — it is pure “New Deal.”

          1. tiebie66

            Does any of this matter if Greece remains a dysfunctional country? It can have all its debt written off and leave the Euro, but if Greece cannot improve its productivity, counter corruption, and implement effective governance, it will remain poor and suffering in one way or another. It will regain bankruptcy again in short order.

            There are those who argue that Greece will recover when its debts are written off or it leaves the euro, forgetting that Greece had the opportunity to improve under the favorable conditions prevailing after joining the currency union. It did not do so then. It also did not improve under adverse conditions. Greece needs to change internally.

            I see no signs of any improvement. More laws do not amount to greater efficiency. More talk does not amount to better governance. Brinksmanship and debt negotiation acumen do not address the ailments of a corrupt and sclerotic society.

            Austerity, IMO, provides the current government with a very handy rationale to implement drastic reforms, to wipe out corruption, and to improve government administration and services. I rather suspect that Germans would welcome such a change with a sigh of relief. They do recognize and appreciate competence and effort and might be willing to extend more favorable terms to Greece if they perceive such.

            Think about it a bit: if the neighbor borrowed a full cup of sugar, partied all weekend, and then tried to return the ‘cup of sugar’ with a few grains in it come Monday, would you be impressed? And if you know that the neighbor tried really hard to return what they borrowed? If you know that, due to no lack of effort and consideration on their part they could not, but returned what they could? Would you not be inclined to be more forgiving?

    2. JustAnObserver

      Interesting. There’s been a lot of comment on how Greece’s negotiating position is weak esp. with the February deadline coming up. However the possible banking/derivative implosion described above actually means is probably much stronger than it looks. There is in effect a game of fiscal MAD going on and Germany’s apparent insouciance in the face a of a potential Grexit is evidence of either (a) total insanity since Deutche Bank would be the first to go, or (b) the first move in a MAD sequence. The wild card is just what level of despair the Greeks have been reduced to by 6 years grinding austerity with not the slightest sign of an end in sight … you need to be (mostly) rational to play MAD and the majority of the Greek populace may have got to the point where they don’t really give a shit what happens to the banks – either their own or the Eurozone as a whole.

      Looks like Syriza should be hiring the RAND Corp. instead of Lazards.

      1. Yves Smith Post author

        The bond markets disagrees, and those investors have a much better grip on the status of the derivatives risk. I’m not current, but the sovereign CDS market was and probably still is really small.

    3. norm de plume

      Informative comment, thanks. I googled the Hart, aber Fair program and found it here:

      It was all Greek, or rather German, to me, but I stuck with it for 30 minutes if only to keep watching the feisty Sahra Wagenknecht. She convinced me even though I couldn’t understand a word she was saying. She must surely be on the debt forgiveness side. Prof Max Otte also seemed for forgiveness, Lehmann against and the Speigel guy I couldn’t read.

      A translated transcript would be fascinating… I don’t suppose you can remember the spot where Soder goes into denial?

  15. Swedish Lex

    Obama votes Syriza (video):

    Kinda funny that Obama feels he must set aside some precious weekend (i.e. golf) time to let Merkel know, via the media, that she is 100% FUBAR on Greece (and the euro strategy in general). If Merkel/Schäuble now drop Greece, and the euro with it, as they well seem inclined to do, at least Obama is on the record for having told them so.

    Wit Greece outside the euro, and probably outside the EU, the situation would become a NATO and a geopolitical problem. And hence a U.S. problem.

  16. Jesse

    Politics is surprisingly non-transparent, isn’t it?

    It is like the markets, to non-specialists. The nuances are often lost to the casual onlooker.

  17. fosforos

    Her bluff Syriza humbles
    with clever compromise.
    Omelettes not to unscramble
    eplicitly. That’s wise! (p.c.c. James Branch Cabell)

  18. Lakshminarayanan

    The most likely end to this situation is the one suggested by Patrick ” both parties will agree on refinancing the Greek debt and extend repayments to say 99 years with 1% interest. This would be a de facto default, but both sides would be allowed to save face and claim victory to their respective electorates.”

    It is highly unlikely that any failure of the magnitude of Lehman will be allowed to happen by any of the CBs. Whether they can prevent it is a matter which is debatable given that they have got away with murder for seven years. Have you heard any squeals/protests about ZIRP, NIRP etc?

    1. Jim Haygood

      ”both parties will agree on refinancing the Greek debt and extend repayments to say 99 years with 1% interest”

      I accept your gracious term of 99 years, and counteroffer with an 0.01 percent interest rate. Deal?

  19. MichaelC

    The immediate issue isn’t the debt or Grexit IMHO.

    It’s all about avoiding a banking collapse. The troika will blink and renegotiate the austerity conditions to avoid the collateral damage to Fr and German banks.The ECBs threat is suicidal.

    I don’t think the ECB will dare be allowed to trigger a greek banking version of a Lehman event.

    Re the interview: Varoufakis was marvelous.

    1. Yves Smith Post author

      Why is there contagion from Greek banks to German and French? The German and French exposure to Greece was dumped on the ECB in 2012. And if anything, French and German banks are now benefitting from the run on Greek banks. Where do you think the money is going?

      The bond markets aren’t registering any contagion risk, and they did in 2012. The fact that they don’t is likely to encourage Germany to continue to be intransigent. The question is what the ECB plans to do. As we noted in the article, one ECB senior official threatened to pull the plug on Greece, but that could well be posturing to browbeat them back into line.

  20. Alberto Rabilotta

    Ives, it is important to quote (and read) Karl Polanyi (not Polyani), and there is and article
    ” Universal Capitalism or Regional Planning?”, The London Quarterly of World Affairs, vol. 10, no. 3, 1945, pp. 86-91.that is very important, where Polanyi said (at that time) that the U.S. had all the ideological and political power to repeat the utopia of liberalism. You can find it in:
    And for Syriza and Greece, it is very early to conclude if this democractic experience (praxis) is going to produce the changes that the left or the right are asuming. Something has changed and there are multiples variables playing, and we are going to see if Tsipras can manage to sail in the political sea of the EU without been atracted by the songs of the sirens. He have to do what Ulises did or he will succumb… The Greeks have a lot of card to play, and every defeat in the fight with the EU will be converted in more will to fight back.

    1. Susan

      Looks like there’s movement afoot, but otherwise, since I can’t read Greek, not sure where this is:

      The Ecuadoran debt audit is featured in the Greek film Debtocracy, so it makes sense that the CADTM (Greece Chapter is working hard behind the scenes. Again, I can’t read this site – it’s in Greek.
      The 2011 film served as a primer for me in beginning to grasp this. I am not one of NC’s finance savvy readers. Must admit that I’m still at sea. It is interesting that this film was entirely grassroots and crowdfunded:

      1. alex morfesis

        more like astroturf

        greek is fairly flowery language so

        “that is what it was”,


        “.little did he know that on that opportunity to flourish and create the situations he could only have dreamed of after a long weekend of heaven and caviar, did it come to be understood that the scenario he had contemplated while conditioning his mind with Voltaire, would come to pass….”

        but grass roots this aint…

        at the website you mentioned,( (elegr dot gr) if you go to the far right you will notice some numbers…6-8 2011

        when you click on it you will see an agenda in “english”…if one was looking to an hellenic audience, the agenda to the “event” would not have been in “ingles”,,,if you poke around in the parties speaking you will notice all these non greeks…almost all of them self proclaimed lovers of the 4th International…oh…and a certain email you will find….

        ac1@ well….russians use C instead of K…

        the documentary…well, I can tell you the voices in the beginning, where you are led to think there was some purported recording of the persons being named…I lived in Athens when Giorgakis and Karamanlis were regularly in the news…at least for those two, that is in no way their actual voice…since there were no dates tied to the purported “quotes”, gonna guess it was made up for dramatic effect…not that they might have not “thought” that….but that is a documentary like Mussolini ran the trains on time…

        Greece has almost no real financial press, which is how it was so easy for it to be tooken…

        most greek media is a clone of univision type fare, with telenovelas filled with sillycone babes trying to steal the “patron” from his wife…of shows with purpetual “married with children” style discooperation and bickering…

        anyone wanting to audit the debt would start by mentioning

        and then might focus on the person who might have the data on the 100K holders of Greek Debt

  21. Dino Reno

    Can central bank stock buying keep the markets from falling more than 10% over the next three weeks? If it can’t, Greece gets its 1%/99 year deal.

  22. Brian

    Yanis was the target of the BBC, and the interviewer acted as though she worked at the Yard. It wasn’t journalism, and since we don’t have much left that passes for journalism on a tv screen, what do you expect? The house organist is going to play Inagaddadavida instead of the same old hymn?
    The joke will be minimalising what Syriza says and does. The joke will explode in Europe like the table tennis championships in 1932, where many people were killed. (W.C. Fields)
    It really depends on whose side you are on at this point, and nothing more. One side thinks the scam has run its course, the other does not. It is only the future of our planet at stake.

    1. dogwood

      Yves, just a heads up – where you say Francine McKenana provides a fine analysis of the exchange… article is actually written by Frances Coppola.

  23. aq

    Two things really boggle the mind. 1. That borrowers must be punished for their sins as opposed to lenders, who know that they are beggaring the borrow and therefore that they are playing a game of chance aka gambling (although if you know the legal frame will force the borrower to pay is it still gambling?) 2. If the world is simply a Game of Leverage (as opposed to a Game of Thrones) how much money are the “lenders” out? Espcially if we were to apply interest payments toward the original principal and not the interest and fees.

    And third offshoot for me is that without society there can be no wealth, no aristocracy/elites or game of leverage. It seems to be that the elites might be more concerned about their power plays and positioning within their own class that they forget the society which grants them their priveleges. On the other hand, if the article a few weeks ago about surnames and societal ranking was anything to go by as long as the system more or less remains in place, even with world wars, then those born into power and privilege, stay within the ranks dispute fighting/jockeying among said ranks.

    1. AQ

      ETA: Regarding Game of Leverage: What are the leverage ratios (of the lenders) these days for something like sovereign debt ? And does anyone have any idea about the ratio between “vapor money” and so called real money? (Vapor money being the adding of ones and zeros to a computer balance sheet vs. what I’m not sure since the system these days really does seem to be about vapor, especially when you start looking at the fraud and the stock values, etc.

    2. lambert strether

      Millions marching hasn’t done it and won’t do it. The equivalent of US capitol occupations might. A million people could surround a parliament building, for example.

  24. jay

    Racism is a tangible part of European life, most especially among the most educated. By tangible, I mean people will make racist comments as a part of everyday conversation. A big reason Germans don’t want to do anything to help Greece is simply because of racism.

  25. Daize

    I am not convinced of this article’s headline. A negotiation strategy I have also observed the French use to great effect is called “souffler le chaud et le froid” similar to what another person in this thread has called “good cop/bad cop”. I get the distinct impression that that is what Syriza is doing. They have had awhile to prepare and they are not idiots from what I can see. I get the feeling that everything Yannis does/says is well thought out and coordinated with Alexis. The real problem is that the press wants a fight and continually portray Greece in the worst light possible.

    1. Lexington

      I get the feeling that everything Yannis does/says is well thought out and coordinated with Alexis. The real problem is that the press wants a fight and continually portray Greece in the worst light possible.

      Maybe the real problem is that Yanis and Alexis aren’t on the same page. Either SYRIZA is still trying to formulate a consistent message -which wouldn’t be at all surprising considering it has only been in power for a week and has exactly zero previous experience in governing- or Yanis is running his own foreign policy. It is also probable that there are substantive differences within the Greek government about how hard to push the threat of Euro exit.

      It probably also doesn’t help that Greece’s finance minister is a guy with no previous political or diplomatic experience who is being called upon to more or less single-handedly stage manage a very delicate diplomat waltz (pop quiz: who is Greece’s foreign minister, and what does the fact you don’t know tell you?)

      This “good cop / bad cop” meme just shows how desperate people are to delude themselves. Good cop / bad cop works because the police are in a position of authority and power over the person being interrogated and therefore can use intimidation to gain cooperation. Greece is an economic pygmy that isn’t in a position to intimidate anyone. The only card it has to play is the threat of defaulting and withdrawing from the Euro zone and to play that card effectively the government needs to appear united behind a definite game plan. The conflicting messages coming from it tell other foreign ministries the exact opposite and therefore undermine their negotiating position.

      As I said these kind of issues are common in new governments but let’s drop the silly conceit that Yanis and Alexis are playing 11 dimensional chess augmented by Jedi mind tricks rather than fumbling their way through a very complex and intractable situation.

      1. Santi

        You are right, the real metaphor is not good cop/bad cop; the right one is the suicide bomber. Yanis is sitting on top of a dynamite barrel, telling the rest of the Eurogroup ministers: “don’t force me to blow it up, I really don’t want to be forced to do it!”. I think Tsipras is trying to limit bank runs by smoothing the words of Varoufakis without changing the semantics.

        This is the position of the desperate people in Greece, specially, but also in Spain, unemployed or about to be evicted. For us the metaphor is quite realistic: we don’t care a dime if we will be worse after the Euro collapses, we really can’t be worse. We prefer turning a problem of a minority into a problem of a majority, so to say.

        The authority of Mr Varoufakis is moral, He has said repeatedly, and also Pablo Iglesias, that we are tired of seeing our old people dying after being rejected at public hospitals or looking for food in the trash cans. If they are forced to square the game by “pressing the button”, they will do it. They don’t want to do it, but, they know the current policies are broken and thus, refuse to keep “pretending” that they will work. If the “creditors” want to keep playing “pretending”, be Armageddon. Sorry about that.

  26. Ed

    One thing that amazes me even about good commentators and apparently policymakers is the constant ignoring of demography.

    Greece has a population, with rounding, of eleven million, which happens to be about the same population as Cuba, and the state of Georgia. Its twice the population of Ireland and the country Georgia. The Greek economy is not that great either, its probably smaller and less important than that of the state of Georgia.

    Greece is just not that important a country or an economy. Hence they don’t have much negotiationg leverage. Its still a surprise that they were admitted to the EU in the first place, and not kicked out of the end of the Cold War. On the other hand, with their merchant marine and geographic location, and some grey market and black market dealing, they could function as a pariah or semi-pariah country, like Cuba. They will be poor, but they are going to be poor anyway, and could at least keep some independence and self-respect this way. There are also an unusually large number of Greek billionaires, and seizure of their assets would help with the transition.

    Greece doesn’t really have much incentive to negotiate either. Both sides have a lack of imagination.

    1. aletheia33

      from 13 june 2012:

      “Greece straddles geo-politics and European modernity in a very peculiar way. It has always been a peripheral and semi-modernised Balkan economy whose national integration took more than 100 years to achieve, following wars against its Balkan neighbours and Turkey. But by virtue of where it sits on the map, especially if combined with Cyprus, it enjoys a considerable geo-strategic advantage. So the historical fault-lines of the country have been and remain a weak political economy, on the one hand, and a strong geo-political/geo-strategic presence on the other.
      “Greece, for example, by virtue of its position in the Aegean, has the power to block the Aegean Sea (trade, communication lines, sea lanes, flight information region etc.), thus causing havoc in global seaborne trade going through the Turkish straits, disrupting oil and gas pipeline projects and sapping NATO and European security in the region. Obviously, such a contingency would involve Cyprus and Turkey, and perhaps Israel, to say the least, inasmuch as Israel’s security is unwarranted if Cyprus is not overseen by a friendly power. Make no mistake: if Greece gets upset, that is to say, if Greek society and domestic politics is pushed by outside powers, ie the ‘troika’, to acts of despair, then this eventuality is not so unlikely.
      “This dimension is worth flagging up for two reasons. The first is to remind readers that Greece and, for that matter, divided Cyprus, did not enter the EC/EU for what it might be worth economically and politically, but for what they needed geo-politically and security-wise. . . . Under Cold War conditions, Greece, in all likelihood, would have had a coup in order to be kept within the NATO fold. . . .
      “Remember that Greece is now populated by an almost pauperised society, brought about by the profligacy of financial capital and the monetarist policies of Germany, and politically dominated by a radical left. Greece can speak now directly to the Turkish and Balkan peoples, its real neighbours about working together to build a new sustainable and green developmental project in the former Ottoman space. It is not under any subservient junta rule and demands to be treated as an equal. If Merkel intends to go ahead with her threats of expelling Greece from the Euro-zone in the event that Syriza wins on Sunday, would she also have the guts to bear the full consequences of the above? Frankly, I don’t think so. She knows that. Obama knows that, and that is why this is an empty threat that is being made, in order to contain the collapse of the corrupt two-party system on 17 June [2012].”

    2. ohmyheck

      Economically, maybe not. But Greece is getting chummy with Russia, and Russia loves the idea of Greece getting out of NATO and allowing the Russian Navy to lease out its quite lovely, warm-water, Mediterranean naval base locations. Forget the vodka, pass the ouzo!

  27. stephen nally

    1. Yes, Syriza are moderates. They are calling for rational common sense solutions. The question is not their left wing credentials ( weak) but their guts, their judgement, and their skill.

    2. If they play it right, the lack of time is a strength to them. The EU can afford to ‘negotiate’ forever. Greece needs action now. Syriza has the political capital now. But political capital dwindles with time.

    3. If they have the guts, they don’t need to negotiate. They can let Greece get expelled from the EMU. They really should see that as plan A. The EMU is worthless to them in it’s current from. There would be 6 months of severe pain, but Greece would be better off with the drachma and no debt. They would be beginning their recovery. Momentum is their biggest hope. It will allow them to leave the EMU. If they have the guts.

    4. The EU’s hand is not as strong as they think. There are major players who are hostile (Russia, UK), indifferent (China, Turkey). They would not join any EU sanctions. There are countries who are inclined to support Syriza even if their governments aren’t (Spain, Italy, France). The ruling parties in these countries need to tread very carefully. They would also benefit from Syriza success at renegotiating within the EMU.

    5. It is the troika who are are the radicals. As the FT says, if Syriza fails, what comes after it will worse. The entire periphery will eventually be out of the EMU, maybe in ugly ways.

    1. Yves Smith Post author

      Iceland is not better off after a banking system collapse. Read Michael Hudson and Jeffrey Sommers on this. The idea that it’s six months and then the pain is over is naive. And the country is already desperate. It can’t take a leg down from here. That level of desperation leads to violence.

  28. George Phillies

    The Greeks have several big guns that they may prefer not to stress, in that everyone knows they are there. They may prefer to try friendly negotiations so that they can make the Germans look like the guilty party. However, they have the fine position that they exchanged some amount of debt to private people fro absurdly more debt to other Europeans, so that they never saw almost all of the money in the current debt.

    The Big Gun is unilateral total default, so that their debt goes away. The default could be accompanied with (i) we are not losing the Eurozone, (ii) we are imposing capital controls so that money can only leave the country if it is used to buy something concrete, (iii) we are issuing these things that are not drachma, because it says “1 Euro, not valid outside Greece” but that are good for payment of taxes and that will be issued in a smaller amount than the taxes we expect to collect this year, and (iv) to interest people in paying taxes, we have arrested large numbers of millionaires and billionaires for tax avoidance, and, no, they will not be going anywhere until they pay their large known debts.

  29. Jose

    An alternative for Greece would be to have its commercial banks issue new euro deposits for the government; these deposits could be transferred to the ECB in order to pay the Greek bonds held on its balance sheet.

    The ECB itself forced a similar scheme upon Greece in 2012. The country then paid 5 billion euros it owed to the European Central Bank. It could resume paying all of its foreign debts this way, instead of asking for the loaded words “debt restructuring”. (The banks borrowed the necessary reserves for the transfers from the Greek Central Bank, under an ELA authorized by the ECB).

  30. Sanctuary

    Again, I think people are jumping the gun on what Tsipras is actually saying. The headlines to these stories (like “Tsipras vows to pay off loans”) seem to be geared to stock market algorithms and front-running strategies and “reassuring markets” rather than the actual content and substance of what is being said. When you actually read what he says you come to a far different conclusion. For instance, as is quoted in this Deutsche Welle article (

    “My obligation to respect the clear mandate of the Greek people with respect to ending the policies of austerity and returning to a growth agenda in no way entails that we will not fulfill our loan obligations to the European Central Bank or the IMF.”

    At first, this looks like a walk-back but it isn’t when you understand the structure of Greece’s debt. As shown in this BBC article (, ECB and IMF debt only amounts to 16% of the total debt. On the other hand, 60% of the debt is held by Eurozone countries. Couple this knowledge with previous statements from Tsipras that they refuse to deal with the Troika and want bilateral negotiations with the other European governments and you come to see that he hasn’t changed his position at all. He’s merely marketing it less obviously aggressive. What he’s actually doing is stating which parties his government feels MUST be paid back, i.e. the IMF and the ECB, while at the same time implying that every other party MUST be negotiable or not get paid back at all.

    Earlier in the Deutsche Welle article, Tsipras says, “No side is seeking conflict and it has never been our intention to act unilaterally on Greek debt.” Again, this is still in keeping with everything that Syriza has said. From their standpoint, they can claim they are seeking mutually agreed to solutions. That they are seeking negotiation, which they are. If Germany or the ECB decides to do something stupid like deny Greek banks funding, then it wasn’t because of a unilateral action taken by Syriza. Syriza will be actively spinning every move it makes in the next few weeks as one seeking reasonable negotiation, not one of making demands. They WANT the ECB/Troika to do something stupid and stubborn because then the Greek public will fully support any action they take to walk away from the Euro. They calculate that they won’t be blamed for unyielding, mule-headed German negotiating positions.

    1. Yves Smith Post author

      Um, your assumption is not correct. Varoufakis made clear that in the BBC interview Greece was not rejecting negotiating with the Troika. He was rejecting having the Troika bailout administrators come to Greece and effectively supercede the government (run audits, privatize assets, etc).

      1. Sanctuary

        I think that is difference of style not substance on the part of Varoufakis and does not really matter. He can say he rejects only the administrators but they are representing the wishes of the Troika. So he’s still rejecting the Troika, it’s just that he’s trying to do it in a less obvious way that buys him time for negotiations with Eurozone members and allows for more financial pressure to ratchet up in the meantime. He reasons that the longer the pressure builds and the closer we get to February 28, the better the deal he’ll be able to get. The more ambiguity, the better for his negotiation position. Likewise, it behooves his position (internationally and domestically) to not be seen as the party making unfair or impossible demands from the outset. So, he’ll keep throwing out contradictory things like, “l’ll deal with the Troika, but not their representatives” while confusing his opponents by reiterating his earnestness for negotiation. All of this is a bet. Syriza is betting that the Germans and the Troika want the Eurozone much more than risking Grexit. It speaks to the desperation of the Greeks that they are willing to play a high risk hand, however trusting the public “confidence” of Germans 4 weeks out from the next deadline is about as reliable as a presidential poll result for 2016 taken last week. Wait and see what they say 2 weeks from now.
        The way Syriza sees it, they’ll either get a much better deal than the horrible one the oligarchs/Troika cobbled together or they get a face-saving expulsion by way of German intransigence. I think they are unofficially happy with either outcome.

        To me, this is the real reason Syriza sought a coalition with the Independent Greeks. They needed a partner that solidly supported walking away from the Eurozone so that when they began their high stakes gambit they could be assured that either way (better deal or forced Grexit) they win.

        1. Yves Smith Post author

          Please go listen to his BBC interview. He was explicit there and made clear he was talking about two levels at the Troika. He was rejecting dealing with the lower, admin level.

  31. Tom

    Patrick Schmidt: right on the money. Thus the solution will look like: there will be a lot of threats and theatre-like posturing from both the Greek finance minister Varoufakis and German finance minister Schauble, but when all is said and done, both parties will agree on refinancing the Greek debt and extend repayments to say 99 years with 1% interest. This would be a de facto default, but both sides would be allowed to save face and claim victory to their respective electorates.
    That is exactky what the German and the French business press predicts. Maybe it is not such a great idea to only get ones information from the FT and the Telegraph. If Tspirpas really manages to finally get a fair tax collection going in Greece everybody will be mightily relieved and end of story.

    1. JustAnObserver

      That’s until you allow for the fact that there seems to be a faction in the ECB consisting of bone-headed nutters like that idiot (Victor ???) who seem to revel in their desire to bring down the Greek banking system and, if they can manage it, the whole economy – pour decourager les autres (who the f**k stopped his meds ?). Led, of course, by the nutter-in-chief Herr Weideman.

      OTOH these guys may actually be going for a Euro breakup or NorthEuro/SouthEuro split … who knows in this game of mirrors & fog ?

    2. Lovely Makiaveli

      Finnish finance minister said, that Greece will not start paying interest for loans what was given for them until 8 years from now on and then their maturity is 30 years.

      1. Yves Smith Post author

        That is the existing structure. The interest is back-ended. That works only if the economy is growing. It’s been shrinking, 25% smaller than at the time of the crisis.

        And the loans in large measure were not “given to them”. They were bailouts of French and German banks. The more recent loans have been almost entirely rollovers of existing debt.

  32. WanderingMind

    One thing I do not understand is where the authority for Greece to either withdraw from the euro/EC or be booted out comes from. It is my understanding that no less than the ECB has taken the position that voluntary withdrawal from the EU is not possible under the Treaty of Lisbon and expulsion is next to impossible.

    Yet, people talk about one or the other like they are talking about a landlord evicting a tenant who refuses to pay the rent. What is the legal structure that supports such a move? This, as I am sure all Americans who read this blog are aware, was the sticking point for the South when it tried to secede 150 years ago. The North said that secession was not possible under the U.S. Constitution. The South said they were free to go anytime they wanted. Thus, the civil war. (Yes, I know there were underlying economic, moral and social drivers, but that was the constitutional gloss put over them).

    There is a different perspective from which to view this dispute between Greece and Germany. The Greeks are tapped into the reality that austerity does not work on a EU wide basis and that what is needed instead is deficit spending on an EU wide basis if the EU is to survive. The Greeks, therefore, are the true “patriots” of the idea of Europe, not the Germans. Their program is the one that will preserve the euroarea, not the German program. So, if the Germans and other “Northern” EU countries insist on continuing a failed and destructive policy, with the resulting break-up of the eurozone, they will be the “traitors” to the idea of Europe, not the Greeks. I.e., who is playing the role of the North in this play and who is playing the role of the secessionist South?

    Yanis Varifoukas has said on at least one occasion that, even though the euro was a bad idea and constructed badly, breaking up the eurozone would be so destructive at this point that it should be avoided at all costs. So, there is both a “patriotic” and practical basis for the position which Syriza takes and which seems to be supported by the Greek people. Unfortunately, they don’t have the economic/military backing to have their point of view dominate.

    One final point regarding debt. Mathematically, there is no limit on the amount of debt which one can take on. The limitation is the ability to repay the debt (in the future) one already has. And that limitation can be overcome (again in strictly mathematical terns) by adding more debt. In that sense, all debt is a matter of “extending and pretending” as Yanis Varifakous says. It relies upon an (unstated) hope in the future by the lender and the debtor. The breakdown comes when enough people no longer wish to pretend. So, debt crises are not the result of some mathematical formula, but a change in human sentiment or “feelings,” which are notoriously unpredictable and uncontrollable. Yanis is no longer a believer in the future repayment of Greek debt. But if creditors of Greece and the Greek government in general wish to continue to pretend, then there is a way to extend.

    1. Yves Smith Post author

      My cynical view is that where this nets out is that unilateral withdrawal is impossible but if need be, a way would be found to kick Greece out if that were deemed to be necessary, that it defied EZ rules consistently and flagrantly. But basically the ECB can do much of the damage you’d see in an exit to Greece with Greece still being in the EZ, which means they are in an even worse position: no ability to leave and print their own currency, which would eventually give them some relief, and at the mercy of the ECB.

      1. WanderingMind

        I can see how that would happen, just based on the current power dynamics. Of course, as I think someone commented already, there does not seem to be any legal basis for the ECB to refuse to buy Greek government bonds when it is buying the bonds of other EU governments, but the legality of it will not stop them.

        What has been interesting to see over the past few years is the lengths to which the ECB and other power centers in the EU will go to keep the euro from failing. If that pattern holds, then something like a 99 year term at 1.00% will allow for more extending and pretending. And then parties like Podemos will have time to form coalition governments of their own, which will put more pressure on the current European power structure towards the end of this year and into next. As you point out regarding Polanyi’s analysis, the confrontation cannot be eliminated, only postponed.

        1. Yves Smith Post author

          My understanding is the ECB can suspend any rule or practice based on a 2/3 vote of its governing board. So the issue is how far the non-hard-liners are prepared to go. The Finns and Germans are already ready to flail Greece.

    2. vidimi

      i can see greece, while not legally out of the euro, issuing its own, parallel currency and then denoting all transactions in that currency. it would struggle for international recognition, but i’m sure russia, china, and many other countries could be brought on board in short time. greece could then have it’s own de facto currency while de jure remaining in the eurozone.

    3. Calgacus

      Of course voluntary withdrawal of Greece from the Euro, the EU, NATO, whatever, even the UN is possible. As long as Greece is a sovereign state, and it still is, it can leave whichever club it wants. Except it cannot escape the core parts of the UN Charter, which are held to be universally binding, even on non-members, so leaving the UN is kind of pointless.

      It is not like the North & South in the US Civil War. The question is what the consequences would be if Greece exercised its right to leave the Euro. Will leaving one club lead Greece to be kicked out of some other clubs? Depends on the club rules – and much more, on the other club members’ political positions.

  33. EmilianoZ

    RE: Polanyi

    Here the Gers and the French are not even trying to save the self-regulating market. Under the rules of such a self-regulating market, banks that made bad decisions should just go under. They’re just trying to save the oligarchy.

  34. Lovely Makiaveli

    “German or Finnish voters may feel they have shown enough solidarity with the Greeks. But strictly speaking they have mostly shown solidarity with their own financial institutions — which would have been among the biggest losers if Greece had not been bailed out.”

    It was German and French banks, which would have suffered loses. Finnish banks didnt have any stakes in Greece bonds, so please show me, how we showed solidarity for our own financial institutions?

    Some proofs please.

    It’s just that heres an election coming in Finland, so parties play tough.

    Im with Syriza, but that, what you said is just bulls#¤t.

    “Germany and its northern allies are locked in their belief in commercial logic over broader social concerns. They may be about to reap a whirlwind.”

    We should maybe also ask, why Greece and Spain hasnt build a safety net? Everybody in Finland are allowed to have apartment and enough money for living. Now they hopefully will build these things also. Now they are interested in politics also, so maybe they wont let just anybody rule them now on.

    These talks, what news papers write from these topics are meant just for voters anyway, so its completely different, what they will speak behind closed doors with Mr. Varoufakis.

    This post just disparaged Finns. I dont really understand, how much do you think, that 5 million people have power in EU, where is +500 million people overall.

    I have also a solution for this problem and its wage raise. Its just damn dumb to wonder why economies are shrinking, when you are cutting wages. Common currency will ruin countries, when they start this beggar thy neighbors policy. Wages are rising only ~1 percent per year now in the eurozone. Thats way too little. If we want this common eurozone to work we need to make a law, which says, that every eurozone countries must rise wages ~2 percent per year. Otherwise common currency aint gonna work. Somebody (German) is otherwise benefiting on others expense.

    If we would have risen other eurozone wages, as much, what we cutted Greeks and Spanish wages, there would be no problem, but now there is deflation, debt deflation and all this dumb stuff, what we could have avoided. And we could have depreciated euro, so there would have been no problem for export sector either. This wage rise would also be solution for deflation problem, because there would always be cost inflation and that would rise prices enough to keep us out of deflation.

    Now they are using this crisis to make structural reforms. EU-elite wont even really want to solve this problem.

    But please, dont blame Finns, at least I agree with Mr. Varoufakis in almost everything.

    1. Yves Smith Post author

      If the French and German banks had failed, the entire European financial system would have collapsed and sent the continent into a massive depression. Are you seriously telling me Finland would not have been dragged down along with it?

      1. Lovely Makiaveli

        Of course it would have then been dragged down with it, but you cant seriously think, that German and French governments would have let this happen? No, they would have financed their banks by themselves. Now governments bought these bonds from banks and will swallow the loses.

        The point was, that I think you judged Finn extraordinarily harsh here and without a good reason. It was not us alone with German.

        It was not our banks who were bailed out. It was not our fault, that Greece people were not interested in politics, before this crisis. It was our fault, that our politics didnt understand, that they were bailing out banks and letting common people to suffer. There should have been different conditions for these structural reforms.

        This whole thing is hurting Finnish economy also and we are shrinking. Mainly because our wages were rising real fast few years ago, when other countries in eurozone were stagnating and cutting wages.

        This asymmetric depression aint much better than full blown. At least I would say that 25 % unemployment rate is just a terrible thing in these few countries.

        Public sector is creating jobs in Finland as automatic stabilizers work and this cant go on for long or we are screwed also.

        “Sharpest” pencils in the pencil case are finding ways to cut Finnish wages also. This deflationary spiral must be cut, because this debt based system cant handle deflation.

        Its real rare, that Finn politics would watch things as a whole and involve whole Europe in their calculations. Those educated fools think, that this is a problem, which can be solved locally.

        We need more Europe, or otherwise this project is going down the drain. Thats the whole purpose of this in EU-elites stand point also, but we have a little differences about what kind of Europe we want to build.

        1. John Jones

          It was not our banks who were bailed out. It was not our fault, that Greece people were not interested in politics, before this crisis. It was our fault, that our politics didnt understand, that they were bailing out banks and letting common people to suffer. There should have been different conditions for these structural reforms.

          So the Finnish were not interested in politics before the crisis?

  35. MarcoPolo

    Syriza has managed to change the terms of the entire debate. And you seem to under-estimate it’s importance. France is on board. Italy will be by the end of the week. Spain by the end of the year. This afternoon even Schäuble seems to get the point.

    The Berlin wall has fallen

  36. yenwoda

    Second is that the Germans believe that contagion risk is lower than in 2012.

    I think part of Syriza’s game plan is to stall for a little while and see what kind of political ripples their ascension causes in the rest of the periphery. If it starts to look like similar parties are heading for wins in Spain etc. then the diminished risk of Grexit is augmented by the larger risk of (wince) Spexit. If “centrist” parties look well cemented then Syriza doesn’t have much leverage and will probably back down a lot more than they already have.

    1. vidimi

      the paradox here is that anti-austerity parties elsewhere have a much better chance if greece has any success.

  37. Santi

    No less than a German, Nietzche, in his “Genealogy of Morals”, (via David Graeber’s “Debt, The First 5000 Years”), gives us the solution fpr the Greek dilemma:

    Finally, with the impossibility of discharging the debt, people also come up with the notion that it is impossible to remove the penance, the idea that it cannot be paid off (“eternal punishment”) . . . until all of a sudden we confront the paradoxical and horrifying expedient with which a martyred humanity found temporary relief, that stroke of genius of Christianity: God sacrificing himself for the guilt of human beings, God paying himself back with himself, God as the only one who can redeem man from what for human beings has become impossible to redeem—the creditor sacrificing himself for the debtor, out of love (can people believe that?), out of love for his debtor!

    Miss Merkel, are you listening? or just preparing for the crucifixion?
    Firmly tongue in cheek :)

    1. Rosario

      The Protestant notion of sin (synonymously a privilege to have life) as eternal debt to God has become completely secularized and transferred directly to Capital in the modern world. This was one of the not so great values proselytized from the first true Capitalists who were often Dutch Protestant. This makes absolving effectively infinite sin (debt) rather difficult without destroying the debtor. It comes as no surprise that the birthplace of the Reformation is the most ardent defender of such values.

  38. Oregoncharles

    I read here somewhere that Germany never paid back the money the Nazis extorted from Greece – arguably, $95 billion. Seems to me a collection action at the World Court would be a good negotiating move. That money would come in real handy right now.

    1. vidimi

      podemos is, quite literally, [yes] we can in spanish. it is directly inspired by the obama campaign.

      a french friend told me over lunch today that he does not expect anything from them as their leader stated publicly that the two things he would not do were a default on the debt and an exit from nato.

    1. Yves Smith Post author

      I have to tell you, when I look at the online version,. the lead story about the Catholic Church, and the first story about Greece is five articles down, with the headline and subhead translated as:

      You again, Greece?
      Manuel Jabois Athens

      With its commitment to Syriza in the last election, the Hellenic country reawakens international misgivings

      Now admittedly, the article order assumes I am a reader in Latin America, but none of the articles about Greece (there is one other) correspond to your front page image.

      Faz also has nothing of the kind, it just reports on what Varoufakis said in Paris with some commentary.

      And the Financial Times (which is anything is Euroskeptic, but only slightly so), has as its lead story that officials in Brussels are upset and think Greece is overplaying its hand. And the subtext is that the officials are not unsympathetic to the Greek position.

      So I see no confirmation anywhere of the El Pais print story, even on its own website.

      1. Santi

        I linked to the paper edition front page because I couldn’t find it online. Now it is there. I guess they are applying some sort of paywalling/embargo until the paper edition goes on. ( )

        Giving that El Pais publishes whatever the current VSPs (Commission, Eurogroup…) wants (see for what Claudi Perez pushes in ), it means that they are also softening their public positions, probably trying to avoid market turbulences as much as possible. Varoufakis knows that market turbulences are not so bad for Greece, specially if there is contagion to Portugal, because they will force the powers that be, specially the ECB, to intervene thus dismounting the Eurogroup and Schäuble bluffs. He seems to know quite well what he is doing.

  39. Otter

    “Germany thinks”

    We have no idea what Germany thinks. We know only what Angela Merkel and her henchmen have said, in public. Who is Angela Merkel? “Bundeskanzlerin” sounds impressive; but, really, she is nothing more than Jen Psaki with frumpier clothes. And, it is less clear who moves her lips.

    “Golden Dawn”

    One should remember that the voters of Greece, Spain, France, Ireland – most European countries – voted the rascals out. And the new rascals had barely sworn their various oathes of office before they foreswore their promises… doubling down on the hated policies of the ousted governments. The Greeks tried a third time, and were cursed with a coalition. Fourth time lucky: they have now elected a band of amateurs. Spain has Podemos pushing and shoving at the starting gate. France has Front National, named after the WW II Resistance. …

    Will the Peoples of Europe be required keep voting until they guess the right answers?

    Will NATO find it necessary to form some sort of corp of modern Janissaries to maintain order?

  40. Rosario

    Their relationship with Europe is a toxic one, and they are wrongfully blamed for Western Europe’s bad behavior. It is not their fault they were devastated by the Germans in WWII then used as a buffer against the Soviet Union for another 40 years. Why not sever the tie? Looking at the stupidity or willful ignorance of Western leaders for the past 6 years and this seems to be the most rational course of action for their long term well being. There is no sense staying on a sinking ship. In short, agree to disagree on debt relations, agree to continue trade, shake hands and say goodbye. In following, maintain good relations with the West, open up more to the East, and reinstate the drachma. How would this be any more traumatic then their slow death at the hands of zombified late stage Capitalism?

  41. Ysaac

    As far as I understand from reading various MMT blogs, the biggest problem Eurozone countries have is that they dont have their own sovereign currency. Taking that into account, wouldn’t Greece being thrown out of the Eurozone be beneficial for them as it would return them their currency sovereigncy and FAR more independence in terms of framing policy?

  42. Dimitri Lascaris

    Ahem, as argued by Frances Coppola in Forbes yesterday, Syriza has not ‘walked back’ anything, and suggestions to the contrary are misleading European leaders as to Syriza’s true intentions. See:
    I spent the last week of the election campaign in Athens reporting on the election for The Real News, and in my view, many observers are underestimating the determination of Syriza and its coalition partner to secure a substantial write-down of Greek debt.

    1. Calgacus

      Yes, very good points and article(s) by Coppola. I’ve become less skeptical of Greece’s & Syriza’s abilities from recent events.

      Her summary of Greece’s position bears repeating. IMHO it is exactly the right line for Greece to take:

      Greece has no intention of leaving the Euro or the EU. (But others might force it out)
      Greece has no intention of defaulting on its debts to primary official creditors. (But others might force it to)
      Greece is committed to pursuing policies that promote the economic stability and recovery of Europe. (But others might not be)

      Yes, Germany, the ECB etc (in principle) have every right to moralize about Greece’s debt. Debt is a moral concept – so it is a moral issue. But Germany’s policies actively prevent Greece from paying its debts. The EU rules & treaties and their mindless application and interpretation backed by Germany opposes the economic stability and recovery of Europe. This policy, these actions therefore void the debt. At least the IMF in the old days understood this. It perfectly well understood it was imposing unpayable debts, debt peonage on the Third World. That was the aim, even admitted at times. Unfortunately, the Eurocrats seem to believe their own lies.
      If Coppola would only think as clearly about a roughly parallel situation, the JG vs the BIG & see that the latter is “managerial, bureaucratic, top down” while the former is “libertarian, bottom up”, I would be a big(ger) fan.

  43. /L

    The underdog takes on the neighborhood bully, David vs Goliath. And with Tsipras and Varoufakis it also comes as they being quite sympathetic compared to Mrs Merkel.

    Sir Edmond Lyons, 1846: ”A truly independent Greece is an absurdity. Greece can either be Russian or English and since she must not be Russian, it is necessary she is English.

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